Spanish PM backs Sarkozy on Tobin tax

Mariano Rajoy, Spain’s centre-right prime minister, on Monday explicitly backed a plan by President Nicolas Sarkozy of France to introduce a controversial financial transactions tax, known as the “Tobin tax” after the economist who first proposed it.

France, meanwhile, agreed to support Spain’s bid to keep a seat on the executive board of the European Central Bank after José Manuel González-Páramo’s term expires in the first half of this year.

“I’m in favour of the tax on financial transactions,” Mr Rajoy said after receiving Mr Sarkozy in Madrid, where the French leader received the Order of the Golden Fleece from King Juan Carlos for France’s contribution to the fight against the Basque separatists of Eta. “It’s a matter on which decisions can be taken.”

Mr Rajoy, who has been in power for nearly a month after winning a November general election and who is seeking to restore Spanish influence in the European Union, nevertheless conceded there were details to iron out so that the tax would not end up being paid by consumers.

Since becoming prime minister, he has been forced to raise tax rates in spite of election promises not to do so after an upward revision of the 2011 budget deficit. He is keen to avoid further tax rises that directly affect Spanish consumers while seeking French support for a seat at the table of European policymaking.

Mr Sarkozy has pushed for the Tobin tax in spite of objections from French bankers and businesspeople who fear that a unilateral application of the measure in France, or even the eurozone, would undermine the role of Paris as a financial centre. The UK opposes the tax over concerns it would hit the City of London financial centre, while Germany wants agreement on its application across Europe.

“If we have to wait for others to begin, what does one do if they don’t begin?” Mr Sarkozy said at a news conference. “Wait?”

He added: “France’s idea is very simple: that there’s a group of countries that take the lead and adopt the tax, so that all adopt it in the end.”

Both leaders acknowledged the depth of the crisis affecting the eurozone and said they were working in their respective countries to revive their economies.

“We are faced with an unprecedented crisis, obliging us to cut spending, reduce deficits and find new paths to growth by improving competitiveness,” Mr Sarkozy said.

But they played down the importance of downgrades for France and Spain last Friday by Standard & Poor’s, the credit rating agency. “It’s not the rating agencies that should decided countries’ economic policies,” said Mr Sarkozy. “This changes nothing.”