EU summit: tales of fiscal union and financial adultery

(roarmag.org) That the UK and EU would break up over money issues was no real surprise — but why is nobody talking about their extramarital affair with the banks?

 It was always a difficult marriage, born out of economic interests and family pressure more than mutual love. For 38 years the partners bickered over money issues — CAP this, rebate that — with the continent occasionally accusing the island of cheating with Uncle Sam, and the island chastising the continent for mingling too much into its personal affairs. But for many years, the two stayed together for the kids and for the family business. That may now be changing.

On Friday morning, a crucial EU summit — touted as the last opportunity to save the euro from collapse — ended in a dramatic split between the UK and the rest of Europe. As Michael White wrote for the Guardian, “it looks like the Big One, the moment when a government in London exercised the famous British veto on an important EU matter and withdraws to the margins of the European Union, thus ending 50 years of more-or-less consistent policy.”

The break-up marks yet another tectonic shift in European history. But it also reveals the extent to which financial interests have corrupted the minds of our leaders and soured their mutual relations. The extramarital affairs of our political elites with the banks now threaten the very survival of the European family. All of them, it seems, are willing to sacrifice not only the family business, but also their own children. No price too high for the love of gold.

As always, the greatest pain is quietly borne by the kids: the citizens who haven’t even been consulted by their leaders. Childhood illusions about European solidarity have been brutally uprooted. But, as if to repress the most confronting part of the drama, no one appears to be talking about the disgraceful extramarital affairs that lie at the root of it all. The truth is that both the UK and Europe have been engaging in financial adultery for decades on end.

Introducing the Lovers: Frankfurt and La Défense vs. the City

This was never a clash over the European interest versus the British interest, as both continental cosmopolitans and British euroskeptics like to portray it. Behind the veil of ideology lurk powerful financial interests dictating the choices of our double-crossing elites. As the Guardian reported, “Cameron wielded the British veto in the early hours of the morning after France succeeded in blocking a series of safeguards demanded by Britain to protect the City of London.”

More specifically, Cameron demanded that: (1) “any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto”; (2) “the European Banking Authority should remain in London”; (3) “banks should face a higher capital requirement”; and (4) “the European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.” Sarkozy rejected Cameron’s demands outright.

The reasons for this are really quite simple: (1) Sarkozy doesn’t want UK-based banks to get a competitive advantage by dodging the European-wide financial transaction tax; (2) he wants the European Banking Authority to move to Paris; (3) he knows French banks are in a much weaker position than their UK counterparts; and (4) he wants euro-denominated transactions to take place within the eurozone so they will be routed via La Défense instead of the City.

The bottomline is that this is a battle of banks; a clash of capital — it has nothing to do with the general European or British interest. If the eurozone were to break up, many German and French banks would collapse, hence the Franco-German push for fiscal union. Yet such a fiscal union would impose continental-style regulations on the free-for-all City of London. Fearing its competitive position vis-à-vis New York, the UK therefore strongly opposed participation.

Read more: http://roarmag.org/2011/12/eu-summit-uk-fiscal-union-banks-city/

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