Business groups, tax campaigners and other European Union member states have been scathing in their criticism of an agreement between France, Germany and eight other eurozone member states to introduce a financial transaction tax.

Michael Spindelegger, Austria’s finance minister, presented the deal at a meeting of EU finance ministers on Tuesday (6 May), distributing a one-page summary to his colleagues, that was short on details. He explained that the tax would apply to dealings in shares and certain derivatives as from 1 January 2016.

The deal was evidence that a deep division between France and Germany has not been overcome, since the ten member states have yet to decide which derivative products – such as futures, options or credit default swaps – will be affected, or even the level of the tax. Germany wants the tax to apply to all derivative dealings, France to none; the group has set itself an end-of-year deadline to hammer out the details.

The European Commission in 2011 proposed a tax of between 0.01% and 0.1% on all financial transactions. The group of ten that are proceeding with the proposal under enhanced co-operation are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia and Spain. Slovenia was originally part of the group, but has put its participation on hold pending the formation of a new government.

Window-dressing

Luis Guindos, Spain’s finance minister, recognised that the deal was a “minimum outcome”, while Wolfgang Schäuble, Germany’s finance minister, observed that it had been “very difficult to get a common position”. But those promoting the tax lambasted the agreement. Philippe Lamberts, a Belgian Green MEP, described it as a “public relations exercise” ahead of the European Parliament elections, while Oxfam described it as “window-dressing”.

The group of ten has not only delayed the introduction of the tax but looks likely to exclude most derivative transactions, the area which would generate the most revenue, said Natalia Alonso, the head of Oxfam’s EU office. She also deplored the lack of agreement on what would be done with the money raised. The French government has said it would like the money to be used for international development projects, while Germany favours the revenues going to national budgets.

BusinessEurope, an association representing European businesses, said that the tax would increase financing costs for businesses: “This political agreement on the [financial transaction tax] is a step backwards in terms of putting Europe on the road towards growth and job creation.” That view was echoed by Anders Borg, Sweden’s finance minister. “It is very difficult to see the logic in this proposal,” he said.

Michel Sapin, France’s finance minister, defended the agreement, saying that financial speculation was at the root of the world’s recent economic woes. But this justification was disputed by Margrethe Vestager, Denmark’s minister for the economy, who argued there were more efficient ways of taxing finance. George Osborne, the United Kingdom’s finance minister, said: “This is not a tax on bankers but a tax on jobs, a tax on investments, a tax on people’s pensions and on pensioners.”

A number of finance ministers criticised the lack of transparency or consultation in the negotiations and queried whether the ten member states had even considered the question of spill-over effects on non-participating countries. “You have decided you must come out with something before the elections, but [finance ministers from non-participating member states] need to know more,” said Jeroen Dijsselbloem, finance minister of The Netherlands, brandishing the political agreement.

Osborne said that he would launch a legal challenge against the tax if it proved to have spill-over costs for the UK economy. A UK legal challenge to the decision to proceed with negotiations was rejected by the EU court on 30 April. Osborne was backed by Borg, who said that Sweden was now more likely to challenge the tax given the group of ten’s apparent lack of concern about potential extra-territorial costs.