EU calls for global tax, Canada says can block it

German Chancellor Angela Merkel (L) is welcomed by European Commission President Jose Manuel Barroso ahead of a meeting at the European Commission headquarters in Brussels October 5, 2011.

BRUSSELS/NEW YORK (Reuters) - The European Commission said on Wednesday it would push next month's G20 summit to agree on a global financial transaction tax, but Canada said it may have enough support to block such a move.

Flanked by German Chancellor Angela Merkel at a news conference in Brussels, European Commission President Jose Manuel Barroso said it was time to push ahead with the initiative.

"The chancellor and I agreed that the time is right to create new momentum globally and at the G20 summit in Cannes, we will press for a global financial transaction tax," Barroso said.

The transactions tax idea has been around for some time and came back into vogue during the 2008-09 financial crisis due to calls for banks and investors, rather than taxpayers, to fund their own bailouts.

The idea has run into stiff resistance from Canada, the United States, Australia, China and others. Canada has argued that its banks were sound during the recent recession and did not require bailing out. It also says that such a tax would be counterproductive by reducing banks' ability to lend during times of weak economic growth.

Canadian Finance Minister Jim Flaherty, in a speech to the financial industry in New York on Wednesday, noted that Canada and others had helped keep the Group of 20 (G20) leading economies from imposing a global tax.

"We will continue leading that charge against a transactions tax and I am confident that our allies on this point, who are the emerging economies, will stay with us and join us in opposing what we view as a counterproductive tax," he said.

"I am actually confident that we have enough of them in the G20 that we will be successful on that initiative," he added. G20 finance ministers will meet next weekend in Paris and G20 leaders will meet November 3-4 in Cannes.

The European Union is proposing a 0.1 percent tax in the EU on trading bonds and shares from 2014, and a 0.001 percent tax on derivatives trading.

Britain also opposes such a tax and says it would only support a levy if it was global. Czech Prime Minister Petr Necas said on Wednesday his country is against an EU-wide tax.

(Additional reporting and writing by Robert Mueller in Prague and Randall Palmer in Ottawa; editing by Rex Merrifield and Peter Galloway)