EU countries divided on financial transaction tax

By DON MELVIN,The Associated Press TOBY STERLING,The Associated Press Updated at 2012-06-22 16:32:45 +0000


LUXEMBOURG (AP) — A plan for European Union countries to tax financial transactions and use the proceeds to fund future bank bailouts ran aground on Friday, with just nine out of 27 countries ready to support it, raising the prospect the tax will be implemented in the end only by a subset of EU countries.

The impasse over the proposal by the European Commission is the latest reflection of the difficulty of getting European politicians to agree to any single plan, even as they wrestle with a bigger, more immediate problem: forging a unified plan to contain the debt crisis that threatens to undermine the euro.

With the Netherlands and Britain unalterably opposed to the tax proposal, finance ministers from the nine countries that endorsed the idea — including Germany, Greece, Poland, Italy and Austria — said they still wanted to forge ahead and hoped that some countries who are still undecided would join them later.

"I will not allow this project to die," Austrian Finance Minister Maria Fekter said on her way into the meeting. In open debate, she threatened that Austria wouldn't participate in one of Europe's bailout funds, the European Stability Mechanism, if work on the tax were not implemented.

"If I don't get the fellowship of more than nine colleagues here, then the ESM would not be ratified in Austrian parliament," she said. "And that would really be a pity."

The proposed financial transactions tax would charge banks 0.1 percent of the value of sales of stocks or bonds, and 0.01 percent per derivative contract.

Adoption of the tax wasn't put to a vote and Friday's debate ended without a clear result, as European Union lawyers described a painstaking procedure for countries to negotiate a treaty when an idea deadlocks. At least nine countries must request "enhanced cooperation" — essentially a side agreement applying only to them and not to other EU countries. That request has not yet been made.

"So it's not (happening) tomorrow then," joked Denmark's Margrethe Vestager, who was chairing the meeting, after hearing the process explained.

It wasn't clear whether Fekter would be satisfied with the result, but it does not appear that Austria can block the bailout fund by itself. The ESM is expected to enter into force once countries representing 90 percent of its funding have approved it. Austria represents 2.8 percent.

George Osborne, the British chancellor of the exchequer, said such a tax would hurt the European economy as financial transactions were routed to countries outside the union.

"I would have thought we want to be attracting business rather than the other way around," he said.

German Finance Minister Wolfgang Schaeuble said he would prefer that all 27 EU member countries adopt the tax, but he hoped it would be possible to pursue it with fewer. "We emphatically want to move ahead," he said.

This is not the first time cracks have appeared in the European Union over its response to the financial crisis. In March, the so-called fiscal compact, which would introduce stricter requirements for national budgetary discipline, was signed by 25 EU countries — but not Britain and the Czech Republic. If the treaty is ratified, it will apply to those countries that ratify it rather than to all EU countries.