A financial transaction tax that does not cover all 27 EU member states could be a breach of the single market and result in legal action from the UK, according to the Liberal Democrats.
Last week, French president Nicolas Sarkozy backed the proposed tax being applied in fewer than all 27 member states, even though he would prefer it to include the UK, which is strongly opposed to the FTT.
German chancellor Angela Merkel (pictured) also sees the tax as workable across a smaller number of member states but has come under pressure from her domestic junior coalition partner for the tax to be applied across all 27 countries.
Speaking to Money Marketing, LibDem MEP and European constitutional affairs spokesman Andrew Duff says the other 26 states could try to set up a transaction tax between them but this could undermine the single market and open them up to legal action from the UK. He says: “The Lisbon treaty’s reinforced co-operation provisions allow smaller groups to do something like this but, and this is a big qualification, the action must not impair the operation of the single market. Cameron could not veto the move, so I expect he would take them to court, claiming they had breached that qualifying clause.”