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EU FTT Now In Sight

by Ulrika Lomas,, Brussels

11 January 2013

An agreement on plans for a financial transactions tax (FTT) is due to be reached at the upcoming meeting of European Union (EU) finance ministers on February 12.

At least eleven EU member states are expected to adopt the levy.

Both the European Commission and the European Parliament have now given a resounding go-ahead to the eleven EU countries planning to introduce a financial transaction tax within the framework of enhanced cooperation, which requires a minimum of nine member states to back a proposal.

In October 2012, eleven EU member states – Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia – requested the use of enhanced cooperation to press forward with the FTT.

Lithuania’s new Prime Minister Algirdas Butkevicius also announced that the country would sign up the EU FTT early in 2013, although he later backtracked saying that the government needed more time to study the the possible effects of the tax, particularly in relation to Lithuania-based branches of foreign banks. Other member states may be persuaded to follow suit, however.

A tax imposed on financial transactions is designed not only to ensure that the banking sector contributes to the costs of overcoming the debt crisis, but also to curb high-risk high frequency trading, seen by some as the main reason for turbulence on the stock markets. A consensus among all 27 EU countries could not be reached, however, given unwavering and staunch opposition from both the UK, fearing major location disadvantages for its London financial center, and from Sweden.

Although an accord on plans for the tax could have been reached during an earlier meeting of EU finance ministers on January 22, Germany and France are said to have asked for the decision to be postponed. German Finance Minister Wolfgang Schäuble and his French counterpart Pierre Moscovici will be absent from the January gathering, instead attending celebrations in Berlin marking the fiftieth anniversary of the Elysée Treaty. Reports stated that both ministers had insisted on being present to push through plans at this crucial stage of the proceedings.

While championing the introduction of the tax, Germany and France remain nevertheless clearly divided over the use of revenues derived from the future tax on financial transactions.

At the end of last year, during his address in Paris to the French National Assembly and Senate foreign and European affairs committees, German Minister of State at the Federal Foreign Office Michael Link underlined the need for FTT revenues to flow to national budgets, rather than serve to finance development policy or to be used as revenues to buoy the EU budget.

In contrast, French minister delegate for European Affairs Bernard Cazeneuve said that revenues from the levy could be used to contribute to development aid, to provide much-needed support for poor countries, or could flow to the EU budget to reduce member states’ contributions.

Despite the clear divide between Berlin and Paris, Link emphasized at the time that the difference of opinion between the two countries "is not a catastrophe."

TAGS: tax | European Commission | Belgium | Portugal | Slovenia | banking | financial services | capital markets | budget | tobin tax | Estonia | Slovakia | Austria | France | Germany | Greece | Italy | Spain | European Union (EU) | Lithuania | services | Europe

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