Cameron and Merkel split on Tobin Tax ahead of talks

A meeting in Berlin between David Cameron and German Chancellor Angela Merkel will be dominated by the European debt crisis, but is expected to also tackle the concept of a tax on financial transactions - known as the Tobin Tax - on which the two nations are split.

Germany and France are understood to be keen to implement a financial transactions tax, which would be levied on dealings in shares, bonds and derivatives, and use the proceeds as part of the eurozone bail out package.

The plan has caused alarm in the UK amid concerns that other major economies may not sign up to the idea, leaving the City of London potentially damaged if the tax only applied across Europe.

Chancellor George Osborne has described a Europe-only tax as "economic suicide" and he has been backed by the Netherlands, Sweden, Italy and others.

But Merkel and others believe the UK may need to make concessions on the issue of the tax and must show more collective responsibility in Europe.

Another area of contention may concern calls for closer collaboration of European Union nations on fiscal metters.

Merkel's governing party, the CDU, wants the EU's Lisbon Treaty to be amended to sanction a move towards closer fiscal union within the eurozone.

This clashes with recent calls from David Cameron for Europe to seize the opportunity for "fundamental" reform, a process he believes will allow the UK to claw back powers from Brussels.