Member States face continuing challenges in the current economic climate with budget deficits pressurising national treasuries, leading to implementation of austerity measures. This has led to tense recent EU budget negotiations. The current financial crisis does, however present some opportunities for the future. This paper will focus on one of these opportunities and its effect on the future workings of the EU – adoption of a Financial Transaction Tax by the European Commission, viewed as part of a three pronged reform of financing of the EU.There is a belief that the financial sector has been under-taxed and that now it should contribute back to repaying the costs of the current crisis. Many alternatives have been discussed. This paper will explain why the financial sector is in a special position and ripe for reform. Following this the economic background and rationale for adopting such a tax (in brief) and the differences between the terms ‘Tobin Tax’, ‘Robin Hood Tax’ and a ‘Financial Transaction Tax’ will be discussed. The proposal does not face unanimous support. Therefore the main focus will be explaining why and the subsequent legal obstacles that the proposal faces assessing the use of the increasingly used Enhanced Cooperation procedure.
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