Push for transaction tax

Chancellor Angela Merkel's Christian Democrats (CDU/CSU) bloc agreed with the Social Democrats (SPD) on Wednesday to a plan that would tax every transaction on eurozone financial markets.

"We will seek to advance the financial transaction tax," said Martin Schulz, the SPD's negotiator and president of the European Parliament, after meeting negotiators in Berlin from Merkel's Christian Democrats and their Bavarian sister party, the Christian Social Union.

The two parties began formal coalition talks last week in the wake of Germany's September 22 election, in which the CDU/CSU fell just short of winning a majority in parliament. The goal is to form a so-called "grand coalition" by Christmas, with a number of working groups formed to reach compromises on key issues.

On Wednesday the two factions failed to come to an agreement on a policy towards a European banking union that would oversee the region's larger financial institutions in effort to avoid new collapses. The parties are aiming to reach a deal on the issue by mid-November.

Pushing for the FTT

Merkel last year eased back in her push for the 0.1 percent transactions tax and a panel of experts from the European Commission warned it was impractical. The 11 willing nations have largely stopped efforts towards the financial transactions tax, or "FTT," over disagreements on how to implement it, but Germany remains one of its main backers.

"We believe that with the strength of the grand coalition we can bring this process to a conclusion," Schulz said. "When a government is formed and it gets to work in the coming weeks, it will launch this initiative at the next European summit."

"What's new is that three big parties in a grand coalition are going to put this on the agenda and give it a push," said the CDU's lead negotiator, Herbert Reul. He added that the 11 interested nations still needed persuading and had to "do their homework."

"The mutual desire in Germany is not enough in itself to impose it in all 11 nations," said CSU negotiator Markus Söder.

Potential impacts

Germany and France agreed in principle to an FTT in September of last year.

A document authored by the negotiators said the tax would boost economic growth in Germany, provide more revenue and create jobs. The European Commission estimated it could raise 34 billion euros ($47 billion) annually.

The plan has been met with heavy criticism from banks, as well as Britain and the US. EU lawyers have said the plan violates taxation jurisdiction and could be harmful to nonparticipating countries in the bloc, as well as restricting the free movement of capital and services in the single market.

dr/tj (dpa, Reuters, AP)