FRANKFURT (Reuters) - German banks and the Irish Finance minister dismissed a Franco-German proposal for a tax on financial transactions as ineffective, while shares in stock exchange operators took a hit on the news.
Under heavy pressure to restore confidence in the euro zone after a dramatic market slump, French President Nicolas Sarkozy and German Chancellor Angela Merkel unexpectedly unveiled a plan on Tuesday to tax financial transactions.
Germany’s cooperative banking association said any such tax — often known as a Tobin tax after economist James Tobin, who first suggested one in the early 1970s — would fail to bring stability to markets if it only operated in the euro zone.
“For all the legitimate efforts at stabilizing financial markets, we feel a financial transaction tax which is limited to the euro zone is not effective,” Germany’s BVR cooperative banking association said on Wednesday.
Merkel and Sarkozy did not detail how such a tax, which has been opposed by some European countries and the European Central Bank, would work.
NYSE Euronext shares were down 8 percent in late trading on Tuesday, while Deutsche Boerse was 7 percent weaker on Wednesday, and rival London Stock Exchange lost almost 4 percent.
A Deutsche Boerse spokesman said the company would need to study the plans before responding further. The LSE and NYSE Euronext declined to comment.
“We doubt that a financial transaction tax, especially on derivatives, will be introduced in the Eurozone as it will damage the local financial industry and tax base without doing any good,” said Christian Muschick, an analyst covering stock exchanges at Silvia Quandt Research.
Ireland insisted that any new financial transaction tax apply to all 27 members of the European Union and not just the 17 members of the euro zone, Finance Minister Michael Noonan said on Wednesday.
Additional reporting by Harro Ten Wolde and Alexander Huebner in Frankfurt, and by Luke Jeffs in London; Editing by Will Waterman