Letter from Herr Bahler
Office for Pan Euro solidarity
(This appears to be to Dame Lucy Doolittle, The Director of the Unit for co-ordinating cross cutting initiatives and partnerships, Whitehall. The letter is in excellent English, but does make the colloquial mistake of sometimes muddling England and the UK. Once again I advise journalists to check the possible source with me before using, as I do not find this Unit on the recent EU organogram -ed)
Dear Dame Lucy,
I understand the difficulties you are experiencing with your Ministers. I am writing to warn you that we are not going to put up with much more grandstanding from the UK. I think you need to be firmer in your dealings with them. They have to understand the realities of the situation they find themselves in.
The EU has been very patient with the wayward English for some years. We allowed you to stay out of the Euro for the time being, and allowed the UK to make slower progress to harmonisation of criminal justice, borders and social policy than other states. We even permitted some continuation of the UK rebate at a time when the richer larger countries of the Union do need to make a greater contribution in the interests of solidarity and harmony.
I should stress it is not helpful for senior UK Ministers to make public statements setting timetables for us to “sort out” Euro and banking issues which are by nature complex. The main members of the EU are frustrated by this conduct, and have proposed a Tobin tax on banks. We are looking at various ways of imposing this, and at the legal base for its agreement. I would suggest your Ministers are asked to give it more careful thought than they have managed so far. Banks are far from popular, and it seems to us to be the least bad way to be seen to be tackling deficit problems around the Union. We would of course allow the UK to benefit more than proportionately from the tax given the Uk revenue base for it. I would have thought it would be very attractive to UK Ministers to have access to such potentially large sums of income.
We do expect to come up with proposals for greater transfers around the Union to promote greater unity of purpose and solidarity. For this we will need agreement to a larger budget.
We also expect to intensify EU scrutiny of banks and other financial institutions in order to prevent systemic problems in our increasingly integrated markets. We would expect the UK to co-operate fully. We do of course have the necessary powers to require more banking cash and capital if we judge them necessary, including for banks with substntial public sector shareholdings.The Uk might be well advised to co-operate with our banking capital review, in the light of theUK state exposures.
If by any chance your Ministers do not wish to work collaboratively on financial matters, we will need to consider ways of restricting market access and ensuring that Euro business is conducted in properly regulated Euro institutions. As you will appreciate, there is always an override of competition and single market rules when it comes to matters of prudence and fitness regulation in matters of finance.
In summary, we expect a more cooperative approach from the UK to the pressing issues of bank regulation, a realistic pan EU budget allowing proper transfers, taxation at an EU level to curb national deficts and pay for enhanced transfers, and some relaxation of the demands for a special deal on budget contributions. The EU needs more powers and money to ensure the success of the Euro, to help countries at risk, and to shore up its banking system. It would not be in the UK’s interest to allow Euro area banks to go down or Euro area countries to default.
We have been heartened by your Finance Minister’s comments that the future health of the Euro matters, and by his understanding that to achieve a strong Euro in the future the EU needs more powers of supervision and budgetary control. I suggest you put to him forcefully that the Uk has an interest in participating fully in the solution from her currently privileged position. There can be no free dinner, as I think you say in English.
I trust you will be able to explain all this to your Minsiters. We have noticed your success with the Foreign office over the Common External Action Service, and with the Home Office over some criminal justice measures. The environmental area is also going very well. These all prove that it is so much better when the Uk is in the mainstream, and can help influence the natural course of EU development.
Yours in ever closer union