'Rapid Outcome' Germany Wants Transaction Tax by Mid-2012
German Finance Minister Wolfgang Schäuble and eight of his European counterparts have called for an EU-wide financial transaction tax to be finalized by the middle of the year. The German opposition is threatening to put the brakes on the fiscal pact if the government doesn't commit to it.
Since the start of the European debt crisis, there have been repeated calls for a financial transaction tax to be introduced within the European Union. Now German Finance Minister Wolfgang Schäuble and eight of his EU colleagues are pushing for such a tax to be finalized by the middle of the year.
"We strongly believe in the need for a financial transaction tax implemented at (the) European level," the finance ministers wrote in a joint letter to Danish Finance Minister Margrethe Vestager, which has been seen by SPIEGEL. Denmark currently holds the rotating EU presidency.
In order to reach a "rapid outcome," the ministers write that they would "welcome very much a decision by the Presidency to accelerate the analysis and negotiating process." Alongside Schäuble, the signatories include French Finance Minister François Baroin and Italian Prime Minister Mario Monti, who is also the country's finance minister. In the letter, the ministers call for the process to be completed within the Danish presidency, which runs until the end of June. Discussions should be started on compromise proposals "to overcome any difficulties," they write.
The issue of a transaction tax is expected to be discussed at the meeting of EU finance ministers in Brussels on Monday and Tuesday. The Danish EU presidency confirmed that the tax was on the agenda. "I do not expect that we will draw any final conclusions at this meeting but we will return to the matter at a meeting (of EU finance ministers) towards the end of the Danish presidency," Finance Minister Vestager said in a statement Monday.
Schäuble has tasked the German Finance Ministry with developing its own proposal for a financial transaction tax, SPIEGEL has learned. He has told the ministry's taxation department to work toward a comprehensive solution. According to Schäuble's vision, the new levy would apply to all financial transactions, including stock and bond sales, currency transactions and all kinds of derivatives. At the same time, the German finance minister wants the proposals to be simpler and more practical than the model which the European Commission presented in September 2011.
The tax proposed under the Commission's model would be paid in the European country where the financial institution is located, and would be levied on the sale of shares and bonds as well as on derivatives. The Commission calculates it could raise 57 billion ($75 billion) per year. The proposal has, however, been met with stiff resistance from countries such as the United Kingdom, which fears for the impact on the City of London, Europe's top financial center.
Meanwhile, the opposition center-left Social Democrats are considering linking the issue of a transaction tax to the planned European fiscal pact. The German parliament, the Bundestag, is scheduled for a May 25 vote on the pact, which was agreed upon by 25 EU member states at a summit in January.
The SPD leadership is coming under increasing pressure from its youth wing, the Young Socialists, to support the fiscal pact in the Bundestag only if the government commits itself to a financial transaction tax. "As long as the financial transaction tax is being blocked, the SPD can not approve a fiscal pact," the Young Socialists executive committee wrote in a resolution.
Dependent on Opposition Support
The fiscal pact will have to be approved by a two-thirds majority in the Bundestag, as it impacts on the parliament's budgetary authority. That means that Chancellor Angela Merkel's government will be dependent on SPD support to get the pact approved.
SPD leader Sigmar Gabriel said that his party was insisting on such a tax in talks with the government over the European fiscal pact. "The voting behavior of the SPD depends on the results of the negotiations," Gabriel told the news agency DPA.
Many SPD members advocate a transaction tax to help overcome the crisis. "A speculation tax could be used to provide stimulus for growth and employment," said Ralf Stegner, head of the SPD's group in the Schleswig-Holstein state parliament.
The government itself is split over the issue. The business-friendly Free Democratic Party (FDP), which governs in coalition with Merkel's conservative Christian Democratic Union and its Bavarian sister party, the Christian Social Union, has previously opposed a financial transaction tax. They are now coming under pressure to change their position. Some FDP politicians, such as Wolfgang Kubicki, the FDP floor leader in Schleswig-Holstein, are urging willingness to compromise on the issue.
dgs/SPIEGEL - with wires