Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

profoundly deep and long-term effects? And what will the consequences
for the EU be?
In one sense this question is already answering itself – at least in part. At
the time of writing, European leaders have already committed themselves
to a programme of reinforced financial regulation to buttress a “more
responsible capitalism” that includes not just highly technical questions
of reserve ratios but the highly charged issue of regulation of bankers’
bonuses. Financial services re-regulation will be at the heart of the
reconstruction of the Single Market once the worst of the crisis is over and
the Commission’s new proposals, based on the earlier De Larosière report,
appear well crafted to secure consensus. It is strongly in the interests of
the Eurozone that the necessary strengthening of financial regulation is
agreed on an EU-wide basis, involving the UK.
As the City of London is the “de facto” financial centre of the euro area,
despite being outside it, this still gives the UK significant leverage in
designing the detailed shape of this new regulatory regime, as long as the UK
agrees to play the European game. Prior to the crisis these proposals would
have been seen as a major threat to UK interests which have historically
been allergic to entangling the City of London in excessive European red
tape. However a significant shift in attitudes is discernible. Lord Turner,
the Chair of the UK Financial Services Agency (FSA), has argued forcibly
that without some element of “single” financial regulation, there can be
no Single European Financial Market. There is clear questioning as to
whether the best interests of the City of London are to be seen in the long
run as a “light touch” regulated market operation offshore of its European
home base. Should this trend be confirmed, this is a significant move in
European economic integration.
Another area where the pace of integration may quicken is tax. The
present pressure to be serious in tackling tax havens and abuses by the
rich may result in greater tacit tax coordination. How far this will go is
as yet uncertain. In order to bring down fiscal deficits and public debt,
member states need to protect and restore their tax bases. With their tax
bases badly weakened by the crisis (of which the UK is a prime example)
member states will not want to see further leakage of tax revenues
overseas to countries with less onerous tax regimes. Nor in this situation
does it make sense to allow business to play off one member state against
another or allow blatant tax competition. It may also be necessary to
implement an EU-wide carbon tax to supplement the operation of the
European emissions trading in order to ensure that the correct market
Chapter 1 – Roger Liddle 21