shaping the new financial architecture…

EU says it’s time for a transaction tax…

Posted in TBTF by Kitty on December 11, 2009

Reuters reports:

EU backs global financial transaction tax

By David Brunnstrom and Timothy Heritage

BRUSSELS, Dec 11 (Reuters) – The European Union urged the International Monetary Fund on Friday to pursue a global tax on financial transactions to limit the risk of another economic crisis, despite U.S. opposition.

EU leaders also underlined the need for “sound and effective” financial sector pay at a two-day summit but, with the notable exception of Germany, did not broadly support French and British proposals to tax bankers’ bonuses heavily.

Although the leaders of the 27-nation bloc largely revived existing ideas, they signalled a desire to address voters’ outrage over a return of the big bonus culture in the banking sector so soon after it was bailed out with tax payers’ money.

The conclusion … is to propose a global financial transaction levy. It wouldn’t be fair that some impose very heavy burdens and others don’t,” Jose Manuel Barroso, president of the executive European Commission, told a news conference.

“I think it makes sense that a sector that created such a problem for our economies, our taxpayers … also makes a contribution to the overall economy,” he said after two days of talks in Brussels.

The IMF is already considering how to limit risk in the financial system after the worst economic crisis in generations, but Washington has opposed calls for a so-called Tobin Tax — named after U.S. economist James Tobin — on financial transactions.

British Prime Minister Gordon Brown called for consideration of such a tax at a summit of the Group of 20 developed and emerging nations last month, saying the proceeds could be used to fund future financial bailouts.

But he faced opposition from U.S. Treasury Secretary Timothy Geithner, who said he was against such a tax as a way to dampen risky bank behaviour [ID:nN07223447]

Without worldwide support, experts say it would be doomed to failure. Brown acknowledged this, telling reporters in Brussels: “Global taxes will not be introduced unless all global financial centres are able to come behind it. But I believe there’s growing support for that.”

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