Europe's planned financial transaction tax (FTT) would be the best solution to address cash shortages for global development and climate policies, the French deputy minister for development told EURACTIV France in an interview.
Deputy Minister Pascal Canfin warned there will be no global deal on climate change at the 2015 UN summit in Paris without new sources of financing.
In his view, the discussions on the financial transactions tax currently taking place between 11 EU member states “represent maybe the last opportunity to find the necessary financing for an ambitious climate deal in Paris.”
“One of the challenges of the Paris conference will be to find the $100 billion on which we agreed in Copenhagen in 2009," Canfin told euractiv.fr in an interview.
"We will also have to agree on greening the financing for development. We will also have to find additional financing sources for climate,” the Minister said.
>> Read the full interview with Pascal Canfin here (in French)
According to Canfin, fresh cash will be needed to convince southern countries to sign up to targets in the global fight against climate change.
“It is normal that southern countries won’t sign without an additional public commitment,” the minister said.
“With the European tax, we can solve the problem of additional financing for the fight against climate change,” he claimed, warning: “We are perfectly aware that if we don’t reach an agreement in Paris, it will create a definite disillusion,” he added.
A less ambitious national version
In France, a less ambitious national version of the tax has been in place since August 2012. 15% of the revenue generated by it is re-invested in public aid for development policy. Italy introduced a similar tax in spring 2013.
At European level, discussions over a similar tax found the support of 11 EU member states – Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. Together, they agreed to launch a so-called ‘enhanced cooperation’ procedure that other EU countries are free to join at any time.
But the adoption process has been stalled partly because of the German election.
The text is also highly controversial for other member states and the finance industry, notably regarding its scope. Currently, the text foresees taxing “intra-day” operations, which represent around 40% of operations in the Paris stock exchange.
“Having a European tax will allow us to do what we cannot do at national level. The aim is to tax flows that we cannot tax alone,” Canfin explains.
Despite the remaining obstacles, the former MEP is confident that the project can be completed.
“I think it is possible to reach a political agreement on this tax before May and the European Parliament elections,” he claims.
In case a political agreement is reached between the 11 member states, it will be up to the national governments to allocate the yields.
“François Hollande said several times that a significant portion of this tax should be allocated to climate and development,” Canfin stressed.
Eleven eurozone countries agreed in October 2012 to press ahead with a disputed tax on financial transactions aimed at making traders share the cost of fixing a crisis that has rocked the single currency area.
The countries are: Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
Other EU countries are free to join at any time under the Lisbon Treaty's so-called ‘enhanced cooperation’ procedure.
The initiative was pushed hard by Germany and France but was strongly opposed by Britain, Sweden and other proponents of free markets.
EU finance ministers gave the green light for the 11 countries to move forward in January 2013, opening a tricky debate on how the money should be used.
Under the initial proposal tabled by the European Commission in 2011, the FTT would apply to any transaction in financial instruments, excluding primary market issuance, and bank loans. Share and bond transactions would be taxed at 0.1% of the higher of consideration and market value and derivatives at 0.01% of their notional amount. The FTT would be due if at least one party to a transaction is based in the EU.
Germany and France, the main proponents of tax convergence, first pushed for EU-wide implementation starting in 2014, but then agreed to resort to the enhanced cooperation mechanism. In this case, France wants to introduce the FTT this year.