The EU Reform Treaty and the City

Global Vision is a non-partisan campaign group that believes Britain needs to negotiate a looser, more modern relationship with the EU to reflect the rapidly changing world of the 21st century. The new relationship should be based on trade and cooperation, whilst opting out of political and economic union.

How will the EU Reform Treaty affect the City? Will this latest EU initiative give it a boost by producing better regulation and bigger markets, or will it merely transfer more power to Brussels and make London extra vulnerable to the whims of Eurocrats and politicians?

At the risk of piling on too many questions, will it make any difference at all? If the answer is no, then the City can get on with more urgent things than trying to understand a tortuously complicated document.

The short answer to the last question, however, is yes; it is bound to because its purpose is to alter the way policy decisions are made and implemented in the EU. The Treaty redistributes political initiative, mostly in the direction of Brussels; it shares out voting power more evenly among EU members, which means that large countries like the UK get less say; and it sets up a process of continuous change which creates a horizon of uncertainty.

All these changes contain risks and opportunities. The risks are that policymaking and regulatory enforcement increasingly shift to Brussels, where the City’s interests have to compete more directly with those of the financial
centres of 26 other countries, and be subjected to a regime which is less sympathetic to its needs. The opportunity is that a more streamlined system of government opens up markets faster and makes the EU more responsive to its
members. But how will it turn out?

The difficulty in giving a clear answer is that the Reform Treaty says little or nothing about finance and regulatory policy, and makes only general statements about the need for open markets. So you can’t point your finger at an Article and say (as you can for immigration or energy policy) “That’s great!” or “That’s terrible!”. Instead, you have to examine the proposed changes and decide how they would play out in the real world. From the City’s point of view, there is only one answer to that: badly.