A tax on banks to raise 50 billion euros ($65.17 billion) could help fund the new European Stability Mechanism to protect countries in financial trouble, according to an internal report from the EU's executive for eurozone countries.
The internal report by the European Commission, seen by Reuters, shows officials recommending different ways of paying for a new stability mechanism to replace the current European Financial Stability Facility in 2013.
Flagging the need for a "critical mass of paid-in capital," officials suggest that the financial sector be called on to help fund this stockpile, because the sector benefits from the fund's existence.
"It is in the interest of the financial sector to contribute to the existence of an ultimate safety net, which protects capacity of public authorities to rescue them," officials write in the report.
"A one-off tax of 0.2 percent on euro area bank assets would allow ... (about) 50 billion euros to be raised," they say in the document, which was presented to euro zone deputy finance ministers at a preparatory meeting on Monday, ahead of the Eurogroup gathering of finance ministers next Monday.
The commission's report, which will be influential in shaping the euro zone's new financial safety net (ESM), also says the fund should be allowed to buy government bonds on the secondary market.
This would relieve pressure on the European Central Bank.
The existing temporary EFSF fund is worth some 440 billion euros and there have been calls to increase its size, but there have been few indications about how big the new fund should be and how it will work.
The report also suggests other forms of financing, including transferring cash left over in the existing EFSF to the new ESM.
It says this cash buffer should amount to 4.2 billion euros in 2013 — assuming Ireland remains the only beneficiary of aid, and potentially much more if it has to raise further funds to support other countries in financial difficulties.
© 2014 Thomson/Reuters. All rights reserved.