Some politicians in favor of imposing a financial transaction tax in Europe are hoping that recent banking scandals, such as the manipulation of Libor by Barclays and possibly other institutions, may see the levy ushered in across a wider area of the European Union than currently planned in a backlash against the financial services community.

Proposals on the table at the moment regarding any financial transaction tax in Europe revolve around a breakaway group of between nine and 12 nations—including the main eurozone countries of Germany, France, Italy and Spain—asking the European Commission to draw up plans for a so-called “enhanced co-operation” on the controversial tax. If the procedure succeeds, these countries will be able to go off on their own and implement the tax without the other European Union countries on board.

This involves at least nine member states who must indicate that they want to proceed with an enhanced co-operation and a qualified majority of all 27 member states have to agree to the procedure, which has been used only twice before—on cross-border divorce rules and on a common patent scheme.

The U.S. has blocked attempts to introduce a financial transaction tax at G20 level, arguing that taxing the financial sector might be counterproductive. The U.K. and Sweden who, with others, have stymied a continent-wide levy, are the main protagonists obstructing progress within the EU using similar arguments.

“Whilst the Commission proposal for a financial transaction tax has unfortunately not met with unanimous support from member states, I would like to welcome the decision to start negotiations under enhanced co-operation for all member states that will wish to join the initiative,” said José Manuel Barroso, president of the European Commission, who also wants to see any financial transaction tax in Europe “inspire a global solution”.

“We have seen once again in recent months and weeks both in the United States and in Europe, including in some of the major financial institutions, that practices that have fueled the financial crisis are not yet eradicated from the sector,” added Barroso. “Once again, we have been confronted with reckless trading and market manipulation. It is time that these practices stop once and for all. And it is time that a sector that owes so much to the taxpayers’ support accepts to hand back a fair share to society.”

However, the Association for Financial Markets in Europe (AFME), a trade body, says that any such proposed financial transaction tax, which would likely entail a 0.1% tax on all share and bond transactions and a 0.01% levy on derivatives trades, would not only reduce economic activity but would be a highly inefficient way to raise public funds.

“We have always said that the financial transaction tax is a flawed idea, which is likely to have serious negative repercussions for the European economy,” said Simon Lewis, chief executive of AFME. “We are also concerned that the political discussions on the subject are taking place without sufficiently rigorous economic analysis. Much more debate is needed about the meagre gains expected from this tax and the significant damage it would cause to savers, investors and companies.”

It is expected that this breakaway group of nations will later this month submit a formal letter of application to the European Commission for an enhanced co-operation agreement regarding a financial transaction tax for these nations although outlines of the plans are still vague. There is also talk of a watered down levy, whereby derivatives, pension funds and possibly even investment funds could be exempt.

The transaction tax is likely, though, to be put in place by the end of the year in some parts of Europe although France is pushing ahead with its own levy on equity transactions on French listed equities, irrespective of where the buyer and seller is based. The tax is due to become law on August 1 and is being seen by some in the industry as a test case for the main piece of financial transaction tax legislation, although some of the rules in France have yet to be fully clarified.

Hungary, meanwhile, one of the likely supporters of the financial transaction tax within the EU, is planning to extend any proposed financial transaction tax on to its central bank, the Magyar Nemzeti Bank (MNB). Andras Simor, the MNB central bank chief, has called the plans “illegal, dangerous and incomprehensible”. The proposal, to levy all financial transactions, money transfers, withdrawals and deposits, is a ploy by the Hungarian government to raise extra funds in a bid to reduce unemployment and is likely to meet little resistance in its parliament. It has been reported, however, that the International Monetary Fund and the EU may be unlikely to support such a move.