European Commission President Jose Manuel Barroso yesterday called for a financial transactions tax, saying the financial services sector must “make a contribution.”
“Today the Commission adopted a proposal for the Financial Transaction Tax. Today I am putting before you a very important legislative text,” Barroso said in a speech to the European Parliament.
In his annual “state of the union” address, Barroso said that over the last three years, members of the 27-nation bloc had granted aid and provided guarantees of 4.6 trillion euros (US$6.3 trillion) to the financial sector in the aftermath of the 2008 global crisis.
“It is time for the financial sector to make a contribution back to society,” he said.
The tax is opposed both by the US and by some countries within the EU, notably Britain, which is home to some of the most important financial markets in the world.
On the commission’s drawing board for more than a year, the tax idea was given fresh impetus last month when given the nod by Europe’s power couple, French President Nicolas Sarkozy and German Chancellor Angela Merkel.
If adopted — not before 2014 — the tax could bring in up to 50 billion euros a year.
Separately, the US securities regulator is considering a plan that would improve a 23-year-old circuit breaker that did not trip during last year’s “flash crash” to make it more sensitive to extreme market moves.
Exchanges pitched a long-awaited plan that would lower percentage thresholds for halting stock trading, shorten the halts and change the reference index to the broader Standard & Poor’s 500 from the current Dow Jones industrial average, the US Securities and Exchange Commission (SEC) said on Tuesday.
The government regulator could formally adopt the changes after a 21 day public comment period.
The new breakers, designed to pause trading in all exchange-listed securities throughout US markets, are the latest in a long line of responses to last year’s May 6 crash, which revealed deep flaws in market structure, spooked investors and embarrassed exchanges and regulators.
NASDAQ OMX Group Inc, NYSE Euronext and other exchange operators, as well as the Financial Industry Regulatory Authority, proposed tightening the thresholds to 7, 13 and 20 percent lower than the previous day’s close, from the current 10, 20 and 30 percent, the SEC said.
The breakers would be based on only two time periods — before and after 3:25pm Eastern Time — rather than six, under the plan. Trading would halt for 15 minutes, instead of a patchwork of 30, 60 or 120 minutes.
Barroso also called yesterday for the creation of joint eurozone bonds and said he would propose options in the coming weeks despite German objections.
“Once the euro area is fully equipped with the instruments necessary to ensure both [economic policy] integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all,” Barroso told the European Parliament. “On condition that such eurobonds will be ‘Stability Bonds’ — bonds that are designed in a way that rewards those who play by the rules and deters those who don’t.”
The EU’s executive arm will present options for the creation of such bonds in “the coming weeks,” Barroso added.
He said some of the options could be implemented within the EU’s Lisbon Treaty, but “fully-fledged eurobonds” would require a treaty change.
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