EU Tax: EU finance ministers seek European bank tax
European finance ministers sought agreement on Tuesday on how to make banks pay for financial crises after the world's top economies' efforts to launch a global levy foundered.
A consensus is growing in Europe that banks should be charged for the costs of financial crises but although the bloc is moving slowly toward taking such measures to reduce bank profits, there is disagreement over how this should be done.
Finance ministers from the Group of 20 countries ditched plans for a global bank levy at the weekend 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 promised they will do so, but European diplomats said their differences were unlikely to be settled on Tuesday.
"We have always said that a financial transaction tax can be introduced on a European level," Austrian Finance Minister Josef Proell said before talks in Luxembourg at which EU countries also discussed cuts to bloated public debts.
Luxembourg Finance Minister Luc Frieden said many questions remained unanswered on such a tax, which has been promoted by Berlin as a complementary charge to a bank levy.
"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 third, to bring money into a reserve fund for bank rescues?" Frieden said.
"Luxembourg believes a tax on high-risk bank transactions would be best, and that makes more sense if it is enacted globally."
HOW TO SPEND IT
European countries have until recently been solely focused on charging banks a levy which could be calculated, for example, on the size of their loan book.
Although there is wide support for such a tax, countries disagree over what should be done with the money. Britain would use it for public spending, while Germany wants it ring-fenced for future crises.
Hungary's government on Tuesday said it wants to put a tax on banks' profits in order to boost state revenues.
In a draft report outlining the bloc's message to G20 leaders who meet in Toronto this month, EU officials said the Union could extend a levy, which could be used to wind down stricken financial groups, beyond banks to other financial services firms.
That is likely to worry 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 draft report said.
"The financial sector should contribute to the cost of crisis," it said.