EU Gets OK For Financial Transaction Tax
Updated On: Jan 22 2013 10:48:53 AM EST
A group of 11 European Union countries have been given the go-ahead Tuesday to push ahead with the introduction of a financial transaction tax.
EU Tax Commissioner Algirdas Semeta told reporters Tuesday after a meeting of the bloc's 27 finance ministers that the decision marked a "major milestone for EU tax policies." He added that it also marks the first time globally that a financial transaction tax will be applied across several countries.
The European Commission, the EU's executive branch, has proposed that trades in bonds and shares be taxed at 0.1 percent and trades in derivatives at 0.01 percent. The plan is to use the revenue raised from the tax, which could run into tens of billions of euros, to prop up shaky banks. This would help out governments, which have had to pay for bank rescues in the past. Some supporters of the tax have also suggested they could help fund the EU's budget.
Europe's banking industry has been one of the main causes of the euro area's three-year financial crisis. Governments in countries such as Spain and Ireland had to step in to rescue their banks, which had been brought close to collapse by toxic property investments. These rescue attempts caused the governments' debt levels to increase to dangerously high levels.
Semeta had no immediate estimate for the tax's revenues, but noted that the EU Commission previously estimated such a tax across the 27-nation bloc could yield annual revenues of â‚¬57 billion. The 11 nations now pushing ahead represent about two thirds of the EU's economy, he added.
Germany, France and the nine other nations had initially hoped the tax would be adopted by the whole EU. However, several countries, including Britain, which is home to the EU's biggest financial hub, refused to endorse the measure amid concerns over the measure's economic impact.
Last year's deadlock over the tax opened the possibility under EU law - using a so-called enhanced cooperation mechanism - for a group of more than nine nations to go ahead separately. The countries are expected to start working out detailed proposals following Tuesday's meeting.
The decision cleared a necessary legal hurdle allowing the grouping of nations to push ahead without the backing of all 27 nations, but it was not a vote on the substance of the proposal.
Ireland's Finance Minister Michael Noonan said the decision was adopted with a qualified majority. It "is more about process than about the make-up or the actual relevance of the financial transaction tax," he added. Ireland currently holds the rotating presidency of the EU, so Noonan was chairing the meeting.
The 11 countries backing the financial transaction tax are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. The Netherlands, where a new government came to power last fall, might also join the bid.
The meeting of the 27 EU finance ministers comes a day after the Eurogroup, which is composed of the finance ministers of the 17 EU nations that use the euro currency.
The Eurogroup elected Dutch Finance Minister Jeroen Dijsselbloem (DIE-sell-bloom) as the group's new president, replacing Jean-Claude Juncker, the Prime Minister of Luxembourg, who held the job for eight years. The Dutchman, who is 46, has been finance minister only since November.
Dijsselbloem already has a full in-tray: The need to negotiate a bailout for Cyprus, pushing forward the introduction of a European banking union and reconciling deficit reduction in many countries with the need for growth-promoting policies.
At their meeting late Monday, the eurozone's finance ministers also agreed in principle to extend maturities on some of the debt of Ireland and Portugal, both of whom have received EU bailouts.
That move, echoing a similar concession made to Greece in December, will allow Ireland "to enhance the sustainability of Irish debt and over time will cost us less," Noonan said.
The decision also needed approval by the EU's 27 finance ministers.
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