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10 September 2015

Financial Times: George Osborne makes shielding City priority in EU talks

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The UK chancellor’s search for guarantees for “euro-outs” — specifically, his determination to protect the City of London against discrimination by the countries of the single currency — has become his central mission in the renegotiation of Britain’s EU membership.

At issue: can Britain coexist in a single market with an integrated eurozone when the single currency area enjoys an inbuilt majority to dictate common rules? And short of an outright veto, which would be politically impossible to obtain, will any safeguard be good enough to satisfy London’s fears of being overridden?

Mr Osborne’s allies say he regards this as vital for the British economy, even if they admit that the issue is a “bit techy” and far less likely to swing votes in a British referendum than more emotive issues such as jobs and migration.

At present, the danger is mostly theoretical. The eurozone rarely unites on policy substance or acts en bloc in EU-wide talks. While common euro area institutions are developing — such as the banking union — differences in outlook prevail among the nations that belong to the single currency area.

“In a way this is a man of straw,” a senior EU official said.


A traditional Brussels fix is to revise EU voting rules. This could potentially involve expanding the idea of double-majority voting , which currently applies only to technical banking rules, to cover lawmaking for the single market.

On Thursday, the Open Europe think-tank unveiled its own variant: giving three non-euro states the power to hold up any proposed law that supposedly contravenes key principles of the single market.

If no consensus is reached within six months, the proposal is either dropped or pursued by a smaller group of member states, subject to some constraints. “Reaching agreement for such a mechanism is tricky but not impossible,” said Stephen Booth, the think-tank’s co-director.

Others are more pessimistic. One challenge is procedural: both EU and UK lawyers have told Mr Osborne that treaty change is the only way to override existing voting rules — and that is almost impossible before the referendum. The compromise of a legally binding side deal — which could be added to the treaty when it is next opened — could only clarify existing voting rules, not overturn them.

Such accords cannot “add something or modify the meaning of the treaty,” Jean-Claude Piris, the EU’s former top lawyer, told MEPs this week.

A second problem is one of substance. Britain’s interests are far from fully aligned with non-eurozone countries, not least because many may eventually join the single currency. Basing a voting guarantee on this bloc could prove neither helpful nor long-lasting.

Germany and France suspect that Britain ultimately wants a veto for the City and would therefore block any safeguard that appears too strong.

“This is all really about raising the threshold of qualified majority voting,” said Nicolas Véron of the Peterson Institute think-tank. “It is difficult to imagine how to get around the fact that some things are majority decisions and one country cannot be a blocking minority, even when the country is the UK.”

Mr Osborne is alive to the limitations and difficulties of tweaking voting rules. He told peers that “ad hoc solutions” had been found to clashes between the eurozone and Britain but added: “It doesn’t give you enormous confidence you can do it in every situation.”

His preference is for non-discrimination — the core feature of the single market — to be more clearly baked into EU law through postdated treaty changes. Such principles would then be enforced by institutions such as the commission and the courts.

This would sharpen principles already within the treaties. Other protections may also be demanded, such as procedural safeguards against the eurozone caucus shutting out non-euros from discussions, or pressing on with initiatives that damage the single market. [...]

Full article on Financial Times (subscription required)

© Financial Times

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