EUROPE’S financial transactions tax (FTT) faces another series of delays in today’s meeting of EU negotiators, City A.M. understands, as the states cannot decide what the charge should cover.
The tax is now only likely to be implemented in January 2015, a year behind the original schedule, while the eventual FTT is set to be highly watered down.
Several of the 11 countries officially in favour are thought to regret backing the tax and are now struggling to find a politically palatable way to back out.
Spain and Italy are pushing for bonds to be excluded as they fear the charge will push up borrowing costs while the Netherlands wants protection for pension funds and others want repo market clauses.
And lawyers fear the tax works directly against other aims of the European Commission.
“The FTT is inconsistent with the general direction of travel of the EU, particularly at a time when there is a need to encourage growth and competitiveness,” said Alexandria Carr from Mayer Brown. “For example, the likelihood that the posting of collateral is within scope of the FTT appears inconsistent with the fact interbank lending is moving from an unsecured to a secured basis.”