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Europe

France, Germany push for financial transaction tax

Despite being rejected by the G20, France and Germany are pressing for a discussion at the next meeting of EU finance ministers on plans to introduce a tax on financial transactions in Europe.

Euro notes

Supporters say the tax could help debt-laden governments

In a joint letter to the Belgian presidency of the European Union, German Finance Minister Wolfgang Schaeuble and his French counterpart Christine Lagarde have called on fellow EU members to proceed with the idea of the transaction tax among themselves.

"We are convinced that the European Union shall pursue its efforts towards the setting up of such a tax that is both feasible and necessary," the letter says.

The latest push for the tax comes after the idea was rejected at a meeting of the G20 group of leading developed and developing in Canada last month.

"We strongly welcome the commitment of the Belgian presidency to examine the various proposals for innovative financing in line with the international agenda and to explore, in particular, the possibility of a global financial transaction tax," the letter said.

Schaeuble and Lagarde asked Reynders to put the matter on the agenda at an informal gathering of EU finance ministers in September.

At that gathering, "Germany and France will jointly make proposals for discussion in order to carry forward a European solution," Schaeuble and Lagarde said.

Tax could help finance global projects

Supporters of the tax say that the financial sector is responsible for the international economic downturn and want a levy to avoid a repeat of the global financial crisis and rein in risky speculation on financial markets.

France's Finance Minister Christine Lagarde, right, and and German Finance Minister Wolfgang Schaeuble

Schaeuble and Lagarde want the matter to be discussed at a meeting in September

Germany has said it would introduce such a tax on its own, if the preferred global or European introduction fails.

A spokesman from the French Finance Ministry said the proceeds from the financial transaction tax could be used to finance global projects in the public good, such as combating climate change.

Former German Development Minister Heidemarie Wieczorek-Zeul said the tax revenue could be used to fight global poverty.

"Developing countries have been especially hard hit as a result of the global financial crisis. And they are the one who don't have the financial means to counter the consequences of the crisis," Wieczorek-Zeul said.

On Saturday, the head of metal and electronics industry union Gesamtmetall voiced support for the idea, saying that it would help to encourage investment away from the financial sector to manufacturing as well as raising revenue.

Gesamtmetall President Martin Kannegiesser

Gesamtmetall President Martin Kannegiesser said the "real economy" would benefit

"It would make the pushing backwards and forwards of money on the financial markets more expensive and create the incentive to invest more in the real economy," Martin Kannegiesser told German daily newspaper Berliner Zeitung.

Britain is at the forefront of opposition within the EU to such a tax, arguing that financial institutions would move to other parts of the world, such as Asia.

Sweden - which introduced a similar tax in the 1980s before scrapping it - is also opposed, warning that businesses would be forced to carry out their transactions elsewhere.

Author: Richard Connor (AFP/dpa/AP)
Editor: Sonia Phalnikar

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