European Union finance ministers cleared the way for a financial-transaction tax to move forward in at least nine member states after Austria said deadlock among all 27 could threaten the euro area’s rescue fund.
The European Commission’s tax proposal “does not, as required, have unanimous support,” Danish Economy Minister Margrethe Vestager, whose country holds the EU’s rotating presidency, said during a meeting in Luxembourg. Now that an impasse has been acknowledged, a smaller group of as few as nine nations can propose to coordinate a tax among themselves.
Germany and Austria today said a transaction tax needs to move forward in some form so their lawmakers will approve the the 500 billion-euro ($627 billion) European Stability Mechanism for it to start July 9 as planned. Austrian Finance Minister Maria Fekter urged nations to sign up to the next steps.
“If I don’t get the fellowship of more than 9 colleagues here then the ESM would not be ratified in the Austrian parliament. And this would really be a pity,” Fekter said. After the meeting concluded, she told reporters that she believed she had taken action to satisfy lawmakers in Austria’s Green Party so they will back the ESM launch.
Negotiations for a tax among all 27 EU nations foundered because of staunch opposition from the U.K., the Netherlands and others. The European Commission, the EU’s regulatory arm, last year proposed a broad-based tax on stocks, bonds, derivatives and other transactions that could raise an estimated 57 billion euros annually.
EU Tax Commissioner Algirdas Semeta today said a move to so-called enhanced cooperation among willing nations would be better than no tax at all. Now potential participants need to formally submit a transaction tax proposal with more specifics on how it would work, which must be considered by the commission and all 27 nations before the plan can progress.
“We had a show of hands today and discussed the issue intensely and saw that 10 countries said that they are willing to work on a financial transaction tax,” German Finance Minister Wolfgang Schaeuble told reporters after the meeting.
Luc Frieden, finance minister of Luxembourg, said it’s too soon to say how the tax should proceed among willing countries. “At this stage I can’t take part,” Frieden said, saying there are “too many open questions.”
U.K. Chancellor of the Exchequer George Osborne said his nation would seek assurances that a financial transaction tax among some nations would not harm the broader EU market. Swedish Finance Minister Anders Borg today reiterated his country’s skepticism toward the tax.
“A financial-transaction tax will increase borrowing costs and it will have a negative impact on European growth and what we need to do is restore growth, not to reduce it,” Borg said.
German Chancellor Angela Merkel supported speeding up efforts to introduce a tax on share and bond transactions in order to overcome a hurdle that has held up German ratification of the euro area’s new budget rules and the permanent rescue fund.
With the time frame narrowing for the government to pass the fiscal pact and bills setting up the ESM before parliament’s summer recess, Merkel agreed to ignore the lack of broad support in Europe for a financial-transaction tax and press ahead to find backers, Frank-Walter Steinmeier, the opposition Social Democratic Party floor-leader, told reporters yesterday in Berlin.
In Austria, the coalition government requires the votes of one of the three opposition parties to achieve the required two- thirds majority for the ESM in parliament. While the far-right Freedom Party and Alliance for Austria’s Future have both said they won’t vote for the ESM, the Green Party has made its vote conditional on the introduction of a financial-transaction tax. Fekter also has already budgeted revenue of 500 million euros from a European financial-transaction tax as of 2014.
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