Monday

25th Jul 2016

Monti and Merkel: Financial tax must cover whole EU

  • Italy's Mario Monti (l) has joined the financial transactions tax camp (Photo: Présidence de la République - C.Alix)

Italian Prime Minister Mario Monti and German Chancellor Angela Merkel on Wednesday (11 January) said they would support an EU-wide financial transactions tax, But Berlin backed down on the idea of a eurozone-only levy.

“We are open to supporting this initiative at the EU level,” Monti said at a press conference alongside Merkel in Berlin, marking a shift from his predecessor Silvio Berlusconi who had rejected the idea.

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The proposal remains controversial. Britain, Sweden and Denmark, as well as euro-member Malta, have spoken out against it in the absence of a global deal, fearing investors will move to more favourable countries such as Switzerland or Caribbean tax havens.

French President Nicolas Sarkozy, who wants an agreement before his re-election bid in April, recently put the issue back on the table by saying France would unilaterally press ahead with such a tax, hoping eventually for it to be applied in the whole of the 17-nation eurozone.

Merkel on Monday voiced sympathy with Sarkozy. But opposition from her Liberal junior coalition partner forced her to backtrack.

"We [the Christian Democratic Union] can imagine it in the eurozone but clearly as the head of a government, you need to have the agreement of the coalition partners ... Therefore, when I spoke on Monday, I made it clear it was a personal opinion."

German institutions and banks on Wednesday condemned efforts to push ahead with a tax which does not include top financial centres such as London.

Monti also said he is "not sure if it makes sense only at eurozone level."

Monti, who studied at Yale with economist James Tobin - the economist who first proposed the levy - remembered his mentor likening the tax’s popularity through history to the fabled Loch Ness Monster.

“You see it, it disappears, then reappears ... In this phase I think it has more sense than in others given the velocity of financial transactions, which can cause damage, and not just benefits," Monti said.

Public support for the tax, however, is solid, with a December Eurobarometer showing that two thirds of Europeans back the idea amid a backlash against the banks and speculators blamed for the crisis.

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