MEPs to back EU-wide financial transaction tax

ECB president says FTT might not be a good idea.

Members of the European Parliament have voted in favour of imposing an EU-wide tax on financial transactions – just hours after Mario Draghi, the president of the European Central Bank, questioned whether the plan was a good idea.

The Parliament’s economic and monetary affairs committee yesterday (25 April) supported the European Commission’s proposal to tax shares and bonds at a rate of 0.1% and derivative contracts at a rate of 0.01% across the EU.

The vote came despite Draghi’s remarks to the committee, in which he had questioned the wisdom of a financial transaction tax (FTT) Policies were needed to encourage foreign investors to return to the eurozone, he had said, adding: “One wonders if an FTT is the best way to attract them back.”

The Parliament – which will hold a plenary vote on the proposal on 23 May – is only consulted on the issue. All member states must agree before it can become law. There is significant opposition to the plan among member states, led by the Netherlands, Sweden and the UK.

Growth prospects

Draghi sounded downbeat about the prospect of eurozone growth during his address to MEPs and gave a strong hint that the ECB was not ready to give more support to eurozone member states. “The ball is entirely, squarely in the court of governments and banks,” he said.

At the same time, he indicated that the ECB’s emergency measures, aimed at lowering countries’ borrowing costs and preventing a credit crunch, would continue. “The only answer is to persevere,” he said.

His remarks come as economic analysts forecast that Spain could be forced to request additional support and that contagion could spread to Italy. However, in the past week, financial markets have remained relatively calm, with Spanish and Italian bond yields falling.

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