03 February 2014

Bloomberg: Merkel coalition signals retreat on broad financial market tax

Chancellor Merkel's coalition said it was ready to accept a levy on stock trades as part of a first step towards a European tax on all financial transactions, amid resistance to a broader application.

The retreat, signalled by lawmakers from the two governing parties, may advance Germany’s goal of teaming up with France to enlist Italy and Spain to enact the tax in the four biggest euro-area economies. French Finance Minister Pierre Moscovici, whose country started taxing share transactions last year, said on January 27 that broader fees risk driving investors away.

“We will continue to work for the broadest possible scope, as agreed in the coalition accord, but we’re also aware of the unanimity principle” in the European Union, Antje Tillmann, finance policy spokeswoman for Merkel’s Christian Democrat bloc in parliament, said in a written reply to questions. “If we can’t convince our European partners, we of course wouldn’t close our minds to a discussion of a gradual introduction.”

Germany’s Social Democratic Party, Merkel’s third-term coalition partner since December, would accept a phased-in financial transaction tax if there’s a commitment at the start to the timing of all later stages, said Carsten Sieling, a Social Democrat on Germany’s lower-house Finance Committee. “The SPD insists that the federal government achieve the introduction of the tax as a complete package, if possible", Sieling said in a phone interview. Derivatives are the biggest danger for markets and must be included in any plan, he said.

The two countries will advance the introduction of the FTT “in a responsible way” without damaging markets and the strength of the countries’ financial sectors, German finance minister Wolfgang Schäuble said at a joint [French/German] news conference that included German Economy and Energy Minister Sigmar Gabriel, a Social Democrat and Merkel’s deputy.

“If we no longer have financial markets in Europe, if Europe has no more stock exchanges, then the financial resources will go elsewhere", Moscovici told French radio hours before Schäuble’s visit.

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