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Europe to press ahead with tax on banks

Luxembourg , June 8, 2010

The European Union said on Tuesday it would press ahead with its own banking levy after the world's top economies failed to agree on taxing an industry seen as a main culprit behind the global economic meltdown.   

Finance ministers finished talks on Tuesday to tackle bloated public debts with a promise to find a way of taxing banks more, days after a meeting of the Group of 20 countries ditched such an idea.

'The EU must be proactive and determined in following that up,' Spanish Economy Minister Elena Salgado said of the G20 move.

Austrian Finance Minister Josef Proell, commenting on taxing financial or banking transactions, said: 'The G20 was a setback.
But not for Europe. We still want this and will continue to advocate it -- the sooner the better.'     

German Deputy Finance Minister Joerg Asmussen warned of growing impatience among voters at a lack of progress in calling bankers to heel after the crisis.

'There is nervousness in our parliaments and among the people that not enough is being done on financial reform,' he said. 'That is why we want to see results.'    

'Over and above the bank levy, we should introduce a financial transaction tax. We will try to reach a global consensus but if that is not possible, we ... should move forward in Europe.'         

A consensus is growing in Europe that banks should be charged for the costs of financial crises but though the EU is moving slowly towards taking such measures to cut lenders' profits, there is disagreement over how this should be done.   

Last weekend, the G20 finance ministers dropped plans for a global bank levy in the face of opposition from Japan, Canada and Brazil, whose lenders sailed through the credit storm unharmed.

This throws down the gauntlet to the European Union to go it alone. Many of the EU's leaders have said they will do so, but European diplomats said on Tuesday that differences remained in their approach.   

A European levy on banks could be calculated, for example, on the size of their loan book. Britain and France would use the money for public spending, while Germany wants it ring-fenced for future crises.   

A financial transaction tax is even more controversial because many believe such curbs in Europe would drive trading to other continents.    

Luxembourg Finance Minister Luc Frieden said many questions remained unanswered.
 'We need to discuss the goal of such a tax. Is the goal to make certain financial activity more difficult? Or to bring more money into state coffers? Or thirdly, to bring money into a reserve fund for bank rescues?'    

In a draft report outlining the bloc's message to G20 leaders who meet in Toronto this month, EU officials signalled the Union could extend a levy, which may be used to wind down stricken financial groups, beyond banks to insurers.

'A levy should be applied to all banks, and possibly to other categories of financial institutions on the grounds that their failure would pose risks to financial stability and/or because they would profit from financial stability,' the document said. - Reuters




Tags: banking | Europe | tax | meltdown |

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