David Cameron will tonight warn European Union leaders they must take tough action to deal with the crisis gripping their economies or face relegation to the “slow lane” of the global race.
The Prime Minister will ruffle feathers at a dinner for the 27 leaders in Brussels tonight by insisting they should set an example by freezing their own £100 billion budget.
He will also warn that he wants major changes to plans for banking union, fearing they could seriously damage the City of London’s competitive reputation if passed. The triple whammy comes as leaders gather for their 20th summit to discuss the financial crisis, with key questions unresolved — including how soon a proper bailout mechanism can be arranged to stabilise the eurozone banks and debt-laden countries such as Greece and Spain.
A British official close to the PM’s thinking said: “We need to make tough choices now to secure the economic recovery or risk being in the slow lane for economic competitiveness.”
France today highlighted divisions with Germany, as president François Hollande criticised Chancellor Angela Merkel for blocking his growth proposals. He suggested in a Guardian interview she is preoccupied with domestic politics and warned that the Franco-German link was out of step. “Our common responsibility is to put Europe’s interests first,” he said.
Mr Cameron is alarmed by moves to harmonise banking regulation in a way that would give the whip hand to the 17 eurozone countries. They would have a blocking majority under voting rules — allowing Paris and Frankfurt to push through regulations that would undermine London’s competitiveness.
The City of London corporation’s policy chairman Mark Boleat called the EU plans “hugely ambitious” and said London was critical because £1.4 trillion worth of euro-denominated assets were held by UK banks and the most complex parts of the euro area banking system were located in the City.
He warned: “We must ensure that the interests of non-eurozone countries are taken into account fully and that the rules for the eurozone are not discriminatory towards other EU states.”
An example of what could be foisted on the City, say officials, could be ordering firms trading in euro-denominated financial products to have offices in the eurozone. Another idea floated in Europe is to insist that all EU financial centres work to regulations set in euros.
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Mr Cameron wants non-euro countries, including Britain, to have a form of veto. But European Commission officials are trying to rush through the new reforms by the end of the year because Germany is insisting it will only allow a proper banking bailout when regulations are harmonised.
