May 5, 2009, 15:01 GMT
Brussels - A simmering row between Germany and Luxembourg over tax havens moved closer to boiling point Tuesday as European Union finance ministers met to discuss how best to respond to the bloc's worst recession in decades.
Speaking to reporters after the talks in Brussels, German Finance Minister Peer Steinbrueck defended a decision by the Group of 20 (G20) and the Organization for Economic Co-operation and Development (OCED) to include Luxembourg, Austria and Belgium in their list of uncooperative tax jurisdictions.
'I think this list, which is incomplete and may contain errors, is right,' Steinbrueck said.
The minister also said Germany would 'continue to push on this issue, since the German tax authorities are losing money.'
The comments came less than a day after Luxembourg Prime Minister Jean-Claude Juncker reiterated his opposition to the list, noting that EU leaders had previously promised not to target any of the bloc's member states.
With Germany enjoying the backing of another EU heavyweight, France, Juncker's position as the influential chairman of the eurogroup of countries that share the euro looks increasingly under threat.
Juncker, who is the EU's longest-serving prime minister, was first designated president of the group in 2005. His mandate was renewed by his eurozone colleagues only last year.
But in an apparent acknowledgement that his days may now be numbered, Juncker pointed out in recent comments that his tenure would depend on the outcome of national elections due to take place next month.
'I face national elections on June 7, and everything depends on the results of those elections,' Juncker said ahead of Monday evening's eurozone meeting.
Showing obvious disdain for Juncker's position, Steinbrueck on Tuesday grouped his country and other European tax havens with the likes of Burkina Faso.
'I will certainly invite Luxembourg, Lichtenstein, Switzerland, Austria and Ouagadougou to a follow up conference (on tax havens) in June in Berlin,' Steinbrueck said.
Rushing to Luxembourg's defence was the Czech presidency of the EU, whose finance minister, Miroslav Kalousek, said the G20 was wrong to include EU nations in its tax havens list.
'Personally, I feel it necessary to say sorry to Luxembourg, Austria and Belgium. In no case are they non-cooperating jurisdictions or tax havens,' said Kalousek, whose outgoing government formally steps down this week.
The row in Brussels came just hours after US President Barack Obama unveiled a new proposal to rein in tax loopholes and target companies that store revenue in offshore bank accounts to avoid paying taxes.
Kalousek said it was too early to comment on Obama's plans, saying only that he generally favoured common international action on indirect, rather than direct taxation.
At their meeting in Brussels, EU finance ministers formally endorsed an earlier decision by EU leaders to double to 50 billion euros (67 billion dollars) the total amount of EU lending available to member states that run into financial difficulty as a result of the global credit squeeze.
Ministers also agreed to throw a 5-billion-euro lifeline to Romania, the third EU country to seek outside help after Hungary and Latvia.
Meanwhile, ministers failed to agree to plans to raise the minimum level of taxes that are applied by member states on cigarettes and other tobacco products.
Faced with ballooning budget deficits as the recession bites and the population continues to age, ministers also discussed the need to reform Europe's generous pension system.
According to estimates, public pension expenditure alone is projected to increase by 2.4 percentage points of the EU's gross domestic product between now and 2060.
Member states are set to discuss the bloc's employment and welfare policies at a meeting due to take place in Prague on Thursday.
Your Talkback on this Story