Austria bourse fears new EU tax will sap trade

VIENNA Tue Oct 9, 2012 12:11pm EDT

VIENNA Oct 9 (Reuters) - Vienna's stock exchange said on Tuesday it feared losing even more trade as a result of a tax on financial transactions set to be introduced in Austria and some other euro zone countries.

Eleven euro zone countries agreed on Tuesday to push ahead with the tax in a breakthrough for an initiative that has been pushed hard by Germany and France but opposed by several other European Union countries.

"Of course we are not happy with this tax," a Vienna Stock Exchange spokeswoman said. "We're afraid that trade will move to other exchanges that have not introduced the tax. We will have a two-class system in the European Union."

Imposing the charge on financial deals is symbolically important in showing that European policymakers are tackling an industry blamed for triggering economic turmoil and which should help to pay to fix the crisis.

But it is deeply divisive.

Sweden - which is in the EU but outside the single currency zone - is a vocal opponent of a tax that it attempted to impose in the 1980s, only to see much of its trading shift to London at heavy cost.

Walter Rothensteiner, chief executive of Raiffeisen Zentralbank and one of Austria's top bankers, said it would be better to roll out such a tax across the board.

"It would be desirable to introduce this globally to avoid disadvantaging the countries in which the financial transaction tax should apply," he said.

Austria has already seen two-thirds of the volume that once traded on the prime segment of the main stock exchange disappear to alternative electronic platforms, over-the-counter networks and rival exchanges such as Warsaw in the last five years.

Between 2007 and 2011, annual share trading volume on the bourse fell to 30 billion euros ($39 billion) from 88 billion, and the first half of 2012 saw just 10 billion euros traded.

Economist Werner Hoffmann, author of a study of the Austrian capital market published on Tuesday, said poor liquidity, a move by investors eastwards to other exchanges, and bureaucracy - as well as the global downturn - are to blame.

Of Austria's top 20 companies, just one - brickmaker Wienerberger - has a 100 percent free float, and half have a free float of under 50 percent.

"It's no surprise that companies don't want to join a market that's on a downwards trend," said Hoffmann, who runs management consultancy Contrast and is also a university professor.

He warned that Austrian economic growth, seen by researchers at 0.6-0.9 percent this year, could be crimped if capital markets do not improve and tougher capital rules restrict bank lending that has traditionally funded much investment.

While rivals including Deutsche Boerse, the London Stock Exchange and in particular the Warsaw Stock Exchange have stabilised or increased their trading volumes since 2009, Vienna has continued its downwards trend.

Just six companies have listed on the Vienna exchange since 2008, and none has done so this year. In Warsaw, 26 companies listed last quarter alone.

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