EC Proposes Transaction Tax, Finland Approves EFSF

Arthi Gupta
28 Sep, 2011
New York City

The European indexes traded sideways after dissent among euro area nations regarding the rescue package for Greece. European Commission proposed a financial transaction tax. The French economy stagnated in the second quarter. AXA confirmed options for private equity arm.

[R]2:30 PM Frankfurt – The European indexes traded sideways after dissent among euro area nations regarding the rescue package for Greece. European Commission proposed a financial transaction tax. The French economy stagnated in the second quarter. AXA confirmed options for private equity arm.[/R]

European stocks traded sideways after the European Commission President Jose Manuel Barroso on Wednesday called for more flexibility and powers for the European rescue fund and proposed a financial transaction tax.

Barroso said that the commission will adopt proposal for the financial transaction tax that would raise around €55 billion a year. The proposed tax, to be levied on all transactions on financial instruments, would come into effect from January 1, 2014.

The exchange of shares and bonds would be taxed at a rate of 0.1% and derivative contracts, at a rate of 0.01%.

The proposal though supported by Germany and France is not likely to be implemented as UK, the Netherlands and Sweden said will extend their support it is accepted globally.

He also reiterated that Greece will remain in euro-zone while addressing the European Parliament in his annual state of the union speech.

German Chancellor Angela Merkel said on Wednesday that she is awaiting a report from troika of the ECB, EU and the IMF on the progress made by Greece in cutting its budget deficit, before deciding whether the July 21 deal need to be renegotiated or not, according to reports.

Investors are speculating that the bailout deal negotiated in July maybe revised and Greece may ask banks to take higher losses and may fall short of its target to cut deficit and raise new revenues.

Euro-zone countries are divided over the terms of Greece''s second €109 billion bailout deal with 7 of the 17 member countries demanding private creditors to share a bigger write-down on their Greek bond holdings.

Seven nations have still not approved the setting up of the rescue fund and Finland approved the measure today in 103-66 vote with 30 absentees. Germany is scheduled to vote on the measure Thursday and Austria on Friday.

Malta, the Netherlands, Cyprus, Slovakia and Estonia are scheduled to vote on the measure in the next six to eight weeks.

In Paris, CAC-40 Index gained 5.58 or 0.2% to 3,028.96 and in Frankfurt DAX Index edged higher 20.91 or 0.4% to 5,649.35.

French Economy Stagnates

The French economy stagnated in the second quarter as initially estimated, with the GDP remaining flat on a sequential basis following the 0.9% growth in the prior quarter, final data from statistics office Insee showed.

AXA Confirms Review for Private Equity Arm

AXA SA, the French insurer confirmed on Wednesday that it initiated a strategic review to evaluate strategic options for its private equity arm AXA Private Equity, including a possible sale.

Gainers & Losers

Air Liquide SA gained 0.5% to €89.10 after the French industrial gas producer said it signed a long-term contract with Petkim Petrokimya Holding AS to supply oxygen, nitrogen and compressed air gases to its Aliaga site.

Credit Agricole SA rose 0.8% to €5.23 after the French lender is planning to announce asset sales at its corporate and investment bank to boost capital following a credit rating downgrade this month, according to reports.

Electrolux AB slumped 3.3% to SEK 103.80 after the Swedish home appliances maker said it has hired Tomas Eliasson as its new finance chief.

Nestle SA increased 0.9% to Sfr49.87 after the Swiss food maker said James Singh will retire as Chief Financial Officer and will be replaced by Wan Ling Martello on April 1, 2012.

Telefonica SA climbed 0.5% to €14.32 after the Spanish telecom giant’s long-term issuer default rating was downgraded by one notch, citing weak economic conditions in Europe.