When the European Union’s finance ministers met in Copenhagen on 30 March they gave the clearest indication yet of what has been clear to most observers for months: that the 27 member states cannot agree a tax on financial transactions. A tax on share deals modelled on the UK’s stamp duty might be possible, but a wider tax on financial trades is off the agenda for the foreseeable future. The German finance ministry, one of the strongest supporters of the tax, admitted as much at the meeting, calling for work to focus on a tax on share transactions. 

Since June 2011, when the European Commission announced it would propose an FTT, it had been obvious that the plan would not fly. Taxation issues are decided by unanimity. The UK, which argues that its large financial sector would be the chief casualty of such a tax, opposed the plan from the outset, and received strong backing from Sweden. Over time, Ireland, Luxembourg and the Netherlands were among the member states that joined the bloc of opponents.

The opposition was not mounted uniquely by countries with large financial-services industries. Margrethe Vestager, the finance minister of Denmark, who is chairing meetings of the EU’s finance ministers until June, criticised the FTT proposal in January, warning that it would damage jobs and growth – at the very moment that the EU was desperately seeking ways to relaunch growth.

Apparently heedless that the object was immoveable, José Manuel Barroso, the Commission president, last week made yet another attempt to exert irresistible force in support of the tax. He told members of national parliaments and the European Parliament that the revenue raised by the tax would allow member states a cut of up to 50% in their contributions to funding the EU.

Perhaps Barroso’s intransigence is inspired by the unfortunate fact that the FTT proposal was central to the Commission’s plans for financing the EU’s multiannual financial framework (MFF) for 2014 to 2020. Removing the idea of an EU-wide tax from the agenda leaves a big hole in Barroso’s plans for financing the MFF.

There was some opportunism behind the Commission’s presentation of the FTT proposal. In the wake of the financial crisis, it reflected a sentiment widespread among national governments – and the public – that the financial sector should be obliged to contribute something in return for the hundreds of billions of euros that governments have provided to keep banks afloat. In Austria, Germany and France this sentiment of equity was whipped up with a touch of revenge, and a desire to punish the financial sector for its role in precipitating the crisis. A financial-transaction tax has accordingly become an issue in the French presidential elections. And in Germany the Social Democrats and Greens are calling for a tax to raise revenues for investments to stimulate economic growth.

Yet less than a year after the Commission presented its proposal, it has run into a brick wall. Precious time, energy and resources have been spent discussing and negotiating the proposal – to little purpose and no effect.

The Commission obviously needs to pay close attention to political debates at national level to work out where the EU’s priorities lie. One of the hallmarks of Barroso’s approach to running the Commission has been his sensitivity to where the political consensus lies.

But the Commission also needs to show the courage to stand up to member states and tell them what is politically impossible. If Barroso’s calculation was that he could blame member states for a lack of political will when the tax plan was rejected, he miscalculated. His decision to push ahead with a proposal that was destined to fail has damaged his credibility and that of Algirdas Šemeta, the European commissioner for taxation and customs union. The time and energy would have been better spent on other issues.