Merkel Coalition Signals Retreat on Broad Financial-Market Tax

German Chancellor Angela Merkel’s coalition is ready to accept a levy on stock trades as part of a first step toward a European tax on all financial transactions amid resistance to a broader application.

The retreat, signaled by lawmakers from the two governing parties, may advance Germany’s goal of teaming up with France to enlist Italy and Spain to enact the tax in the four biggest euro-area economies. French Finance Minister Pierre Moscovici, whose country started taxing share transactions last year, said on Jan. 27 that broader fees risk driving investors away.

“We will continue to work for the broadest possible scope, as agreed in the coalition accord, but we’re also aware of the unanimity principle” in the European Union, Antje Tillmann, finance policy spokeswoman for Merkel’s Christian Democrat bloc in parliament, said in a written reply to questions. “If we can’t convince our European partners, we of course wouldn’t close our minds to a discussion of a gradual introduction.”

EU finance ministers allowed member countries a year ago to move forward on a financial-transaction tax they expected to reap as much as 34 billion euros ($46 billion) a year, including 11.8 billion euros in Germany. France, Germany and nine other EU countries signed up for the plan, which includes taxing trades of stocks, bonds and derivatives.

Germany’s Social Democratic Party, Merkel’s third-term coalition partner since December, would accept a phased-in financial transaction tax if there’s a commitment at the start to the timing of all later stages, said Carsten Sieling, a Social Democrat on Germany’s lower-house Finance Committee.

Derivatives Risk

“The SPD insists that the federal government achieve the introduction of the tax as a complete package, if possible,” Sieling said in a phone interview. Derivatives are the biggest danger for markets and must be included in any plan, he said.

German Finance Minister Wolfgang Schaeuble sought to allay French concern after meeting Moscovici in Paris on Jan. 27.

The two countries will advance the introduction of the FTT “in a responsible way” without damaging markets and the strength of the countries’ financial sectors, Schaeuble said at a joint news conference that included German Economy and Energy Minister Sigmar Gabriel, a Social Democrat and Merkel’s deputy.

“If we no longer have financial markets in Europe, if Europe has no more stock exchanges, then the financial resources will go elsewhere,” Moscovici told French radio hours before Schaeuble’s visit.

France collects a 0.2 percent tax on trades of shares of French listed companies with a market capitalization of more than 1 billion euros. The EU plan would charge 0.1 percent for stock and bond trades and 0.01 percent for derivatives, with some exemptions likely on transactions like primary-market sales and trades with the ECB.

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