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The Associated Press Posted: Mar 12, 2014 1:40 PM ET Last Updated: Mar 12, 2014 1:40 PM ET
European Union finance ministers failed once again Tuesday to agree on a sweeping new policy to fight tax evasion because of resistance from Luxembourg, a tiny country that long has prospered from a secretive banking culture.
EU Taxation Commissioner Algirdas Semeta said their failure was disappointing because, if approved, the legislation proposing an EU-wide automatic exchange of data on bank deposits would allow governments to "identify and chase up tax evaders."
Luxembourg, a duchy of barely 500,000 people, was able to shelve the legislation for the 28-nation bloc and its 500 million citizens because the decision required unanimous approval at Tuesday's meeting in Brussels.
Luxembourg Finance Minister Pierre Gramegna said he could not vote in favour and pushed the decision to a summit of EU government leaders next week.
Luxembourg has insisted for years it would support the proposed law only if non-EU banking hubs within Europe, particularly Switzerland, also sign up.
But as the EU's negotiations with Switzerland, Liechtenstein and three other nations on signing the agreement have made progress, Luxembourg has responded with new reasons for opposition, chiefly the risk that banks outside Europe would draw deposits away if the continent's banking rules are tightened too much.
German Finance Minister Wolfgang Schaeuble said he was confident that Luxembourg would drop its opposition at next week's summit.
"We've been working on this for such a long time, whether we agree today or in four weeks, that doesn't kill me either," he said.
EU officials say tax fraud and companies' aggressive cross-border tax avoidance schemes cost the bloc's governments an estimated 1 trillion euros ($1.4 trillion) a year, money needed in an age of sluggish growth and high debt across Europe.
The finance ministers did achieve some progress Tuesday. They drafted compromise proposals designed to break a deadlock between EU governments and the European Parliament on how to set up an agency that could restructure or shut down failing banks, the EU's so-called "single resolution mechanism."
The agency is intended to help stabilize the financial system and reduce the risk that taxpayers would have to fund future bank bailouts. Greek Finance Minister Yannis Stournaras said the new proposals sought to address lawmakers' criticisms. He and other finance ministers declined to provide details.
The proposals are to be presented at negotiations with lawmakers Wednesday in Strasbourg, France.
To avoid significant delays in setting up the agency, an agreement between the EU's governments and European Parliament leaders must be reached by the end of March. That would leave time for the legislation to be voted on before the Parliament dissolves for May elections.
Lawmakers have complained that the EU's original proposals gave national governments and regulators too much influence over the rescue authority's decisions, leaving room to play politics and give advantage to their domestic banks.
The new bank-rescue fund would be financed by a levy on banks that would raise 55 billion euros ($75 billion) over 10 years by 2026. However before the fund would be tapped, a failing bank's creditors, including holders of large deposits, would be forced to take losses.
Mar 12, 2014 4:41 PM ET Mar 12, 2014 4:34 PM ET Mar 12, 2014 4:15 PM ET Mar 12, 2014 4:34 PM ET Mar 12, 2014 4:41 PM ETThe data on this site is informational only and may be delayed; it is not intended as trading or investment advice and you should not rely on it as such.
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