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EU leaders agree to introduce national bank levies

Reuters

European leaders agreed to introduce national bank levies at a summit Thursday in Brussels of EU heads of state and government. The tax could fund future bailouts though the leaders did not provide details on how this would be done.

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They agreed that "member states should introduce systems of levies and taxes on financial institutions to ensure fair burden sharing and to set incentives to contain systemic risks."

The wording was changed from "levy" to “levies” plural after Britain, which will announce a new national bank levy in an emergency budget on June 22, expressed concerns that monies raised in London could, further down the line, be used to prop up troubled eurozone banks.

Tax remains solely the preserve of national sovereignty, Britain insists.

"Such levies or taxes should be part of a credible resolution framework," the declaration added, inviting countries to shape the tax in similar terms and for the same purposes in their individual territories, so as not to encourage cross-border bank flight.

EU president Herman Van Rompuy said, however, that leaders had decided not
to back a joint call by France and Germany for a global tax on financial transactions, but to "promote" the option when G20 leaders gather for a summit in Toronto, Canada, next weekend.

The global tax is supported by the International Monetary Fund, European powers and the United States but its opponents argue that they should not have to pay to clear up a mess they did not create.

The EU leaders also agreed to publish so called "stress tests" of banks next month to show investors where any potential risks lie.

EU Commission President Jose Manuel Barroso said the results would be published "on a bank by bank basis - this should reassure investors".

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