Europe split on proposed banking levy

27 May 2010

Europe's leaders are divided about the prospect of introducing a new banking levy to cover the costs of future bailouts.

The idea was set out yesterday by Michael Barnier, the European Union's internal market commissioner, and would see nations set up a tax on their financial sector.

But the British and French governments are said to be lukewarm about the idea, with officials from the UK telling the Financial Times the proposal would introduce "moral hazard" to the marketplace, as banks would feel insured against failure.

However, German finance minster Wolfgang Schauble has given his backing to the plan, stating that the proposal is "moving in the right direction".

The banking levy is to be discussed next month, with its proponents hoping an official agreement can be reached by the end of a G20 meeting taking place towards the end of June.

Last month, Mr Schauble laid out proposals for German banks to pay a combined total of €1.2 billion ($1.6 billion) on an annual basis into a bailout insurance fund.

He said at the time that a detailed bill would set out the proposals in July.

By Claire Archer

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