Germany and France will step up a diplomatic drive on Tuesday to convince more EU countries to join them in setting up a financial transactions tax (FTT), but they remain stubbornly short of the nine needed to push ahead with the plan. In Malta Government and Opposition are against the introduction of FTT as they consider it harmful to the financial services sector in Malta that makes up 15% of GDP.
Greece, Portugal, Austria, Slovenia and Belgium have agreed to join Berlin and Paris in the endeavour, and Estonia is expected to sign up on Tuesday, but one more is required to reach the threshold to put the initiative into action. Italy is expected to announce that it will support such a tax after a deal has been reached with the centre right parties.
It is still not clear what position Spain will take. Poland is also a likely supporter, but officials indicated it was trying to get too much in return for its support and Germany might not accept the terms, despite its long-held determination to introduce a tax on market activity.
The European Commission, the EU executive that initiates legislation, said it will do "everything it can to facilitate quick progress" on the tax once the threshold is reached, but there is little it can do before then.
"An EU Financial Transactions Tax would not just be a good source of revenue," said Algirdas Semeta, the commissioner in charge of taxation policy. "It would also ensure that the financial sector pays its fair share."
But there are many naysayers in the EU who believe that while a tax on financial transactions might be good in principle and could help pay for the errors of the financial community, it is unworkable unless it is universal, or at least pan-European.
Sweden, which tried its own levy in the mid 1980s, has warned against the move, saying it will do little more than drive trading elsewhere. It lost a large portion of its trading to London and still smarts at the experience.
Imposing the charge on financial deals is symbolically important, however, as Germany prepares for national elections.
Pierre Moscovici, France's finance minister, told reporters on Monday ahead of a meeting of euro zone ministers that he and German peer Wolfgang Schaeuble had written to "counterparts" about the tax. "I think that it is possible," he said.
Public distrust of banks
Much of the momentum for the debate comes from public distrust of banks and similar groups after the financial crisis.
But gathering support among the 27 members of the European Union has been difficult, with Italyand Spain hoping to win concessions for support, while Poland, the biggest economic power in eastern Europe, would want something in return.
"Poland would consider supporting the Financial Transactions Tax if it would find understanding on issues important for Warsaw such as the EU's long-term budget and a voice in the new banking supervision framework," an EU diplomat said.
Even supporters are apprehensive. The Greek finance ministry said it wanted "an evaluation which will look into the possible economic consequences from the introduction of the ... tax."
So far, the debate has focused on a blueprint written by the European Commission for a tax on stocks, bonds and derivatives trades from 2014 that the EU's executive arm said could raise up to 57 billion euros a year.
The Commission's proposal is to tax stock and bond trades at the rate of 0.1 percent and derivatives trades at 0.01 percent.
Britain, home to the region's biggest trading centre, has a stamp duty of 0.5 percent on share trades, raising almost 3 billion pounds in the financial year to April 2011. It will not join the scheme.
Separately, lawmakers in the European Parliament are set to vote for measures to jail traders found guilty of rigging financial market benchmarks such as the London interbank offered rate.