Germany, France seek to revive transaction tax plan

Mon Feb 17, 2014 8:45am EST
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By Huw Jones

LONDON (Reuters) - Germany and France will lead a face-saving bid this week to revive a flagging project to tax financial transactions in 11 euro zone countries and allay fears it could hamper economic recovery.

The tax is expected to be scaled back from an original plan to introduce it from January to raise 35 billion euros ($48 billion) annually to make banks pay back some of the money received in the 2007-09 financial crisis.

The idea of a transaction tax failed to win backing globally due to U.S. opposition, and a pan-European Union tax or even one covering all 18 euro zone countries also found no support. Britain, Ireland, the Netherlands and Sweden are among countries that have opposed it on grounds that it would encourage banks and finance firms to relocate trading activities.

Although the levy is likely to end up being a shadow of the original proposal, its introduction in some form would allow Germany and France to claim a victory.

The latest plan for the tax is expected to be on the agenda when Germany and France meet in Paris on Wednesday.

Soundings among all the 11 countries will first be taken on the sidelines of the regular monthly meeting of the EU finance ministers in Brussels on Monday.

"I hope that we take a step forward on that," Wolfgang Schaeuble, Germany's finance minister said when arriving in Brussels ahead of the planned talks.

"We may possibly have to move ahead step by step," he told journalists, in an apparent reference to a phased introduction of the tax.   Continued...

German Finance Minister Wolfgang Schaeuble speaks during an interview with Reuters at the Finance Ministry in Berlin, February 10, 2014. REUTERS/Tobias Schwarz