I also agree that there are some areas where the EU is currently involved but may not need to be. Eurocrats talk of ‘subsidiarity’. In practice this simply means the EU should only intervene if it can act more effectively than Member States. The subsidiarity principle should be respected more.
I don’t know what the British people will decide. It's up to them. But I know one thing. The single market cannot be 'pick and mix'. I've heard some people suggest that financial services should be repatriated. It’s the wrong cause to fight for. Because financial services are an integral part of the single market.
The single market is the heart of Europe. And the City depends on it to sell products and attract investment. Of course access to the single market is not the City's only trump card. But it is an important one. Let's not forget that the single market is why 40 per cent of new financial institutions chose London as their headquarters in the past seven years. By definition, there can’t be two single markets: one for financial services and one for the rest of the economy. One for the City, and one for the rest of the EU. Repatriating full policy responsibility for financial services would mean leaving the single market as a whole and de facto the EU. I believe the UK would lose out on many of its own interests if it chose that path.
There is always much talk about great divides between the Commission and the UK on financial services. However, many of those differences are exaggerated. As the Commissioner for financial services, I have consistently worked closely and constructively with the UK. Taking account of British specificities, as far as possible. This has not been by accident, but by design.
The EU response to the crisis has been to create a framework for a solid, robust financial sector underpinned by a single rulebook. Importantly, this means all financial institutions operating in Europe respect one set of rules. The UK has always been a supporter of such a rulebook. This is essential to avoid the loopholes where the next crisis could kick off. And it also helps companies operating across the EU, many of which are based here in the City, so they can fully benefit from the single market.
The single rule book also allows Europe to negotiate on an equal footing with other jurisdictions. Transatlantic exchanges still account for 70 per cent of the world’s financial services market. The UK and the Commission both strongly believe that financial services should be part of the mandate of the TTIP [Transatlantic Trade and Investment Partnership]. Why? So we can ensure a real level playing field between EU and US companies, and avoid regulatory arbitrage, in the interest of global financial stability.
The United States don’t agree. Our only chance of persuading them is if we show up at the negotiating table speaking with one voice. I don’t think any European country – however special their relationship with the US is - can succeed alone. But when you sit at the negotiating table representing the biggest consumer market in the world, you’re in a much stronger negotiating position. And what is true for a cross-cutting trade negotiation is also true for individual financial services issues.
Take over-the-counter derivatives. The Commission and the UK have both worked hard to create a common EU framework. The Americans also have their rules. European and American rules are nearly identical. But there are a few differences. And small differences can cause massive regulatory headaches. And costs for companies. That is why the Commission negotiated with the Americans for a year to find a common way forward. We succeeded yesterday. The agreement will benefit all European companies and the City in particular. I would like to mention here the good cooperation we had with CFTC Chairman Gary Gensler and his colleagues. Once again, we are best placed to achieve our negotiating objectives because we are one big bloc, and because we already have one single set of EU rules rather than 28 national rules.
I will explain to my US counterparts that the EU single rulebook is progressing. With the UK on board. As was highlighted once again on June 27th with the agreement in Council on new rules to restructure and resolve failing banks.
The financial crisis highlighted the EU's need for a stronger financial sector. It’s what we have been building brick by brick since 2010 – for all 28 Member States of the EU. The more recent eurozone crisis highlighted that the euro area needs much greater integration for a single currency to work. There is no contradiction per se between a single rulebook for 28 and a deeper European Monetary Union. Indeed, a more integrated eurozone is in the UK's interest. The UK needs more stability on the continent. And that is why the UK support for the Banking Union, which builds on a solid framework for 28 but goes further by centralising some roles such as supervision and resolution, makes sense even if it does not want to belong to it.
We are making real progress with the Banking Union. The single supervision mechanism will make the ECB the eurozone’s banking supervisor next year. And two days ago, I proposed a single resolution mechanism. With resolution and supervision aligned at a central level, banks in crisis can be managed more effectively in the Banking Union. And we can break the negative spiral between sovereign crises and ailing banks.
It is not and has never been true that eurozone Member States always have coinciding views. Or vote as a caucus. Indeed some are closer to the UK in outlook than to many of their eurozone counterparts. That being said, it’s also true that the interaction between the single market and the eurozone is complex. There are sticking points. For example, the ECB thinks that central counterparties (CCPs) offering euro-denominated clearing must be based within the eurozone to safeguard financial stability. The UK considers that this breaches the single market. I believe getting the working arrangements and relationship right between the eurozone’s ins and outs and the interaction with the single market will be one of the big challenges of the next few years. It’s a learning process. And we need the UK to help us find the right balance.
We are in a period of flux. On many fronts. Less than a year away from the European elections, the EU and eurozone are still facing a tough crisis. And even if there is light at the end of the tunnel, there is still a long way to go. I believe we are better equipped to face those challenges together.
The EU needs Britain, with its long democratic history, its capacity to innovate, its pragmatism, its influence in the world and its great financial centre, the City of London. And I believe that Britain needs the EU. Not only because of the benefits of the single market. But also because, faced with new superpowers such as China, Brazil and India, no EU country, be it Britain, France or even Germany, can exercise sufficient global influence alone.
The debate on the UK's relationship with the EU has a long way to run. Public interest will increase. There will be a stronger demand for sober information about how the EU works. I think that will mean a higher profile for the economic and political benefits that membership of the EU - and commitment to it - bring to this great and proud country. In my opinion, those benefits are immense, not least for the City. They can be even greater in the future. In a modern single market which plays to many of the UK's greatest strengths. Finance, the digital economy, vibrant SMEs and more.
I think we will also see more scrutiny of the sometimes outlandish claims made by some parts of the anti-EU lobby. They caricature the day-to-day reality of the EU. They present, as an alternative, a world of absolute national sovereignty that has not existed for decades or even centuries. At the outcome of a debate which will be – to use British understatement – vigorous - it will be for the UK to decide its path. My own belief, ever since that vote of mine in 1973, has remained simple: together, we are all stronger.
Full speech
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