• U.K.'s Osborne threatens legal action, Estonia withdraws
  • Italy's Finance Minister Padoan says text on FTT is vague

Plans for a European tax on financial trades fell into disarray as member states argued about its impact on world markets and clashed over threats of legal action.

Instead of sealing a deal on Tuesday in Brussels after months of preparation, EU governments kicked the proposal to mid-2016 as fresh worries erupted over the economic and political consequences of the levy. The group of countries seeking to introduce the financial-transactions tax said they needed more time to assess the impacts as Estonia withdrew its support and Britain reignited a threat to file a lawsuit should the plan ever materialize.

“The text on FTT isn’t clear, maybe vague,” said Italian Finance Minister Pier Carlo Padoan after a meeting with his 27 counterparts. “We have, however, reached a text to establish political will.”

The EU’s inability to get a deal after more than four years of negotiations highlights the potential limits to deeper European integration following concern about economic sluggishness and a surge in anti-euro forces from Paris to Athens. Member states supporting the levy hope it will raise revenue and limit market speculation as part of the regulatory landscape intended to reign in investment banks after the financial crisis.

U.K. Referendum

During a public debate, British Chancellor of the Exchequer George Osborne threatened legal action after citing the negative impact of the proposed levy on job growth and investment in the EU. “You cannot involve other member states here who are busy trying to create jobs and attract investment,” he said. 

The warning comes as the U.K. gears up for a referendum on whether to remain a member of the EU. Over the coming several months, British Prime Minister David Cameron aims to renegotiate U.K. ties to the EU -- while retaining London’s status as a top financial center -- and campaign to keep the country in the bloc.

European Economics Commissioner Pierre Moscovici played down Osborne’s concerns and said European countries are already dealing with different national levies, pointing out that foreign firms already pay taxes in the countries where they reside.

Ten countries remain involved in talks, just one above the minimum allowed under EU rules, after Estonia pulled out. They are Austria, Belgium, Germany, Greece, Spain, France, Italy, Portugal, Slovenia and Slovakia.

“Compromises on FTT have drifted away from initial preconditions -- a low tax rate, a wide tax base,” Estonia’s Finance Minister Sven Sester said.

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