A banking union poses some problems for the UK and the Euro economy

It is suddenly fashionable on the continent to talk of a banking Union. The EU assures us this is one way that they can advance their goal of “deeper economic integration”. They see this as necessary to help save the Euro.

Reading the EU’s document on what a banking union would look like, the first thing that emerges is they are well on the way to having one for all 27 member states of the EU anyway. There has been huge change in recent years, bringing into play the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational pensions Authority. These bodies at the moment co-ordinate and supervise the national regulators. The wish now is for them to do more, regulating the larger institutions in the EU directly, and becoming more detailed in how they tackle the national regulators. There will be more pressure for harmonised standards and approaches. They are floating the idea of one pan Euroepan bank deposit guarantee scheme, for example. The EU did intervene in the ways EU governments aided their banks during the crisis, and did impose some state aid rules on the subsidies.

The UK should have a problem with all this. If the Euro area wants a centralised approach to regulating its banks, that is one thing. If they wish to use the institutions of the 27, and impose the results on the UK, that should be another thing. The safest way for the UK to approach it is to insist that the Euro area has its own rules and institutions, but that would duplicate the institutions the 27 have already set up. The least bad way would be to give the new banking tasks to the European Central Bank, writing firmly into the rules that the powers only relate to Euro member states. If the EU 27 common institutions are to be used, the UK has to exempt itself from the application of their rules to us if it wishes to keep control over how it regulates its important financial service industry.

There are also problems for Euroland. The EU thinking seems to be in favour of higher capital and cash requirements. Whilst these would have been eminently sensible 7-10 years ago, to stop the bubble, today they may well delay the recovery. So far there has been little evidence of the restructuring , writing off and closing down the EU says it favours. The system is thriving on massive bail outs of damaged institutions. This does not provide a sure basis for growth. When linked to strict controls on the stronger banks, it produces a toxic cocktail of anti growth policies. Some in Germany are also now trying to limit the damage of this proposal, as they do not fancy Germany having to help guarantee the bloated balance sheets of weak banks all round the Euro area.

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64 Comments

  1. backofanenvelope
    Posted June 14, 2012 at 7:16 am | Permalink

    Sounds like a lot of people will be required to staff these EU regulatory bodies. Who are these people? Are they by any chance the same people who didn’t prevent the current shambles? Or even some of those who created them?

    • Posted June 14, 2012 at 4:00 pm | Permalink

      Almost certainly – state sector people with suitable friends in the right places, the right “PC linguistic ability”, little knowledge or understanding of risk/reward (other than an understanding they personally are taking virtually none), little to lose, regardless of how poorly they do the job. Doing the job according to the wishes of the EU, socialist, undemocratic, superstate to be. Or even the interest of the banks that they might get a job with later.

      • Bazman
        Posted June 15, 2012 at 5:29 pm | Permalink

        Or other private companies often taking large payments for a few hours a month on the board. Croney capitalism at it’s worst supported by the state.

  2. Leslie Singleton
    Posted June 14, 2012 at 7:34 am | Permalink

    You say the system is “thriving” on massive bail outs of damaged institutions., at which I stopped and struggled but failed to follow you. Following, indeed fully agreeing, was duck soup in the remainder of your article, however.

    Did you really mean “thriving” or did you accidentally write thriving when you perhaps meant “surviving”? The “system” such as it is as seen by yours truly has become one big exercise in Peter paying Paul simply to survive and only by the skin of its teeth at that.

    • zorro
      Posted June 14, 2012 at 11:07 am | Permalink

      Probably thriving like a vampire thrives on human blood…..

      Zorro

    • lojolondon
      Posted June 14, 2012 at 1:35 pm | Permalink

      I think John means that the people running the EU are thriving on bail-outs, not the institutions or countries themselves. ?

  3. Posted June 14, 2012 at 7:40 am | Permalink

    This is a classic case of refusing to take the pain now and therefore condemning ourselves to take more pain in the future.

    Banking needs to be de-emphasised. The whole sector needs shrinking, not protecting. People and businesses should not be relying on loans the whole time. Businesses can grow organically, ploughing the profits back each year as re-investment. People should be saving for their treats, and even major purchases like cars and to a large extent houses. (If credit were not available these things would be much cheaper anyway. Easy credit is a nasty little trap.)

    • alan jutson
      Posted June 14, 2012 at 8:59 am | Permalink

      Nationalist

      Agree absolutely.

    • Posted June 14, 2012 at 3:40 pm | Permalink

      Quite right. Bank assets and liabilities relative to GDP have expanded a whapping TENFOLD in the last thirty years. That’s according to p.3 of this Bank of England publication:

      http://www.bankofengland.co.uk/publications/speeches/2009/speech409.pdf

      And what has the benefit of this massive expansion in banks been? Growth is no better now than 30 years ago. In fact over the last 5 years growth has been in the disaster zone: all due to banks.

      • A different Simon
        Posted June 15, 2012 at 4:40 pm | Permalink

        Ralph ,

        How can we retain the useful one tenth and get wrid of the other nine tenths ?

        Banks are like the Govt , they are too big and feature too prominently in peoples lives .

  4. Brian Tomkinson
    Posted June 14, 2012 at 7:41 am | Permalink

    We are fed a daily diet on nonsensical “ideas” from Brussels all designed to preserve the wretched euro at whatever cost. These people are like robots programmed to arrive at one destination a country called Europe. If they ever make it they will have destroyed its own economic viability in the process. Why do we want to be associated with such an organisation? They seem to have some kind of mafia-like hold over our politicians. As for the people of the UK or the other countries of Europe they have nothing but contempt.

  5. Alan Wheatley
    Posted June 14, 2012 at 8:14 am | Permalink

    This survey of EU institutions, extant and proposed, is yet another example of why the EU is fundamentally undemocratic and inherently doomed to failure. As the Council of Ministers, Commission and Parliament drive towards the EU State they are removing themselves ever further from the people they seek to control.

    How many people in how many countries have the faintest idea of what is going on, and by whom? Where is the idea that government is for the people, and that people have the final say as to who governs and what they allow government to do? Where is the manifesto for the EU upon which “they” were “elected” and can claim a mandate? Where are the alternative manifestos that gave people a choice?

    And it is not as if this supra-national government is “supra-wise”. The relentless drive to the promised land will deliver the opposite. So many have invested so much in the idea that they can not countenance negative thoughts for fear that realism will reveal the idea to have been conceptually flawed from the outset and their endeavours wasted.

  6. NickW
    Posted June 14, 2012 at 8:22 am | Permalink

    Who knew about this?

    “On March 2, 2012 the European Council appointed for a second two-and-a-half year term, Mr. Herman Van Rompuy as its President after receiving the unanimous approval of its members.”

    The European project is proceeding entirely according to plan; as each Country collapses into financial and economic ruin, it loses its sovereignty in return for its bailout, and places itself under the rule of the unelected dictators of Europe.

    We have to understand that this was the plan from the beginning; that it was the intention to destroy the lives of millions in order to unite Europe under the permanent rule of self electing officials who cannot ever be removed, and who impose a policy incapable of influence by any European elector.

    It is time to realise that Europe is being frog marched into dictatorship in return for “saving” the Euro.

    The debate needs to focus less on economics and more on the destruction of democracy.

  7. Damien
    Posted June 14, 2012 at 8:35 am | Permalink

    If and when the majority of the EU members agree rule changes in the way you describe there are only three choices 1.Object 2.Agree 3. Have a referendum. According to the law we are entitled to the last option. Why should we have to wait until after the next GE?

    • zorro
      Posted June 14, 2012 at 11:10 am | Permalink

      If we have a referendum, DC won’t get a nice job in the EU…….

      Zorro

    • Denis Cooper
      Posted June 14, 2012 at 11:35 am | Permalink

      As I pointed out yesterday, but at present the comments are still in moderation:

      http://johnredwoodsdiary.com/2012/06/13/why-the-spanish-banking-bail-out-did-not-impress-for-too-long/

      the law says that you are not entitled to the last option if the necessary EU treaty changes do not “apply” to UK.

      So no matter how far-reaching the necessary treaty changes might be, and no matter how much they might directly or indirectly “affect” the UK, there would be no UK referendum if they could all be put into such a form that they do not “apply” to the UK.

      For example, by being couched in a general form like this:

      “The eurozone states may do X”

      where X is something they are not permitted to do under the present treaties.

      The radical treaty change agreed on March 25th 2011:

      http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091:0001:0002:EN:PDF

      would put an additional paragraph into Article 136 TFEU, starting thus: 

      “The Member States whose currency is the euro may establish a stability mechanism … ”

      and the law says that there should be no referendum on that treaty change.

      As the minister Lord Howell explained yesterday during the Lords debate on the Bill to approve that treaty change, at Column 1349 here:

      http://www.publications.parliament.uk/pa/ld201213/ldhansrd/text/120613-0001.htm

      “The way in which the European Union Act 2011 applies to the treaty change we are considering today is clear. The provisions of this decision, amending Article 136 of the TFEU, do not apply to the United Kingdom, so the decision simply does not attract a referendum.”

    • nicol sinclair
      Posted June 14, 2012 at 1:20 pm | Permalink

      I wholeheartedly agree.

      However, although I have much pleasure in reading Mr R’s posts, I am neither an economist nor a banker and I have difficulty in providing a suitable comment. I am a mere procurement expert…

    • Posted June 14, 2012 at 4:05 pm | Permalink

      “According to the law we are entitled to the last option.”
      Not I suspect Cameron and Cleggs interpretation of the law.

      “Why should we have to wait until after the next GE?”

      – So the next government can ditch or bend the law, to subvert democracy and deprive the voters, yet again, of their Cast iron worthless promises and locks.

      • Denis Cooper
        Posted June 15, 2012 at 8:34 am | Permalink

        During the debate on Wednesday, Lord Howell said:

        “The Government have been clear that a referendum is not required under the 2011 Act right from the very beginning. On 13 October 2011, the Foreign Secretary laid a Statement before Parliament in accordance with Section 5 of the Act, in which he confirmed that in his opinion a referendum was not required under the Act. The Statement was open to judicial review but, as my right honourable friend pointed out, in the intervening eight months, no one has sought to challenge it in the courts.”

        There are a number of reasons why no one has sought to challenge it in the courts, but in any case the law has been written in such a way that the prospects for a successful challenge would be seem very slim.

        • lifelogic
          Posted June 16, 2012 at 6:50 am | Permalink

          Indeed

  8. oldtimer
    Posted June 14, 2012 at 8:50 am | Permalink

    If Germany is against it then chances are it will not happen.

    On the wider EZ crisis and sundry, yet to be implemented, bailout mechanisms I ask my self if Germany is intentionally playing a long game. In short the policy of kicking the can down the road serves a deeper, undeclared purpose, that purpose reflecting a disenchantment with the euro project. Clearly German voters do not want to bail out southern Europe. Merkel faces constitutional as well as electoral challenges to sign up to the bail out mechanisms. Nor does she want to be seen as the person who put the boot in the euro project – no European politician in power wants to be seen doing so. The solution is for the offenders to fail by placing ever more onerous conditions on them. Obstinately, the Irish have complied and even voted Yes to more in a referendum. Greece sounds as though it wants to bargain for easier terms – unlikely to succeed. So the pressure builds up, the PIGS ultimately fail to refinance themselves, the bail out mechanisms remain stuck in the approval process and the market decides for the politicians by witholding funds from them. The euro fails or is significantly reduced in scope and everyone can then blame wicked financiers (based in London).

  9. alan jutson
    Posted June 14, 2012 at 8:55 am | Permalink

    So forgive me if I am a bit dim here, but as I understand it, should this come to pass.

    My take on this is:

    Our government (or our banks) would be underwrtiting all Banks in all other Country’s in the EU, as well as those in the Eurozone.

    Thus borrowing , lending and reserve requirements would all need to be the same, as would any legislation with regard to the banking system in the whole of Europe.

    Thus our taxpayers (because that is the only money the government has) or future years taxpayers contributions, would be used to shore up any Bank in the EU.

    Please tell me why banks, which are a Private commercial enterprise, are to be subsidised or underwritten at all.

    Have I got it wrong ?

    let us just get out of this minefield which is the EU.

    The Falkland islanders are getting a referendum next year, how about us here getting the same..

  10. SteveS
    Posted June 14, 2012 at 9:36 am | Permalink

    It is all just getting far, far too complicated. It just goes to prove that a two speed Europe is just as unworkable and lacking in democratic accountability as the current EU 27 fudge.

    If people want somethign similar to the EU to rise from the rubble, then there is going to have to be a re-boot – a complete abandonmnent of what has gone before with a Treaty for the Eurozone nations with a President, Parliament and Commission and a looser Trade Treaty for the rest of us with national vetos in all areas restored. The Eurozone nations will hate losing the all in it together position, but that needs to be the price of establishing the required Superstate.

  11. Tad Davison
    Posted June 14, 2012 at 9:47 am | Permalink

    I think the answer to this is a pretty easy one. Better out than in.

    Tad Davison

    Cambridge

    • sjb
      Posted June 14, 2012 at 8:51 pm | Permalink

      Open Europe’s recent report identifies “major economic drawbacks” for the UK should it leave the EU. For instance, relying on just our WTO membership “would see some exports facing relatively high tariffs (i.e. 10% on car exports) and market access for services would be limited. “

      • Leslie Singleton
        Posted June 14, 2012 at 10:37 pm | Permalink

        This Open Europe Report made interesting Reading but what I can mever understand when this sort of summing up is attempted is why there is never any reference to the Japan/Asia model. If you hadn’t noticed, Japan is an island not a million miles different in size from us off a large continental mass and clearly Japan manages OK without tying itself in knots with its own continental neighbours.

      • Tad Davison
        Posted June 14, 2012 at 11:33 pm | Permalink

        Ok then, let’s throw this one into the arena for debate. Why should our export opportunities be any worse than they are at present, were we to leave the EU?

        We’d still belong to a trading bloc, we just wouldn’t have the restrictive encumbrances that are presently holding us back, so that must surely improve our chances of exporting our way to recovery.

        With good housekeeping at home, and by that I mean less waste and a smaller state sector, we should manage to claw our way to prosperity. Is that such a difficult concept?

        Tad

  12. Cliff. Wokingham
    Posted June 14, 2012 at 9:53 am | Permalink

    I watched the State’s broadcaster’s Daily Politics programme yesterday and found much of the input from the politicians rather patronising and, to be frank, insulting; they treated us with contempt and like idiots. They appeared to be trying to support more EUSSR but didn’t want to say so because they realized that it would be unpopular with the electorate. The Conservative rep even said that that Number Ten felt there was no appetite amongst the British population for a referendum on the whole of the EUSSR question; How out of touch can someone really be or are they just treating us with contempt?

    What strikes me is that this latest wizzard wheeze and power grab by the EUSSR is just yet another cynical move to create their goal of a giant socialist superstate.
    It strikes me that, within the UK there are some areas that are net contributors to the economy of the UK, London and the South East for example, and some areas that are in effect a liability to our economy, the North East for example. If we scale this up to the whole of the new “country”, then Germany would be the same as London, a net contributor and Greece would be the same as the North East, a liabilty.
    This new banking union, is just a ploy by Brussels to create a new and totally false, giant single country.

    • Tad Davison
      Posted June 14, 2012 at 11:41 pm | Permalink

      Totally agree! I’ll try to find that clip on the iPlayer to watch it and add it to the list of politically slanted BBC broadcasts that I aim to shove inder the nose of Chris Patten.

      Tad

      • Alan Wheatley
        Posted June 15, 2012 at 7:35 am | Permalink

        More strength to your elbow, Ted, for the shove.

        I think you might get a more realistic response from Mark Thompson, but he is leaving soon – I wonder why!

  13. MajorFrustration
    Posted June 14, 2012 at 10:15 am | Permalink

    There appears to be massive frustration building up both about the eurozone management/freeloaders and the lack of clarity/bottle by our own politicians. Any number of banks are bust and should be “let go” otherwise they will drag us all down. Instead Dave pussyfoots around – is he PM for the better good of the country or just for the power ego trip?

  14. zorro
    Posted June 14, 2012 at 11:16 am | Permalink

    John, as you allude in your article, there is too much rear view mirror driving with the capital requirements issue. But then, the speed and decisive nature (not) of the EU makes the Imperial Russian Army deployment in WW1 look like Marlborough’s to the Danube!

    Zorro

  15. Denis Cooper
    Posted June 14, 2012 at 12:14 pm | Permalink

    “There has been huge change in recent years, bringing into play the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational pensions Authority.”

    It would be interesting to know how just much of that change has been based upon the EU treaty changes brought in with the Lisbon Treaty, on which we were denied a referendum and which the Irish were bullied into accepting on the second time of asking, that amending treaty demanded by Merkel to resurrect most of the legal innovations in the EU Constitution, which had been rejected in the French and Dutch referendums and which would have almost certainly have been rejected in a UK referendum if there had been one.

    • Tad Davison
      Posted June 14, 2012 at 11:47 pm | Permalink

      Yes, and now we see Merkel is beginning to baulk at the prospect of continually bailing out other countries, throwing good money after bad. It’ll be interesting to see what results her own elections bring.

      Tad

  16. Denis Cooper
    Posted June 14, 2012 at 12:31 pm | Permalink

    Before agreeing that anything should apply just to the eurozone we should always ask at least three questions:

    1. If we don’t want this applied to us, why should we stand idly by while it is imposed on eurozone states which may also not want it but are too scared to object?

    2. Given the complexity of the EU treaties and laws, and the deviousness and dishonesty of those driving forward the process of “ever closer union”, and the heavy bias of the ECJ towards the promotion of “ever closer union”, how can we ever be sure that this won’t be applied to us through some back door, and later openly accepted by some future government as a fait accompli?

    3. And how are we going to prevent the expansion of the eurozone until we end up so “isolated” that a future government of whichever party decides to bounce us into the euro, if necessary without asking us in a referendum, so that what we now agree should be imposed on “them” will later be imposed on “us” as well?

    • Tad Davison
      Posted June 15, 2012 at 12:04 am | Permalink

      Denis, that’s a perfectly valid point, but I’ve always been of the view that Britain should lead the way. Not from within, but from without. If we can leave the EU and make a success of it, as I know we can, then to be globally competitive, the others will have to follow our example. It will ultimately be in their interests to escape the chains that bind them.

      We’ve known all along that the EU has an undemocratic, bureacratic, uncompetitive, and highly-wasteful socialist core. We’d be doing everyone a massive favour, especially those who have had their sovreignty usurped in the most underhanded way. The EU is very nearly as much of an evil empire as the old Soviet Union . I don’t think it will be long before individual objectors to it are ostracised and cast out. It’s a multi-headed Hydra that must be slain.

      Tad

      • Denis Cooper
        Posted June 15, 2012 at 8:46 am | Permalink

        I agree that we should leave.

        Unfortunately over many decades both Houses of Parliament have been systematically packed with supporters of EU membership, and they won’t vote for us to leave. Given that they’re set upon us staying in the EU, they might at least think give proper thought on how to protect our position within it, rather than walking out of the chamber whenever any detailed discussion comes up.

        Present company excepted, of course.

  17. David Langley
    Posted June 14, 2012 at 12:57 pm | Permalink

    When will Cameron decide to attempt to repatriate one just one bit of legislation or one act?
    We all know he cannot, so we will have to endure more of this EU claptrap. Why is he messing about with bits of domestic tinkering, important that it may be eventually. We have a big problem over the Channel, address it now!

    • Bob
      Posted June 14, 2012 at 8:15 pm | Permalink

      @David Langley

      Dave & George are just “useful idiots”.

      Maybe they realise that the party is over, and are just hoping to score enough brownie points to buy themselves a comfortable existence when the train finally hits the buffers.

      Here’s a You Tube clip of Nigel Farage:
      “No more lifeboats left on EU Titanic”

      http://www.youtube.com/watch?v=9ISdTcwC-54

      >>>

      • lifelogic
        Posted June 14, 2012 at 9:45 pm | Permalink

        That is the only realistic explanation useful idiots indeed.

    • Tad Davison
      Posted June 15, 2012 at 12:13 am | Permalink

      David, the respected columnist, Peter Hitchens, said on the BBCs Question Time programme something to the effect that the present government merely masquerades as Tories, and he betted that not a single one of their proposals will ever come about. We’ve got to lose Cameron, just as surely as we needed to lose Brown, Blair, and Major before him. Only this time, we need a good ‘un, not a con-man!

      Tad

      • lifelogic
        Posted June 16, 2012 at 6:53 am | Permalink

        Indeed Hitchins is probably right.

  18. peter
    Posted June 14, 2012 at 1:03 pm | Permalink

    If what you are saying will be a big change they want to enforce across the EU then this surely means the referendum clause kicks in – what a good time to turn it into an in/out EU membership referendum

    • Denis Cooper
      Posted June 15, 2012 at 8:51 am | Permalink

      So far there have been two uses of the “referendum lock” law, and in both cases it has been used to rule out a referendum.

      Hague, Statement laid before Parliament October 13th 2011:

      http://www.fco.gov.uk/resources/en/pdf/eu-section5-statement

      “In my opinion the European Council Decision of 25 March 2011 amending Article 136 TFEU with regard to a stability mechanism for Member States whose currency is the euro adopted under Article 48(6) TEU does not fall within section 4 of the Act and no referendum is required in the UK.”

      Hague, Statement laid before Parliament February 2nd 2012:

      http://www.fco.gov.uk/resources/en/pdf/eu-act-croatia-stmnt-020212

      “In my opinion the Treaty concerning the accession of the Republic of Croatia to the European Union of 9 December 2011 does not fall within section 4 of the Act and no referendum is required in the UK.”

  19. Lindsay McDougall
    Posted June 14, 2012 at 1:11 pm | Permalink

    The least bad way would be to have a two ring Europe, the inner ring consisting of the German empire (sorry, the Eurozone federation) and the outer ring comprising a Gaulist Europe, possibly joining with EEA. And it should be the core of our foreign policy to make the inner ring as small as possible.

  20. Bert Young
    Posted June 14, 2012 at 1:30 pm | Permalink

    The EU banking proposal is merely a smokescreen . Germany has made it clear that it will not support “Euro-bonds” but , it will do everything in its power to save the Euro . The centralised banking system is its “way out”. Osborne has already stated that the UK will not be a part of such a system and will use its “opt-out” if necessary . One way or another Germany will have to pay . It has taken far too long to reach this stage and much damage has been done through the German shilly-shallying .The ECB must have the administration and control of the proposed system or cease to exist .

  21. lojolondon
    Posted June 14, 2012 at 1:33 pm | Permalink

    To quote from Thatcher, “No! No! No!” We are doing quite badly enough on our own, thank you, the EU and Euro has been really bad for every single economy and bank in Europe, thankfully we remain separate in this small area so we will keep it that way.

  22. Posted June 14, 2012 at 3:59 pm | Permalink

    If the liar ( no Parliamentry privilege ) Cameron had given the promised referendum on the EU stated in the last Tory manifesto then surely we wouldn’t be having these opinions as I am certain we would have said bye bye to this useless profligate organisation.

  23. Vanessa
    Posted June 14, 2012 at 4:01 pm | Permalink

    Quite honestly the people who “run” the EU are so utterly ignorant of any kind of finance and budgetting etc. that unless the UK leaves, we will be pulled down with the rest of them.
    It is time for us to say “bye-bye” and leave them to their black hole. If this government so much as dips its toe into “more centralised banking” I shall be round to the Houses of Parliament with my own special (large) (protest-ed) and I shall lob it into the centre of you idiots who purport to govern this country. Stop asking the EU for permission to do anything and get on with the job.
    Watch Nigel Farage telling the EU yesterday they know nothing and the lunacy of their policies are bring all 27 countries down because of their love of the euro which must be saved at all costs; don’t worry about the countries and their mounting debts.

  24. Posted June 14, 2012 at 4:10 pm | Permalink

    In 2011, the European Banking Association, the European Central Bank and the European Systemic Risk Board did stress tests on all major European banks, and what do you know? Bankia, the shambolic Spanish bank passed with flying colours.
    Now it needs 20 billion Euros and counting. Yep, we’re safe in the hands of the above bunch of clowns.

  25. Posted June 14, 2012 at 4:41 pm | Permalink

    Look just tell Cameron to get us out and start telling the truth. I Cameron doesn’t want out the people will replace him with someone who represents their wishes sooner or later.

  26. Mazz
    Posted June 14, 2012 at 4:54 pm | Permalink

    … European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational pensions Authority …

    One definition of Authority:

    – the power or right to control, judge, or prohibit the actions of others.

    Makes me shudder, to think of the control freakery of the European Union!

  27. Frances Matta
    Posted June 14, 2012 at 6:05 pm | Permalink

    The banking union idea was floated as part of the “Bolkestein Directive” in 2000. It was adopted as a strategy by the European Commission in 2006 in the run up to the “Lisbon Treaty” as part of the single market for services within the EU the aim of which was to make the EU the world’s most dynamic and competitive economy by 2010.
    That Barrosso is still trying to back it as a runner long after the horse has bolted and the euro is going down the pan shows the European Commissioners as the bunch of idiots I’ve always considered them to be. Unelected, incompetent failures at home and abroad.

  28. Barbara Stevens
    Posted June 14, 2012 at 6:21 pm | Permalink

    It appears time is running out for commonsense over the channel, and the way things are shaping up they think all 27 should pay for their mistakes, not those within the eurozone themselves. I don’t like all these new organisations being brought to the for, who will pay for them? Will they want us to help pay for them and eventually their debts too?
    Mr R I wonder how Mr O will handle this situation for the country?
    The madmen over the channel will destroy us as well in their dealings. Take Greece today, the people cannot afford drugs now for illness, will this be us if we are drawn into their games? Mr R, the news gets more worrying by the day, and with Mr C not very able in a crisis one does wonder where it will all end.
    We hear the Bank of England is making preperations for the loss of he euro, I hope they will get them in order well before the bubble bursts. How will it effect us? Elderly people are very worried, not only for themselves but for their children’s jobs and all that entails. Its obvious over the channel they beleive they have domination in the bag for europe, but not for England, I hope. Can you enlighten us all what the governments answers might be?

  29. Martin
    Posted June 14, 2012 at 9:40 pm | Permalink

    Funny money continues. £140bn is going to appear from who knows where and is to be given to the banks. http://www.telegraph.co.uk/finance/financialcrisis/9332570/Osborne-unveils-140bn-scheme-to-kick-start-stagnant-economy.html

    So €100bn didn’t work for Spain but £140bn will for the UK?

    • sm
      Posted June 15, 2012 at 2:51 pm | Permalink

      Bank shares appeared to rise on the news, why?

      Why use the existing banks? Why not create an unencumbered bank to do this? Get new management with (LTIPs) shares which pay dividends at same level as other shareholders but cannot be sold/traded or assigned until post death.

      This would enable the jumpstart competition and lending particularly if it is focussed on SME’s and exporting/import reducing industry.

      Alternatively why not just increase NI thresholds at lower levels of pay and personal allowances?

      Alternatively you can prop up the existing paradigm of failure unitl ultimate collapse. Lets look for the fall in GBP and the pressure it will place on the cost of essentials or basics and stopping them falling in price or even rising. Meanwhile non-essential stuff will sufffer a demand crunch.

      Looks like the taxpayer guaranteed banks are at the point of killing the hosts?

      http://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog

    • uanime5
      Posted June 15, 2012 at 2:51 pm | Permalink

      So including this £140 billion how much has been give to the banks after they were bailed out in 2008?

    • A different Simon
      Posted June 15, 2012 at 4:49 pm | Permalink

      I think it’s more about securing juicy non-exec directorships than trying to help the economy .

      Evidently the trickle-up and transfer of wealth upwards is not enough since they see the need to give it a helping hand .

      None of this money will make it into the real economy .

  30. Posted June 15, 2012 at 1:25 am | Permalink

    Bailout, subsidy, money for old rope – just like the failed policies of the Wilson and Callaghan era. But then that’s the EU all over – social democracy, the doomed attempt to graft socialism onto capitalism.

    Either go for socialism (like the failed Soviet Union) or capitalism, which will only be possible once we are free of the EU, and possible thanks to the Thatcher government’s reforms in the 80’s.

    The EU can only survive through increasingly authoritarian and repressive methods, comparable to the dictatorial social democratic regimes of Nazi Germany and Fascist Italy. Better off out!

    • uanime5
      Posted June 15, 2012 at 2:52 pm | Permalink

      Given that the UK Government is planning to monitor all the emails sent and other digital activities it seems the UK is far closer to Nazi Germany and Fascist Italy.

  31. Posted June 15, 2012 at 11:20 am | Permalink

    I’m a bit of a heretic on this. I think the primary problem is the EU and the Euro is more of a symptom. The EU has a range of antigrowth policies built around bureaucratic regulation and Luddism. This is why the EU area has been in recession while the rest of humanity grows at 6%. The borrowing, quantative easing and so on that the weaker economies have been doing is to simulate the growth they refuse to have in reality.

    With Germany now in the process of closing down its nyclear plants it, though it was the intrinsically strongest economy, has also doomed itself and not all the fiscal measures in the world will prevent it – though they can delay it & make it worse.

    Had the EU zone been growing at the world average none of these countries would have had to exceed their 3% of GBP borrowing limits and the, admitedly ramshackle, Euro would not have been under the stresses that pull it apart.

    The good news is that, just as we could be out of recession and into fasct growth in days if the political elite wanted it, the entire EU could in months – this will require the replacement, or damascene conversion, of the majority of our MPs, which, on the one hand looks quite an ask & on the other looks like something the large majority of voters would be very happy with.

    • uanime5
      Posted June 15, 2012 at 2:54 pm | Permalink

      Only the developing countries can hope to grow at 6%, most developed countries would be lucky to get 2% growth.

      • Posted June 17, 2012 at 5:08 pm | Permalink

        Wrong again Uni. Singapore, a country with no natural resources except human beings and a significantly higher level of development than here recently managed 14%. On a previous thread I pointed that out to you but clearly facts make no impression on such as you.

  32. Derek Emery
    Posted June 15, 2012 at 5:08 pm | Permalink

    The banks are slowly sinking under the weight of debt. Tying them all together will not solve the problem. There would have to be a central bank of last resort to solve the problem. The likelihood of Germany ever agreeing to that must be very low.

    In any event holes below the waterline are getting bigger as debts continually rise. There is no sign of the EU ever coming up with an effective policy that would restore GDP growth. Even if they did it will be hard bordering on impossible to make the PIIGS competitive and will take many many years. Will Germany agree handouts of the order of a trillion Euros and more over future years ( probably close to a decade) to to keep the losers afloat by a continuous injection of German money?

    Poor parts of superstates such as the US that have been “integrated” for centuries are still poor. If it worked them why are poor regions of the US still poor and dependent on charity from rich regions? Why would this work for the EU when it never worked for the US or UK?

    We are being sold a pup to imagine that fiscal integration will produce growth except for Germany which is already rich. Much of the UK is poor except for London and the South East and has been for a long long time. Peripheral countries like Greece, Portugal, and Spain will be in equivalent positions relative to the EU centre – Germany. There’s a massive difference between the real world and the dreams of some politicians.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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