The UK was right yesterday to rule out giving more money to the IMF to finance a currency. The Chancellor, asked to commit Euro 30 billion to IMF resources to defend the Euro, sensibly pointed out that the IMF is there to lend money to distressed countries against the security of better economic policies, not to aid currencies. He could have gone on to say it is not there to try to defend a currency bloc which is following the wrong policies, was improperly constituted at the beginning and has broken its own rules ever since. It is great to see the UK government offering tough love as advice, and protecting the UK interest. The Euro does not need a bigger bail out fund. It needs reconstruction, and policies which allow its subject economies to grow.
Yesterday in the Commons also served as a reminder of just how much power previous governments have given away to the EU. The Chancellor’s main task was to present his findings to the Commons following the Vickers Report into banking. That should have been work enough for him. He was kept on a long conference call until almost the last minute for his appearance in Parliament, discussing the Euro’s problems with many othher Finance Ministers. Our Ministers today have to be involved in two governments at the same time, which is demanding.
When it came to his announcement, the Chairman of the Treasury Committee and others asked about how far the UK is now free to do as it wishes on banking regulation. The Chancellor explained that the EU was now considering the Vickers Report with a view to seeing how much the UK can do without infringing the EU’s growing mastery of financial regulation. There are queries about whether the UK is any longer able to impose its own capital requirements on banks, one of the three main recommendations of the Report.
The government correctly wishes to implement the Vickers preference for more competition in the banking industry. So far the plans just revolve around the disposal of branches by Lloyds which were demanded by the EU competition authorities. It is I suppose good news that in this area the EU is following a policy which I think is a good one, but I would like to see the UK show some independence of spirit in going beyond the recommendations of the EU in this important area as well.