A group of 11 eurozone members wants to introduce a financial transactions tax, even if the rest of the bloc does not. The hope is for billions in revenues, but it will be years before the tax can be implemented.
The 27 EU finance ministers rejected a tax on financial transactions once already last March - in particular because Britain and Sweden refused to back it. Swedish Finance Minister Anders Borg said in Luxembourg the tax would endanger the economic growth of his country. "We still think the financial transactions tax is a very dangerous thing," he explained.
The smaller eurozone group, consisting of the 17 countries that use the euro, failed to agree on introducing the tax because Luxembourg and the Netherlands did not agree. Dutch Finance Minister Jan Kees de Jager adamantly rejected the proposal. "We have three independent studies that suggest that a financial transactions tax would have catastrophic consequences for the Netherlands. That's why we are very much against it," he said.
Tax could bring billions
Monetary Affairs Commissioner Olli Rehn is frustrated by the lack of agreement in the European Union. A year ago he proposed a bill for a transactions tax, which would have brought in an estimated 57 billion euros into EU coffers. The tax was naturally rejected by brokers, investors and hedge funds. In order to stop companies from just leaving the EU as a result of the tax, it was to be levied regardless of where the trades took place. But, Rehn has failed to win over the opponents. "I regret that we received no positive response, both in the G20 and the European Union," he said.
Germany and France support the tax
Supporters and opponents of the tax remain fiercely intransigient in their ideological trenches. Liberal economists flatly reject the levy, while others more critical of the markets see it as an instrument to discipline the financial markets. Anti-globalization activists from the lobby group ATTAC, for instance, are among the supporters of the tax. US Treasury Secretary Timothy Geithner, on the other hand, is vehemently opposed.
The Socialist government in France this summer introduced a watered down version of the tax for France. Germany's conservative finance minister, Wolfgang Schäuble, is also in favor of the measure. Chancellor Merkel's junior coalition partner, the Free Democrats however, is against the tax. Germany's center-left opposition of Social Democrats and Greens, have long been calling for the levy.
Eleven nations take the lead
Wolfgang Schäuble and his French counterpart Pierre Moscovici have now joined forces to push through the tax, at least in some of the eurozone countries. They are counting on a clause in the EU treaties that enables a group of states to introduce separate measures, as long as at least nine member states go along.
At the finance ministers meeting in Luxembourg, a total of 11 countries have agreed to cooperate. "Everyone who claimed this was just something unrealistic have been proved wrong," Schäuble said. "The initiative from France and Germany has once again been effective. The others, in a way, are waiting for us to go through with it," he added. But even if there is now a stronger joint effort it could still take years before the tax is introduced. And the European Parliament also has a word in the matter.
A number of EU countries are already taxing their financial market, but with different models. Even Britain has a so-called Stamp Tax, albeit which affects only a small portion of the trading on the London Stock Exchange.
Austrian Finance Minister Maria Fekter is in favor of the tax. She sees it first and foremost as a new source of income. Financial markets, after all, have to participate in efforts to fix the financial crisis, she argues, saying that so far it has been mostly the taxpayers who had to jump in. "The tax would bring in money which could be used for a joint European safety net, such as insuring people's savings or for winding-down bankrupt banks," she explained.
Banking supervision still controversial
The plan to create a joint European banking oversight authority has also not seen any real progress. Joint supervision had been agreed on by European leaders in June and was to go into force in January 2013. Plenty of details remain controversial.
One of the questions is whether ailing banks from Spain or Ireland will simply be able to offload their old debts and bad loans with the new institution. Germany Finance Minister Schäuble has dismissed such concerns as nonsense and insisted that any recapitalization of banks would have conditions attached and that the countries those banks come from would have to make commitments to the European bailout funds.