COPENHAGEN, Denmark -- Tentative support from Sweden for a small levy on share purchases may open the door for a limited tax on financial transactions in the European Union.
Europe is looking for a way to recoup some of the billions of euros (dollars) national governments spent on saving banks during the financial crisis. However, a Franco-German plan for a broad tax on financial transaction, including purchases of bonds and derivatives, has been rejected by Britain and Sweden. Derivatives are complex financial instruments whose use has grown exponentially in recent years.
The U.K. and Sweden fear that taxing most financial trades would push banks and other financial institutions to relocate to other financial centers in the U.S. and Asia – ultimately leaving governments with even less tax revenue.
But on Saturday, Sweden's finance minister indicated that he may back a small levy that would likely primarily target shares – a much less radical proposal than the one Germany and France had foreseen for Europe.
"There are stamp duties in, for example, France and in the U.K. that (are) less costly for the economy and would not have a detrimental effect on the financial markets," Anders Borg told journalists at a meeting of EU finance ministers in Copenhagen, Denmark. "If we want to find a solution for all the 27 EU countries we have to be pragmatic."
Taxing banks is hugely popular among voters across Europe, who feel that they are bearing the whole burden of a crisis largely caused by financial speculation. However, without a global plan for a broad financial transaction tax, which has been ruled out by the U.S. and others, Europe is worried about dashing ahead.
Faced with opposition for an EU-wide solution in some countries, France, which is in the middle of a presidential election campaign, is already introducing a small levy on purchases on shares of large French companies, high-frequency trading as well as trades in some credit instruments linked to eurozone sovereign bonds. The U.K. has had a duty on share purchases for some time.
However, Danish Finance Minister Margrethe Vestager, whose country currently holds the presidency of the EU, cautioned against expecting anything on an EU-level too quickly – even if there is great agreement among politicians that financial institutions should share the cost of future crises.
"It's difficult to be very precise on the timeline," she told journalists after Saturday's meeting. Ministers would try to get back to the issue in May or June, but before any concrete steps could be taken, the European Commission, the EU's executive, would have to present a new legislative proposal, Vestager said. Currently, the Commission is still advocating for a broad financial transaction tax.
Sarah DiLorenzo in Paris contributed to this story.