Osborne denies UK damaged by euro treaty snub
Chancellor George Osborne denies that the UK Government’s refusal to back a treaty aimed at stabilising the eurozone will damage British influence over European financial regulation.
In an interview with Money Marketing, the European parliament’s economic and monetary affairs committee chair and Liberal Democrat MEP Sharon Bowles says negotiations have already moved away from ground favoured by the UK since the European council summit last December.
But, giving evidence to the Treasury select committee last week, Osborne said: “In the directives I have negotiated on hedge funds, short selling and the current one on derivatives, we are securing British interests directive by directive with some tough negotiations.”
Bowles says the “stupid” British approach to the summit has left it isolated in negotiations over derivatives and the detail of Solvency II.
She says: “Where are our friends? They say you would not help us save the euro, so why should we help you with your pensions?”
Last December, the UK Government said it would not back EU treaty changes to impose strict fiscal rules on eurozone countries without a string of assurances about financial regulation. Bowles says the demands made Britain look like “a sulky child” trying to renege on previous agreements.
Cicero Consulting Brussels analyst Tim Gieles says the UK’s demands dealt a blow to negotiations but that hostility has softened since the immediate aftermath of the summit, when even reopening deals sealed in the UK’s favour was moote d.
He says: “Nevertheless, Britain will have to show it is willing to come back to the table to secure its interests, it is a give and take process.”
The Investment Management Association says the Government’s stance will make defending UK interests more difficult.
A spokeswoman says: “Britain already has an uphill battle and this is going to make it that much harder.”
The Chancellor on…
Danger that Europe could interfere with plans to split retail and investment bank operations:
“The European Commission is looking at possibly separating retail and investment banking but it cannot mandate it, the council has to agree. I am encouraged it is looking at this because people worried we were only doing this in Britain, now it is being looked at elsewhere. There should not be maximum harmonisation, it is important that countries are able to erect on top of minimum standards appropriate to national circumstances. We will have to see what the EU legislation looks like to make sure assurances that we will be able to do that are correct.”
Possible costs to consumers of the retail/investment split:
“It is good value for money, the benefits are the British taxpayer is better protected from bank failure. The cost comes from the removal of an implicit subsidy from the Government. I do not accept the only way banks can absorb these costs is to increase the cost of lending, they could actually reduce, shock horror, their remuneration.”
“My hands are tied on bonus arrangements agreed by the previous government but when it comes to new bonuses arrangements, you can be sure this Chancellor will be taking a keen interest.”
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