Plans to introduce a financial transaction tax across parts of Europe are nearing reality as European Union finance ministers are set to thrash out authorization of the controversial measure in the coming days.

The EU’s tax commissioner Algirdas Semeta said yesterday that he will demand “quick progress” on the introduction of a FTT in 11 member states, using a legal loophole called enhanced co-operation to push through laws without the backing of all 27 member states.

The new FTT proposals, which are now likely to be in place early next year, are a French and German backed initiative that promises a two-speed Europe in which many of Europe’s biggest stock markets—including Frankfurt, Paris, Milan and Madrid—will be affected by the tax, while others, such as London, Amsterdam and Warsaw, will not.

“Let us not forget the strong public demand for this tax, nor the many benefits it has to offer once implemented,” said Semeta. “There is no question that going ahead with the FTT through enhanced co-operation is fully justified, but also strongly grounded and legally compliant.”

However, serious concerns continue to be raised as to the ramifications of an FTT in parts of Europe.

Captus, a Swedish free market think tank, says any levy will harm Europe’s economies and force trade to other nations as financial transactions are highly mobile—as well as bring about more market volatility.

When a transaction tax on stock trading was imposed in Sweden between 1984 and 1991, the result was a dramatic reduction in home market liquidity as well as increased volatility. Sweden is not one of the 11 nations that has signed up to the current FTT proposals.

“It should be noted that the proposed taxes are levied on tax bases that can move from one country to another,” said Nima Sanandaji, a board member at Captus. “The more mobile a tax base is, the more loss there will be, because people and companies might opt for countries outside of the EU to avoid the tax.”

Another lobbyist, Brussels-based Business Europe, which represents business organizations across 35 European countries, is too concerned about the negative impacts a financial transaction tax will bring to the region.

“The tax would add unnecessarily to an already significant regulatory burden without addressing weaknesses in the financial sector,” said Philippe De Buck, director-general of Business Europe.

“If an FTT is to be introduced, full consideration should firstly be given to an appropriate limitation of the scope of the tax and to exemptions that can minimize its negative impact on growth and jobs.”

De Buck added: “Those countries which have not chosen to adopt the FTT should not suffer a negative externality from the tax. To avoid extraterritorial taxation and impending the taxation base of sovereign states, both parties in a transaction must be within the jurisdictions agreeing to implement a FTT.

“Moreover, we have deep concerns that rather than enhancing EU integration as required under enhanced co-operation, this initiative could disrupt the functioning of the single market for financial services by increasing the complexity and differences in market conditions between member states.”

Of the 11 EU nations to support the introduction of a financial transaction tax, several have even started to introduce the levy unilaterally. France, which has had its scheme in operation since August, is the most advanced.

However, according to investment bank Credit Suisse, institutional investors in France are piling into derivatives in a bid to avoid the FTT in equities.

Once the 11-nation FTT proposals are firmed up, nations like France will have to revert to the new EU proposals. It is believed that the new FTT plans will follow the same lines as the original European Commission proposal in June—which would have been vetoed by the U.K., Sweden and the Netherlands among others—with a 0.1% tax on all share and bond transactions and a 0.01% levy on derivatives trades. It is estimated that the revised plans may bring in more than €10 billion a year, significantly less than the €57 billion predicted for an EU-wide levy.

The 11 countries to support the FTT are France, Germany, Italy, Spain, Austria, Belgium, Greece, Portugal, Slovenia, Slovakia and Estonia.