EU's Barroso unveils finance tax

Sep 28, 2011, 11:11 GMT

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 chief of the bloc's executive said Wednesday.

Meanwhile, the European Parliament approved a package of six legislative items designed to improve economic coordination and budget discipline within the eurozone.

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

Announcing that the European Commission had adopted a proposal for a financial transaction tax, Barroso said: 'It is time for the financial sector to make a contribution back.'

Since the global financial meltdown of 2008, banks had received 4.5 trillion euros (6.1 trillion dollars) in state aid and public guarantees, he said.

The proposed tax would reap 55 billion euros a year in revenues by slapping a 0.1-per-cent levy on bonds and shares and a 0.01-per-cent levy on derivatives, and would apply from 2014, the EU commission said.

As EU tax decisions are subject to unanimity, any bloc member could veto the proposal.

Barroso 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, and 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.

Germany is 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 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 dictates the speed of all the other member states. This is not credible, also from the markets' point of view,' he said.

He 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 approved the six pack, despite opposition from centre-left groups, which consider it to focus too much on austerity, at the expense of growth-promoting policies.

The package was billed as a definitive solution when it was proposed a year ago, but EU leaders are now considering further reforms to instil even greater eurozone discipline and fiscal union.