Transaction tax row threatens German talks

City A.M. Reporter
A REPORT that German Chancellor Angela Merkel is not serious about implementing a European financial transaction tax threatens to undermine an initial deal struck last week with the opposition over the EU’s planned fiscal pact.

Der Spiegel weekly reported yesterday that Merkel’s chief of staff, Ronald Pofalla, had said such a tax would not get passed in the current legislative period so the centre-right coalition could support the idea in principle knowing it would not have to act on it any time soon.

Last week, the government and opposition parties agreed on the outlines of a transaction tax proposal. Further talks between senior party members are due today, and Merkel wants these to form a basis for a final deal when party chiefs meet on Wednesday.

Saturday’s agreement between Eurozone finance ministers to lend Spain up to €100bn to shore up its banks will, if anything, raise the pressure on her to quickly get opposition support to ratify an EU deal on budget discipline.

She wants to push the pact through parliament in the next few weeks together with a bill on the new European Stability Mechanism (ESM) bailout fund which Spain may use, but needs the opposition to get the required two thirds majority.

The Social Democrats (SPD) and Greens are insisting on a plan for a transaction tax and measures to boost growth.

Highlighting the pressure on Merkel to take a tough line with struggling Eurozone members, an Emnid poll for Bild am Sonntag newspaper showed 66 per cent of Germans are opposed to supporting Spanish banks with German money.