EU Urges IMF To Levy Global Tax On Financial Institutions

To prevent another global financial crisis

European Union (EU) has stepped up pressure on IMF to consider a global tax on financial transactions to avoid another economic crisis, reported Reuters citing a draft summit statement. The leaders of the bloc also emphasized the need for 'sound and effective' pay in the financial sector but did not support UK and France to tax bankers' bonuses.

The draft statement said: "Remuneration policies within the financial sector must promote sound and effective risk management and should contribute to preventing future crises in the economy."

"The European Council (of EU leaders) emphasises the importance of renewing the economic and social contract between financial institutions and the society they serve and of ensuring that the public benefits in good times and is protected from risk.

"The European Council encourages the IMF to consider the full range of options including insurance fees, resolution funds, contingent capital arrangements and a global financial transaction levy in its review."

Reportedly, Gordon Brown, prime minister of UK, called for imposing so-called 'Tobin tax' on financial transactions at G20 summit to discourage short-term speculation and channel the proceeds to fund future financial bailouts. However, the idea met with opposition from Timothy Geithner, treasury secretary of US, who said that it would dampen risky bank behaviour, reported the news agency.