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16th Aug 2022

French minister stokes divisions on EU financial tax

A junior minister in the French government has predicted there will be an EU financial transactions tax by the end of 2012 in remarks likely to annoy fellow EU countries on many levels.

EU affairs minister Jean Leonetti spoke out on the subject on the French LCI news channel on Wednesday (4 December), saying: "It's on the agenda of the next EU summit, Nicolas Sarkozy and Angela Merkel have decided it and it will be put in place before the end of 2012."

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He added: "France and Germany have already agreed on it. And I believe the new Italian government, with which we have been in contact, is not opposed. Twenty six out of 27, in fact all the EU countries except Great Britain have no objections to the idea, and except Sweden, which had a bad experiment in this area."

Leonetti's prediction is more hawkish than that of earlier pro-tax advocates.

The French government previously said it would put forward a study on the subject on 23 January with a view to implementation in 2013.

The European Commission last September put out detailed proposals on a tax designed to capture €57 billion a year from financial companies which do business in the EU and to enter into force on 1 January 2014.

The junior minister's attempt to depict the UK as a lone or near-lone opponent of the measure rubs salt into the wound of the December EU summit in which London vetoed an EU Treaty change in an attempt to get an opt-out on the tax.

Despite his auto-correction on Sweden, he understated the extent of antipathy to the scheme.

When EU finance ministers last discussed the idea in November, Austria, Belgium, Finland, Greece, Hungary, Portugal and Spain - none of which have large financial sectors - backed the idea.

But Bulgaria and the Czech Republic also voiced concerns, while Polish finance minister Jacek Rostowski at the time said the Union is "very, very divided" on it.

For his part, Swedish minister Anders Borg said it would "reduce growth and increase borrowing costs" in indebted EU countries, as well as making it harder for EU banks to build up rainy day capital.

Sweden unilaterally introduced a tax in the 1980s but saw a sharp decline in trading of some financial products on its territory - a precedent which indicates what might happen to the City of London if the EU goes it alone without US or Asian support.

Meanwhile, Leonetti's language - that French and German leaders "Nicolas Sarkozy and Angela Merkel have decided it" - will do little to assuage fears in smaller EU countries that the pair have hijacked power in an EU system which is supposed to work on the basis of consensus among the 27 member states on sensitive issues such as taxation.

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