11 Euro States Back Financial Transaction Tax

(Reuters) - Eleven euro zone countries agreed on Tuesday to press ahead with a disputed tax on financial transactions designed to help pay for the cost of fixing a crisis that has rocked the single currency area.

The initiative, pushed hard by Germany and France but strongly opposed by Britain, Sweden and other free-marketers, gained critical mass at a European Union finance ministers' meeting in Luxembourg, when more than the required nine states agreed to use a treaty provision to launch the tax.

The so-called "Tobin tax," first proposed by Nobel-prize winning U.S. economist James Tobin in 1972 as a way of reducing financial market volatility, has become a political symbol of a widespread desire to make banks, hedge funds and high-frequency traders pay a price for the crisis.

"This is a small step for 11 countries but a giant leap for Europe," Austria Deputy Finance Minister Andreas Schieder said. "The way is now clear for a just contribution from the banking and financial sector for financing the burdens of the crisis."

The agreement raised the prospect of a pioneer group of European states for the first time launching a joint tax without the unanimous backing of the 27-nation bloc, a move that may fragment the single market for financial services.

EU Tax Commissioner Algirdas Semeta told the meeting the number of states backing the initiative had passed the quorum for so-called "enhanced cooperation," provided some countries turn their oral backing into written commitment.