11 February 2016

Financial Times: Britain locked in battle with France and Germany over City rules

George Osborne, UK chancellor, has cast the measures as reassurance for Britain and other non-euro countries that they will not suffer discriminatory EU rules dictated by a eurozone majority acting on self-interest. However, the British Treasury has been coy about how the legally binding principles would apply to concrete regulatory questions.

Paris and Berlin fear the implications are far-reaching and would endanger the single-market financial services for 28 countries, one of the most developed areas of Europe’s common market. For the UK, the flexibility is necessary to better manage one natural tension: the 19 eurozone countries need to integrate, but they are legally only able to do so by regulating for all 28.   

Sharon Bowles, a UK former MEP who previously chaired the European Parliament committee handling EU financial regulation, said: “It is a fact that the matter of economic governance needs to be sorted out . . . The EU treaties no longer fit as a construct as far as the needs of the euro area are concerned. We need to regularise that, but in a way that is not unfair to others. It's a two-way street.”

Paris has been particularly exercised in the talks. Michel Sapin, French finance minister, said on Wednesday that “several ambiguities” could allow “difference in treatment between London and the others”.

“That’s not possible,” he said, adding that he was “fighting” so treatment was “as identical as possible”.

Negotiations are particularly tense over the principles on how common financial rules are drawn up and enforced in banking, where the eurozone has already integrated and centralised supervision.

At stake is the EU’s so-called “single rule book” for banks in the bloc, and the regulatory approach to issues such as bank structural reform and capital standards. 

Recent revisions to the negotiating text have tightened London’s room for manoeuvre. Stephen Booth, of the Open Europe think-tank, wrote that the “vague” language “suggests the deal could provide for differences within common EU rules, but not two sets of rules”. One senior eurozone official said even the revised language would allow “the single rule book and single market to fall apart”.

© Financial Times