* Paris, Berlin agree derivatives should be covered
* Better "imperfect" than no tax at all - Hollande
* Modest results at Franco-German cabinet meeting
By Jean-Baptiste Vey
PARIS, Feb 19 France and Germany agreed that a
planned pan-European tax on financial transactions should cover
all derivatives products, a source close to French Finance
Minister Pierre Moscovici said on Wednesday.
President Francois Hollande and Chancellor Angela Merkel
said after a joint meeting of their two cabinets in Paris that
they wanted other EU partners to agree on such a levy by
European Parliament elections in May.
France and its banks have in the past warned that imposing a
transactions tax across the board of financial products could
damage Europe's financial sector. But Germany has in recent days
suggested a compromise under which different components of the
tax could be phased in over time.
"France and Germany agreed on the principle of a financial
transactions tax covering all derivatives, not just equity
derivatives," the source said.
While Hollande and Merkel signalled their will for the 11
countries who back the tax to conclude a deal on it by the
European elections, it was still not clear how high the final
tax would be and when it would be applied to specific products.
Asked whether he favoured a phase-in of the tax as suggested
by German Finance Minister Wolfgang Schaeuble - starting with
share trades first - Hollande said such details would be worked
out in minister-level discussions.
"The main thing is that it happens. If we seek the perfect
product, I know there are some people who will go so deep into
details that there will never be a financial transactions tax. I
prefer an imperfect tax to no tax at all," he said.
Hollande said Paris and Berlin "shared the same approach" on
derivatives but did not elaborate. Merkel reaffirmed the joint
goal to forge an EU deal by the European elections.
The two were talking after a meeting of their cabinets, the
most broad-ranging talks between the two sides since Merkel's
re-election in charge of a "grand coalition" with centre-left
The financial transactions tax failed to gain broad support
when it was first proposed during the euro zone debt crisis but
eventually won the backing of an uneasy coalition of 11 states,
led by Germany and France.
It is seen as politically important to show European voters
that their governments are holding the banks and other
organisations implicated in the financial crisis accountable.
Officials in Brussels had first expected the tax to raise up
to 35 billion euros ($48 billion) a year, but it has since been
watered down following lobbying from the financial sector and a
cooling of enthusiasm among member states.
A redesigned levy is expected to raise only a tenth of the
amount originally targeted, officials who worked on revised
proposals told Reuters last year.
Existing national measures vary, with an Italian tax
applying to shares and derivatives and in France just a levy on
shares like the British stamp duty on the stock market.
Germany's main stock and derivatives exchange Deutsche
Boerse argues that taxing derivatives would be
particularly harmful to the economy by making it more expensive
for companies to hedge risks, Deutsche Boerse said.
The Franco-German meeting was hailed as an opportunity for
the two founding EU members to fix their priorities for the
28-country union, but other results of the talks were modest.
As expected, they confirmed that a 250-head Franco-German
brigade would be deployed in Mali to help force training there.
The two reaffirmed their commitment to completing EU's
banking union in the weeks ahead and to support efforts to
harmonise fiscal and social arrangements across the EU.
They agreed to work on developing data storage and other
communications infrastructure in Europe. However a French text
summarising the meeting's results did not mention the "European
communications network" Merkel proposed after reports last year
of mass surveillance in Germany and elsewhere by the U.S.
National Security Agency.
On energy and climate policy, the two backed European
Commission proposals for a binding goal to cut greenhouse gas
emissions by 40 percent by 2030.