The finance ministers of ten European countries reached a tentative agreement in December on a plan for implementing a financial transaction tax (FTT), a small tax on trades of stocks, bonds, derivatives, and other financial instruments.
Supporters of the tax say that even a tax as small as 0.01 percent on the trillions of euros worth of trades that take place in the 10 countries could generate billions of euros in public revenue that could be used to offset the austerity cuts to public services and public infrastructure.
A financial transaction tax would have the extra benefit of reducing the kind of market volatility and risk taking that led to the 2008 financial crisis.
The tentative agreement does not, however, mean that implementation of the financial transaction tax is a done deal. There are a number of details that need to be worked out and how these details are finally resolved will determine how much revenue the tax generates.
The finance ministers agreed to set a six-month deadline for working out the details of the final agreement.
Some supporters of the tax cheered the agreement.
“It was never an easy task to implement a new tax on the financial sector, but we are getting there,” said Chouffot to Equal Times. “And importantly, there seems to be an appetite for making the tax as broad as possible, so that it includes derivatives.”
Others were less sanguine.
The European Public Service Union (EPSU), a confederation of public sector unions whose member unions represent 8 million employees, expressed concern that as the ministers work out the details of the tax, they would grant exceptions that weaken it.
“The FTT is an opportunity to make the financial sector give something back to the societies from which it has taken so much over recent years,” said Jan Willem Goudriaan, general secretary of the EPSU. “The countries involved need to agree (to) a strong FTT, without loopholes. European governments have no problem coming to a decision on budget cuts, so they should be able to reach an agreement on the FTT.”
Discussions among European Union (EU) members about implementing a financial transaction tax began after the European Commission, the executive body of the European Union, proposed that EU members coordinate their implementation of an FTT.
Progress toward implementation has come in fits and starts.
After failing to achieve a consensus of all 28 EU members, 11 nations–Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia, and Spain–decided forge ahead with implementation.
Estonia didn’t agree with the terms of the tentative agreement and dropped out.
One of the details that needs to be worked out before a final agreement can be reached is who and what financial instruments will be subject to the tax.
Reuters reports that the tentative agreement stipulates that all share transactions would be taxed including derivatives.
France, however, has proposed exempting market makers, super large brokerage firms that keep markets liquid by buying and selling stocks that they own.
There also appears to be no agreement on the tax rate, and some worry that banks, which have opposed the FTT, will continue to lobby for more exemptions that would weaken the tax.
During the interim period, the finance ministers will also consider how the tax will affect large pension funds and sovereign debt markets.
Public support for a financial transaction tax is widespread in Europe. One poll found that 64 percent of the population in the countries considering implementation favor the tax.
Many of those who support the tax do so because their governments spent billions of euros bailing out banks that engaged in the risky financial speculation that caused the 2008 financial crisis.
The expense of saving the banks played a role in government decisions across Europe to implement austerity programs that resulted in reduced public investment in public infrastructure such as education, health care, transportation, and human services.
The FTT would allow governments to recoup some the bailout money and use it to invest in the public good.
The FTT would be “a much-needed boost for investment to tackle unemployment, generate growth, make Europe more competitive and deal with the refugee crisis,” said Julian Scola, head of communications at the European Trade Union Confederation to Equal Times.
It would also enable Europe “to invest in education and training, in infrastructure, in the shift to a low-carbon economy, in research and development, and in health, housing and social care,” added Scola.