Cook stands his ground on EU tax

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Indy Politics

The Government stood firm in its opposition to a Europe-wide savings tax yesterday, despite mounting pressure from its EU partners to back down.

The Government stood firm in its opposition to a Europe-wide savings tax yesterday, despite mounting pressure from its EU partners to back down.

Robin Cook, the Foreign Secretary, told a Commons committee last night that it would not be Britain's fault if the dispute over the withholding tax soured the atmosphere at next week's summit of EU leaders in Finland.

He told the Foreign Affairs Select Committee that EU finance ministers, who failed to agree on the savings tax on Monday, would meet on the sidelines of the summit in the hope of breaking the deadlock.

But Mr Cook warned that Britain would veto the plan unless there were adequate safeguards to protect the City of London, where thousands of jobs in the eurobond market could be threatened. "We are not going to agree a directive that will impose a tax on the international bond market in London," he said.

In a memo to the MPs, Mr Cook said "many issues remained unresolved" in the draft directive, which would impose a 20 per cent tax on savings held by EU citizens living in other EU countries. Downing Street raised the stakes in Labour's biggest dispute with the EU since coming to power in 1997, with Tony Blair's spokesman referring to "the German problem" over the stalled directive.

Number 10 insisted there were ways of protecting tax evasion by Germans who hold savings in Luxembourg without harming the City of London. "We are not prepared to sign up to anything that threatens the primacy of the City."

Mr Blair held talks about the sensitive issue yesterday with Paavo Lipponen, the Finnish Prime Minister, who will chair the Helsinki summit. Mr Lipponen said Mr Blair had been "constructive" but admitted the dispute might not be resolved at the summit.

William Hague sought to exploit the weakness of the single currency by calling on Mr Blair to drop his support for Britain joining the euro. Mr Hague told a dinner in London last night: "It is crazy to commit Britain in principle to abandoning the pound in favour of this helter-skelter currency."

The Conservative leader added: "You don't have to be a financial genius to work out that after a year in operation, the euro has lost a sixth of its value and is distinctly volatile."

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