LUXEMBOURG - A plan for European Union countries to tax financial transactions and use the proceeds to fund future bank bailouts ran aground on Friday, with just 10 out of 27 countries prepared to support it.
The impasse over the proposal by the European Commission, the European Union's executive body, highlights the difficulty of getting European politicians to agree on just one plan as they wrestle with the incredibly complex problem of containing the debt crisis that threatens to undermine the euro.
The proposed financial transactions tax would charge banks 0.1 per cent of the value of sales of stocks or bonds, and 0.01 per cent per derivative contract. Money raised by the tax would then be used to fund future bank bailouts. Some countries such as the Netherlands and the U.K . are vehemently opposed to the scheme.
George Osborne, the British chancellor of the exchequer, said such the tax would hurt the economies of countries that adopt it, as financial transactions will be re-routed to countries outside the union.
"I would have thought we want to be attracting business rather than the other way around," he said.
However, finance ministers from 10 countries that endorsed the idea — including Germany, France, Spain, Greece, Poland, Italy and Austria — said they still wanted to forge ahead with the plan and hoped that some of the countries who are still undecided would join them later.
German Finance Minister Wolfgang Schaeuble said he would have preferred all 27 EU member countries adopt the tax, but he will still pursue it. "We emphatically want to move ahead," he said.
"I will not allow this project to die," Austrian Finance Minister Maria Fekter said.
After it became clear the plan would not be adopted by all, the debate ended without a clear result. European Union lawyers then outlined the painstaking procedure for a group of countries to negotiate a side agreement within the EU. As a first step, at least nine countries must draft a proposal and put it forward as a so-called "enhanced co-operation."
"So it's not (happening) tomorrow then," joked Denmark's Margrethe Vestager, who was chairing the meeting, after hearing the process explained.
This is not the first time cracks have appeared in the European Union over its response to the financial crisis. In March, the so-called fiscal compact, which would introduce stricter requirements for national budgetary discipline, was signed by 25 EU countries — but not Britain and the Czech Republic. If the treaty is ratified, it will apply to those countries that ratify it rather than to all EU countries.
Don Melvin can be reached at http://twitter.com/Don_Melvin