By Martin Banks - 8th March 2011
The FTT could provide the money the EU urgently needs to deal with the challenges it faces
MEPs in Strasbourg have adopted a controversial report on "innovative financing" that includes the introduction of a European tax on financial transactions (FTT).
Deputies were bitterly divided over the issue, but they backed the proposal by a cross-party majority of 529 votes to 127 with 18 abstentions.
The introduction of an FTT is part of a package of measures on innovative financing.
The report's author, Greek Socialist deputy Ani Podimata, welcomed the outcome of the vote, describing it as a "fair tax on the financial sector".
If approved by the other EU institutions, she says the tax could raise €200bn a year and "leave ordinary citizens unharmed and impose a fair burden-sharing of the cost of the financial crisis on those who caused it in the first place".
She also said the FTT could provide a "lasting answer" to the eurozone crisis, adding, "This is the second time that this parliament has called for a financial transaction tax. It is now time for the commission to act.
"Citizens have been hit hard by the financial crisis and face growing unemployment. At the same time, the financial sector remains largely under-taxed and has this year enjoyed profits and bonuses at pre-crisis levels."
Further comment came from S&D spokesman on economic and monetary affairs, Udo Bullmann, who said, "We need to restore the balance. It is time for financial gamblers to share the burden and repair the damage they caused in the first place.
"The tax should be implemented at global level and the EU should take the leadership."
Her comments were echoed by Party of European Socialist leader Poul Nyrup Rasmussen, who called the vote "a massive vindication of our progressive economic strategy".
The former Danish MEP added, "This vote gives further momentum to the economic direction we have proposed. This vote represents a clear rejection of the Conservative 'austerity only' approach to economic governance."
The outcome was also welcomed by the international alliance of catholic development agencies (CIDSE), whose spokesman Jean Letitia Saldanha said, "The response to the crisis is already being felt by the social sector while the EU continues to drag its feet on implementing measures such as an FTT.
"The FTT would make short-term speculation more expensive and therefore have a stabilising effect on asset prices.
"In addition to stability, the FTT could provide the money the EU urgently needs to deal with the challenges it faces. An FTT implemented at a rate of 0.05 per cent on all financial market transactions could raise €209bn in the EU alone, each year. The revenue generated would be sufficient to finance development priorities at home and at the international level.
"A majority of EU governments, encouraged and supported by the commission, insist that national public debts must be reduced via a programme of austerity and cuts."
However, Ivo Strejcek, a European Conservatives and Reformists MEP, was less happy.
He warned that in adopting the report, MEPs were "using EU funds to lever even more debts for national governments, and encouraging investments that would need to be underwritten by taxpayers' money".
He said, "We must not break the ultimate mechanism of accountability for the EU: that it must ask the national governments for its funding. Giving the EU tax-raising powers of any kind enables it to take on a life of its own.
"EU taxes have been a twinkle in the eye of EU federalists for some time, but there is a real danger of them becoming a reality when the next long-term EU budget is set.
"Direct EU funding and common debt instruments would be a dangerous step down the road towards a federal Europe and they must be stopped."