EU Transaction-Tax Plan on Brink as Belgium Inches Toward Exit

  • Finance Minister Van Overtveldt pushes for Belgian rejection
  • Group of countries supporting proposal continues to dwindle

Belgium’s finance minister signaled his country may pull out of plans by a group of European Union nations to impose a financial-transaction tax, a step that would leave the initiative hanging by a thread.

Johan Van Overtveldt said he is opposed to the levy and is winning the argument within the four-party coalition government to withdraw from negotiations over fears that the tax would drive business away.

“This financial transaction tax will increase the cost of financing,” Van Overtveldt said in Brussels on Wednesday. “There’s some work to do to convince some of my good friends in the government that” leaving negotiations “is the right way, but it’s starting to work.”

Belgium is among 11 countries that began talks three years ago on a common imposition of a tax on financial trades. Under EU rules, the plan needs the backing of at least nine nations to go ahead.

Estonia pulled out last year, Italy is said to be wavering, while Slovenia has raised concerns over the viability of the plan. Member states supporting the levy say it will raise revenue and limit market speculation as part of the regulatory landscape intended to reign in investment banks after the financial crisis.

Liquidity Problems

“It’s not a good thing. I’m against it,” Van Overtveldt told an audience at the British Chamber of Commerce. “When you start looking at government, public finances, very small differences in cost can create liquidity problems.”

The EU’s inability to get a deal after years of negotiations highlights the potential limits to deeper European integration following concerns over economic sluggishness and a surge in anti-euro forces from Paris to Athens.

In December, instead of sealing a deal after months of preparation, EU governments kicked the proposal to June 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 impact.

Austrian Finance Minister Hans Joerg Schelling, who is leading the negotiations, said in an interview with Bloomberg News in February that the tax can only move forward if it brings in enough revenue. Germany and Austria said in early March that the proposal would need three more months of talks.

Italian support for the plan has been complicated because Prime Minister Matteo Renzi is said to be considering suspension of an Italy-only tax on financial transactions that was introduced three years ago. Italian Finance Minister Pier Carlo Padoan said on Monday that talks on a common financial-transaction tax in Europe “have been slowed down, but this doesn’t mean it’s dead.”

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