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After an intense build-up through February, the “Treaty on Stability, Coordination and Governance of the Economic and Monetary Union” was signed by 25 members of the EU on 2nd March. That should mark a step change in economic governance that will restore sound public finances in due course – with first fruits being visible in the next couple of years. Those states struggling to convince sceptical markets of their intentions should be aided by the proposal from ELEC to issue joint and several guaranteed euro T-Bills with maturities of up to two years. The issuing fund would last for just four years, thus tiding the euro area over this period of intense difficulties. (Full details).
The debate about EU regulation within the City of London often seems to be somewhat detached from the mainland but outgoing FSA chief executive, Hector Sants, gave a remarkable speech: "I cannot stress enough that engaging with the European regulatory process is central to delivering financial regulation in the UK. It needs to be recognised that currently, in respect of prudential regulation, and increasingly over the longer-term in respect of conduct, the rules will be made by Europe and the role of PRA and FCA will primarily be one of supervision and enforcement. Essentially, the UK is moving to become a ‘supervisory arm’ of Europe.” All his peers could give a similar speech in recognition that the economic crisis has created a fundamental power shift within the EU. “The 25” have just signed a manifestation of the shift to a political union at the most macro level of economic governance. At the micro level of financial regulation, the political union of the euro area is already in full swing.
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