Germany, France and Britain announced plans on Tuesday to introduce a bank levy to help meet the costs of the financial crisis, without waiting for a G20 summit this week, underscoring a rift with key partners.

A joint statement said the three biggest European economies were "committed to the full implementation of the ambitious G20 financial sector reform agenda", but the timing of the tax move suggested the Europeans have low hopes of any global deal.

G20 finance ministers dropped the idea of a common levy this month due to Canadian and Japanese resistance. But European Union leaders, under pressure to justify austerity measures to their voters, renewed a call for international action last week. 

Britain's new centre-right government included a bank tax in Tuesday's austere emergency budget, aimed at slashing a giant deficit and swollen public debt built up rescuing teetering banks and fighting the deepest recession since World War Two.

Finance minister George Osborne announced a two-year public sector pay freeze, a big increase in value-added tax on goods and services, a 25 percent cut in most ministries' spending over four years and measures to curb welfare costs.

The planned spending cuts were the toughest in a generation, prompting economist Howard Archer of IHS Global Insight to call it "a pretty eye-watering package".
On the other side of the globe, Japan announced ambitious targets to rein in its debt, with new Prime Minister Naoto Kan making clear the government would have to push through contentious tax increases to fill deep fiscal gaps.

Kan said the example of Greece, whose debt crisis has undermined confidence in the euro zone and forced other European states to adopt austerity measures, showed how markets had become more wary of public debt and sovereign risk.

Germany said it would put a bank tax bill to the cabinet in summer and France said it would present details of its bank levy in the 2011 budget, due to go to parliament in the autumn.

Canada, the G20's host, appeared to soften its stance on the bank levy on Tuesday. Finance Minister Jim Flaherty said in a newspaper interview: "I really want to see the G20 agree on how to go forward. It is important that we try to be collegial."          

German officials claimed victory even before leaders of the world's main industrialised and emerging powers meet in Toronto, saying the G20 was not demanding new stimulus measures and Berlin did not face censure for its planned austerity drive.

The United States has repeatedly urged "surplus countries" -- code for China and Germany -- to do more to boost domestic demand. - Reuters