European Cooperation

Written by Colin Breed on Tue 16th Feb 2010

This week the Treasury Select Committee has been carrying forward its work looking into the banking and financial sector and it is becoming increasingly clear that real cooperation and coordination of regulation both in Europe and the USA is going to be vital if multi-national banks with considerable cross border operations are to be effectively supervised. Of course, the work of the Committee will have to cease when the General Election is called and as it is unlikely we shall have completed all the investigations the successor Committee will have to take up the baton and do the last lap. However, this could be against a very different UK Government.

If a Conservative government is elected it is likely to be broadly anti-European as an analysis of current Conservative candidates makes clear. It opposed the Lisbon Treaty which it cannot alter as it is now part of European law which immediately makes life a little tricky. Close cooperation with Europe is essential but the Tories will not want to be seen as actively supporting the European project for fear of losing their eurosceptic voters, so when it comes to financial regulation they face a counter-intuitive position. Somehow they must reject integration, but must participate in the financial services agenda.

At present they are unwilling to discuss the European issue openly; which could jeopardise not only their votes but also the City of London which sees rapid agreement as less damaging than a "stand off" position which precludes becoming involved in negotiations or involvement in new regulatory frameworks. As regulation is being generated thick and fast the UK will have to maintain close links with not only the G20 but also with the IMF, the OECD and the ECB on the other side of the Atlantic.

This raises an important issue. Will the Conservatives be willing to set aside a larger slice of the shrinking pie for Brussels and other international players? There is a growing need to be more internationalist yet the Conservative Party took a step back when it removed itself from the European People's Party (EPP), the main central block in the European Parliament, as it was seen as too integrationist for sceptical conservatives. This has been counter-productive as it leaves a vacuum for France and Germany to fill at a very crucial time.

It seems clear that if the Conservatives do win the next election they will have to stay close to Europe - perhaps closer than much of the Party membership would like. On such an important issue, it will be necessary for Mr Cameron to make his position clear before the General Election