Financial transaction tax for 10 EU states

Paris trader
Image caption By charging a small fee on all financial transactions, the tax could raise significant amounts of money

The European Commission has backed plans from 10 countries to launch a financial transactions tax to help raise funds to tackle the debt crisis.

The 10 countries include France, Germany, Italy and Spain.

The nations want to push ahead with the tax after failing to win support from all members of the European Union.

The UK has been especially vocal in its opposition to the tax, which it feels would hit the City of London particularly hard.

The remaining countries that have signed up to the tax are Austria, Belgium, Greece, Portugal, Slovakia and Slovenia.

"I am delighted to see that 10 member states have indicated their willingness to participate in a common financial transaction tax (FTT)," said Commission President Jose Manuel Barroso.

"This tax can raise billions of euros of much-needed revenue for member states in these difficult times.

"This is about fairness - we need to ensure the costs of the crisis are shared by the financial sector instead of shouldered by ordinary citizens."

Every little helps?

The EU failed to get agreement for a transactions tax from all 27 member states in June, but leaders from France, Germany, Italy and Spain all agreed at the time to push ahead with plans for the tax.

A number of states have said they are not against the tax in principle, but would not agree to implement it unless it was adopted across all global financial centres.

The idea is to impose a small charge on transactions of currencies, bonds and shares traded at banks and financial institutions. Although each charge would be small, the number of transactions made means the total revenues raised could be significant.

The Commission has estimated such a "Robin Hood" tax could raise 57bn euros ($74bn; £46bn) a year, if it were applied across the entire EU.

Governments across Europe have been implementing drastic austerity measures to cut debt levels, and taxing banks is seen by some as an important way to raise revenues, particularly while the economic recovery remains so fragile.

Opponents argue that unless it is adopted universally, the tax would drive business to financial centres that did not impose the tax.

A spokesman for the Treasury was critical of the plan by the 10 countries.

"We've consistently said the UK will not participate in an EU FTT," he said.

"As with an EU-wide FTT, a FTT amongst a smaller number of EU countries would still have damaging impacts on growth, jobs and financial activity in the EU.

"It would increase costs for pensions, for manufacturers. It could conceivably distort competition and fragment the single market.

"We are, however, not minded to block others from creating a FTT using the enhanced co-operation procedure, but before taking a firm view the UK would need to fully consider the scope of the new proposal and what the revenues would be used for."