EU nations seek transaction tax answers on repurchase agreements

Greece and 10 other European Union nations that plan to introduce a common financial transaction tax are seeking assurances from the European Commission that the levy won’t drive up their borrowing costs.

The Commission should provide data about the impact of the tax on the market for so-called repurchase agreements, and by extension “on the funding cost of the central government and the real economy,” according to an April 16 working document prepared by the 11 states.

The EU estimates the tax could raise 30 billion to 35 billion euros a year.

To become law, it has to be approved by the participating nations: Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia.

All 27 EU nations can sit in on the talks and have the option to join.

The 11 states are trying to address concerns that the plan could lead to the “extinction” of repo operations that keep government borrowing costs down by allowing traders to hedge their risks, according to the document.


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