Yesterday’s democratic frenzy over how to pay for university places got plenty of air time. There has been precious little all week for the huge changes being contemplated in Brussels for banks, government bonds, state borrowing,levels of state spending and economic government.
The Economic and Financial Afairs Council which met on Tuesday had before it a large agenda. They reported progress on:
1. Possible Treaty amendments, regulations and directives to strengthen economic governance by the EU over member states.
2. Tougher capital adequacy regulations for EU banks.
3. A strengthened supervisory regime for all financial institutions in the EU.
4. A system of bank levies to raise money for “resolution” funds in each mamber state, money to enable regulators to put risky banks into a kind of adminsitration
5. A draft directive over savings taxation to tackle tax fraud
6. Possible measures to limit “harmful” business tax competition.
7. A general plan for “crisis management in the financial sector”, which includes more intervention before a bank gets into difficulties and stronger powers to appoint temporary management, demand asset sales, or change personnel at individual banks to prevent a crisis the regulators think likely.
Whilst they did not report progress on it, they doubtless also debated the issue of EU sovereign bonds to replace some national state debt. They did finalise the proposals for the Irish loan.
None of this was reported back to the UK Parliament in an oral statement or debate, yet all of it is fundamental to our economic futures.
The EU is very clearly using tax fraud and tax competition as reasons to encroach more into the formerly reserved area of taxation. They reaffirmed a minimum 15% VAT rate as a reminder that VAT is a European tax.
The EU is right that it needs more control over spending, debt and deficits for Euroland member states. The weaker states are now making claims on the stronger, and need more transfers from them. There is every reason to move swiftly to a common policy. There is equally no reason why the UK or any other non Euro member should have anything to do with any of this.
It is also clear that Euroland member states need to take a close interest in the methods of bank and financial regulation in each other’s countries. If banks go wrong in one place that can have serious knock on effects in others where they share the same debt risks and interest rates through the evolving common system. Again there is no reason why the UK should be part of this common framework. It is big enough to have its own, and needs its own to guarantee the solvency of its own institutions and to reassure the world of its security as a major world financial centre.
The new resolution regime is reminiscent of the UK interest in living wills for banks. It may be sensible. What is not sensible is for the UK to bind itself to the wheel of EU led regulation and bank levies, when the UK may have good reason or need to make its own judgements in these crucial areas.