Eurozone banking union could challenge the City of London

Labour Party

Monday’s extract from the latest tranche of Alastair Campbell’s diaries, The Burden of Power: Countdown to Iraq, published in the “Guardian” is very telling on the Euro question.

According to Campbell, Blair was well and truly thwarted by Brown. What is more, Tony Blair feared “we were making the wrong decision for the wrong reasons”.

While the bickering, not to say in-fighting, between Blair and Brown as told by Alastair Campbell makes depressing reading, there is no doubt in my mind that Tony Blair’s instincts on the Euro were right, even in the light of the current crisis in the Eurozone.

When British commentators talk about the Euro they all, almost without exception, take a congratulatory, not to say patronising, tone. The UK is deemed to have done the right thing by staying outside the Euro. We are not, after all, embroiled in the current economic problems.

Except of course, we are. The recession is deeper here than elsewhere in the EU. Britain’s double dip recession matches the economic problems of almost any save the most deficient Eurozone country. Unemployment in the UK stands at 8.4%. This is higher than Germany at 5.4% and Holland and Luxembourg (5.2%). True, there are also very high unemployment in the Eurozone, especially in the member states facing huge problems such as Greece and Spain where the rates are in the low twenties. Overall, the Eurozone total in 11.2%, more than Britain, but not much more given that the peripheral countries are in such difficulties.

As readers of this blog know, I very much support what was the Tony Blair position on the Euro in 2003, the year Campbell features. In a world where economies are intertwined, it would have made a lot of political sense for the UK to join the Euro at that time.

The UK has once again failed to join the European project at the right time. Former Permanent Representative to the EU Sir Stephen Wall is quite clear in his excellent book “A Stranger in Europe” that Britain would have not faced many of the issues it found itself dealing with regarding the European Union if we had been there at the beginning rather than leaving it until 1973 to join.

The same, I fear, will happen in relation to the Euro. If a country is not there at the start they stand to miss out on crucial decisions, finding that the architecture has been put in place without their input. This is, of course, why the UK is uncomfortable with some aspects of the European Union, especially when it comes to agriculture.

The Eurozone seems to be going in the direction of some kind of banking union. This will obviously have an effect on the City of London. Being outside whatever kind of union emerges may well prove problematic for our financial services industry. We in Britain should ask ourselves whether we really want a powerful neighbour with a unified banking system which will be able to challenge, not to say get the better of, our most important industry.

A Stranger in Europe by Sir Stephen Wall

Labour Party

What a real joy to read a well argued and thoughtful book on the European Union which takes a rational, objective view rather than the strident Euro-bashing all too available in Britain. Sir Stephen Wall himself makes the point that there is nowhere near the level of anti-EU feeling in any other member state that we see in Britain.

A Stranger in Europe proved a surprisingly good choice for Christmas, not too heavy and showing real insight. So much so that, now fully back in the swing of things in Brussels, I thought it deserved a review.

The author, a leading diplomat whom I met at 10 Downing Street when he was Tony Blair’s Europe Advisor from 2000-2004 shows in the course of his book that he represents the very best of the British Civil Service – hugely intelligent, balanced with great analytical ability. Wall’s essential thesis is that Britain’s major problems with the EU, especially the Common Agricultural Policy (CAP) came about because we weren’t there at the beginning. By the time Britain finally got over its distaste and joined in 1973 it was too late, France and Germany ruled the show and weren’t going to make any major moves to accommodate late comers. Britain had to take it on their terms or not at all.

Wall, always the quintessential civil servant, tells how Margaret Thatcher had no real friends in Europe. Although she joined the UK up to the single market her stridency in securing the British rebate ultimately prevented her from forging real alliances. Having been John Major’s Private Secretary, Wall is immensely qualified to write about the Maastricht Treaty and the concession which allowed Britain to decide when to join the single currency.

Wall, an insider though not a politician, brings a welcome objectivity to this and other seminal moments in Britain’s relations with the EU. Tony Blair sought to move public opinion in the UK in a more EU friendly direction. Wall mentions Blair’s speech to the European Parliament in Brussels during the British presidency of the EU in 2005. I was there and the speech was, indeed, a masterpiece. Outstanding rhetoric aside, Blair put climate change on the EU agenda, a significant achievement for the UK.

I generally find books by civil servants about their time at the top very illuminating. Wall’s book is no exception, drawing as it does on his wealth of experience. As well as working for Prime Ministers Major and Blair, Sir Stephen Wall was posted to Paris in 1972 as Private Secretary to the Ambassador. From 1979 to 1983 he served in the British Embassy Washington. On return to the FCO he was Assistant Head and then Head of European Community Department (Internal). From 1988 to 1991, he was Private Secretary to three successive Foreign Secretaries – Geoffrey Howe, John Major and Douglas Hurd.

Wall’s practical knowledge of the EU which began at the very beginning of Britain’s accession is second to none. He is not only uniquely qualified but uniquely coherent. This relatively recent book published in 2008 is a must for all those genuinely interested in Britain in Europe.