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&#39Euro needs harmony in financial services&#39

EU Internal Market Commissioner Fritz Bolkestein is warning that the single currency needs common rules in financial services and that failure to achieve integration could undermine the EU economy.

Financial integration is set to be a key priority at this week&#39s crucial Barcelona summit, where government heads could give the process renewed political impetus.

Speaking in Geneva last week, Bolkestein said: “To complement the single currency, Europe&#39s financial industry needs one set of common rules.”

The impact on financial services forms part of Chancellor Gordon Brown&#39s five tests for euro entry.

Bolkestein described negotiations on the “cornerstone” investment services directive, which could increase controls on investment advice, as “potentially the most difficult” and said he had received 70 responses.

He said he is working hard on prudential legislation on financial conglomerates. He pointed out that industry consolidation in the financial sector will require closer co-operation across sectors and harmonised rules.

A Treasury spokesman says: “We are very keen to see a single financial market as soon as possible, as it will benefit businesses and consumers. We do not think there has to be linkage between the single market and the euro. Our position on the euro has not changed.”

South Bank University professor of international economics Iain Begg says: “To say the single market depends on the euro is, to some extent, spin. But not participating in the single currency will slow the pace of integration.

“This country&#39s position in arguing for a particular regulatory framework for financial integration is likely to be weakened by non-participation in the euro.”

Aifa director general Paul Smee says: “My main preoccupation is to ensure that IFAs do not get unintentionally trampled on by the EU.”

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