"The City" and the EU

I read this article by Ruth Lea in the Telegraph on Friday but forgot to post a link then. The article is about the EU's propensity to regulate everything it can. Read the whole article, it is very well written, and then worry about the EU screwing up "The City" as it has our fishing industry, farming etc. etc. etc.

"The statistics relating to London as the leading global financial centre are awesome. For example, the daily turnover in foreign exchange is more than $1,100 billion (32 per cent of the global total), London has 40 per cent of the global foreign equity market and trades 70 per cent of all Eurobonds. It is also the world's leading market for international insurance.

It hardly needs emphasising that Britain's financial sector is also hugely important to the domestic economy. Indeed, some would argue that the financial sector is too dominant and distorts the economy, making it especially vulnerable to squalls and setbacks in the City.

They may be right. But whether they are or are not, it is impossible to deny the economic significance of the financial services sector. It pays one third of all corporation tax, generates nearly one million jobs and contributes a surplus of nearly £20 billion to the trade balance. It accounts for eight per cent of GDP."

"Britain, of all European countries, cannot afford to be complacent about its attractiveness to international business. In particular, Britain cannot afford to be complacent about the EU's Financial Services Action Plan (FSAP), which is intended to complete the EU-wide single market in financial services.

The FSAP is monumental and comprehensive. It covers both the retail sector and the global wholesale markets, which are crucially important for London. It comprises 42 detailed measures. Frankly, it is a monster.

According to an estimate by Open Europe, the plan could cost the British economy at least £14 billion to implement by 2010. But, shockingly, there has been no comprehensive cost-benefit analysis to enlighten us about its potential benefits. It therefore comes as no surprise that many financial businesses, especially small ones with no cross-border trade, regard the FSAP measures as dead-weight costs. "

No cost-benefit analysis by this government, quelle surprise!

"An EU-wide financial regulator, a European Securities and Exchange Commission (ESEC), is already being widely discussed and attracting growing support. An ESEC would probably largely replace the individual member states' regulators, including our respected Financial Services Authority (FSA).

If the ESEC were to go ahead, its location would overwhelmingly be determined by political considerations. Despite, or perhaps because of, London's financial supremacy, the ESEC's central location would probably not be in London.

It is unsurprising that some believe that the EC's harmonising ambitions in financial services are, at least partly, about controlling the City of London. To put it crudely, it is a power grab."

and now the killer fact ........ "The prospect of having a financial regulator regulating London's financial markets that is based outside Britain and operating a set of rules originating in Brussels, with Britain as one voice among 27, should be sounding alarm bells in the City... Moreover, the new City minister is unlikely to be raising any alarms either. She is Kitty Ussher, who was previously the chief economist for the now defunct and ardently pro-EU campaign group, Britain in Europe. Just who will raise the alarm?"

Why am I not surprised?