Sweden proposes EU bank tax, gets cool response

January 19, 2010

By John O’Donnell

BRUSSELS, Jan 19 (Reuters) – Sweden’s finance minister called on European counterparts to follow U.S. President Barack Obama’s lead with a bank tax to recoup the cost of propping up the industry but the idea received a guarded response.

Obama proposed last week that Wall Street pay up to $117 billion via a special levy to reimburse taxpayers for the financial bailout, saying “fat cat” bankers were making massive profits and “obscene” bonuses.

“We cannot accept a situation where the bankers are running away from the bill,” Sweden’s Anders Borg said on Tuesday at a meeting of European Union finance ministers, outlining his ideas for a bank tax or levy based on that in the U.S. and Sweden.

However, while Germany, France and Britain all hailed Obama’s new levy last week, they said they would press on with their own ideas.

Earlier on Tuesday German finance minister Wolfgang Schaeuble signalled an approaching international agreement on measures for the banking sector to share the costs of bailouts. [ID:nLDE60I0E5]

“Minister Schaeuble has said that the Americans have brought movement into the discussion and that we will try to reach a common position at the G20 meeting,” Germany’s deputy finance minister Joerg Asmussen said on Tuesday.

Finance ministers from the Group of 20 leading economies are due to meet in February.

Asmussen said Berlin would examine the suggestion from Borg, who helped hammer out compromises on some key areas of financial reform during Sweden’s recent term as European Union president.

And French finance minister Christine Lagarde welcomed the Swedish proposal, which she described as interesting.

But EU tax commissioner Laszlo Kovacs said that it would only take one country to block plans for such a pan-European tax. “I wouldn’t bet a lot of money on the introduction of this new tax,” Kovacs said.

Last Friday Germany said it was waiting for an international discussion on the issue and preferred a transaction tax. Britain and France said Obama’s plan was addressing a specific U.S. situation.


Sweden outlined its plan in a letter delivered to Elena Salgado, the Spanish economy minister chairing Tuesday’s gathering and who later compared it with other ideas already being discussed.

Sweden has embarked on a mission to recoup roughly 75 billion Swedish crowns ($10.6 billion) from its banks that will then be set aside in a fund to cope with financial crises.

It opted for a direct levy on bank loans rather than a tax on transactions — such as buying investments — because a similar move after the country’s 1990s banking crisis backfired.

“We had a transaction tax,” Borg said. “Basically, the transactions moved to London. But you cannot move your balance sheet.”

Britain’s opposition Conservatives, who are widely expected to return to power at national elections this year, have also voiced support for the Swedish idea if applied globally.

The International Monetary Fund (IMF) is working on proposals for a crisis levy on banks.

The subject will be discussed at a meeting of the Group of Seven top industrial countries, the World Bank and the IMF next week.

But Jean-Claude Juncker, who chairs meetings of euro zone finance ministers, said last week that although he favours the Obama approach it may be difficult to copy in Europe.

“This is a tax or a fee which can bring substantial revenues for dealing with the public finance situation,” Borg said. “It is not a transaction tax but a tax on the balance sheet.”

(Additional reporting by Huw Jones in London and James Mackenzie; editing by Luke Baker/Ruth Pitchford)

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