Cable fights Euro ‘tax on Britain’

TENSIONS are mounting between Britain and Germany ahead of a crisis summit between their two leaders after Business Secretary Vince Cable hit out at German pressure for a Europe-wide financial transactions levy, describing it as a “tax on Britain”.

Mr Cable said German demands for the introduction of a so-called Tobin tax were “completely unjustified”, insisting such a measure did not carry public support and was “not a sensible way” of dealing with the sovereign debt crisis.

His words came in response to a speech by a senior member of Chancellor Angela Merkel’s conservative bloc, who accused Britain of selfishness over its rejection of a transactions tax.

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Brussels says £35bn of much-needed revenue could be raised via the measure but Britain, home to Europe’s biggest financial centre, fears business would be driven away from London.

David Cameron has already said introducing such a tax without other key global players such as the United States and China doing the same would be “economic suicide” for Britain and Europe.

Volker Kauder, a key domestic ally of Mrs Merkel, said it was unacceptable for Britain to simply defend its own interests, and suggested the eurozone should consider going it alone.

But Mr Cable said: “I think the Germans are (taking) a completely unjustified position,” pointing out that most of the tax revenue would come from Britain but would flow into the European budget.

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“I don’t think, frankly, people in this country want to see a new tax on financial services – which they will ultimately pay for – being diverted into Common Agricultural Policy, and roads that go to nowhere. That is not a sensible way of dealing with things.”

Mr Cable added: “There is an argument for having a tax which applies to all financial jurisdictions – we’ve certainly no objection to that in principle.

“But what the European Union countries are proposing, and Angela Merkel, is a tax which effectively is a tax on Britain – the revenue of which would go to support the European Union budget. ”

The row threatens to sour tomorrow’s meeting in Berlin between Mrs Merkel and David Cameron, and underlines the differences between how each believes the debt crisis should be addressed.

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One area where the two leaders may reach some agreement is over the need to re-write EU treaties in response to the crisis.

Mrs Merkel wants treaty changes to reinforce eurozone integration, while Mr Cameron has signalled he may use a renegotiation to wrest back powers from Brussels.

That such a move would create divisions within his own Government was emphasised yesterday as Mr Cable hit out at those “obsessing” about the EU amidst a major economic crisis.

“This whole discussion about treaty renegotiation is a terrible distraction from a very real crisis,” the Liberal Democrat said.

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“You just wonder quite what planet people live on when they obsess about this problem.”

The spat came as the Greek and Italian governments sought to shore up their positions over the crisis in the eurozone. Greek Prime Minister Lucas Papademos won a key confidence vote in Parliament for his plan to push through a series of tough budget measures designed to keep Greece afloat and in the euro.

New Italian leader Mario Monti formed a government without a single politician, picking bankers, diplomats and business executives. The former European commissioner said he will be Italy’s economy minister as well as premier. He will set out his emergency measures against the crisis later today ahead of a confidence vote.

Hopes for the new administration rose yesterday after the interest rate on its bonds fell.