Britannia Radio

E U BRIEF

UK faces defeat to EU on key derivatives regulation

UK faces defeat to EU on key derivatives regulation

The UK is facing defeat over a critical piece of EU financial regulation, forcing it to cede control over the shape of key markets in the City, home to more than three-quarters of Europe’s derivatives trading.

London objects to how Europe plans to inject competition only into over-the-counter derivatives Photo: Alamy

11:10PM BST 29 Sep 2011

157 Comments

The Financial Times reported on Thursday night that Chancellor George Osborne is expected to break from next week’s Conservative party conference in Manchester and travel to Luxembourg to seek a reprieve over the derivatives regulation, as well as press for action on the eurozone crisis and fight a proposed financial transaction tax that would hit trades that are overwhelmingly routed through the City of London.

He is insisting that EU finance ministers continue to debate new requirements for clearing derivatives, in spite of European finance ministers stating that the UK Government is alone in opposing the package.

Most EU nations want to override UK objections and ask finance ministers to confirm a joint position at their meeting on Monday, enabling negotiations to begin with the European parliament.

The FT reported that in a heated meeting of EU ambassadors, Britain warned that rejecting its views on a London-based industry would have “consequences”, not least in enraging eurosceptics in Westminster calling for Britain to reclaim powers from the EU.

Britain holds a veto on taxation and has allies in opposing measures such as the proposed EU financial transaction tax.

Related Articles

Posen's £100bn QE push

30 Sep 2011

Santander's warning shows just how fragile the UK banking sector is

30 Sep 2011

ICAP considers London Metal Exchange bid

29 Sep 2011

Santander UK issues severe profits warning

29 Sep 2011

Hedge funds find themselves in a marathon, not a sprint

29 Sep 2011

Europe must grasp this chance to turn off the doomsday device

28 Sep 2011

“I think it’s completely worthless,” Frans Wekers, the Dutch state secretary for finance, reportedly told a meeting of Parliament’s finance committee. “And when I say it’s completely worthless, I speak for the entire cabinet.”

Mr Osborne’s team argue that there is a long way still to go in the legislative talks and point out that past confrontations over financial services measures have often ended with last-minute concessions to Britain. A Treasury spokesman said: “Britain’s principled position has always been clear – the EU, like others, should implement faithfully its G20 commitments.”

In the case of the European Markets Infrastructure regulation (Emir), London objects to how it proposed to inject competition only into over-the-counter (OTC) derivatives, excluding derivatives traded on exchanges.

Emir and other European measures contain proposals for an overhaul of how OTC derivatives are traded, all part of G20 commitments made in 2009 to bring greater transparency to the OTC derivatives markets.

Emir proposals also beef up the powers of Esma, the Paris-based European markets regulator, meaning UK regulators could in principle be overruled on decisions to authorise a clearing house that wanted to operate in the UK.

The looming defeat over the planned derivatives rules is heightening British concerns – both in government and in the City – that the UK is increasingly isolated in Brussels, just as a wave of financial regulation enters the EU legislative pipeline with far-reaching implications.

Michel Barnier, European commissioner for the single market, has promised not to isolate the UK on regulation. But London’s relations with Mr Barnier are increasingly strained.

Meanwhile, it was reported on Thursday night that Icap, the world’s biggest interdealer broker by trade volumes, would move its main operations away from London “extremely rapidly” if faced with a European financial transactions tax, its chief executive has warned.

Michael Spencer told an analysts’ conference call that “the wholesale financial market will evaporate from Europe” if the levy were introduced.

--------------------------------

NEIN, NEIN, NEIN, and the death of EU Fiscal Union - Ambrose Evans-Pritchard

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012332/nein-nein-nein-and-the-death-of-eu-fiscal-union/

Mr Evans-Pritchard is probably wrong. This wasn't the first time the Germans were asked to make a loan to their partners in the EU. They throw up their hands in horror and say NEIN! every time. Then, they start writing the cheques. I have never had so much fun since watching black&white Laurel & Hardy films as a child.

Did the Germans deserve this? Of course they did. Helmut Schmidt, ex-chancellor of Germany, has published his memoirs in 1990 (Die Deutschen und ihre Nachbarn). Of Greece, he writes "FM Genscher and I decided to lend our support to Karamanlis and his country in every way. We resumed military aid. We set a ratio of three to five for military aid to Greece and Turkey respectively even though the former had a population of 9 million and the latter, 40 million. We gave Greece more in relative terms. We used military aid to press both countries towards a solution in Cyprus but we didn't succeed. Immediately afterwards we gave Greece capital aid. In addition, a consortium of European banks, with government backing, gave commercial credit. The total was DM370 million. No other European country had received so much aid. Greece also got the U-boats it wanted. But most of all, we did our best to bring Greece in the EU as quickly as possible. When I visited Karamanlis in late 1975, these operations were already under way."
http://webarsiv.hurriyet.com.tr/2000/12/29/276621.asp (in Turkish)

People from other countries don't know this, but many of Turkey's 'allies', including Germany, went out of their way to egg the Greeks on to make life hard for Turks. EU membership jacked up the Greeks' self-confidence beyond reason and Cyprus became a dagger directed at Turkish diplomacy and shores. In the end, the evil people got caught up in their own trap. Germany will have to waste its energies fighting one fire after another, a destiny that its leaders had wished for Turkey.

-----------------------------------------

Europe Inflation Unexpectedly Quickens

European inflation unexpectedly accelerated to the fastest in almost three years in September, complicating the European Central Bank’s task as it fights the region’s worsening sovereign-debt crisis.
The euro-area inflation rate jumped to 3 percent this month from 2.5 percent in August, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the biggest annual increase in consumer prices since October 2008. Economists had projected inflation to hold at 2.5 percent, according to the median of 38 estimates in a Bloomberg survey.
http://www.bloomberg.com/news/2011-09-30/european-inflation-unexpectedly-accelerates-to-the-fastest-pace-since-2008.html

------------------------------------------------

EU’s Barroso criticizes Franco-German proposal

EU’s Barroso criticizes Franco-German proposal to govern euro with member state meetings

BERLIN — The head of the EU’s executive on Friday dismissed as unrealistic the French and German proposal to manage the eurozone through meetings of member states, saying decision-making needed to be centralized in European bureaucracies above sovereign nations.
http://www.washingtonpost.com/business/markets/eus-barroso-criticizes-franco-german-proposal-to-govern-euro-with-member-state-meetings/2011/09/30/gIQAs57O9K_story.html

Germany ups EU bailout fund – but is it enough? Chancellor Angela Merkel wins parliamentary vote easily – but the battle is just beginning