Written by Ilay Levinshtein, edited by Tommaso Filippini


In the aftermath of the 2008 financial crisis, the European Commission proposed to enact a tax on the financial sector, dubbed the Financial Transaction Tax (FTT). The objective of the FTT was to promote the economic recovery of the European internal market by applying a tax on various actions performed by the financial sector, namely activities relating to money transactions within capital markets and a “broad range of securities”, although some transactions were to be excluded from taxation (Allevato & de Vito, 2020, p. 75). In so doing, the FTT was intended to generate a sufficient amount of tax revenue to contribute to the recovery of the European market in the post-financial crisis reality (Schäfer et al., 2012). 

The notion of such a tax was viewed positively across EU institutions and by the European public, who perceived the financial sector’s actions of excess risk as a threat to Europe’s financial stability. Moreover, the FTT was viewed by regulators and officials as an important tool for harmonising the tax governance of the Union and its Member States, thereby further advancing financial integration (Wasserfallen, 2013, pp. 424-425). However, this initially ambitious and EU-wide policy initiative was reduced both in scope and capacity following salient lobby strategies employed by the financial sector (Kastner, 2018). 

This article seeks to examine how the financial sector was able to exert influence over the decision-making process surrounding the FTT proposal, regardless of its salience and strategic importance to the Union’s budget. More specifically, this article seeks to argue that when negotiations regarding the FTT proposal advanced to a ‘closed-door’ stage, the financial sector was able to better utilise its lobbying capabilities vis-à-vis decision-makers.  First, the political setting which enabled the Commission to present the FTT will be presented, after which the lobbying strategies of the financial sector will be discussed

The importance of the FTT to economic integration and financial recovery

Following the financial and Euro crises of 2008 and 2009, EU policymakers and regulators have held discussions regarding future policy tools that will improve the EU’s financial stability, harmonise its taxation system, and prevent future financial turmoil (Wasserfallen, 2013; Allevato & de Vito, 2020). In the framework of these discussions, popular consensus was reached concerning the need for a re-adjustment of the financial sector’s role within the European economy, the ultimate goal of which would be to make the financial sector contribute its fair share towards economic recovery after the financial crisis (Baker, 2013; Kastner, 2017). To this end, the European Commission introduced the FTT in 2012 as an ‘enhanced cooperation’ initiative of 11 Member States – France, Germany, Italy, Spain, Greece, Belgium, Portugal, Austria, Estonia, Slovenia, and Slovakia (EU11), after realising that unanimous agreement among all EU Member States concerning a Union-wide transaction tax would not be feasible (Levanti, 2014; Kalaitzake, 2017).

The FTT’s regulatory goal is to reduce short-term speculative trading and its impact on market volatility and promote long-term investment, which in turn was thought to discourage financial institutions from taking excessive risks, while stabilising markets and promoting tax coordination between Member States (Bratis et al., 2017; Solilová et al., 2017; Allevato & de Vito, 2020). The FTT was to be applied to any transaction involving stocks, securities, derivatives, and foreign exchange, the reasoning for which lies in the assumption that the steady increase in trading activity within EU markets lead to excessive liquidity (Allevato & de Vito, 2020, pp. 73-74). As of 2020, the FTT puts a 0.1% tax rate for transactions involving stocks and bonds, and 0.01% for derivatives transactions (Allevato & de Vito, 2020, p. 75). The FTT was to be imposed on all financial transactions involving entities with a legal connection to the EU11 jurisdiction, even if such transactions occurred in non-participating EU states or even outside the EU, though an exemption could be made for transactions involving the European Central Bank (ECB) or national Central Banks of the EU11 (Lomas, 2012; Kalaitzake, 2017, p. 714; Allevato & de Vito, 2020, p. 75). The expected revenues of the FTT were predicted by both researchers and the Commission to range in the tens of billions of EUR (Solilová et al., 2017, p. 694).

The FTT also corresponded with the Commission’s goals relating to European integration and the tax harmonisation of the internal market while acting as a contributor to the annual EU budget (Nugent, 2017, pp. 423-424; Kalaitzake, 2017, p. 715). In this regard, it is important to note two points: that the internal market is vital in driving European economic recovery and growth (Cini & Borragán, 2019, pp. 303–304) and that the Commission and the European Parliament (EP) have been keen on increasing the EU’s annual budget since the adoption of the 2014-2020 Multiannual Financial Framework (MFF) (Nugent, 2017, p. 421). Indeed, the Commission requested that the EU11 consider allocating a percentage of the tax revenue towards the EU budget. As such, it is apparent that the FTT would have been able to contribute to the aforementioned goals. Furthermore, the FTT would boost EU-level tax authority, an important step in itself towards an increased, EU-wide financial integration since European tax authorities are directly linked to the functioning of the single market (Wasserfallen, 2013, pp. 424-425; Kalaitzake, 2017, p. 715). 

Opposing factions

Spearheaded by the EU11, the FTT enjoyed wide support from both the EP and the European public. In fact, the 2012 Eurobarometer presented that 66% of the public were in favour of the tax, while the EP approved the proposal with 487 votes in favour and merely 152 votes against (European Parliament, 2012). Throughout the negotiating process, the Parliament was a strong supporter of the FTT and constantly showed resolute cross-party backing towards it, with the last legislative vote on the matter registering 522 votes in favour. Likewise, the FTT proposal received the support of citizens from key EU11 states, namely Germany, France, Spain, and Italy (Kalaitzake, 2017, p. 715). As such, the EP decided that the FTT was to be implemented in all EU11 states starting 1 January 2014 (European Parliament, 2012). 

However, a conflict of interest ensued vis-à-vis the financial sector, which proceeded to employ massive industry lobbying in retaliation to the FTT in an attempt to pressure the Commission into postponing its implementation and granting more exemptions for various financial activities (Kastner, 2018). Meanwhile, media coverage in the wake of the financial crisis increased the public’s perception of unjustified industry influence, deeming the financial sector and big corporations as responsible for economic insecurity and as a force employing pressure associated with business interests in the EU (Kastner, 2018, p. 1651). 

Financial regulation has become a salient issue within the European public discourse after the financial crisis (Young, 2013, p. 462), the result of which demonstrated the great influence that financial interest groups held over national governments and EU institutions pertaining to financial policies (Woll, 2012). In fact, if, prior to the crisis, financial institutions were actively involved in the design of financial regulation whilst enjoying an informal discussion behind closed doors vis-à-vis EU Institutions, the post-crisis reality saw restrictions upon the financial industry’s influence and its lobbying groups that were also made aware of regulatory policy changes at a much later stage (Young, 2013, pp. 463-465). Therefore, the financial industry had to re-adjust its lobbying strategy in order to gain achievements concerning the implementation of the FTT (Pagliari & Young, 2013; Young, 2014; Kastner, 2018). 

Enter the financial sector

In opposition to the imminent implementation of the FTT, the financial sector employed financial associations, non-financial corporations, consulting firms, and even the business community while expanding the scope of its arguments to include the financial press so as to recruit support and to exert pressure on decision-makers (Kalaitzake, 2017; Kastner, 2018). Essentially, the financial sector and its various segments formed a wide coalition with the aforementioned groups in order to leverage their influence across the public sphere. In this sense, private interest groups are capable of expanding issues of high public salience and to link their own arguments to a broader context of social goals (Kaster, 2018, p. 1651). To this extent, the financial sector employed an expertise-based framing strategy that linked its arguments against the FTT to a broader societal goal of economic growth (Boräng & Naurin, 2015). In February 2013, shortly after the Commission had presented its second draft directive for enhanced cooperation of the EU11, negotiations regarding the FTT took place within the Commission’s indirect taxation working party (Boräng & Naurin, 2015). This meant that the salience of the FTT was narrowed down from a wide public debate towards special interest bargaining, which enabled the financial sector’s lobbying attempts to achieve exemptions, delays, and modifications of the proposed tax (Kastner, 2018, p. 1658). Such a shift in the decision-making process lowered the salience of the public discourse around the FTT. Subsequently, in June 2013, financial sector groups began to employ an active lobbying strategy which included, inter alia, publicly warning of potentially harmful economic outcomes of the FTT while focusing their arguments on public interests and societal costs (Kastner, 2018). 

One such front of the financial sector’s arguments against the FTT was spearheaded by the banking industry, namely Deutsche Bank, Bank of England (BoE), and Goldman Sachs, aided by other banking and investment associations and their lobbying associations. Deutsche Bank, for instance, published a report pertaining to the planned implementation of the FTT in January 2014, wherein it argued that the FTT would potentially weaken Europe’s financial power if it were to be implemented (Deutsche Bank Research, 2013, p. 1). 

Evidently, the financial sector, through the mobilisation of major European financial associations that were based in Brussels, was also able to lobby EP and European Council officials, and exert pressure on Commission representatives (Kalaitzake, 2017, p. 716). This allowed the financial sector to convey a unified message to political officials, the media, and other organisations that were indirectly affected by the FTT, namely the business community. Seeing that policymakers did not publicly justify the regulatory reforms that negatively affected corporate activity and economic growth, many within the business community mobilised against the introduction of the FTT, including multinational companies, such as Bayer and Siemens, that publicly highlighted the negative effects the FTT would have on private companies (Wilson, 2013). 

The mobilisation of the business community proved to be effective, because rather than accentuating potentially unwanted tax outcomes on financial markets, they spoke of the consequences for growth and corporate activity, which would result in serious implications for the real economy (Kitromilides, 2013; Kastner, 2018). Moreover, the largest employer associations in Germany and France issued a direct warning to the European Council, claiming the FTT would put productive businesses at a disadvantage (Kalaitzake, 2017, p. 718). These activities represent the unique strength of business and financial lobbies, which hold sophisticated technical understanding of markets, close financial ties to the mainstream financial press, and significant financial resources, all of which resulted in the hindering of the Commission’s and the EU11’s implementation plan (Kalaitzake, 2017). 


By employing consulting firms that provided external assessments, coupled with support from major European central banks and non-financial businesses, the financial sector’s lobbying efforts managed to present objective and unbiased support of its stance, essentially allowing it to bulk its pressure vis-à-vis Commission officials. Although the Commission and the EU11 worked towards implementing the FTT in January 2014, disparities within the European Council’s coalition began to emerge due to the intense opposition of the financial sector, further weakening the prospects of officially implementing the FTT (Kalaitzake, 2017, p. 720). The first major setback occurred with the sudden withdrawal of France from negotiations in mid-2013, due to the French Central Bank’s public disapproval of the tax, followed by Estonia, Belgium, and Slovenia, all of whom voiced their concerns regarding the reduced taxation scope that would make the FTT obsolete in regard to its revenue stream. Subsequently, Estonia permanently withdrew from the FTT proposal, leaving only 10 Member States to implement it (Kalaitzake, 2017). Finally, the deadline for the implementation of the FTT was postponed to June 2016, and in 2017 new deadline negotiations re-emerged along with discussions concerning additional exemptions,  (Kalaitzake, 2017; Kastner, 2018).Up to this day, negotiations on an EU-level concerning the FTT did not re-emerge and the policy is yet to be implemented.

Concluding remarks

Considering the above, it is apparent that the financial sector’s lobbying strategies are most influential and effective when policy negotiations shift from a wide public discourse to close-door discussions. In the case of the FTT, such a shift allowed the financial sector’s agenda to pass through both public and political channels, resulting in their re-emerged ability to exert pressure on both the Commission and the EU11 without sustaining public backlash. Finally, this article demonstrated how the influence of the financial sector over financial policy may be hindered when a certain issue is saliently present within public discourse yet enhanced when policymaking shifts into close-door discussions among officials and experts. 


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