US embassy cable - 05VIENNA2441

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 
--------------------------------------------- ------- 
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 
--------------- 
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