the Copenhague informal ECOFIN last Friday/Saturday was another chapter in the thriller on the FTT.
German finance minister Schäuble had presented a so called "room paper" in which he made a compromise proposal.
The core idea of the paper is "an intermediate step towards the introduction of a comprehensive FTT so that
we can promptly implement a form of tax on financial transactions ... The first step should, in our opinion,
be guided by the overall approach of the British stamp dty reserve tax (SDRT) and the French tax on financial
transactions (TTF). ... This would not be the end of negotiations on the broader and more ambitious FTT
sought by the Commission which also covers bonds and derivatives, but the continuation of the negotiations
should not impede the rapid implementation of a tax on shares, since the latter is technically and politically
the most mature item."
A working group has been established to follow up on the proposal.
However, the UK has already flagged, that they would not agree even to a reduced version of the FTT (see the German
public Radio & TV Süddeutscher Rundfunk at: http://www.sr-online.de/nachrichten/29/1398282.html).
Although it might sound cynical, I would say that London has done us a big favor. To bluntly say NO excludes the
classical UK strategy to negotiate for another year, to water down the entire thing and then at the end to still stay out. This attitude is known to the German government and the German strategy in the fiscal pact has clearly shown that the UK is losing more and more its blocking power.
The British NO opens the way to address now the option of Enhanced Cooperation, i.e. a coalition of at least nine countries.
However, before the end of French presidential elections and the German elections in North-Rhine Westphalia (13. May)no substantial new moves can be expected. The North-Rhine Westphalia elections are in so far relevant, as the destiny of the liberal party (FDP), which is part of the governmental coalition will definitively be clear. In all recent elections in federal states they have been kicked out of the parliaments and we all hope for the same in May. It cannot be excluded that after May there will be advanced elections of the federal parliament.
How to interpret Schäuble's attitude?
My sense is still, that it is very much motivated by tactics and not the beginning of the end of the FTT, although some media might say so.
The arguments are:
1. Berlin has at present the image as the leading factor pro FTT.
This implies both that they cannot just give in and the responsibility to play a constructive role in the process.
2. The official EU process is still on. Under these circumstances Berlin must be supportive until the EU-27 approach
is officially buried.
3. Schäuble has been nominated as boss of the Euro-group as Juncker has to be replaced. The decision will probably taken in May. In the forefield he has to consider that some Euro countries (Ireland, Netherlands, Cyprus, Malta, Luxemburg) have spoken out against Enhanced Cooperation.
4. At present, it is unclear whether Italy and Spain will participate in an FTT on the basis of Enhanced Cooperation.
5. Berlin has to avoid the impression, that there is too much German "leadership" in the EU.
6. Even if the FDP would not collapse definitively in May, it is sure that they remain so weak, that Merkel will have no majority in the next federal elections together with them. Her only potential and preferred partner is the social democratic party, SPD. As the the SPD is pressurizing for the FTT, Merkel has interest not to go too far away from the SPD. In addition she needs a 2/3 majority for the fiscal pact and thus the SPD.
I know, that all these complex and German domestic tactics are quite boring. But if we like it or not, politics works like this. It result from that we have come so far now, that the elephants are fighting heavily over the issue. For the mice it is then sometimes difficult to understand what is happening.
And of course, all this does not mean that the German support for the FTT is for granted. Political pressure from below has to be kept up.
We also have to find ways to get Italy and Spain definitively on board.
Without these two big countries, Enhanced Cooperation would be difficult, even if one reaches the quorum of nine with countries like Slovakia, Slovenia, Hungary etc.
We'll keep you in the loop.
All the best
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