The EU’s top financial services official warned the UK it won’t be allowed to pick and mix its relationship with the EU and must accept rules governing the City of London in exchange for access to the single market.
Michel Barnier, the EU commissioner responsible for proposing financial laws, stepped into the UK’s debate over its relationship with the bloc, saying a more nationalised approach to financial regulation is “the wrong cause to fight for”.
“By definition, there can’t be two single markets: one for financial services and one for the rest of the economy; one for the city, and one for the rest of the EU,” Barnier told a conference of industry representatives and policy makers in London.
“Repatriating full policy responsibility for financial services would mean leaving the single market as a whole and de facto the EU.”
David Cameron, the British prime minister, has promised to seek a new settlement with the EU amid a rising tide of opposition that saw the UK Independence Party, which advocates a divorce from the bloc, gain seats in local elections in May.
While Cameron has said that he plans a referendum on EU membership by the end of 2017, this has failed to quell calls from members of his Conservative Party for Britain’s European destiny to be put to the people sooner. At the end of 2011, Cameron split with other EU leaders when he refused to support a treaty to underpin euro area nations’ fiscal policies unless he was given guarantees that the UK could not be overruled on financial laws.
Leaders sidestepped the move by going ahead with the fiscal treaty in a different legal form.
“Discussing the UK’s relationship with the EU is a good thing,” Barnier said. “Democracy needs debate.”
The UK has clashed with the EU on financial rule changes ranging from banker bonus curbs to short selling restrictions, with the nation often finding itself on the defensive.
George Osborne, the chancellor of the exchequer, has said that plans being discussed by 11 other EU nations for a common financial-transaction tax are “unlawfully extraterritorial” and poorly designed.
The country started a legal challenge over the draft measures in April.
The UK is suing the ECB over policies that it says push clearing of some derivatives away from London and into the euro area, and has started a court challenge against an EU law that hands the Paris-based European Securities and Markets Authority banning powers over short-selling.
“There is always much talk about great divides between the commission and the UK on financial services,” Barnier said.
“Many of those differences are exaggerated.”