Merkel’s fresh stance on Tobin tax threatens rift

German chancellor Angela Merkel has said she cannot guarantee support of the controversial financial transaction tax – known as the Tobin tax – which threatens to create a rift between Germany and France days before a crucial European summit.

French President Nicolas Sarkozy strongly supports the tax, which has divided Europe in recent months, but Merkel has said despite personally supporting the tax, her government was split over the issue, the Telegraph reported.

"We do not have an agreement on this within the government, but personally I will campaign for [the tax]," she said at a pre-summit meeting in Berlin.

President Nicolas Sarkozy's government is keen to push ahead with a so-called "Tobin tax" even without its European Union partners and hopes to introduce it before an April presidential election.

French Finance Minister Francois Baroin wants to target bonds and derivatives, as well as stocks, according to reports and said a bill should be ready in February.

"We want it to be broad - stocks, bonds and derivatives," Baroin said. "We want, along with Germany, to put it into place, if possible at European Union level, otherwise in the eurozone, under the swiftest possible timetable, which for France means putting it into place in 2012," he added.

Analysts have speculated the tax could drive a wedge between the leaders, despite the issue not being vital to solving the eurozone debt crisis.

Merkel said talks on the fiscal pact agreed on December 9 were progressing.

"There is a good chance that we will have signed off debt brakes and everything that that entails already in January, and by March at the latest," she said.

However, last week, reports suggested a leaked draft copy of the summit agreement implied talks had hardly progressed since the summit.

The introduction of a Europe-wide tax on financial transactions would raise €37bn in revenue, according to the European Commission. However, the figure has been disputed by analysts, who say it does not take into account the damage the tax would do to public finances.