The story being briefed out of the year’s first Franco-German Summit is that President Nicolas Sarkozy won the backing of Chancellor Angela Merkel for a tax on financial transactions, a levy that the British government objects to and that Ernst and Young say would leave a €116bn hole in Europe’s public finances.
But before the City begins building barricades and the PM puts on his bulldog mask, it is worth taking another look at the news from Berlin. For no sooner had the agreement been announced than the tax was rejected by Chancellor Merkel's junior coalition partner, the pro-business Free Democrats, who say they will only back a Europe-wide tax scheme. They are not alone. The Netherlands and Ireland feel the same. And as an EU-wide tax has no chance of succeeding, given British and Swedish opposition, the whole story is more a matter of French electoral spin than European fiscal policy.
But, for the time being, France may have to impose the tax by itself – as its government has threatened. And like Sweden’s experience in the 1980s, that may be the best way to dissuade anyone from expanding its adoption. After seeing 90 to 99 per cent of its traders in bonds, equities and derivatives move out of Stockholm to London after the introduction of the tax, the Swedish government now opposes a geographically-limited tax. Who says politicians never learn?