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European Commission financial tax opposed by UK | European Commission financial tax opposed by UK |
(about 2 hours later) | |
The UK has said it will "resist" a financial transaction tax on EU members proposed by the European Commission. | The UK has said it will "resist" a financial transaction tax on EU members proposed by the European Commission. |
The tax would raise about 57bn euros ($78bn; £50bn) a year and would come into effect at the start of 2014. | The tax would raise about 57bn euros ($78bn; £50bn) a year and would come into effect at the start of 2014. |
Commission president Jose Manuel Barroso said banks must "make a contribution" as Europe faced its "greatest challenge". | Commission president Jose Manuel Barroso said banks must "make a contribution" as Europe faced its "greatest challenge". |
The UK said it had no objection to a financial tax in principle, but it would have to be introduced globally. | The UK said it had no objection to a financial tax in principle, but it would have to be introduced globally. |
A transaction tax would need the approval of the UK in order to be implemented across the EU. | A transaction tax would need the approval of the UK in order to be implemented across the EU. |
The commission said that if the UK vetoed the tax, it would look to implement it in the eurozone. | The commission said that if the UK vetoed the tax, it would look to implement it in the eurozone. |
Referring to "the constraints of unanimity", Mr Barroso said "further changes to the Treaty of Lisbon" may be required in order to push through measures to stabilise Europe's economy. | Referring to "the constraints of unanimity", Mr Barroso said "further changes to the Treaty of Lisbon" may be required in order to push through measures to stabilise Europe's economy. |
'Fair contribution' href="/news/special/business/11/economy_jargon/css/main.css" rel="stylesheet" type="text/css" /> Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full | |
Under the proposals, the financial tax would be levied at a rate of 0.1% on all transactions between institutions when at least one party is based in the EU. Derivative contracts would be taxed at a rate of 0.01%. | Under the proposals, the financial tax would be levied at a rate of 0.1% on all transactions between institutions when at least one party is based in the EU. Derivative contracts would be taxed at a rate of 0.01%. |
The commission said the tax was "to ensure that the financial sector makes a fair contribution at a time of fiscal consolidation in the member states". | The commission said the tax was "to ensure that the financial sector makes a fair contribution at a time of fiscal consolidation in the member states". |
It said financial firms had played a role in the current "economic crisis" and was "under-taxed" compared with other sectors. | It said financial firms had played a role in the current "economic crisis" and was "under-taxed" compared with other sectors. |
The "significant additional revenue" raised would contribute to public finances, it added. | The "significant additional revenue" raised would contribute to public finances, it added. |
A spokesperson for the UK Treasury said it would "absolutely resist" any tax that was not introduced globally. | A spokesperson for the UK Treasury said it would "absolutely resist" any tax that was not introduced globally. |
"We would not do anything that is not in the UK's interests," he told the BBC. | "We would not do anything that is not in the UK's interests," he told the BBC. |
City of London officials have said that about 80% of the revenues of any Europe-wide financial tax would come from London. | City of London officials have said that about 80% of the revenues of any Europe-wide financial tax would come from London. |
'Ensure discipline' | 'Ensure discipline' |
Earlier, in his annual State of the Union address in Strasbourg, Mr Barroso called not only for the transaction tax but for eurozone members to issue debt collectively, through so-called eurobonds. | Earlier, in his annual State of the Union address in Strasbourg, Mr Barroso called not only for the transaction tax but for eurozone members to issue debt collectively, through so-called eurobonds. |
"Once the euro area is fully equipped with the instruments necessary to ensure both integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all," he said. | "Once the euro area is fully equipped with the instruments necessary to ensure both integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all," he said. |
Mr Barroso also dismissed speculation that Greece may be forced to leave the euro if it defaulted on its debts. | Mr Barroso also dismissed speculation that Greece may be forced to leave the euro if it defaulted on its debts. |
"Greece is, and Greece will remain, a member of the euro area," he said. | "Greece is, and Greece will remain, a member of the euro area," he said. |
Further austerity | Further austerity |
Officials from the commission, along with those from the European Central Bank and International Monetary Fund, are due to begin reviewing Greece's attempts to reduce its debt levels on Thursday. | Officials from the commission, along with those from the European Central Bank and International Monetary Fund, are due to begin reviewing Greece's attempts to reduce its debt levels on Thursday. |
They will then decide whether to release about 8bn euros from a 110bn bailout package agreed last summer, money the Greek government badly needs in order to pay its bills. | They will then decide whether to release about 8bn euros from a 110bn bailout package agreed last summer, money the Greek government badly needs in order to pay its bills. |
A key obstacle to the payment was removed on Tuesday when the Greek parliament passed a controversial new property tax bill that aims to boost revenues. | A key obstacle to the payment was removed on Tuesday when the Greek parliament passed a controversial new property tax bill that aims to boost revenues. |
The tax is one of a number of austerity measures Athens is introducing, measures that saw Greece's budget deficit fall by more than 5 percentage points in 2010, Mr Papandreou said in a speech to German business leaders on Tuesday. | The tax is one of a number of austerity measures Athens is introducing, measures that saw Greece's budget deficit fall by more than 5 percentage points in 2010, Mr Papandreou said in a speech to German business leaders on Tuesday. |
The debt review comes amid reports of a split among eurozone members about further support for Greece. | The debt review comes amid reports of a split among eurozone members about further support for Greece. |
Citing "senior European officials", the Financial Times said a number of the bloc's 17 members want private investors to take a bigger hit in the proposed restructuring of Greece's debts. | Citing "senior European officials", the Financial Times said a number of the bloc's 17 members want private investors to take a bigger hit in the proposed restructuring of Greece's debts. |
Eurozone members are in the process of ratifying proposals put forward in July, one of which would see private lenders writing off about 20% of their loans to Greece. | Eurozone members are in the process of ratifying proposals put forward in July, one of which would see private lenders writing off about 20% of their loans to Greece. |
The proposals also included expanding the powers of the eurozone bailout fund. Finland approved the plan on Wednesday, while Germany will vote on it on Thursday. | The proposals also included expanding the powers of the eurozone bailout fund. Finland approved the plan on Wednesday, while Germany will vote on it on Thursday. |
Greek write-off | Greek write-off |
There has been renewed optimism this week that eurozone leaders may finally be ready to take decisive action to tackle the debt crisis. | There has been renewed optimism this week that eurozone leaders may finally be ready to take decisive action to tackle the debt crisis. |
G20 leaders met over the weekend to discuss the best way forward, but EU officials stressed that no grand plan of action had been agreed. | G20 leaders met over the weekend to discuss the best way forward, but EU officials stressed that no grand plan of action had been agreed. |
A number of ideas were reportedly discussed, including a 50% write-down of Greece's government debts. | A number of ideas were reportedly discussed, including a 50% write-down of Greece's government debts. |
Other proposals included strengthening big European banks that could be hit by any defaults by highly indebted governments, and boosting the size of the eurozone bailout fund. | Other proposals included strengthening big European banks that could be hit by any defaults by highly indebted governments, and boosting the size of the eurozone bailout fund. |
These helped to boost investor sentiment with stock markets rising sharply on Tuesday, although Asian and European markets were largely flat on Wednesday. | These helped to boost investor sentiment with stock markets rising sharply on Tuesday, although Asian and European markets were largely flat on Wednesday. |
However, markets remain highly volatile, with investors remaining sceptical of policymakers' ability to solve the crisis quickly. | However, markets remain highly volatile, with investors remaining sceptical of policymakers' ability to solve the crisis quickly. |
"Every time the market gets its hopes up that a solution to the eurozone crisis is near, the rug gets pulled from under it," said Ben Potter at IG Markets. | "Every time the market gets its hopes up that a solution to the eurozone crisis is near, the rug gets pulled from under it," said Ben Potter at IG Markets. |
"Only when we see firm action being taken, rather than hollow promises, will confidence and sentiment begin to improve." | "Only when we see firm action being taken, rather than hollow promises, will confidence and sentiment begin to improve." |