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EU pores over 'Tobin' tax plans 40 years on

13 march 2012, 16:15
©REUTERS/Alex Domanski
©REUTERS/Alex Domanski
European ministers stage Tuesday the first serious talks on plans to levy a cross-border tax on banks and other finance houses, four decades after economist James Tobin's idea took root, AFP reports.

Finance ministers will listen to updated proposals brought by France and eight other governments -- in the face of stiff resistance from Britain, whose City of London is home to 80 percent of Europe's finance industry.

The Paris-inspired financial transactions tax (FTT) is aimed at making the money-men pay their way in future after banks especially benefited heavily from taxpayer bailouts when mortgage meltdown in the United States triggered the 2008 global financial crisis.

France's eight backer countries are Austria, Belgium, Finland, Germany, Greece, Italy, Portugal and Spain.

The nine said in a letter demanding the EU examine their plans that the tax is necessary "to ensure a fair contribution from the financial sector to the costs of the financial crisis, but also to improve the regulation of markets."

Nine countries signing on paves the way for a special provision of the EU's Lisbon Treaty that allows at least one third of the EU's member states to trailblaze new laws by themselves.

So-called "enhanced cooperation" has already been used to overcome difficulties in harmonising some aspects of cross-border divorce law, and is also currently the vehicle for a single EU patent.

But Denmark, currently in the EU chair, has stressed that this provision is only applicable as a "last resort."

Diplomats have recalled that the patents push is only now starting to unblock after decades in legal limbo following challenges from Italy and Spain on that issue.

President Nicolas Sarkozy announced in January that a financial transactions tax in France would already take effect in August, saying it would add one billion euros annually to state revenues.

British Prime Minister David Cameron retorted that French banks would only up and move to the City of London to escape the tax.

But experts say the tax would likely hit any financial institution that has any foothold in the nine countries -- thereby affecting the City as well.

Joining Britain in opposing an FTT are Sweden, which cites a failed experiment of its own, and the Czech Republic.

Alongside the tax talks, ministers are also due to reach a decision on whether to fine Hungary for what the EU says is excessive public spending -- denied in Budapest.

The verdict comes a day after eurozone governments granted Spain leeway in its struggle to tame a runaway public deficit amid rampant unemployment by a final deadline of 2013.

Faced with renewed recession snagging the entire eurozone, ministers allowed Madrid to soften its 2012 deficit target provided it still meets its commitments for next year.

Hungary is not in the eurozone, and its deadline to return within the EU's longstanding deficit threshold -- 3.0 percent of GDP -- saw Brussels threaten last month to freeze 495 million euros ($650 million) in routine EU grants for 2013 unless Orban's government took credible steps to tame spending.

Diplomats say the die is all but cast, after Brussels also warned that Hungary's bid to secure a 15-20 billion euro credit line from the EU and the International Monetary Fund depended on Budapest proving its commitment to the EU's democratic principles.

New laws covering the forced early retirement of judges, data protection and reforms of the central bank are disputed by the EU.

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