Gonzi insists on ‘no’ to transaction tax, EU leaders discuss Greece, Spain crisis

Prime Minister Lawrence Gonzi has reiterated Malta's opposition to the introduction of a blanket transaction tax by Europe, which would jeopardise the island's competitiveness in the financial services sector.

British Prime Minister David Cameron has also confirmed the United Kingdom's opposition to the tax.

At the heart of tonight's informal EU summit in Brussels, EU leaders discussed proposals from the European Commission for a legal framework to wind up or reorganise insolvent banks, so as to avoid a repeat of the multi-trillion-euro taxpayer bailouts during the financial crisis.

The issue of bank resolution has risen to the top of the agenda as concerns grow about the impact if Greece were to leave the currency zone, and as problems deepen in Spain's large banking sector, which is laden with bad property debts.

Leaders were close to agreeing on the setting up of a task force - possibly to be headed by EU Commission President Jose' Manuel Durrao Barroso - which would look in more detail about bank resolution issues, and to examine related steps such as what legislation and fiscal steps would be necessary to lay the ground for euro zone bonds.

EU leaders will formally decide on this proposal next month as they meet again, while diplomatic sources say that alot of work will be needed until then to convince German Chancellor Angela Merkel on the need for the Task Force.

Meanwhile, the European Central Bank wants the proposals to include a pan-euro-zone resolution fund for larger, systemically important banks, with ECB President Mario Draghi calling for a debt agency for euro bonds.

Some EU leaders have asked to make it possible for the euro zone's bailout funds to directly recapitalise banks, rather than having to lend to the sovereign which then lends to the banking sector.

The proposal for a central euro-zone fund to neutralise any knock-on effects from the closure or overhaul of a struggling bank is one of the most contested issues in the debate about winding up lenders.

Any such fund would also require giving further powers of enforcement to European authorities such as EU regulator, the European Banking Authority, or the European Central Bank.