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Originally published Friday, December 11, 2009 at 5:19 AM

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EU calls for global financial levy

European Union leaders called for a global financial transaction levy and more responsible banking pay in the hopes it could help buffer against future market crises, according to a joint statement published Friday.

AP Business Writer


European Union leaders called for a global financial transaction levy and more responsible banking pay in the hopes it could help buffer against future market crises, according to a joint statement published Friday.

British Prime Minister Gordon Brown said there was "growing support" across the world for such a levy and that other EU nations were supportive of Britain's plans for a one-off tax of 50 percent for all bonuses of more than more than 25,000 pounds ($40,800.)

France says it will follow suit - and called on others to join them. French President Nicolas Sarkozy said, "We want and expect others to do the same because we are in a globalized world."

"It would be very difficult for Gordon Brown to say he was the only one to do it. It would have been impossible to say I was the only one to do it, so we do it together," Sarkozy told reporters.

Sarkozy's warm words of support for Brown are a striking contrast to recent comments where he claimed victory for France over Anglo-Saxon economics in nabbing a key EU financial services post for a Frenchman, Michel Barnier.

But the EU's 27 leaders stopped short of saying they would also introduce taxes on bankers' bonuses. German Chancellor Angela Merkel gave a lukewarm response Thursday, calling the British tax "a charming idea."

She also told reporters that a bonus tax might raise constitutional problems in Germany - and that it was more of a problem for British companies. Separately, 11 leading German banks and insurers agreed Friday to link pay to "sustainable business success."

In a statement, the EU's 27 leaders broadly backed limits on bankers' pay, saying that the financial sector should "immediately implement sound compensation practices" and that governments could consider "short-term options" - such as a bonus tax - if they want to.

They also said a global tax on financial transactions should be one of several options that the International Monetary Fund should investigate when it puts forward plans on how the world should respond to the financial crisis.

It is important, they said, for financial institutions to make a contribution to "the society they serve" and to make sure the public "benefits in good times and is protected from risk."

Brown said banks have had government backing in hard times "and people rightly ask ... 'have they not a responsibility to ensure that they don't get into that position again.'"

EU leaders are also suggesting that the IMF should look into insurance fees, resolution funds and contingent capital requirements to backstop the global financial system.


Brown last month called on the Group of 20 rich and emerging nations to consider a tax on financial transactions that would pay for a global fund to rescue banks in future. France has talked about using such a tax to help poor countries fight climate change.

U.S. Treasury Secretary Tim Geithner was quick to shoot the idea down, saying the United States was not keen to support such a levy even as it sought ways to shield taxpayers from bailing out the financial system again.

Supporters of measures such as a so-called Tobin tax - a flat tax on currency transactions named after Nobel Prize laureate James Tobin - say the money would protect countries from spillovers of financial crises. Critics argue the tax would simply dry up world financial flows.

EU officials such as European Central Bank President Jean-Claude Trichet and the EU's economy commissioner Joaquin Almunia are skeptical about how such a tax would work - because businesses could flee Europe if it were only charged here.

But Sarkozy and Merkel say they support the concept, without giving details of what they want to see. French Foreign Minister Bernard Kouchner says the proceeds of a levy should be given to aid development in poor nations.


Associated Press writer Raf Casert and Barbara Schaeder in Brussels and Geir Moulson in Berlin contributed to this story.

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