The Danish government turned down an offer to join a coalition led by France and Germany to introduce a financial transaction tax (FTT), Politiken newspaper revealed yesterday.
Supporters of an FTT on the sale of stocks, derivatives and non-government bonds argue that it will reduce risky financial speculation and raise money for the EU budget.
But negotiations that Denmark led while they held the EU presidency in the first six months of this year failed to find a consensus between all 27 EU member states.
As a result, France and Germany decided to forge ahead and introduce a FTT using a mechanism called ‘enhanced co-operation’ which allows some EU states to move ahead with an initiative.
For an enhanced co-operation to be considered, at least nine countries need to express an interest. Denmark won’t be one of them, however.
“The government’s position on a charge on financial transactions is well known and unchanged,” the economy minister, Margrethe Vestager (Radikale), told Politiken. “We will not be participating in a strengthened co-operation with a financial transaction tax.”
Vestager has argued that an FTT is pointless unless implemented globally. Otherwise, she contends, financial markets will simply move to where it is cheapest to do trade.
The UK was the most vocal opponent to the FTT for precisely this reason, as its economy is reliant on income derived through its financial services industry where the majority of European derivatives trades take place.
A last ditch effort by Denmark before the end of their presidency in June to strike a compromise by temporarily excluding derivates from the FTT failed.
Vestager’s decision is bound to disappoint European Commission spokesperson, Emer Traynor, who told Politiken the commission needed seven more countries to sign up before they could proceed.
“Denmark has played an important role and did a lot of work on the financial transaction tax during its chairmanship, so it would be great if they joined,” Traynor said. “The benefits would be enormous, even if it doesn’t cover all 27 countries. It would be a new source of income coming from a sector that can afford it and is under taxed. A financial transaction tax would also add stability to the financial sector by limiting high risk and very speculative transactions.”