In charging 1,000 pounds ($1,600) for each delegate apart
from the leader and a chief adviser, Britain says it is only
doing what other G8 host countries have done.

But other members of the club of wealthy nations, some of
whom may send a support staff of 12-15 people, see it
differently.

“As far as we know, this has never happened before,” said an
official from one European delegation, adding that London had
only mentioned the issue of delegate fees a few days ago.

“It’s unprecedented and hasn’t been handled very well. The
Japanese and Americans are saying: ‘Hold on a minute, this
hasn’t been budgeted for’. There’s some outrage.”

An official from another delegation said Britain was doing
itself no favours by being seen to “profit” from holding the G8
- an event that could boost the local economy to the tune of 40
million pounds, according to research carried out for Barclays
Bank.

“A lot of people are uneasy with this,” he said.

A spokesperson for the British government defended the
arrangements for the gathering, taking place on June 17-18 at
the Lough Erne golf resort in Enniskillen:

“It would be unprecedented for a G8 nation to foot the bill
for the entire cost of delegations attending a Summit.

“We are paying for the accommodation of each G8 leader and
their lead official. That’s what we did at Gleneagles (where
Britain hosted a G8 summit in 2005). And it’s more than previous
summits – for example, at the G8 summit hosted by France in 2011
only the cost of accommodation for the leader was met by the
hosts.”

Any perceived difference was “an administrative one”, the
spokesperson added.

“Delegations have been asked to settle the costs for
accommodation and transport directly with us, and that’s because
we secured these early to ensure we could meet the needs of our
visitors.”

The G8 brings together Britain, Canada, France, Germany,
Italy, Japan, Russia and the United States, while the European
Union also attends the meeting, sending two representatives.

The summits have been held every year since 1975, when six
countries first got together in Rambouillet, France.

(Additional reporting by Andrew Osborn in London; Editing by
Kevin Liffey)

The poll, conducted in six EU countries by Gallup, also found most Britons want to leave the European Union, a higher figure than in other recent surveys. That is likely to fuel demands for an early British referendum on EU membership.

But perhaps the most striking findings were those related to France, a founding EU member state that is experiencing increasing disillusionment over Europe amid slumping growth and rising unemployment since Hollande took office a year ago.

The survey showed opinions in France and Germany, the traditional twin motors of Europe, are diverging, undermining unity over where the continent is headed following three years of economic upheaval and social tension.

“The French-German axis that provided the largest basis for common European policy in the past is now weakening, reflecting the diverging mood in the two countries,” Gallup’s Anna Manchin wrote in an accompanying analysis.

“The French are losing confidence in globalization and growing insecure in their position within Europe. Our findings reflect this turn in France away from the EU toward more pressing national problems.”

The survey showed that the French are the least likely to say things are moving in the right direction in the EU (17 percent), while 62 percent say they are moving in the wrong direction, a figure that rises to 86 percent among those who say they disapprove of Hollande’s leadership.

By comparison, in Britain, which is generally more euro-skeptical than France, 56 percent think the EU is moving in the wrong direction, a figure that rises to 82 percent among those who disapprove of Prime Minister David Cameron’s policies.

Across all six countries surveyed – the Netherlands, Denmark, Poland, Germany, Britain and France, representing around half of the EU’s 500 million population – most people felt things were going in the wrong direction.

WHERE ARE YOU TAKING US?

In a question about Hollande’s leadership on Europe, 51 percent of French said they disapproved, more even than those surveyed in Britain (45 percent) or in Germany (37 percent), where views were more positive on the Socialist president.

Asked about Germany’s leadership in Europe, 54 percent of Germans approved as did 45 percent of French and 36 percent of Britons. Across all six countries, Chancellor Angela Merkel met with substantially more approval than disapproval.

For European leaders, perhaps the most worrying findings are the views on quitting the EU, a club that has grown from 6 members at its founding in the early 1950s to 27 now, and soon to be 28 once Croatia joins in July.

While surveys – including a poll by the Pew Research Center released last month [ID:nL6N0DU3PY] – often show Britain is largely negative about Europe, Gallup’s findings revealed an even deeper strain of antipathy towards the EU.

Asked how they would vote if a referendum were held next week on whether they should leave, 55 percent of Britons said they would vote “out” and only a quarter to stay in.

While that will be a concern for Cameron, who is worried by the steady climb of the anti-EU UKIP party in opinion polls, the findings in France and Germany will be even more disconcerting for advocates of deeper EU integration.

More than a third of French (34 percent) would vote to leave if asked, and nearly a third of Germans (31 percent) too.

With elections to the European Parliament taking place in May next year, concerns are growing that popular discontent with the EU after years of crisis will fuel anti-EU votes.

The survey did not collect opinion on voting intentions, but it did show an apparent increase in voter engagement. In the past, turnout has fallen at every European election since 1979, dropping to 43 percent at the last ballot in 2009.

But that could change: 73 percent of French said that if the elections were held next week, they would vote, a figure that falls to 69 percent among Germans and 68 percent in Britain – still far above usual voter turnout.

Their backing calls into question the performance of Dutch Finance Minister Jeroen Dijsselbloem, who was appointed chairman of the Eurogroup of finance ministers of the 17-nation currency area in January, to serve initially for 2-1/2 years.

Dijsselbloem, who succeeded Luxembourg Prime Minister Jean-Claude Juncker, has unsettled financial markets since taking office, especially with comments about Cyprus and how bank depositors could finance future bailouts.

Those views, while supported by some at the European Central Bank and the European Commission, have irked other officials in Paris, Berlin and Brussels.

At a meeting in Paris on Thursday, President Francois Hollande and Chancellor Angela Merkel agreed to propose to fellow leaders appointing a permanent Eurogroup head, which France has long favored.

“A full-time president of the Eurogroup with reinforced powers, including the possibility of delegating power to other euro zone ministers,” their joint “contribution” to next month’s EU summit said under the heading “Reinforcing euro zone governance and legitimacy”.

Merkel’s spokesman said the aim was to create a position with a much more dedicated focus on euro zone issues.

“It should not be a euro zone finance minister but a president whose job would be to coordinate work intensively,” said Steffen Seibert. “It will be a very demanding job.”

The Franco-German document said the proposal should be implemented within two years. It also said euro zone leaders should hold more frequent summits than the two annual sessions they already have and be able to instruct specialist ministers of the euro zone to work more closely on issues such as employment, social affairs, research and industry.

Both moves could widen the gap between a euro zone core and other member states of the European Union that are not in the single currency, and put national governments rather than the European Commission in the driver’s seat.

When he was appointed, Dijsselbloem, 47, had only been a minister for a couple of months and had little experience of finance. But he was seen as the best of those available from among the 17 ministers that sit in the Eurogroup.

His style has been remarkably different to Juncker’s, who held the job for nearly 8 years and was accustomed to the backroom dealing of European Union politics. Juncker once said that “when it becomes serious, you have to lie”.

TOO OPEN?

Dijsselbloem, on the other hand, has been all about telling it straight, but his openness, especially over Cyprus, is what has most unsettled markets and put EU leaders on edge.

“He has not covered himself in glory,” said one French policymaker after Dijsselbloem told Reuters in an interview that unsecured bank deposits could be used to bail out banks in future rescues, in much the same way as in Cyprus.

“As (former French President) Jacques Chirac would have said, he missed a good opportunity to shut up.”

Speaking on a visit to Greece, Dijsselbloem said the euro zone did not need a permanent Eurogroup chief now, but the question could be revisited in late 2014.

“The Eurogroup is now functioning under my presidency and I will be happy to do that at least until the end of 2014,” he told reporters in Athens, adding that he did not feel insulted.

Dutch Prime Minister Mark Rutte was more dismissive.

“The risk of a permanent chair of the Eurogroup is that it will become a political position and it will create more inter-institutional competition between the European states,” Rutte told reporters. “We are strong supporters of its independence. The current construction is the one we prefer.”

If a permanent president were to be established it would likely require a change to the EU treaty, which will only come in time, suggesting that even if the idea does gain momentum, Dijsselbloem will see out his 2-1/2-year term.

A German official, who requested anonymity, denied that the plan to create a permanent Eurogroup president reflected any dissatisfaction with the work of Dijsselbloem. He indicated that Berlin had changed its mind about the role itself.

“It’s no secret that we’ve had our doubts about the idea of a permanent president but that was mainly because we didn’t want a figurehead with no resources at their disposal,” he said. “Now this post has been given the resources, so we can support it.”

The official said creating a permanent Eurogroup chief and dedicated euro-area structures within the European Parliament, as proposed in the Franco-German paper, might require amending the EU treaty.

“I’m not saying it will but we can’t rule that out,” he said. The “contribution” did not mention treaty change.

One of the benefits of having a permanent president is that the job would be based in Brussels with its own secretariat and would not be answerable to one national parliament.

As it stands, Dijsselbloem has to brief the Dutch parliament before every meeting of the Eurogroup, an obligation that can limit the privacy and scope of Eurogroup discussions. Juncker was not so beholden to Luxembourg’s parliament.

Also, Dijsselbloem’s communications staff are all based in The Hague, which can make it difficult to coordinate the policy message with officials in Brussels.

“The most important thing for a chairman of the Eurogroup is that he discusses issues in his group – when you do it in public it could be that doors get closed very rapidly,” said a senior EU official involved in deciding on the position.

“It is the end of the debate when you are very open or candid.”

(Additional reporting by Stephen Brown and Noah Barkin in Berlin and Paul Taylor and Mark John in Paris; Writing by Luke Baker; Editing by Paul Taylor)

Shortly after midnight, after more than 12 hours of negotiation, the EU’s 27 member states failed to agree on how to renew their Syrian arms embargo. That means the restrictions expire as of June 1, allowing EU states to export arms if they want, although only Britain and France are inclined to do so.

It is the most fundamental internal disagreement over foreign policy the European Union has had since the Iraq war 10 years ago and casts doubt on efforts to carve out a common stance that would help bind its members more closely together.

But more immediately, it has raised questions about what impact Britain and France – the EU’s leading military powers – can expect to have on the ground in Syria, what it means for a negotiated peace and whether it begins a slippery slope towards far deeper involvement in the world’s most combustible region.

British Foreign Secretary William Hague described Tuesday’s outcome as “the right decision”, even though the overwhelming majority of EU nations, led by Austria, opposed not only the lifting of the arms embargo but also any notable easing of it.

A French official highlighted the confrontational tone, saying Vienna would not be allowed to “dictate Europe’s foreign policy”. By holding to their position, Paris and London made any consensus impossible, forcing the embargo’s collapse.

Diplomats and EU officials were surprised by how unbending the two proved to be, describing the mood in the negotiating room as downcast and the result as a “bad day for Europe”.

Italy’s foreign minister, Emma Bonino, called the outcome “inglorious” and laid the blame in part on EU foreign policy chief Catherine Ashton. The Briton, whose role is to represent a common diplomatic approach by the Union, had offered states many options but no one proposal they could back, Bonino said.

Some analysts described a far wider fallout, worrying that the decision will scupper what little chance there was of success at U.S.- and Russian-sponsored peace talks in Geneva next month, and will invigorate the flow of arms to President Bashar al-Assad from his Russian and Iranian allies.

“I would call it a serious miscalculation,” Daniel Levy, the head of the Middle East and North Africa programme at the European Council on Foreign Relations in London, said of the Franco-British push that dismantled the EU arms embargo.

“The risk is that escalation begets escalation,” he said, setting out the likelihood that Russia will ramp up its own arms supplies to Assad with weapons that come with far less oversight or restriction than any arms the EU may supply to the rebels.

“There’s a strong chance that things will be made worse, and then there’s the risk of mission creep, especially when the Syrian opposition are very clear that that’s what they’re after, that they want more Western skin in the game.”

DANGEROUS BLUFF?

France and Britain say they have taken no decisions yet on supplying arms, saying they first want to see what comes of the Geneva talks. But they also emphasised on Tuesday that they now have legal authority to send weapons to Assad’s opponents if they want, which they hope will pressure him to negotiate.

“Our focus in the coming weeks is the Geneva conference,” said Hague. “What this is doing is sending that signal loud and clear to the regime and … being very clear about the flexibility that we have if it refuses to negotiate.”

Yet some analysts see that calculus as faulty. If the EU had decided to extend its arms embargo ahead of the Geneva talks, it might have called upon Russia to follow suit, de-escalating an arms race inside Syria and giving more scope for negotiation.

Instead, the opposite is happening, with weapons now set to bolster either side on the battlefield while the political track faces many obstacles. Russia’s foreign minister accused the EU of undermining the Geneva peace efforts.

Coming in a week that has seen Moscow supply more missiles to Damascus and a declaration by Lebanon’s Hezbollah militia that it stands with Assad, the EU dropping its arms embargo has ended up looking much more warlike than pacific.

“The EU decision to allow members their own discretion – within limits – of arming the Syrian rebels is the third shoe to drop in a week that will be considered the full internationalisation of the Syrian war,” said George Lopez, a professor of peace studies at the University of Notre Dame.

There may be further pitfalls for Britain and France, too. If the Geneva talks fail – and many diplomats fear they will – then the two allies, who worked closely together to help Libya’s rebels, will have little choice but to show they can follow through on commitments in Syria too. The rebels will expect it.

London and Paris say they would supply arms to “moderate” factions only, which means careful monitoring on the ground by European observers. The last thing Prime Minister David Cameron or President Francois Hollande want are headlines revealing that British arms have ended up in the hands of al Qaeda.

They also face strict limits on the type of weaponry they can send since longstanding EU law proscribes the export of any equipment, whoever the recipient, that would “provoke or prolong armed conflicts or aggravate existing tensions”.

Bound by those rules, there is little chance Britain or France could match the arms Russia or Iran might supply. That is one reason why Israel, still in a cold war with Damascus but also wary of the rebels, opposes weapons being sent to either.

“At the end of the day, Britain and France are playing bluff in a game of poker,” said Levy of the European Council on Foreign Relations. “But they’ve got a transparent hand.”

(Additional reporting by Justyna Pawlak, Francesco Guarascio and Adrian Croft in Brussels, John Irish in Paris and Andrew Osborn in London; Editing by Alastair Macdonald)

Shortly after midnight, after more than 12 hours of negotiation, the EU’s 27 member states failed to agree on how to renew their Syrian arms embargo. That means the restrictions expire as of June 1, allowing EU states to export arms if they want, although only Britain and France are inclined to do so.

It is the most fundamental internal disagreement over foreign policy the European Union has had since the Iraq war 10 years ago and casts doubt on efforts to carve out a common stance that would help bind its members more closely together.

But more immediately, it has raised questions about what impact Britain and France – the EU’s leading military powers – can expect to have on the ground in Syria, what it means for a negotiated peace and whether it begins a slippery slope towards far deeper involvement in the world’s most combustible region.

British Foreign Secretary William Hague described Tuesday’s outcome as “the right decision”, even though the overwhelming majority of EU nations, led by Austria, opposed not only the lifting of the arms embargo but also any notable easing of it.

A French official highlighted the confrontational tone, saying Vienna would not be allowed to “dictate Europe’s foreign policy”. By holding to their position, Paris and London made any consensus impossible, forcing the embargo’s collapse.

Diplomats and EU officials were surprised by how unbending the two proved to be, describing the mood in the negotiating room as downcast and the result as a “bad day for Europe”.

Italy’s foreign minister, Emma Bonino, called the outcome “inglorious” and laid the blame in part on EU foreign policy chief Catherine Ashton. The Briton, whose role is to represent a common diplomatic approach by the Union, had offered states many options but no one proposal they could back, Bonino said.

Some analysts described a far wider fallout, worrying that the decision will scupper what little chance there was of success at U.S.- and Russian-sponsored peace talks in Geneva next month, and will invigorate the flow of arms to President Bashar al-Assad from his Russian and Iranian allies.

“I would call it a serious miscalculation,” Daniel Levy, the head of the Middle East and North Africa program at the European Council on Foreign Relations in London, said of the Franco-British push that dismantled the EU arms embargo.

“The risk is that escalation begets escalation,” he said, setting out the likelihood that Russia will ramp up its own arms supplies to Assad with weapons that come with far less oversight or restriction than any arms the EU may supply to the rebels.

“There’s a strong chance that things will be made worse, and then there’s the risk of mission creep, especially when the Syrian opposition are very clear that that’s what they’re after, that they want more Western skin in the game.”

DANGEROUS BLUFF?

France and Britain say they have taken no decisions yet on supplying arms, saying they first want to see what comes of the Geneva talks. But they also emphasized on Tuesday that they now have legal authority to send weapons to Assad’s opponents if they want, which they hope will pressure him to negotiate.

“Our focus in the coming weeks is the Geneva conference,” said Hague. “What this is doing is sending that signal loud and clear to the regime and … being very clear about the flexibility that we have if it refuses to negotiate.”

Yet some analysts see that calculus as faulty. If the EU had decided to extend its arms embargo ahead of the Geneva talks, it might have called upon Russia to follow suit, de-escalating an arms race inside Syria and giving more scope for negotiation.

Instead, the opposite is happening, with weapons now set to bolster either side on the battlefield while the political track faces many obstacles. Russia’s foreign minister accused the EU of undermining the Geneva peace efforts.

Coming in a week that has seen Moscow supply more missiles to Damascus and a declaration by Lebanon’s Hezbollah militia that it stands with Assad, the EU dropping its arms embargo has ended up looking much more warlike than pacific.

“The EU decision to allow members their own discretion – within limits – of arming the Syrian rebels is the third shoe to drop in a week that will be considered the full internationalization of the Syrian war,” said George Lopez, a professor of peace studies at the University of Notre Dame.

There may be further pitfalls for Britain and France, too. If the Geneva talks fail – and many diplomats fear they will – then the two allies, who worked closely together to help Libya’s rebels, will have little choice but to show they can follow through on commitments in Syria too. The rebels will expect it.

London and Paris say they would supply arms to “moderate” factions only, which means careful monitoring on the ground by European observers. The last thing Prime Minister David Cameron or President Francois Hollande want are headlines revealing that British arms have ended up in the hands of al Qaeda.

They also face strict limits on the type of weaponry they can send since longstanding EU law proscribes the export of any equipment, whoever the recipient, that would “provoke or prolong armed conflicts or aggravate existing tensions”.

Bound by those rules, there is little chance Britain or France could match the arms Russia or Iran might supply. That is one reason why Israel, still in a cold war with Damascus but also wary of the rebels, opposes weapons being sent to either.

“At the end of the day, Britain and France are playing bluff in a game of poker,” said Levy of the European Council on Foreign Relations. “But they’ve got a transparent hand.”

(Additional reporting by Justyna Pawlak, Francesco Guarascio and Adrian Croft in Brussels, John Irish in Paris and Andrew Osborn in London; Editing by Alastair Macdonald)

At a summit to discuss energy and tax policy, the leaders of
the three largest EU countries took the opportunity at news
conferences to lament the impact of corporate tax avoidance,
following several cases involving U.S. firms.

The issue has hit a nerve in Europe where many countries are
cutting back on social spending and squeezing workers in order
to reduce national deficits and debt.

Most recently a U.S. Senate report found that Apple Inc
had paid just 2 percent tax on $74 billion in overseas
income, largely by exploiting a loophole in Ireland’s tax code.

“We cannot accept that a certain number of companies can put
themselves in situations where they escape paying taxes in ways
that are legal,” French President Francois Hollande said.

“We must coordinate at a European level, harmonise our rules
and come up with strategies to stop this.”

British Prime Minister David Cameron, who has put tax at the
top of the agenda for a meeting of the G8 in Ireland next month,
was equally clear about the need for coordination steps.

“There is a real chance of seeing the sort of international
action that we need to fix this problem,” he said. “You can’t do
it on your own, you have to have that international action and
that is why I think today has been a bit of a breakthrough.”

France and Britain in particular have grown concerned by the
sheer scale of the legal tax schemes.

Monday’s U.S. Senate report on Apple Inc followed
reports that the British unit of Amazon paid just $3.7
million tax on 2012 sales of $6.5 billion, and similar
revelations concerning the UK operations of Google and
Starbucks.

In all, officials estimate that EU governments miss out on
around 1 trillion euros ($1.3 trillion) a year through the legal
tax avoidance schemes employed by such companies and via illegal
tax evasion.

German Chancellor Angela Merkel, who avoided commenting on
the issue ahead of the summit, expressed her frustration that
existing laws were not sufficient to capture taxes fully.

“We will work towards ensuring companies have to pay more
where they are based,” she told reporters, saying that new rules
would affect big companies most, although it many cases
companies are basing themselves in low- or no-tax jurisdictions.

HARD TO CLOSE LOOPHOLES

While there is common consent among EU leaders that action
needs to be taken to close loopholes and level the playing field
on tax policy, little has been done on the issues despite
regular lobbying by the Organisation for Economic Co-operation
and Development (OECD) and other international organisations.

In a report in March last year, the OECD, a club for wealthy
countries, set out in detail how companies were using “hybrid
mismatch arrangements” to avoid paying taxes, the very technique
that Apple is alleged to have used in its tax planning.

“We have got to make sure as we set those tax rates that
companies pay taxes, and that means international collaboration,
the sharing of tax information,” British Prime Minister David
Cameron said as he arrived at the summit.

But officials have dismissed the possibility of immediate
steps to close loopholes or any targeting of companies, saying
it is primarily up to EU member states to craft the necessary
legislation, and to work through wider international forums such
as the OECD, G8 and G20 to make progress and close the net.

Eversheds, a global law firm dealing with tax issues, said
that while recent cases involving high-profile U.S. companies
had pushed the tax issue to the top of the global agenda, it
could not be tackled with any quick or immediate steps.

“While the issues deserves this top-level attention, the
public should not expect any game-changing developments, and
indeed it would be wrong for the EU to try to tackle the issue
on its own,” said Ben Jones, a tax expert at the firm.

“Uncoordinated attempts by individual countries or blocs of
countries to tackle the issue may actually create more tax
‘loopholes’ or have a detrimental impact on businesses that do
not engage in aggressive tax planning.”

France has already shown its willingness to take on major
U.S. companies, with authorities raiding Google in a 2011
investigation into whether its Paris office conducts sales work.
The company was asked to pay 1.7 billion euros in back taxes.

A similar issue has arisen with how Google operates in
Britain, with questions raised about whether its sales staff are
based abroad, as the company maintains, or in the country, which
would create a liability to UK tax.

Google says it follows tax rules everywhere it operates and
that references to selling in job ads for British-based staff
reflect the fact that it likes people with a sales skills.

The four-hour summit was originally called to discuss energy policy, but investigations in Britain, France and the United States exposing how little tax major international companies have been paying by carefully structuring their European operations has forced the issue to the top of the agenda.

France and Britain in particular have grown concerned by the sheer scale of the legal tax schemes, with a U.S. investigation revealing on Monday that Apple Inc had paid just 2 percent tax on $74 billion in overseas income, largely by exploiting a loophole in Ireland’s tax code.

That followed reports that the British unit of Amazon paid just $3.7 million tax on 2012 sales of $6.5 billion, and similar revelations concerning the UK operations of Google and Starbucks.

In all, officials estimate that EU governments miss out on around 1 trillion euros ($1.3 trillion) a year through the legal tax avoidance techniques employed by such companies and illegal tax evasion.

“A lot of these revenues (from the digital economy) are not getting taxed,” said a French diplomat briefing reporters in Paris ahead of the summit. “We need to find a way of bringing home the tax on these activities.”

Officials said French President Francois Hollande could raise the issue with other leaders at the meeting, though it was unclear what agreement could be reached with little advanced preparation and just four hours of talks scheduled.

A draft of the summit’s declaration, which is agreed in advance but can be changed, set out nine proposals for strengthening tax policy and coordination, including fighting tax avoidance schemes and the process of routing profits abroad.

“Work will be carried forward as regards the Commission’s recommendations on aggressive tax planning and profit shifting,” a draft seen by Reuters read.

While there is common consent among EU leaders that action needs to be taken to close loopholes and level the playing field on tax policy, little has been done on the issues despite regular lobbying by the Organisation for Economic Co-operation and Development (OECD) and other international organizations.

In a report in March last year, the OECD, a club for wealthy countries, set out in detail how companies were using “hybrid mismatch arrangements” to avoid paying taxes, the very technique that Apple is alleged to have used in its tax planning.

“We have got to make sure as we set those tax rates that companies pay taxes, and that means international collaboration, the sharing of tax information,” said British Prime Minister David Cameron as he arrived at the summit.

Cameron has put tax policy on the agenda of the G8 meeting taking place next month in Ireland.

NAME NO NAMES

But officials played down the possibility of immediate steps to close tax loopholes or any naming and shaming of companies in the final summit declaration, saying it was primarily up to EU member states to craft the necessary legislation, and to work through wider international forums such as the OECD.

“But while companies may be using loopholes to pay as little tax as possible, the truth is it’s a national issue,” said an EU official preparing the summit. “It’s up to the relevant member states to change their tax codes and tighten the net.”

The official said the most likely outcome from the talks was tougher language on strengthening bilateral tax treaties and bolstering so-called “anti-abuse” rules in national legislation.

Eversheds, a global law firm dealing with tax issues, said that while recent cases involving high-profile U.S. companies had pushed the tax issue to the top of the global agenda, it could not be tackled with any quick or immediate steps.

“While the issues deserves this top-level attention, the public should not expect any game-changing developments, and indeed it would be wrong for the EU to try to tackle the issue on its own,” said Ben Jones, a tax expert at the firm.

“Uncoordinated attempts by individual countries or blocs of countries to tackle the issue may actually create more tax ‘loopholes’ or have a detrimental impact on businesses that do not engage in aggressive tax planning.”

France has already shown its willingness to take on major U.S. companies, with authorities raiding Google in a 2011 investigation into whether its Paris office conducts sales work. The company was asked to pay 1.7 billion euros in back taxes.

A similar issue has arisen with how Google operates in Britain, with questions raised about whether its sales staff are based abroad, as the company maintains, or in the country, which would create a liability to UK tax.

Google says it follows tax rules everywhere it operates and that references to selling in job ads for British-based staff reflect the fact that it likes to hire people with a sales background.

($1 = 0.7769 euros)

(Additional reporting by Adrian Croft and Peter Griffiths in Brussels and Mark John in Paris; Editing by Will Waterman)

The summit was originally called to discuss energy policy
and tax coordination, but press reports in Britain, France and
the United States exposing how little tax major international
companies have been paying by carefully structuring their
European operations has forced the issue up the agenda.

France and Britain in particular have grown concerned by the
sheer scale of the legal tax schemes, with a U.S. investigation
revealing on Monday that Apple Inc had paid just 2
percent tax on $74 billion in overseas income, largely by
exploiting a loophole in Ireland’s tax code.

That followed reports that the British unit of Amazon
paid just $3.7 million tax on 2012 sales of $6.5
billion, and similar revelations concerning Google’s
and Starbucks’s UK operations.

In all, officials have said that tax avoidance and evasion
costs the EU around 1 trillion euros a year.

“A lot of these revenues (from the digital economy) are not
getting taxed,” said a French diplomat briefing reporters in
Paris ahead of the EU summit. “We need to find a way of bringing
home the tax on these activities.”

Officials said French President Francois Hollande could
raise the issue with the EU’s 27 leaders, although it was
unclear what agreement could be reached with little advanced
preparation and just four hours of talks scheduled.

A draft of the summit’s declaration, which is agreed in
advance but can be changed, set out nine specific proposals for
strengthening tax policy and coordination, including fighting
tax avoidance schemes and the process of routing profits abroad.

“Work will be carried forward as regards the Commission’s
recommendations on aggressive tax planning and profit shifting,”
a draft seen by Reuters read.

“The Commission intends to present a proposal before the end
of the year for the revision of the ‘parent/subsidiary’
directive, and is reviewing the anti-abuse provisions in
relevant EU legislation.”

NAME NO NAMES

But officials played down the possibility of immediate steps
to close tax loopholes or any ‘naming and shaming’ of companies
in the final summit declaration, saying it was primarily up to
EU member states to craft the necessary legislation.

“We agree that companies shouldn’t be able to avoid tax by
pursuing aggressive tax avoidance schemes,” said an EU official
involved in handling preparations for the summit.

“But while companies may be using loopholes to pay as little
tax as possible, the truth is it’s a national issue. It’s up to
the relevant member states to change their tax codes and tighten
the net.”

The official said the most likely outcome from the talks was
tougher language on strengthening bilateral tax treaties and
bolstering so-called “anti-abuse” rules in national legislation.

“I can see the issue hijacking this summit, but the fact is
there are recommendations out there already and it’s up to
countries to explore them,” he said, referring to
recommendations the Commission made last December on tackling
aggressive tax planning and the erosion of the tax base.

France has already shown its willingness to take on major
U.S. companies. In 2011, French authorities raided Google in an
investigation of whether its Paris office does sales work. The
company was asked to pay 1.7 billion euros in back taxes.

A similar issue has arisen with how Google operates in
Britain, with questions raiseed about whether its sales staff
are based abroad or actually in the country.

Google has said it follows tax rules everywhere it operates
and that references to selling in job ads reflect the fact
Google likes to hire people with a sales background.

In a briefing ahead of the Wednesday’s gathering, a senior
EU diplomat sidestepped suggestions that EU leaders were looking
to take on specific companies, but said the issue was serious.

In a 2-1/2-hour news conference at the Elysee Palace on Thursday, Hollande set out plans for an “economic government” for the 17 euro zone countries, including its own budget and a full-time president.

The sweeping vision also encompassed a harmonized tax system and the ability for the euro zone to borrow money by issuing its own bonds, a proposal that has been raised repeatedly over the past three years and been roundly rejected by Germany.

“It is my responsibility as the leader of a founder member of the European Union … to pull Europe out of this torpor that has gripped it, and to reduce people’s disenchantment with it,” Hollande said, casting himself as something of a savior.

“If Europe stays in the state it is now, it could be the end of the project.”

The European Commission, the EU executive which presented detailed plans for closer integration in a “blueprint” published last November, said it was pleased Hollande was engaged on the same issues, calling it “food for thought”.

“We see that the Commission and France share the common ambition for Europe, a more integrated Europe from a political and economic point of view,” Commission spokesman Olivier Bailly told reporters.

“We welcome their desire to get involved in this discussion regarding the economic deepening and political union, and their ideas are welcome, and we have our ideas, of course.”

Other officials cast Hollande’s comments as an attempt to regain the initiative in the European debate, after criticism in recent months that France has lost its voice in Europe and no longer has the same influence and stature as Germany.

Political analysts argue the EU can only function successfully when France and Germany, who fought two world wars before overcoming their differences to forge the foundations of the EU 60 years ago, stand together and work in consort.

But the economic malaise that has gripped France over the past two years, including slipping into recession at the start of this year, has undermined Hollande’s clout and left the nation lagging Germany, the euro zone’s largest economy.

“Everything we’re hearing from Hollande we’ve already heard from (Nicolas) Sarkozy,” said an EU official, referring to the former French president, who also talked about the need for an economic government and jointly issued euro zone debt.

“This really sounds like ‘back to the future’. It’s more about Hollande trying to have a voice, trying to regain the initiative on the European agenda, but there’s nothing new.”

FRENCH ‘WINDOW-DRESSING’

More importantly, it does not appear that Hollande has much backing from Berlin for his vision, which includes the ambition of forging a full “political union” within two years.

Chancellor Angela Merkel’s spokesman told a news conference that Hollande’s proposal was “interesting and worth considering” but was essentially something the chancellor had been discussing with Sarkozy since 2011.

“It has been part of German thinking for a while anyway, and we have been working closely with France on it,” Steffen Seibert told reporters.

On the specific idea of creating a separate budget for the euro zone, the German economy ministry urged caution, pointing out that it could limit the rights of the German parliament, something guaranteed to make it unacceptable to Berlin.

“I think we should exercise caution on this,” said a spokesman.

Officials in Brussels, speaking on condition of anonymity because they did not want to be seen to be meddling in Franco-German relations, said they had no indications Merkel was suddenly more open to France’s ideas than before.

“It’s not as if Hollande has suddenly identified some new appetite in Berlin for euro zone debt issuance and a single euro zone president,” said a diplomat from a leading member state.

“Hollande’s proposals are not based on any new entente between Paris and Berlin, it’s just pie in the sky ideas.”

Economic commentator Wolfgang Munchau, in his daily commentary on EU news and affairs, described Hollande’s plans as a desperate attempt to revive his flagging domestic popularity.

“Essentially, this is not about Europe at all but about French politics, an attempt to calm down French critics who want France’s voice to be heard,” he wrote.

“Hollande repeated ideas that are known to be no-go zones for Germany. So it looks like a window-dressing exercise with no real consequences.”

(Additional reporting by Stephen Brown and Andreas Rinke in Berlin and Paul Taylor in Paris; Editing by Hugh Lawson)

In a survey of 7,600 people in eight EU member states, Pew
Research Center found rapidly declining confidence in the
European project and growing disagreements over key parts of it
between Germany, France, Britain and other major nations, a
dangerous combination that could splinter European unity.

“The prolonged economic crisis has created centrifugal
forces that are pulling European public opinion apart,
separating the French from the Germans and the Germans from
everyone else,” the survey’s authors said.

“The effort over the past half century to create a more
united Europe is now the principal casualty of the euro crisis.
The European project now stands in disrepute across much of
Europe,” they added.

The findings come at a time when many European policy makers
were beginning to hope that the worst of the crisis was over,
with confidence slowly returning to financial markets and high
streets, even if growth and job prospects remain dire.

The headline finding of the survey, conducted between March
2 and 27, was the fact that the “favourability” of the EU has
fallen by 15 percentage points over the past year, from 60
percent in 2012 to 45 percent now.

At the same time, the southern European nations of Spain,
Italy and Greece have become increasingly estranged, and France
is drifting their way too, leaving a big divide with Germany.

“No European country is becoming more dispirited and
disillusioned faster than France,” the authors concluded,
highlighting French citizens’ rapidly declining confidence in
the economy, in President Francois Hollande’s leadership and in
the country’s overall commitment to the EU.

What’s more – and it is an element that investors have often
expressed concern about – the survey showed that French public
opinion was now sharply at odds with Germany’s and more closely
aligned with that of Italy, Greece and Spain.

“The French now have less faith in the European Union as an
institution than do the Italians or the Spanish,” the survey
found. “And the French, like their southern European
compatriots, have lost confidence in their elected leader.”

TRUST IN GERMANY

Despite the fact that Germany, and Chancellor Angela Merkel
in particular, are frequently portrayed negatively in countries
that have received EU bailouts, respondents were largely
positive about Berlin, considering it the most trustworthy of
states.

Merkel remains by far the most popular head of government in
Europe, with 74 percent of those polled saying she was doing a
good job in the crisis, down from 80 percent in 2012. The least
popular leaders were in the Czech Republic, Greece and Italy.

But perhaps the most difficult finding to resolve is that,
while respondents in many southern European countries tend to
think the economic situation is only going from bad to worse,
those surveyed in Germany see circumstances improving.

Three-quarters of Germans described economic conditions as
good, up from 63 percent in 2007, while in Spain only 4 percent
said conditions were good, down from 65 percent six years ago.
The extent of the decline was similar in Britain.

That suggests a disconnect over budget austerity, the policy
of spending cuts and tax increases that is firmly backed by the
European Commission and governments in Germany, Britain and
elsewhere, and has been enforced across much of Europe.

“Overall, the 2013 survey highlights more starkly than ever
the differences between the views of Germans and other
Europeans,” Pew said, highlighting Germans’ confidence about
personal finances, the future and European integration.

Perhaps the only slither of positive news in the survey was
to do with the euro, the single currency that entered
circulation in 2002 and is used by 17 of the EU’s 27 states.

For the past three years, Europe’s problems have often been
referred to as the “euro crisis” with fears that a country could
withdraw from the currency or the whole system could collapse.

But the survey showed that while there may be growing
disillusionment about the European project, the euro remains
popular, with more than 60 percent of people across those
surveyed wanting to keep the currency, and support for it
actually rising in Italy and Spain.