Europe seeks 'social' tax on banks worldwide

I / Brussels December 11, 2009, 16:09 IST

Europe today urged the IMF to introduce a "social" tax on banks, insurers and markets to repay taxpayers' support during lean years with a slice of boom-time profits.

Leaders of the European Union backed a fresh call by British Prime Minister Gordon Brown, supported by French President Nicolas Sarkozy, for the International Monetary Fund (IMF) to examine a global so-called 'Tobin' tax.

The 27 member states said that an "economic and social contract" needs renewing "between financial institutions and the society they serve... Ensuring that the public benefits in good times and is protected from risk.

"The European Council encourages the IMF to consider the full range of options including insurance fees, resolution funds, contingent capital arrangements and a global financial transaction levy in its review."

While the language of a two-day EU summit's draft conclusions erred on the side of caution, the inclusion of the idea -- which has been kicking about since the 1970s -- represents alignment between Europe's three core powers.

German Chancellor Angela Merkel already sought support from fellow EU leaders in September for such a proposal to be taken to a summit of the Group of 20 countries in Pittsburgh, although they refused to back her then.

But Brown sees an "urgent need" for a new deal between banks and society and fleshed out a range of ideas in an article penned with French President Nicolas Sarkozy, aimed at American policy makers.