SHARE
COPY LINK

EUROPEAN UNION

Germany breaks finance tax deadlock

Europe's finance ministers crawled towards a compromise on a disputed financial transactions tax Saturday, after a German plan to break a months-long deadlock on the issue won cautious support.

Germany breaks finance tax deadlock
Photo: DPA

Ministers effectively agreed to park a European Commission proposal for a wide-ranging EU-wide levy on the financial sector and consider Berlin’s plan to tax trades on company stocks and shares.

In a letter to his colleagues, German Finance Minister Wolfgang Schäuble acknowledged that his wish to see a wide-ranging tax introduced was unlikely in the face of British opposition and instead proposed “an intermediate step.”

“This would entail a tax payable on all transactions involving shares of corporations listed on a stock exchange, with the tax levied according to the place where the corporation has its registered office,” said Schäuble.

Such a move would be based on a tax already in force in Britain – stamp duty – added the Berlin proposal, making it harder for London to block.

The suggestion won broad approval, with French Finance Minister Francois Baroin deeming it “wise” and stressing that “we have to move forward on this issue.”

The finance minister of Sweden, which along with Britain, has been sceptical over a broad financial transaction tax, also showed a willingness to compromise.

“We have some differences of opinion,” admitted Anders Borg as he briefed reporters after the meeting. “We will try to work constructively to find something that is common ground for the whole of the EU.”

He stressed that the Commission’s proposal, which seeks to tax not only trading in company shares but also complex financial instruments like derivatives, should be taken off the table.

“It’s problematic for the recovery, for households and for corporates,” said Borg.

Danish Finance Minister Margrethe Vestager, who hosted the meeting as Denmark holds the rotating EU presidency, said ministers would focus “primarily on alternatives, because that’s where you find the most constructive atmosphere.”

Speaking to reporters after the meeting, Schäuble said that experts would come together to thrash out the remaining issues. “We made good progress,” he said.

“We agreed that if we maybe don’t reach the perfect solution of a broad financial transaction tax at a European level, because we need a unanimous decision for that, we should … intensively look at a working group,” he added.

“It is an important step in the right direction.”

The tax aims to make the financial services industry pay its way in the future after banks especially benefited heavily from taxpayer bailouts when the mortgage meltdown in the United States sparked the 2008 global financial crisis.

The Commission’s proposal from September has been strongly supported by nine countries, including European power couple France and Germany.

But Britain, home to 80 percent of Europe’s finance industry, has warned that it would prompt investors to flee the 27-nation bloc.

Despite the opposition, Baroin stressed the “determination” of the nine countries backing the introduction of a broader tax, describing it as “an essential political project for us.”

The German proposal insisted: “Negotiations on the Commission’s proposal for a common system of financial transactions tax (FTT) should not be abandoned or postponed.”

“I have not given up on the FTT,” stressed Schäuble.

AFP/hc

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

EUROPEAN UNION

The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.

SHOW COMMENTS