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France to Unilaterally Impose Financial Transaction Tax

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Sarkozy wants to tax financial transactions in France at 0.1%.

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French President Nicolas Sarkozy is planning on closing France's budget deficit with a financial transaction tax.

On French television yesterday, (via Bloomberg) the conservative president proposed a 0.1% tax on all financial transactions to start in August. The tax will only apply in France.

"There's no reason why deregulated finance, which brought us to the current situation, can't participate in the restoration of our accounts," he told reporters.

Shares for French banks fell on the news. BNP Paribas SA (BNP) fell by as much as 6.21%

Sarkozy also suggested a 1.6 percentage point rise in value-added tax. The new tax revenues are also aimed at making French labor costs more competitive by letting the French state take over some employee benefits that are currently paid for by employers.

Before you get ready for the exodus of bankers from France, keep in mind that this is an election year in France.

Sarkozy, who has yet to formally enter the race, is trailing rivals in polls The bank-bashing of Francois Hollande, the Socialist candidate for president, is striking a chord with the French electorate. Supporting a financial transaction tax might just be a bunch of hot air.

Elsewhere in Europe, Germany's Angela Merkel, surprising her fellow coalition members, says she might also support a financial transactions tax on the 17 eurozone countries if the UK, home to the EU's biggest financial center, blocks a EU-wide transaction tax.

Twitter: @vincent_trivett

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