guardian.co.uk,
Ian Traynor, Monday 12 December 2011
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| Olli Rehn: 'The UK’s excessive deficit and debt will be the subject of surveillance like other [EU] member states.' Photograph: Yves Herman/Reuters |
The
European commission on Monday underlined the negative impact of David Cameron's
summit gambit by pledging that the City's financial institutions would be
subject to new regulations hatched in Brussels.
Emphasising
the EU's determination to dismiss Cameron's abortive attempt to secure exemptions for the City, Olli Rehn, the commission vice-president in charge of
economic and monetary affairs, was scathing about the prime minister's
campaign. This was rejected by the Brussels summit on Friday, triggering a
British veto of German plans to anchor a new eurozone fiscal union in a
renegotiated Lisbon treaty.
Cameron's
move isolated Britain in Europe as seldom before, producing weekend headlines
and comment across Europe that the UK was on the way out of the EU.
"We
want a strong and constructive Britain in Europe, and we want Britain to be at
the centre of Europe, and not on the sidelines," said Rehn, sounding more
sorrowful than angry at what is seen in Brussels as Cameron's self-inflicted
wound. "If [Cameron's] move was intended to prevent bankers and financial
corporations in the [City of London] from being regulated, that is not going to
happen. We must all draw lessons from the financial crisis, and that goes for
the financial sector as well."
Launching a
new set of economic convergence policies – known as the "six-pack"
and which come into force on Tuesday – Rehn admitted that Britain's blocking of
attempts to reopen the Lisbon treaty could create problems for the EU.
Potentially, the move makes it legally more difficult to establish the
eurozone's "fiscal compact" – the main result of last Friday's summit
– by March.
Because of
the British block, at least 23 and possibly 26 of the 27 EU states are now to
agree a new international treaty among themselves as the answer to the eurozone
debt crisis. The aim is for all eurozone countries to enact laws setting
binding debt ceilings and with quasi-automatic penalties and fines for those
countries breaking the rules. Germany, the architect of the new regime, wants
to strengthen the key European institutions – the European commission and the
European court of justice – giving them formidable powers of intervention in
enforcing the new regime.
But on the
central innovation – automatic fines for deficit sinners – Rehn conceded that
it could be difficult to give the new regime as much clout as Berlin would
like. The Germans want the commission to enforce the regime independently by
recommending punishments for eurozone countries running excessive budget
deficits. The penalty would be triggered automatically unless a qualified
majority of eurozone governments then voted to overturn it. Rehn said the
Lisbon treaty would need to be changed for this to happen – but it cannot be
changed because of the British veto on Friday.
While
eurosceptic Tory backbenchers may be pleased by the potential legal stalemate,
the Cameron veto may be generating more unintended consequences. For months it
has been British government policy to back EU efforts to stabilise the euro
through an effective fiscal union. Cameron and the chancellor, George Osborne,
have been stressing the "relentless logic" of fiscal union,
supporting it strongly provided that Britain is not involved. Britain's veto
and its resistance to having EU bodies involved in policing the fiscal compact
could leave the new regime weaker, setting back attempts to stabilise the euro,
which Britain says is also crucial for the UK economy.
"I
regret very much that the UK was not willing to join the new fiscal compact, as
much for the sake of Europe and its crisis response as for the sake of British
citizens and their perspectives," said Rehn. "I would also like to
remind you that the UK government has also supported and approved the six-pack
of new rules tightening fiscal and economic surveillance, which enters into
force tomorrow.
"The
UK's excessive deficit and debt will be the subject of surveillance like other
member states, even if the enforcement mechanism mostly applies to the euro
area member states."
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