It’s with cautious optimism that I say that it looks as though the EU’s controversial Financial Transaction Tax (FTT) could be starting to unravel, after Luxembourg yesterday pledged to back Britain’s attack on the measure.

Speaking to reporters,Luc Frieden,Luxembourg’s Finance Minister, said: “We are very sympathetic to the stance of the UK… We will certainly bring our support to the case that has been started in the European Court of Justice.”

He added: “Policies must be looked at on a global level not by 17 countries.  On this issue we need global standard setting not regional standard setting.”

His comments come two days after Britain officially launched a legal case against the 35 billion euro FTT agreed by 11 EU countries at the beginning of 2013.  The UK, of course, has no intention of signing up to the FTT, but British businesses operating with firms based in those countries which do could also be adversely affected.

Mr Freiden’s stance is another major blow to this contentious policy that many experts and influential institutions, including the US Chamber of Commerce,London’s Global Financial Markets Association andJapan’s Securities Dealers Association, have rejected.

Hopefully, this is a step in the right direction because prohibitive taxes of financial transactions simply do not work – they slash market activity and do not raise as much as the politicians try and tell us.  Recent history has proven this.

For example, inFrance, it was expected that 530 million euros would be raised when it ploughed ahead and implemented its 0.2 per cent tax on sales of shares.  However, only 200 million euros was raised.

Whilst inItaly, which introduced its own FTT several weeks ago, trading has fallen by over 38 per cent already and, in response, German and Spanish trading is up.

Luxembourg is a powerhouse of influence in Europe and the remarks and public backing for the UK’s plans to kill the FTT plans could represent a serious challenge.

Nigel Green deVere Group