European finance ministers have been sparring over the introduction of a bloc-wide financial transaction tax ever since the first global financial crisis rolled around in 2008.
A meeting of EU finance ministers in Brussels once again adjourned without agreement on introducing a financial transaction tax. Supporters and opponents have irreconcilable differences.
Germanyand France, in particular, support the tax as a toll for forcing the financial sector to shoulder more of the costs of the current financial and debt crisis. They have managed to marshal seven other countries behind them, but have again failed to break the resistance of countries like Britain, with its financial powerhouse in London.
For German Finance Minister Wolfgang Schäuble the debate is a fundamental tax issue.
"Just like we subject the exchange of goods and services to sales taxes, we must consider whether the selling of financial products and services, which are not taxed, should rightfully be exempt. I tend to think this is not right, but there are, of course, a range of arguments in favor and against," Schäuble said.
This does not sound especially pugnacious, but this may be because the coalition government in Berlin is itself divided on the issue. Chancellor Merkel's Christian Democrats support the financial transaction tax, while the Free Democrats only support a streamlined version on a smaller range of transactions - and then only if it applied to the entire European Union.
France, on the other hand, sounds more convinced. President Nicolas Sarkozy has already announced that, if push comes to shove, he would introduce a transaction tax unilaterally. Finance Minister Francois Baroin is well aware of the resistance, but wants to overcome it.
"We will take the necessary time to achieve the broadest consensus possible for a principle which the citizens of all the countries of the eurozone and probably the entire EU desire. What counts is what is possible, and then we will have achieved what most countries in Europe want," said Baroin.
United in division
But not all countries - the fiercest opponent of the tax is Britain. It is worried about its finance industry in London, which is by far the most important finance center in Europe. If London were to impose such a tax, a portion of its business would emigrate to New York, Hong Kong or Singapore, argues the British government.
But Britain is not alone, Sweden is also opposed. They had a transaction tax once before, but had a bad experience with it and repealed it. Finance Minister Anders Borg has advised his colleagues against implementing the proposal.
"We think that the financial transaction tax will be difficult to accept. It would increase the cost for home, business and government loans. And it is also a proposal that is not good for growth in Europe," Borg said.
A number of eurozone countries in the past were prepared to impose the tax just in the euro currency area, if necessary. But not all of the 17 currency users agree on this point either. Luxembourg, Ireland and the Netherlands all have objections.
It is no accident that the financial industry in these three countries is an important economic sector. "It would be a disaster if nothing came of this," said Schäuble.
Tuesday's finance ministers meeting in Brussels focused on an EU Commission proposal, which called for imposing the tax on stocks and bonds throughout the entire European Union beginning in 2014. It is estimated the tax would bring in nearly 60 billion euros annually.
Not surprisingly, however, the Council of Ministers adjourned without an agreement. And since the EU requires consensus on all matters involving taxation, the prospects for introducing this tax do not look particularly rosy.
The next opportunity to explore avenues for compromise will be an informal meeting of EU finance ministers in Copenhagen at the end of March.
Author: Christoph Hasselbach / gb
Editor: Michael Lawton