GERMANY, France and nine other euro zone countries got a go-ahead today to implement a tax on trading, despite the reservations of financial centres such as Ireland, London and Luxembourg that are worried it could drive business out of Europe.
EU finance ministers gave their approval at a meeting in Brussels, allowing 11 states to pursue a financial transactions tax. The 11 are: Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia.
The levy, based on an idea proposed by US economist James Tobin more than 40 years ago but little considered since, is symbolically important in showing that politicians, who have fumbled their way through five years of financial crisis, are getting to grips with the banks blamed for causing it.
"This is a major milestone in tax history," Algirdas Semeta, the European commissioner in charge of tax policy, said after ministers backed the scheme.
Under EU rules, a minimum of nine countries can cooperate on legislation using a process called enhanced cooperation as long as a majority of the EU's 27 countries give their permission.
Ireland supported the tax plan in principle but kept a low profile in the campaign for the deal, following London’s lead. Ireland’s IFSC employs more than 25,000 people and there were concerns that adoption of the tax here would affect trade in Dublin.
Following today’s decision, the European Commission will put forward a new proposal for the tax, which if agreed on by those states involved, would mean the levy could be introduced within months.
Although critics say such a tax cannot work properly unless applied world-wide or at least Europe-wide, some countries are already banking on the extra income from next year, which one EU official said could be as much as €35bn annually.
"We will be able to put it into place quickly," said Benoit Hamon, a junior minister in the French finance ministry who was at the meeting.
Germany and France decided to push ahead with a smaller group after efforts to impose a tax across the whole EU and later among just the 17 euro zone states foundered. Sweden, which tried and abandoned its own such tax, has repeatedly cautioned that the levy would push trading elsewhere.
Critics say the levy could open another rift in Europe, where the 17 states using the euro are deepening ties in order to underpin the currency, and there is the growing risk that Britain could even leave the European Union.