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EU countries divided on financial transaction tax

The European Union, struggling to hold together under financial and political pressures, may soon fracture a bit further over the issue of whether to tax financial transactions to make banks pay for their own bailouts.

As EU finance ministers trooped into a meeting in Luxembourg on Friday morning to attempt to forge a unified response to Europe’s financial crisis, unanimity on the tax issue was nowhere in sight. With countries including the Netherlands and Britain unalterably opposed to the proposal, finance ministers from other countries said they would likely break away to institute the tax in a smaller group.

“I will not allow this project to die,” Austrian Finance Minister Maria Fekter said on her way into the meeting. “I expect that there will be nine countries, amongst them non-euro countries,” that will decide to implement the tax.

German Finance Minister Wolfgang Schaeuble said there would be a vigorous effort to move forward on the proposal with all 27 EU member countries. “We emphatically want to move ahead,” he said. But prospects for Europe-wide success seemed slim.

Some countries said they shared the goal of the current proposal but not the means put forward for achieving it.

Denmark’s economic affairs minister Margrethe Vestager said the idea “is a good signal that it’s not taxpayers who are going to bail out banks in the future,” although her country opposes the specific plan that has been put forward by Germany and France.

Vestager said she expected Germany and France to indicate Friday whether they want to pursue the idea as it stands with a limited group of countries, or whether other ideas appear promising for a wider group.

Swedish Finance Minister Anders Borg said the proposal was simply a bad idea.

“The transaction tax will increase borrowing costs and it will have a negative impact on European growth,” Borg said. “What we need to do is to restore growth, not to reduce it.”

This is not the first time cracks have appeared in the European Union over its response to the financial crisis. In March, the so-called fiscal compact, which would introduce stricter requirements for national budgetary discipline, was signed by 25 EU countries — but not Britain and the Czech Republic. If the treaty is ratified, it will apply to those countries that ratify it rather than to all EU countries.