AUSTRIAN CHANCELLOR SCHUESSEL CALLS FOR AN EU

UNCLAS VIENNA 002441

SIPDIS

STATE FOR EB/IFD/OIA, EUR/ERA, AND EUR/AGS
FRANKFURT FOR TREASURY (JWALLAR)

E.O. 12958: N/A
TAGS: PREL ECIN EFIN AU EUN
SUBJECT: AUSTRIAN CHANCELLOR SCHUESSEL CALLS FOR AN EU
TAX ON FINANCIAL TRANSACTIONS


Summary
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1. Austrian Chancellor Wolfgang Schuessel has proposed
an EU-wide tax on financial cross-border transactions.
Schuessel said he believes the tax would provide
increased financial autonomy for the EU's budget and
close the unresolved financing gap in the 2007-2013
financial framework. Despite overwhelming support across
Austria's political spectrum, the proposal appears to be
a non-starter. Schuessel has no plans to press the
financial tax during Austria's EU Presidency in the first
half of 2006. However, Schuessel stated that he hopes
discussion of a financial transactions tax would
encourage the European Commission to put forward such a
proposal. End Summary.


Chancellor Proposes EU Tax on Financial Transactions
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2. During a July 10 press interview, Austrian Chancellor
Wolfgang Schuessel proposed an EU-wide tax on financial
cross-border transactions, without elaborating on
details. He claimed the tax would provide the EU with an
autonomous source of revenue and defuse tensions among
Member States regarding budget financing. In a July 12
cabinet meeting, Schuessel reportedly noted that the new
tax would cover only a fraction of EU budget revenues,
but could close the gap between the budgetary proposals
of net contributors and the Commission. According to
Schuessel, Austria would not initiate such a proposal
during its EU Presidency the first half of 2006.
However, Schuessel said he hopes that discussion of a
financial transactions tax could motivate the Commission
to put forward such a proposal.


Mixed Reactions
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3. The junior partner in the governing coalition, the
Alliance Future Austria (BZO),publicly supported
Schuessel's idea, as did the opposition Social Democrats
(SPO) and Green parties. BZO Chairman Joerg Haider
claimed that such a tax would reduce speculation and
yield Euro 20-25 billion annually. SPO Chairman Alfred
Gusenbauer opined that the tax would signal a necessary
turn-around in EU policies and an acknowledgement that
the era of "cold neo-liberalism" is over. The Austrian
Industrialists Association spoke out against the tax,
noting the negative consequences on London and other EU
financial centers. Schuessel's economic policy advisor
Claus Raidl, CEO of Boehler-Uddeholm Company, admitted
the proposed tax would only be feasible in a global
context, particularly with U.S. and Japanese
participation. Alfred Finz, State Secretary in the
Finance Ministry, maintained the tax would divert
financial transactions away from Europe.


Comment
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4. Schuessel's proposal seems to be a non-starter
because of the negative impact on European finance
centers and the reduction in the potential tax base, as
financial transactions migrate away from Europe. The GoA
believes it will have to solve the 2007-2013 financial
framework problem during its presidency. Schuessel's
idea is thus most likely an attempt to stimulate
discussion following the failure of the Council to reach
an agreement on the financial framework.

BROWN