BRUSSELS: The European Union increased pressure on the International Monetary Fund on Friday to consider a global tax on financial transactions to limit the risk of another economic crisis.
Responding to public outrage over bankers’ big bonuses, EU leaders also underlined the need for “sound and effective” financial sector pay in a draft statement at a summit but did not specifically back British calls to tax the bonuses heavily.
“The European Council (of EU leaders) emphasizes the importance of renewing the economic and social contract between financial institutions and the society they serve and of ensuring that the public benefits in good times and is protected from risk,” they said in a draft statement obtained by Reuters.
“The European Council encourages the IMF to consider the full range of options including insurance fees, resolution funds, contingent capital arrangements and a global financial transaction levy in its review.”
The IMF is considering how to limit risk in the financial system following the worst economic crisis in generations, but the United States has opposed calls for a so-called Tobin Tax on financial transactions.
British Prime Minister Gordon Brown called for consideration of such a tax at a summit of the Group of 20 developed and emerging nations last month, saying the proceeds could be used to fund future financial bailouts.
But he faced opposition from US Treasury Secretary Timothy Geithner, who said Washington was against such a tax as a way to dampen risky bank behavior.
Without worldwide support, experts say it would be doomed to failure.
Brown acknowledged this, telling reporters in Brussels: “Global taxes will not be introduced unless all global financial centers are able to come behind it. But I believe there’s growing support for that.”
The draft EU statement, expected to be approved by leaders later on Friday, did not refer to calls by Britain and France to tax bankers’ bonuses heavily despite public anger that bankers are again making huge sums even though some of their banks have been bailed out with tax payers’ money.
The British government said on Wednesday banks operating in Britain would be charged a 50 percent tax rate on employees’ bonuses of above £25,000 ($40,610).
French Economy Minister Christine Lagarde said President Nicolas Sarkozy planned to announce a windfall tax on banking bonuses “equivalent” to the 50 percent levy proposed by Britain.
