On Friday, December 9th, 2011, at the EU summit in Brussels, the British Prime Minister David Cameron refused to sign up to a new treaty, aimed at solving the Euro zone crisis. He did it on the ground that the EU partners failed to offer safeguards for the UK-based financial services. He had a reason to do that. Financial industry located in the City of London (London’s financial district), is the biggest exporter, taxpayer and provider of well-paid jobs in Britain.
On December 12th, 2011, Mr Cameron explained his veto to the British Parliament. The Lib Dem deputy Prime Minister, Nick Clegg, who had criticized David Cameron over the veto, accusing him of endangering the interests of the British economy and falling to play a diplomatic game effectively, was notably absent.
The ‘fiscal compact’ is a pact for a stricter budgetary discipline. It was drafted at the EU summit in Brussels, which took place on December 8th – 9th, 2011 (see globalopinion.pl ‘The latest EU’s attempts to bring the euro crisis to an end’ 29/01/2012). It says that each country that signs up will have to write into a constitution a debt-brake rule to keep a budget roughly in balance – a structural deficit of no more than 0.5%. Automatic fines will be applied, when things start to go out of kilter. The pact states that the European Court of Justice (ECJ) can impose fines up to 0.1% of a country’s GDP, if the rules are broken.
On Monday, January 30th, the first EU summit in 2012 took place in Brussels. 25 out of the 27 member states of the EU signed up to the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, a treaty of stricter fiscal discipline. Only Britain and the Czech Republic refused to sign up. However, the treaty will enter into force on January 1st, 2013, provided that twelve Euro zone countries have ratified it.
The EU leaders also agreed that the 500 billion euro European Stability Mechanism (ESM), a permanent EU’s rescue mechanism, would come into effect from July 2012, a year earlier than planned. If a member state of the EU doesn’t sign up to the treaty, it won’t get a financial aid (when it need it) from the ESM, after March 2013.
Britain is worried about financial regulations and finds the EU too interventionists. The most pernicious for London is a proposed financial transaction tax. If implemented, the tax will levy a charge on financial transactions, involving financial institutions based in the European Union.
In September 2011, the European Commission proposed a tax of 0.1% on shares and bonds transactions and 0.01% on derivatives. The Commission calculated that the tax could rise as much as 57 billion euro a year and should come into effect from January 1st, 2014. Of that 57 billion euro, some 60-70% would be collected in Britain.
London is one of the biggest financial centres in the world. The bulk of the European financial transactions are funnelled through the City of London.
Strict regulations weakening the City are not in Britain’s interest. David Cameron has said that a financial transaction tax could cost the UK 500 000 jobs.
John Major negotiated opt-out clause from the single currency during the Maastricht Treaty negotiations in 1991. Opt out means that Britain has a legal right to stay outside the euro. Denmark negotiated a similar opt out clause. Other non-euro currency members of the European Union are legally bound to join the single currency. Britain also never joined the border-free travel regime of the EU, known as the Schengen Agreement.
The British public is more eurosceptical than any other in the EU. Over 40% of the Brits would vote in a referendum to leave the European Union.
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