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Merkel Pressed on Financial Tax as EU Loans
Plan Goes to Vote May 18, 2010, 8:52 AM EDT
By Brian Parkin and Rainer Buergin
May 18 (Bloomberg) -- Chancellor Angela
Merkel.s coalition pressed for a financial
levy to be introduced "as quickly as
possible," as they prepared to put the
euro-region.s $1 trillion bailout plan to the
German parliament this week.
The three ruling parties agreed to pursue a
financial transaction tax or a levy on
financial activities, as well as a ban on
naked short selling, Volker Kauder,
parliamentary leader of Merkel.s Christian
Democrats, told reporters in Berlin today
after a meeting of the party caucuses. He
refused to give details or say which form of
tax the ruling parties favored.
"We agree that the financial sector must
share in the cost of the crisis," said Birgit
Homburger, floor leader of Merkel.s Free
Democratic coalition partner. "Those who
speculate at the taxpayer.s expense must
Merkel.s coalition is seeking to build
momentum on regulation as lower-house
lawmakers begin debating a bill tomorrow
authorizing Germany.s contribution of as much
as 148 billion euros ($184 billion) to
backstop the euro. Kauder said he.ll press
for parliament to clear the legislation by
May 21, which would allow the upper house to
vote on the loans June 4.
While European Union finance ministers
considered pushing for a tax on all financial
transactions, such a levy "can.t be achieved"
without agreement to implement it globally,
Finance Minister Wolfgang Schaeuble told
reporters in Brussels today.
"There are serious doubts whether this will
happen on a global scale," he said. In the
absence of a global accord, a banking levy
plus a tax on financial activity as proposed
by the International Monetary Fund is a
"sensible proposal," he said.
Merkel and Schaeuble will host international
talks on financial regulation in Berlin on
May 20 ahead of the Group of 20 summit in
Canada in June.
Merkel.s allies are pressing her to rebound
after her party lost the majority in
Germany.s most populous state on May 9,
depriving her of control of the upper house,
in an election overshadowed by parliament.s
approval for 22.4 billion euros in loans for
Greece. The first installment, 4.4 billion
euros of a total 14.5 billion euros, was
transferred to Greece today.
The activities tax proposal would take the
form of a levy on total profits and
remuneration paid by financial companies,
according to the IMF. A transactions tax is
paid "every time a share, bond, or other
financial instrument is bought or sold,
and/or whenever foreign currency is bought or
A "moderate" transaction tax would generate
as much as 36 billion euros each year in
Germany alone, and stem short-term,
speculative transactions, the labor
union-financed IMK institute said in evidence
to parliament.s Finance Committee yesterday.
Merkel, in a speech in Berlin two days ago,
claimed credit for forcing any kind of a levy
on to the international agenda. The IMF only
looked into the financial transaction tax
after "we vehemently" pushed the G-20 to
consider it, she said. While still favoring
such a levy if possible, Merkel said she.ll
settle for what is achievable.
"If the International Monetary Fund supports
a financial activities tax and I have a
chance of implementing it but not the other
tax, then I will decide for the one that I
can get implemented," Merkel said.
Wall Street Journal
"We have agreed in the coalition committee
that the government will be asked to campaign
for a European, global contribution of the
financial markets -- this means a
financial-transaction tax or
financial-activities tax," said Volker
Kauder, parliamentary floor leader of the
Either tax would come on top of the bank levy
that Germany already plans to implement,
party officials said. A financial-transaction
tax would fall on every sale and purchase of
financial products, and a
financial-activities tax would be applied to
financial institutions' profits and bonus
payments for executives.
Merkel bank tax plan rebuffed at pre-G20 meet
Berlin - German Chancellor Angela Merkel's
call for a global tax on financial
transactions was given a clear rebuff by
officials from G20 nations Thursday during a
financial market reform conference in Berlin.
At the meeting, which was intended to form a
common position for the group of 20 developed
and emerging economies ahead of a summit in
Canada next month, Merkel called for global
cooperation to calm turbulent markets.
"My plea for the G20 is, even if your
countries have not been affected by specific
tendencies of the financial markets, the task
is to bring forward the process as a whole,"
Merkel laid out a series of tough proposals,
including moves to: tighten regulation on
banks; cut budget deficits; remove economic
stimulus measures in a coordinated fashion;
and impose a global levy on financial
"We need a sound, efficient and stable
financial system that is capable of serving
the needs of the real economy in a
sustainable way," she said.
The conference comes during a stormy week on
global currency and stock markets, which,
reeling from the euro crisis connected to
Greece's debt woes, reacted negatively to a
shock German ban on certain kinds of
speculative derivatives trading.
However lead nations of the G20, including
Canada and South Korea, reacted frostily to
Merkel's key proposal that banks and other
financial institutions around the world
should pay a levy on their transactions.
The US was not significantly represented at
the meeting, but the transaction tax proposal
is currently being debated there.
The logic behind such a tax, sometimes called
a Tobin tax, is that it would curb the worst
excesses of risk taking, and would create a
fund with which systemically important banks
could be rescued in future crises.
"We are doubtful that you can tax your banks
to stability," Canada's Deputy Treasury
Secretary Tiff Macklem said.
Asian economies, which were only peripherally
affected by the financial crisis that began
in the US mortgage market in 2007, also
balked at becoming involved in such a system.
South Korean Deputy Minister of Strategy and
Finance Je-Yoon Shin, whose country is
chairing the G20 in 2010, said that such
measures were just "not that relevant" for
The financial transaction has been treated
with scepticism by Merkel in the past. She
was persuaded to back the measure under
pressure from Germany's opposition Social
Merkel acknowledged that a rift had formed
within the G20 on the transaction tax issue.
"There won't be agreement at the first dinner
in Canada," she said.
"This has been rather frustrating. We need to
send a joint signal in moments of crisis,"
Delegates instead concentrated on more
fundamental issues facing the global
financial system, including capital
requirements - the ratio at which banks can
invest with borrowed money - and how to
manage financial risk.
OECD Secretary General Angel Gurria warned
that the structural problems that brought
financial institutions into the crisis in
2007 were still largely present -
over-reliance on risky investment activities,
rather than solid lending - were still
"The monster is still with us," he said.
French Finance Minister Christine Lagarde,
one of the few overt supporters of Merkel's
transaction tax proposal, also called for
much stiffer regulation of over-the-counter
Such transactions involve the largely
unregulated trading of asset-linked
"It is critically important that European
coordination be organized so that rating
agencies do not undermine the appropriate
(function) of the markets," she said.
Derivatives trading has come under specific
fire in Germany, which moved to ban so-called
naked short selling and naked-short selling
of credit default swaps on Tuesday. In that
practice, investors essentially bet that
traded products will lose value, which some
say drives down prices.
Germany blames such instruments for enabling
speculators to bet against the euro amid the
Greek debt crisis. However the German ban
caused near panic on global markets, which
interpreted the unilateral move as a sign of
Berlin's desperation that it couldn't control
German Finance Minister Wolfgang Schaeuble is
due to present a nine-point plan for the
reform of the EU's Growth and Stability Pact,
which dictates how far states can go into the
red, on Friday, with the aim of bringing
other euro members into line with Berlin's
Also Friday, Merkel's centre-right coalition
faces a tough task to gain consensus in the
German parliament for the country's share of
the 750-billion-euro (915 billion dollars)
European financial rescue system.