EU finance ministers to discuss bank levy

European Union (EU) finance ministers are set to discuss the possibility of introducing a levy on banks and whether a tax on financial transactions can deal with another banking crisis, as they gather today in an atmosphere more benign than when they last met in July.

Worries about the European economy and its ability to deal with large amounts of government debt have been eased by a run of better-than-expected economic data, progress by Greece in strengthening its bailed-out government finances and the results of stress tests on 91 of the EU's banks.

The most apocalyptic scenarios openly discussed a few months ago, such as the collapse of the euro currency, have been put on the back burner. But policymakers remain wary that the government debt crisis could flare up again, particularly as the 16 governments that use the euro are set to issue more debt this month than they did in August in a continuing test of how bond markets view government finances.

Any signs of EU disunity or discord could trigger another bout of investor unease. That could lead to market borrowing costs spiking again, which would make government financial troubles even worse.

Top of the agenda will be the first discussions among finance ministers from all 27 EU member countries on the possible introduction of a bank levy and a separate tax on financial transactions, as governments try to find a way to protect against another banking crisis. The euro group ministers convene afterwards.

"We all agree on the need to have credible sanctions,"said Olli Rehn, European commissioner for economic and monetary affairs.

The leaders of the EU agreed at their June summit that bank levies should be introduced but technical issues, such as how the tax will be imposed and what the proceeds will be used for, need to be ironed out.

The leaders did not issue any guidelines on the transactions tax, which is often called the Tobin tax after the Nobel Prize laureate James Tobin who first made the proposal in the 1970s.

- AP