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01 December 2013

WSJ: FTT faces more delays; governments remain divided on key details

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Berlin's decision to push for a tax that would cover currency transactions could complicate negotiations because the EU's executive arm has warned that such a move would violate the free movement of capital in the EU.

The tax was originally supposed to be implemented on January 1, according to the Commission's proposal in February, but the Commission said in June that the timeline had slipped by at least six months. "Given that [the 11 states] still need to draw up a compromise text, and then agree to it at the level of finance ministers…2015" is a more realistic date, an EU official said.

EU finance ministers aren't expected to discuss the tax when they meet in Brussels on December 10, as they focus instead on finalising a plan to centralise control of failing eurozone banks—the next step in the bloc's Banking Union project, EU officials said.

In recent days, the talks regained some momentum after Germany's two main political parties pledged in their coalition treaty to "swiftly implement" a broad tax covering "shares, bonds, investment certificates, currency transactions and derivative contracts". In addition to the reference to the controversial currency trades, the coalition treaty also contains a significant caveat: that the tax should be structured so as to avoid "negative effects on pension instruments, small investors and the real economy".

That concern is shared by a number of governments, which worry about the impact of such a sweeping tax on Europe's still-weak economy and sovereign-bond markets, as well as on pension funds and personal savings.

At Wednesday's meeting, France and Italy continued to push for a watered-down version of the proposal that would more closely resemble their own national financial transaction taxes, —an approach that was also supported by Spain, a person familiar with the discussion said. By contrast, a number of smaller countries argued that the tax should cover as broad a range of instruments as possible, the person said.

Full article

Further reporting: EU executive document says transaction tax plan legal, 4.12.13 © Reuters

© Wall Street Journal

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