France to push for financial tax at Berlin meeting
French President Nicolas Sarkozy is meeting German Chancellor Angela Merkel in Berlin on Monday (9 January) to seek support for a financial transactions tax that risks aggravating EU division on how to handle the financial crisis.
"We won't wait for others to agree to put it in place, we'll do it because we believe in it," he said on Friday after talks in Paris with Italian Prime Minister Mario Monti in reference to Britain's opposition to the new tax.
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Amid ever-widening disagreement in the Union on how to react to the crisis, British Prime Minister David Cameron said on Sunday he would block any attempt to introduce an EU-wide toll, but added that if France wants to go it alone it is "free to do so."
"The idea of a transactions tax put in place only in Europe that doesn't include other jurisdictions, what that would do is it would cost jobs, it would cost us tax revenue, it would be bad for the whole of Europe," he told the BBC.
Britain fears that the so called 'Tobin tax' - named after Nobel prize-winning economist James Tobin - would see financial institutions leave London for softer tax regimes such as Switzerland or China.
Protecting the interests of the City of London was one main reason why Cameron in December vetoed an EU treaty change. The British leader demanded "safeguards" that no further legislation will be passed to curb the freedom of financial markets. The veto isolated Britain as the 26 other EU countries went with a new inter-governmental treaty on financial discipline without it.
Other EU leaders including Angela Merkel and Mario Monti still back the idea of an EU-wide Tobin tax.
"It is necessary that the different countries do not go it alone in the application of this tax. I believe in a European perspective," Monti said on Friday. Merkel spokesman Steffen Seibert said the German government is pushing for an EU tax even though there is no global agreement on the subject at the level of the G20 countries.
For his part, French state secretary Benoist Apparu said on Sunday that a first draft of legal proposals for an EU tax will be discussed by finance ministers "probably in February." He added that Paris will "lead by example" and vote on a France-only tax "ahead of the presidential elections" in April.
French finance groups have warned against any attempt to play politics with th sector.
Association Paris Europlace - representing key players in the French financial sphere - said the tax would hurt the country's economy unless it was implemented across the Union.
"If this tax was applied only in France, it would inevitably lead to an exodus of banks, insurance companies and management, and would reduce the role of Paris in the European and global economy," it said.
Audit firm Ernst & Young estimates that even an EU-wide tax would have a negative impact on revenues.
Last September, the European Commission published an impact study of the tax suggesting it could raise annual revenue of around €37 billion.
Ernst & Young said in its report the commission made a "number of optimistic assumptions about the likely decline in trading activity that would result" and instead predicted that it would create a €116 billion hole in EU countries' public finances.