To date, this debate has focused on whether a with-holding tax on eurobonds would destroy the City's largest financial market by causing its key participants to relocate in Switzerland and the US.
"But," said Mr Monti - who is charged with co-ordinating EU taxes - "countries have the option of providing information to tax authorities instead of imposing a withholding tax. It is entirely up to the British government which it prefers to do."
Lord Simon, minister of state at the Department of Trade and Industry, did not rule out such a compromise. "When it gets down to the realpolitik of negotiations, we have to be pragmatic," he said.
Under the compromise, the UK and its EU partners would agree at a meeting on 25 May to exempt eurobonds owned by pension funds and insurance companies from the EU's proposed tax co-ordination directive. City firms would then help the UK to devise a plan to distinguish between the 90-95 per cent of eurobonds held by institutions and the 5-10 per cent held by individuals, principally residents of continental countries with high tax regimes.
Once this plan had been agreed upon, the UK would then opt to provide information to tax authorities on eurobonds held by individuals rather than impose a withholding tax.
The compromise would spare City institutions the cost of administering a withholding tax. It would also save the face of the Commission, which has invested considerable political capital in co-ordinating EU taxes, and the UK government, which has threatened to veto the eurobond withholding tax plan.
Reaction to the compromise floated was broadly negative.
"We would prefer to see an OECD-wide approach to the issue," said Tim Dickenson, at the International Securities Markets Association. "We do not condone tax evasion. But the current directive should be shelved until countries including Switzerland and the US are included."
Sally Easton, at the International Paying Agents' Association, argued that, even without a withholding tax, the costs of providing information to tax authorities could drive euro-bond houses out of the City.
"The view of the market is that if something can be done cheaper by switching locations, then banks will switch locations," she said.
But City representatives gathered at Mansion House on Wednesday to hear Mr Monti argue his case accepted that the compromise plan might be the best they can expect. "Gordon Brown is desperate not to use the veto on this one," one banker claimed.Reuse content