PARIS (Reuters) - France and Germany agreed that a planned pan-European tax on financial transactions should cover all derivatives products, a source close to French Finance Minister Pierre Moscovici said on Wednesday.
President Francois Hollande and Chancellor Angela Merkel said after a joint meeting of their two cabinets in Paris that they wanted other EU partners to agree on such a levy by European Parliament elections in May.
France and its banks have in the past warned that imposing a transactions tax across the board of financial products could damage Europe’s financial sector. But Germany has in recent days suggested a compromise under which different components of the tax could be phased in over time.
“France and Germany agreed on the principle of a financial transactions tax covering all derivatives, not just equity derivatives,” the source said.
While Hollande and Merkel signalled their will for the 11 countries who back the tax to conclude a deal on it by the European elections, it was still not clear how high the final tax would be and when it would be applied to specific products.
Asked whether he favoured a phase-in of the tax as suggested by German Finance Minister Wolfgang Schaeuble - starting with share trades first - Hollande said such details would be worked out in minister-level discussions.
“The main thing is that it happens. If we seek the perfect product, I know there are some people who will go so deep into details that there will never be a financial transactions tax. I prefer an imperfect tax to no tax at all,” he said.
Hollande said Paris and Berlin “shared the same approach” on derivatives but did not elaborate. Merkel reaffirmed the joint goal to forge an EU deal by the European elections.
The two were talking after a meeting of their cabinets, the most broad-ranging talks between the two sides since Merkel’s re-election in charge of a “grand coalition” with centre-left Social Democrats.
The financial transactions tax failed to gain broad support when it was first proposed during the euro zone debt crisis but eventually won the backing of an uneasy coalition of 11 states, led by Germany and France.
It is seen as politically important to show European voters that their governments are holding the banks and other organisations implicated in the financial crisis accountable.
Officials in Brussels had first expected the tax to raise up to 35 billion euros (28 billion pounds) a year, but it has since been watered down following lobbying from the financial sector and a cooling of enthusiasm among member states.
A redesigned levy is expected to raise only a tenth of the amount originally targeted, officials who worked on revised proposals told Reuters last year.
Existing national measures vary, with an Italian tax applying to shares and derivatives and in France just a levy on shares like the British stamp duty on the stock market.
Germany’s main stock and derivatives exchange Deutsche Boerse (DB1Gn.DE) argues that taxing derivatives would be particularly harmful to the economy by making it more expensive for companies to hedge risks, Deutsche Boerse said.
The Franco-German meeting was hailed as an opportunity for the two founding EU members to fix their priorities for the 28-country union, but other results of the talks were modest.
As expected, they confirmed that a 250-head Franco-German brigade would be deployed in Mali to help force training there.
The two reaffirmed their commitment to completing EU’s banking union in the weeks ahead and to support efforts to harmonise fiscal and social arrangements across the EU.
They agreed to work on developing data storage and other communications infrastructure in Europe. However a French text summarising the meeting’s results did not mention the “European communications network” Merkel proposed after reports last year of mass surveillance in Germany and elsewhere by the U.S. National Security Agency.
On energy and climate policy, the two backed European Commission proposals for a binding goal to cut greenhouse gas emissions by 40 percent by 2030.
Additional reporting by Julien Ponthus and Elizabeth Pineau in Paris; Writing by Mark John; Editing by Louise Heavens