EU to press for global financial transaction tax

The European Union will press for an agreement on introducing a global financial transaction tax at the G-20 summit in Toronto by the end of this month.

At the conclusion of their one-day summit in Brussels on Thursday, the heads of states of the 27-nation bloc said in a joint communique that the EU representatives of the G-20 will seek the support of other participating nations for “further developing and exploring” the possibilities of introducing a global financial transaction tax.

The EU should lead efforts to arrive on a global agreement “for introducing systems for levies and taxes on financial institutions,” the communique said.

German Chancellor Angela Merkel told journalists after the meeting that the agreement among EU leaders on a common position has created a “good negotiating basis” for the G-20 summit.

“In addition to a system of levies and taxes for financial institutions, we also want to explore and develop the introduction of a global financial transaction tax,” Merkel said.

The financial transaction levy plan was also endorsed by the British government, which -- until now -- had been very sceptical about it. The British government was concerned that the introduction of such a tax could diminish London’s position as a major financial centre.

President of the European Council Herman Van Rompuy said the EU leaders have agreed to the introduction of the bank levy even without the participation of G-20 partners.

The proposed bank levy would require financial institutions to pay for the costs of future economic crises, whenever they arise.

The European commission has proposed the creation of a network of national crisis funds, through which financial institutions can pay the bank levy.

To restore the confidence of financial markets in the Eurozone nations’ ability to contain the present debt crisis, the EU leaders agreed to publish the results of “stress tests” on the financial health of leading banks.

The EU leaders also agreed on closer economic policy coordination, and enforcement of tougher budgetary discipline to prevent a repeat of the Eurozone debt crisis.

Though they agreed on the need to coordinate their national budgets, there were differences over a proposal by the European Commission that all the member nations present their budgets to the commission for a review before taking them to their respective parliaments.

A joint initiative by Germany and France to impose punitive sanctions on nations that repeatedly violate the Eurozone stability criteria found little support from their EU partners.