'EU should decide taxes' - Schroeder

Schroeder: full of praise for New Labour

German Chancellor Gerhard Schroeder has stepped into the growing row over Britain's policy on Europe by calling for taxes to be set at an EU level.

I trust in the wisdom of the British government and British society

Gerhard Schroeder

In an interview with The Times newspaper, the German leader called for the "Europeanisation" of "everything to do with economic and financial policy".

He said the EU should determine taxation policies in member states.

His comments will be seized upon by the Conservatives as further evidence of moves towards a federal European state.

UK Chancellor Gordon Brown has always insisted that tax should be a matter for individual nations.

Labour 'feud'

On Thursday, UK foreign secretary Jack Straw fuelled opposition claims of a Labour feud on Europe by saying the decision on whether Britain should join the euro will be a political one.

Government policy is that five economic tests must be met before a referendum is held on euro entry but Mr Straw says there could be uncertainty over that judgement.

Earlier, Europe Minister Peter Hain said the economic tests could be judged this autumn ready for a referendum in spring next year.

Sources at the Treasury attacked Mr Hain's "random musings on market sensitive information."

'Soothing British feelings'

However, in his interview with the Times, Mr Schroeder said he thought that nobody would deal better with the process of Britain's entry into the euro than Tony Blair and Gordon Brown.

"What we need to Europeanise is everything to do with economic and financial policy.

"In this area we need much more - let's call it co-ordination and cooperation - to soothe British feelings than we had before.

"That hangs together with the success of the euro," he told The Times.

'Political union'

Asked if he wanted a United States of Europe, Mr Schroeder said the "substance" of the union was more important than, "what a child wants to call it".

"European monetary union has to be complimented by a political union - that was always the presumption of Europeans including those of us who made active politics before us."

Mr Schroeder said he was "full of respect" for what New Labour had achieved.

"I am confident they will get it right: I trust in the wisdom of the British government and British society," he said.

A Downing Street spokesman said Germany's position on taxation was well known.

A Treasury spokesman said: "We believe that tax matters are a matter for individual countries, we made this clear at Nice."