European finance ministers struggled to agree a long promised financial transaction tax on Saturday, with Germany urging a watered-down version amid resistance from France, eager to protect its lucrative derivatives trading sector.
“The first step will only be small, that’s unfortunately true,” said German Finance Minister Wolfgang Schaeuble, an influential backer of the scheme on the sidelines of European Union minister talks in Milan.
“Given the different situations in the different countries, we will probably only agree on a small first step, but a small first step is better than none,” Schaeuble said.
Blamed for the financial crisis that had sparked a global recession, public anger in 2011 against bank traders ran high.
This pushed the European Commission, backed by Germany and France, to propose a tax on financial transactions.
The idea was inspired by the ‘Tobin Tax’, named after Nobel laureate James Tobin, who proposed it in the 1970s as a means of reducing speculation in global markets and redistributing Wall Street profits to poor countries.
In the European version, the proceeds would go towards financing future bailouts, sparing the taxpayer from saving big banks caught out by over-speculation.
Many member states, led by Britain eager to protect its City of London financial hub, opposed the scheme, leaving 11 countries, including France and Germany, to go it alone.
But with public attention turned away from the crisis, some of those countries, notably France, have cooled to the idea, preferring to enact a watered-down version that would be less onerous on key types of financial trades.
The derivatives trading market “is very developed” in Paris, a European diplomatic source said.
For now, there is little detail on what the tax would entail, but another EU diplomat said the aim is to have a proposal “by the end of the year”.
In 2013, the Commission floated a 0.1 percent levy on stock and bond trades and 0.01 percent on the more complex derivatives, which would raise about 35 billion euros ($45 billion) a year, it said.
The banking lobby has been fierce in its opposition to a transaction tax.
“Even when an FTT is introduced in a limited number of member states in the EU its effects will be detrimental to the entire European economy,” the European Banking Federation said in the runup to the talks in Milan.
“Despite this overwhelming evidence against the merits of an FTT, the plan remains on the table,” the lobby group added.
Despite the resistance, Germany’s Schaeuble said he was hopeful that a scaled-back tax could gain support and eventually attract more member states.
“I am very optimistic that, if we make the first step, we will create a knock-on-effect that leads to further steps and that could convince other countries to join in,” he said.