STOCK MARKET WATCH - Tuesday, 13 March 2012

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69. Euro Zone Split over Financial Transaction Tax

http://www.spiegel.de/international/europe/0,1518,820965,00.html

It's being greeted as a breakthrough. When the 27 European Union finance ministers meet in Brussels on Tuesday, they plan to discuss the introduction of a financial transaction tax in Europe. It's the first time that the issue has been on the agenda at such a meeting. Supporters of the tax argue that is evidence that the tax is making progress in its long journey through the EU's institutions.

Indeed, a certain amount of progress can be seen in the ongoing battle over a tax on financial transactions -- at least on paper. French President Nicolas Sarkozy and German Chancellor Angela Merkel, the EU's two most powerful leaders, have made the issue a priority. And in September 2011, the European Commission presented a draft directive which foresees a financial transaction tax on all stock, bond and derivative transactions within the EU. The tax could come into force in 2014 -- provided all 27 EU members agree to it.

Therein lies the rub. There is little chance of such an agreement. Officially, supporters of the tax are still aiming for the "comprehensive solution," as the Commission's proposal is dubbed. But an agreement is already regarded as a pipedream. A whole row of naysayers, led by Britain and Sweden, are opposed to the tax unless it is introduced globally. They consider it to be detrimental to growth and fear that they will become less competitive on the international playing field if they introduce a tax. The unanimity principle applies to tax matters within the EU, so even a single veto would be sufficient to derail the plan.