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Germany Rebukes UK Over Tobin Tax Opposition

German frustration over Britain’s approach to the euro zone crisis erupted on Tuesday after a close ally of Angela Merkel accused the UK of selfishness just days before a meeting between the two countries’ leaders in Berlin.

London Financial District
Photo: Vulture Labs | Getty Images
London Financial District

In a speech to members of the German chancellor’s CDU party, Volker Kauder, its parliamentary leader, criticised Britain for opposing a European tax on financial transactions. To applause, he said it was not acceptable that the UK was “only defending its own interests” rather than that of the wider EU.

Ms Merkel has said that the euro zone should push ahead with the so-called Tobin tax if Britain continued to block the measure – raising funds from the financial sector to help cash-strapped governments – even if that put Frankfurt at a disadvantage to London.

The issue could sour talks between the German chancellor and David Cameron in Berlin on Friday. The British prime minister has vowed to block the financial transactions tax, which would fall most heavily on London as Europe’s biggest financial centre.

Mr Kauder told the CDU annual conference in Leipzig: “The British are not members of the currency union but they are members of Europe and they have a responsibility for the success of Europe.”

He added: “The British don’t want this and I understand, when 30 percent of your gross domestic product comes from the financial market business in the City of London.”

Suggesting that the crisis-struck euro zone was increasingly accepting Ms Merkel’s policy lead, Mr Kauder said: “Suddenly, German is being spoken in Europe.”

George Osborne, chancellor of the exchequer, has called the Tobin tax plan “a bullet aimed at the heart of London”, but Mr Kauder may have overstated his case: most estimates suggest financial services amount to less than 10 percent of Britain’s GDP.

Mr Cameron’s talks with Ms Merkel will also focus on her call for a “political union” to overcome the problems facing the euro zone. “That does not mean less Europe, it means more Europe,” she told her party this week.

Her stance is in direct contradiction to the view of the British prime minister, who told a City audience on Monday that Europe should develop with “the flexibility of a network, not the rigidity of a bloc” and that powers should be returned from Brussels to member states.

However, the two leaders may yet be able to find common ground. Ms Merkel wants to improve the running of the euro zone through a quick and very limited treaty change – possibly by the end of 2012 – that would not impact on Britain.

Mr Cameron would prefer a limited treaty change. In spite of describing himself as a “skeptic” on Monday, he does not want Europe to be plunged into a lengthy negotiation of a big treaty change, with accompanying demands from Tory MPs that he should fight to repatriate powers from Brussels.

If Mr Cameron was plunged into a confrontation in Europe, it would place huge strains on the British coalition. Nick Clegg, Liberal Democrat leader and deputy prime minister, said that treaty talks would be a big distraction from the main task of generating jobs and growth.

“The only people who will benefit will be populists, chauvinists and demagogues, who will exploit that lack of political leadership,” Mr Clegg said after meeting Mark Rutte, the Dutch prime minister. His comments exposed tensions with Mr Cameron, who claimed this week that the euro zone crisis was “an opportunity” to remake the EU.

The fear stalking Westminster is that a “core Europe” of 17 single currency states would start to impose their will on the other EU members, including foisting unpopular regulations on the City through single market legislation.

But Mr Clegg was encouraged by Mr Rutte’s vow that he would “do everything in power to prevent that”. Liberal states, particularly in northern Europe, are keen to have Britain in the room when key decisions are taken affecting the operation of the EU’s single market.

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