Indeed, the appointment was widely seen as a coup for the French over Gordon Brown and London. Sarkozy at the time gloated:
“It’s the first time in 50 years that France has had this role. The English are the big losers in this business.”Clearly then Michel Barnier's hearing yesterday was likely to be scrutinised closely for any signs that could be detrimental to an important part of the UK economy.
Overall, Barnier seemed to give a smooth performance and wanted to reassure the UK that he doesn't want an Anglo-Franco dispute:
"I believe in a strong City at the heart of jobs and growth – for London, the UK and Europe as a whole. I don't want to undermine the City, on the contrary. I fully understand its importance and I want it to be an even more vibrant powerhouse, creating jobs and growth for all."However, he also made it clear that reform of the banking system was on the agenda. Using language and phrases designed to appeal to the MEPs who are going to approve his appointment, he laid out a number of possible legislative initiatives that will cover areas ranging from derivatives markets to bank capital:
"We are not just going to talk about reform. We are going to reform. We need to put transparency, responsibility and ethics at heart of the financial system. No market, no financial player and no product should be allowed to escape anymore."Barnier continued (my emphasis):
“Let there be no doubt, I’m not going to be taking orders from Paris, London or anywhere else.”Which sounds rather ominous and as Godfrey Bloom, a UKIP MEP warned him:
“Don’t kill the goose that lays the golden egg.”Kay Swinburne, a British Conservative MEP adds to the concern:
"[Barnier 's] now talking about giving European regulators binding powers [to intervene], which he didn't before. He seems to have swung towards the Germans and French."Barnier, in my view, during his hearing has publicly and deftly positioned himself between appeasing the MEPs to secure his job and not being specific enough to frighten the City. But it’s clear that behind the scenes there will be more coercive maneuvering in order to introduce more and more restrictive legislation.
The recession is essentially a beneficial crisis where the EU will take the opportunity to instigate another power grab. Undoubtedly it will be euphemistically sold as a way of 'strengthening financial supervision', and given the low esteem with which bankers are held in who is going to argue?
So where will this leave the Tories? Assuming they win the General Election this year, which looks very likely considering their solid lead in the polls, what will they do to try to stem the tide of EU regulations and protect a fundamental part of the UK's economy?
Well so far the signs are not good, Mark Hoban, Shadow Financial Secretary to the Treasury said:
"George Osborne was one of the first politicians to call Barnier to welcome him to his new post."Ok not much to see there on its own, but worrying when Hoban continues with (again my emphasis):
"The government said the rules would not have a fiscal impact on the UK. It said this was a red line issue. But we know that the rules as they stand can have a fiscal impact on the UK. Yet if the government had engaged at an earlier stage we could have shown that these rules were not just a problem for London, but all EU countries," he said.Oh dear, engagement; a phrase every Government uses as another way of saying being at the heart of the EU. We've been here before.
Hoban said the UK needed to engage with the commission at an earlier stage to influence new laws and regulations."
The problem is that when 'cast-iron' Dave backtracked on a referendum on the Lisbon Treaty he emphasised that the economy came first before any bust up with Europe. But the two are not mutually exclusive. The financial services sector is fundamental to the UK economy; it generates 15% of corporation tax and accounts for 10% of the total output of the UK economy. Its competitiveness is essential for helping the UK to get out of recession, whether we like or not.
Cameron obviously wants the issue of the EU to go away but it won't, if Cameron wants to protect the City he has to adopt a more vigorous line. Engagement with the EU never works in Britain's interests so what will he do?
Well my hopes are not high. It's been demonstrated time and again from Heath through to Thatcher, Major and Blair that a desire to be at the heart of Europe, and try to influence the process, inevitably turns out to be ruled by Europe.
The whole sorry process seems set to continue.