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Typical News Day in Europe

By: William McBride

Euro-wide Tobin tax looking likely…

Italy, under the new leadership of Prime Minister Mario Monti, has voiced support for the introduction of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es on European financial transactions.

VAT going up…

French Budget Minister and government spokesman Valérie Pécresse recently confirmed that plans to reform the financing of the welfare system in France will inevitably lead to an increase in value-added tax (VAT)A Value-Added Tax (VAT) is a consumption tax assessed on the value added in each production stage of a good or service. Every business along the value chain receives a tax credit for the VAT already paid. The end consumer does not, making it a tax on final consumption. .

Credit ratings going down…

Ratings agency Standard & Poor’s is set to announce later Friday that it has cut France’s coveted triple-A rating, undermining euro-zone efforts to solve a persistent sovereign-debt crisis, according to media reports. French news agency Agence France Presse, citing an unnamed government source, reported on its website that S&P had already informed the French government of the move. Neither the ratings agency nor the French Finance Ministry would comment, AFP reported. Austria was also set to be downgraded, but fellow euro-zone countries Germany and the Netherlands reportedly were not to be downgraded.

Why’s Austria getting downgraded? Not sure, but on Wednesday this happened:

Following the first ministerial council meeting of 2012, Austria’s Chancellor and leader of the Social Democrats (SPÖ) Werner Faymann underlined the importance of a stable eurozone and of generating new revenues in Austria as part of the government’s planned national consolidation package. The Chancellor also stressed the importance of introducing a financial transactions tax, championed by France and Germany.

Faymann recently referred to a package without wealth taxA wealth tax is imposed on an individual’s net wealth, or the market value of their total owned assets minus liabilities. A wealth tax can be narrowly or widely defined, and depending on the definition of wealth, the base for a wealth tax can vary. es as “unthinkable”, alluding explicitly to a tax on capital gains derived from property sales.


Standard & Poor’s late Friday stripped France and Austria of their triple-A ratings and also downgraded Spain, Italy, and Portugal. France and Austria are now both rated AA+ while Spain is at A and Italy is rated BBB+. Meanwhile, Portugal’s rating was slashed to a junk grade of BB. The move had been anticipated after the ratings agency placed 15 euro-zone countries on CreditWatch negative in early December.

Follow William McBride on Twitter @EconoWill