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EU's Barroso unveils finance tax, suggests treaty changes

Sep 28, 2011, 9:07 GMT

President of the European Commission Jose Manuel Durao Barroso (L) talks with European Parliament President Jerzy Buzek (R) ahead of his address to the European Parliament during the plenary session of the European Parliament in Strasbourg, France, 28 September 2011. EPA/CHRISTOPHE KARABA

Strasbourg, France - The European Union should adopt a financial transaction tax and consider changing its treaties once again as part of efforts to solve the eurozone debt crisis, the head of the bloc's executive said Wednesday, in a keynote speech.

European Commission President Jose Manuel Barroso delivered his annual State of the Union address to the European Parliament in Strasbourg, France, against the backdrop of a stalling economy and a deepening eurozone crisis.

'I am very proud to announce that today the (European) Commission has adopted a proposal for a financial transaction tax,' Barroso said.

Barroso pointed out that since the global financial meltdown of 2008, banks had received 4.5 trillion euros (6.1 trillion dollars) in state aid and public guarantees.

'It is time for the financial sector to make a contribution back,' Barroso said, estimating that the tax would reap 55 billion euros a year in revenues.

He gave no details on proposed tax rates.

Barroso also expressed support for eurobonds - but only after the eurozone 'is fully equipped with the instruments necessary to ensure both integration and discipline.'

When that is achieved, 'the issuance of joint debt will be seen as a natural and advantageous step for all,' he said, reiterating that the commission would present 'options' on eurobonds 'in the coming weeks.'

Joint bonds would eliminate risk differentials between Germany - the currency bloc's strongest economy - and more indebted countries such as Italy and Spain, helping them access credit at cheaper rates.

But Germany and other tightly run northern European countries are wary of letting profligate southern European peers piggyback on their financial reputations.

Germany is also insisting on greater eurozone discipline being backed by EU treaty changes, to make it more difficult to evade the new rules.

While most other EU nations have deep reservations, because of the cumbersome procedure required to change EU treaties, Barroso expressed sympathy for the German position.

He said EU countries 'can do a lot' within the existing rulebook, the Treaty of Lisbon. 'But it may be necessary to consider further changes to the Treaty,' he indicated.

Barroso suggested dropping the unanimity requirement for EU decisions, which has slowed down the bloc's response to the eurozone crisis.

'Today we have a Union where the slowest member that dictates the speed of all the other member states. This is not credible, also from the markets' point of view,' he said.

The head of the EU executive acknowledged that the EU was facing 'the biggest challenge (it) has faced in all its history,' but insisted that its most troubled member, Greece, is, and will remain, a member of the euro area.'

However, he said he was 'hurt' by outside 'paternalism' - a reference to recent interventions from the United States, where officials have urged EU counterparts to take quick action, including by increasing the size of the eurozone bailout fund.

Barroso urged EU institutions and national governments in 'Paris, Berlin, Athens, Lisbon and Dublin' to show 'a burst of European pride' and 'a burst of dignity.'

In so doing, they should tell international partners, 'thanks for the advice, but we are capable, together, of overcoming this crisis,' Barroso said, drawing wide applause from EU lawmakers.

After the speech, EU lawmakers were expected to vote on the 'six pack,' a package of six pieces of legislation on budget discipline and economic coordination, designed to shore up confidence in the eurozone.

The package was billed as a definitive solution when it was first proposed a year ago, but since then EU leaders have launched a debate on further reforms to introduce even greater discipline and fiscal union within the eurozone.

The six pack involves 'important steps forward, but we must go further,' Barroso said, announcing a commission 'proposal for a single, coherent framework to deepen economic coordination and integration, in particular in the euro area.'

An EU summit is expected to debate ideas on October 17-18.