EU’s ‘dead’ bank-tax plan lives on in elections

brussels — A European proposal for a tax on financial transactions is trapped in limbo: financial realities won’t let it come to life while political opportunism won’t allow it to die a quick death.

The tax initiative is being kept alive largely for domestic political reasons as German Chancellor Angela Merkel bids for a fourth term and France prepares for presidential elections this year.

“It’s dead, but nobody dares to say it, especially in an election year,” Karel Lannoo, chief executive officer of Brussels-based think tank CEPS, said in an interview. “It would create controversy for the Socialists in France and for Merkel, given their longstanding backing for the idea.”

Forged in the wake of the 2008 crisis, the financial transaction tax took shape in 2011 with a proposal for levies on stock, bond, derivative and other trading as a way to curb speculation and force the industry to make a “fair contribution” — projected at €57 billion ($61 billion) a year — to state budgets. Trouble is, such a tax risks scaring off banks looking for a new jurisdiction just as the U.K. prepares to leave the 28-nation European Union.

The proposal failed to garner the required unanimous support of EU governments and was revived in late 2012 by a smaller group under European “enhanced cooperation” rules that depend on the participation of at least nine member states. More than four years on, amid worries about the FTT’s economic and political side effects, 10 signatory countries, including Austria, France, Slovakia and Germany, have kept the idle plan on a drip feed. — Bloomberg