German Chancellor Angela Merkel gestures during the EU summit in Brussels on Thursday. Ms. Merkel wants the G20 to adopt a global financial levy on bank transactions.Geert Vanden Wijngaert
Europe will call for imposing a transaction tax on financial institutions at the G20 summit next week as well as a levy on banks to help pay for the costs of the crisis that started in the banking sector.
Leaders of the 20 biggest developed and developing economies meet on June 26-27 in Toronto.
"In the G20 we will ... propose to explore and to develop the introduction of a financial transaction tax," European Union President Herman Van Rompuy told a news conference after a meeting of leaders of the 27 EU countries.
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The EU will also push for a global levy on financial institutions.
"The EU should lead efforts to set a global approach for introducing a levy on financial institutions with a view to maintaining a worldwide level playing field and will strongly defend this position with its G20 partners," EU leaders said in a statement after the meeting.
Even the Europeans have yet to decide the details of any levy, such as its size or how the money would be used. The European Commission and EU finance ministers will work out such details by October.
At a preparatory meeting in South Korea earlier this month for the Toronto summit, G20 finance ministers came short of agreeing on any global bank levy because of opposition from Canada, Brazil and Japan.
But they did agree that the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government interventions, where they occur, to repair the banking system.
Mr. Van Rompuy said that if G20 countries did not support the European idea of a bank levy, Europe would go it alone.
"We have a common position, all the European countries, and we try to convince our partners. But we also implicitly agree that if there is no consensus in the G20, we go forward," Mr. Van Rompuy said.
Last month, Canada mounted an aggressive campaign against European and U.S. support for a bank tax being proposed as a way to keep the G20 pledge to ensure taxpayers never pay for another bank bailout. Arguing that such a tax would unfairly punish countries that stayed out of trouble, Mr. Flaherty won enough support from countries such as Australia and Russia to keep the bank-tax lobby from gaining steam.
Because of a lack of agreement on the levy and a financial transaction tax, some EU diplomats expect the G20 summit could produce a menu of measures for countries to pick from rather than a single measure for all.
Europe, however, will still strive for a global deal.
"We want a global system. Besides this system of levies and taxes on financial institutions, we also want to research and develop a global financial transaction tax in order to propose it at the G20 summit," German Chancellor Angela Merkel said.
The EU will also push for the G20 to agree on a co-ordinated, even if differentiated, end to special anti-recession government spending in a bid to make public finances more sustainable.
G20 finance ministers agreed on June 5 that the euro zone debt crisis showed how important sustainable public finances were and that countries with serious fiscal challenges had to accelerate consolidation.
But they also said any measures should be tailored to individual countries.
"Given the major risks that late exit from extraordinary fiscal stimulus would entail for public accounts' sustainability, the G20 should agree on a co-ordinated and differentiated exit strategy to ensure sustainable public finances," the EU leaders' conclusions said.
With a file from Kevin Carmichael
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