The European Union is set to press for a levy on banks and a tax on global financial transactions at next week's summit of the world's 20 leading economies (G20), European leaders said after a summit in Brussels on Thursday.

EU Council President Herman Van Rompuy said after the talks that EU states were keen to make banks pay them back for the massive cash injection they were given during the 2008-2009 financial crisis.

The bank levy will be discussed next week as an EU proposal at the G20, and the bloc will also make a proposal to develop and explore the introduction of a financial transaction tax," Van Rompuy told journalists.

The summit also addressed the EU debt crisis, with leaders agreeing to have stress tests of their nations' banks published to reassure investors and dispel fears that further EU members are in danger of bankruptcy.

German Chancellor Angela Merkel welcomed the EU-wide regulation, saying it was "high time" that Europe take strides towards "more cooperation in the face of the financial and economic crisis."

"I believe this is a very important step to show international markets that we are headed in the direction of more transparency," she told reporters in Brussels after the talks.

Estonia's euro entry officially confirmed

Also in Brussels on Thursday, EU leaders gave Estonia the green light to become the euro's 17th member at the start of next year.

"The EU welcomes the European Commission's proposal that Estonia adopt the euro on 1 January 2011," an official statement read.

Estonia's debt and deficit levels have consistently been lower than those of current eurozone states over the last five years. However, its inflation soared after it joined the EU in 2004, ruling it out for swift euro adoption.

Before Estonia can join the eurozone, however, EU finance ministers must set the final exchange rate between the euro and Estonian kroon.

Iceland talks to begin despite banking row

Another membership proposal considered on Thursday concerned Iceland's bid to join the European Union. EU officials announced they were ready to begin membership talks with the island nation despite an existing banking row.

The row concerns the 2008 collapse of Icesave, an Icelandic bank, which caused losses for primarily British and Dutch customers of up to four million euros. Neither the bank nor the Icelandic government has yet reimbursed the savers for their losses. In a referendum on the issue in March, a large majority of Icelanders forced the government to abandon plans to make good the losses.

A Dutch diplomat said the repayment of those funds would be a condition of Iceland's EU membership.

"It's clear the existing obligations are going to be essential in the accession negotiations, and this is something that the EU as a whole will insist upon," a Dutch diplomat said, adding that otherwise the Dutch government "supports Iceland's EU aspirations."

An opinion poll carried out this month by the Market and Media Research pollster showed almost 60 percent of Icelanders are in favour of the government withdrawing its application for EU membership.

Author: Gabriel Borrud (AP/dpa)
Editor: Michael Lawton