Faced with fierce opposition from Britain and Sweden, France and Germany could formally request plans for a smaller group of countries to move forward on a financial transactions tax (FTT) when finance ministers meet in Luxembourg on Friday (22 June).
"France and Germany could appeal for the Commission to draw up plans for an enhanced co-operation together," said an EU diplomat who was speaking EURACTIV on condition of anonymity because of the political sensitivity of the matter.
"Nevertheless there remain differences over how the proceeds of an FTT should be spent, with France wanting to keep open the option of the money being used for the EU budget, a proposal Germany currently opposes," the diplomat added.
If confirmed on Friday, the move could mark a significant policy shift by German Chancellor Angela Merkel who had previously supported an FTT in principle, but on the basis that it could be introduced by all 27 member states.
The German Social Democrat opposition on 11 June raised the pressure on Merkel, linking progress on the tax to their approval for the EU's fiscal discipline treaty and for the euro bailout fund, the European Stability Mechanism (ESM). Both are political priorities for Merkel.
The FTT is one of many proposals made to tax banks and hinder market speculation that policymakers believe have exacerbated the financial and economic crisis in the eurozone.
Debate set for Luxembourg
Last year, the European Commission proposed a scheme to tax stock, bond and derivatives trades from 2014, potentially raising €57 billion in revenue. But much of the proceedings will originate from trades taking place in Britain, the region's biggest financial centre, and the most vocal opponent of the FTT proposal.
Under the EU plan, which needs the backing of all 27 countries to become law, stock and bond trades would be taxed at the rate of 0.1%, and derivatives trades at 0.01%.
The Commission will report to finance ministers in Luxembourg in an ‘orientation debate’ on the current state of deliberations on its own proposals for an FTT, and any alternative ideas it may have.
A spokesman at the EU executive said “intense work is still ongoing at 27 [member-state level] on the basis of our proposal for a FTT," and pointed out that no member state had spoken out against the broad objective of “getting the financial sector to pay its fair share."
Britain and Sweden are likely to repeat their strong opposition to such a tax at the ministerial meeting. If it remains clear that no proposal at 27-level is likely, EURACTIV understands that Germany and France are considering making a joint request for the Commission to draw up plans for an enhanced co-operation of member states.
Ten could support the tax
Such an enhanced co-operation would almost certainly involve the seven other member states which have asked the Danish presidency in February to push for the introduction of the FTT without delay. These are Austria, Belgium, Finland, Greece, Italy, Portugal and Spain.
Other countries previously lukewarm on the issue appear to be shifting their position also. The Bulgaria government is believed to have changed its mind whilst Danish officials have indicated they might be convinced if certain changes are made to the Commission’s blueprint.
Merkel has indicated that she will also raise the FTT at a meeting in Rome on 22 June with the leaders of Spain, France and Italy.