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The Renegotiation - Eurozone governance and UK financial services

The Renegotiation does not resolve the “Economic Governance” problem: as the Eurozone integrates further UK financial services are left exposed

Lawyers for Britain has published a major report The UK Renegotiation: What has it really achieved? authored by Martin Howe QC and City Lawyer Eric Phillips.  In a detailed 25-page analysis, it chronicles the series of serious problems which have arisen for UK financial services and the City as a result of tensions with the Eurozone and the fact that UK financial services are subject to an EU regulatory apparatus which is dominated by the Eurozone member states. It closely scrutinises the text of the European Summit Conclusions Feb 2016 and asks whether these problems have been resolved.  Its conclusions are stark:

  • The Renegotiation does not resolve the “Economic Governance” problem and does not adequately protect the UK’s financial services sector or the ability of UK authorities to maintain financial stability in the UK. In the future, as the Eurozone proceeds to integrate further without the UK, it is likely that the Economic Governance problem becomes greater.
  • The tensions underpinning the UK’s relationship with the Eurozone remain. The Eurozone needs to integrate further. The plan for this has been adopted and is contained in the “Five President’s Report”. The Eurozone has a legislative majority in the Council of Ministers and can therefore pass any legislation related to financial services even if it is not in the UK’s interests.
  • To resolve the Economic Governance problem would require a fundamental overhaul of the EU Treaties. This has not been achieved.There is no acknowledgment in the Renegotiation that the EU is a multicurrency union. Jean‐Claude Juncker said on the day the Renegotiation concluded: “Today's deal leaves no doubt that the euro is the currency of our Union”.
  • The Economic Governance principles in the Renegotiation are deliberately vague. Rather than clarify matters, they introduce a new uncertainty. Discrimination on the basis of currency is prohibited, except if there are "objective reasons". Specific provisions within the single rulebook may be necessary, but the level‐playing field must be preserved. Financial stability  in the UK is a matter for our own authorities, but this is without prejudice to the powers of the EU to take action.
  • The Safeguard Mechanism to protect the economic governance principles is simply the power to call a meeting. It is clear that the Safeguard Mechanism does not change the legislative process or give the UK a veto.
  • Over the years the UK has had various disputes with the EU related to Economic Governance including the fiscal compact, the financial transactions tax, short‐selling, the location of euro clearing‐houses and macro‐prudential requirements of financial institutions. The terms of the Renegotiation would not have resulted in a different outcome in these disputes.