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German governing parties call for market tax
German ChancellorAngela Merkel arrivesat a faction meeting ofthe German ChristianUnion Party in Berlin,yesterday. (Photo: AP)
Business
May 18, 2010

German governing parties call for market tax

BERLIN, Germany – Germany’s governing parties called yesterday for the introduction of an international tax on financial markets, but left details open. Chancellor Angela Merkel said she would press the idea with other countries in the Group of 20.

The call came before the German parliament starts Wednesday to consider the euro750 billion (US$1 trillion) rescue package to help eurozone nations avoid default. It is expected to vote on Friday.

As with the separate rescue package for Greece, which was unpopular among Germans, Berlin will be the biggest contributor among European countries.

Lawmakers from Chancellor Angela Merkel’s center-right coalition urged the government to push for “a financial transaction or finance activity tax” in Europe and elsewhere, said Volker Kauder, the parliamentary leader of Merkel’s conservative bloc.

“We want the stabilization of the euro,” he said after a meeting of the coalition’s top lawmakers. “But we also want the financial markets to be involved in this stabilisation.”

Merkel said after meeting Austrian Chancellor Werner Faymann that Germany would press for such a tax at the G-20 — and if that doesn’t succeed, “we will continue to seek a way in Europe.”

“I think people’s wish that (they) want to see something here is justified,” she said.

The government lawmakers also called for quick legislation at home on measures such as a ban on naked short-selling, when a trader sells shares or investments he doesn’t own.

Hermann Otto Solms, a senior lawmaker with the Free Democrats, the junior partner in the coalition, told Germany’s DAPD news agency that the country’s financial regulator, BaFin, would quickly ban some short selling.

Details of how a financial market tax might work were fuzzy. Birgit Homburger, Kauder’s counterpart from the pro-business Free Democrats, spoke only of “financial market taxation.”

A transaction tax would involve a small levy on individual transactions. The Free Democrats have been unenthusiastic about the idea.

It wasn’t immediately clear where any extra tax revenue in Germany might go, though the government recently has made curbing the budget deficit a priority.

The main opposition party, the center-left Social Democrats, have pushed for the government to commit itself to a transaction tax as it pushes through the rescue packages, and abstained in this month’s vote on the Greek package after the parties failed to reach an agreement on that.

The government has a comfortable parliamentary majority of its own, but had sought opposition votes as well.

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