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EUROPEAN UNION

France, Germany, Spain and Italy to sidestep Hungary on global tax plan

Germany, France, Spain, Italy and the Netherlands said Friday they would implement an international minimum tax on big corporations, sidestepping Hungary's opposition to an EU-wide plan.

French Minister of the Economy and Finance Bruno Le Maire (R) and German Finance Minister Christian Lindner
French Minister of the Economy and Finance Bruno Le Maire (R) and German Finance Minister Christian Lindner speak with journalists as they arrive for an informal meeting of EU Economy and Financial Affairs Ministers and Central Bank Governors on September 9, 2022 in Prague, Czech Republic. (Photo by Michal Cizek / AFP)

The decision by the top European economies effectively ends months of effort to implement the tax jointly across all 27 member states.

The 15-percent minimum tax was one of two pillars of a major international agreement decided at the OECD and signed by more than 130 countries, including Hungary and the United States.

“Should unanimity not be reached in the next weeks, our governments are fully determined to follow through on our commitment,” the countries said in a joint statement.

“We stand ready to implement the global minimum effective taxation in 2023 and by any possible legal means,” the countries added.

French Finance Minister Bruno Le Maire, who initiated the joint text, said that “tax justice must be a priority for the European Union”.

“We will put in place minimum taxation from 2023, either through the European route or through the national route,” said Le Maire.

Christian Lindner, his German counterpart, said Germany will “if necessary” adopt the tax “independently of an agreement at the European level”.

The EU’s original ambition was that the 27-member bloc would be the first jurisdiction to implement the OECD-brokered agreement. The bloc-wide plan needed the vote of all EU countries in order to pass.

The resistance by Hungary came as the relationship with its EU partners remained fraught, with Budapest along with Warsaw seen as steering away from the bloc’s democratic values.

The Hungarian veto of the minimum tax is seen by many in Brussels as a means of pressure to obtain the release of seven billion euros ($7.3 billion) in grants planned under the European pandemic recovery plan.

Poland’s acceptance of the minimum tax came after Brussels accepted Warsaw’s recovery plan, which should see it receive 36 billion euros in grants and loans over the next several years.

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ECONOMY

‘Very small breather’: German inflation unexpectedly slows down

German inflation unexpectedly slowed in November after months of increases, preliminary data showed Tuesday, as sky-high energy prices begin to ease.

'Very small breather': German inflation unexpectedly slows down

The inflation rate in Europe’s top economy fell back to 10 percent this month, federal statistics agency Destatis said, after hitting a record high of 10.4 percent in October.

Analysts surveyed by Factset had expected an acceleration of 10.5 percent in November.

The surprise dip comes as “energy prices have eased slightly”, Destatis said, although it noted they were still 38.4 percent higher than a year earlier.

As in other countries across Europe, Germany’s recent consumer price hikes have been fuelled by soaring food and energy costs in the wake of Russia’s war in Ukraine.

READ ALSO: EXPLAINED: 10 ways to save money on your groceries in Germany

The German government has unveiled a €200 billion energy fund to shield households and businesses from price shocks, and has raced to diversify supplies after Russia cut gas deliveries.

Tuesday’s inflation data offered a “very small breather” for a country bracing for a difficult winter, said ING bank economist Carsten Brzeski.

But he cautioned it was too soon to hope inflation was on a downhill path.

“The pass-through of higher wholesale gas prices is still in full swing. Many households will see the first price increase only as of January 1st,” he said.

READ ALSO: How energy prices are rising across Germany

European Central Bank President Christine Lagarde echoed that sentiment Monday, when she said the eurozone had not yet reached peak inflation.

Like other central banks around the world the ECB has moved aggressively to curb red-hot inflation, lifting its key interest rates by two percentage points since July.

Lagarde has repeatedly said the bank would continue to raise rates in its battle to bring inflation back to its two-percent target.
The next rate hike is expected at the ECB’s upcoming December 15th meeting.

READ ALSO: Has Germany’s sky high inflation finally peaked?

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