EU’s power grab is a disaster for London
FIRST they came for the hedge funds, then private equity – now it is the turn of the banks, the securities industry and the insurers. The EU’s power grab is almost complete; it is pumping out new proposals on everything from derivatives to asset management virtually every day. The fact that most of these are full of holes, reeking of a complete ignorance of how markets actually operate and seemingly designed to fail disastrously seems to matter not one jot. As ever, bureaucrats have used a crisis – the collapse of the asset bubble of the noughties and the failure of many large banks – to extend their power over as many industries as possible, even those not implicated in the bust.
There has been all the usual horse-trading: London gets a banking regulator, Paris the securities body and Frankfurt that for insurance. The reason for that is three-fold: to ensure that three countries can “benefit” from the creation of new bureaucracies; to deflect claims that power is moving to Brussels; and to put London in its place and pretend that other EU cities still matter in global finance.
In reality, only London can hope to compete with Singapore, Shanghai, New York and of other powerful centres; rather than reinforcing our competitiveness while reducing the risk of another crisis, the move to the new EU regime risks bringing us down to the lowest common denominator. It is a tragedy that many in the EU, especially the French, cannot see that a well-functioning and reformed City would be one of Europe’s greatest assets. Instead, they are rejoicing at bringing it to heel. Nicolas Sarkozy, who openly states his hatred of financial capitalism, was gloating yesterday after Michel Barnier, a statist former French foreign minister, was appointed internal market commissioner and put in charge of financial services.
All of this was entirely predictable. The Maastricht, Amsterdam and Nice Treaties had already given massive regulatory powers to the European institutions (including the council of ministers, where decisions made by qualified majority voting ensure that the UK can be outvoted); these have now been further extended by the new Lisbon treaty. The direction of travel is clear, even if yesterday’s latest proposals still allow national governments to retain significant powers.
It is also a bit late for firms and trade associations to be complaining. They had been warned for years that the EU would eventually grab control of financial regulation and that this would inevitably damage London’s competitiveness; yet many continue to support ever-deeper EU centralisation, arguing that Britain needs to be at the “heart” of European institutions to exercise “influence”. Yet the best way to have real influence would be for UK-based authorities to control all UK policy – and for that body to cooperate with other regulators all over the world when necessary. We need less power at EU level, not more; most of the major failures of the past two years – RBS, HBOS and Northern Rock – could have been prevented without the need for any pan-EU discussion.
Taxes are too high, the government is too big and regulations are throttling us; many of London’s erstwhile advantages no longer exist while all of its drawbacks – from high living costs to a crumbling infrastructure – remain. Yet as powers are moved to the EU, it is becoming ever harder for a future British government to push through the changes that are necessary. At times like these, it is difficult not to despair. [email protected].