UK and France refuse EU bank plan
May 15, 2012 at 11:22 am
Britain and France rejected EU bank plans to insure banks against future failures in a lengthy 16 hour meeting on 2nd May.
Michel Barnier, EU internal market commissioner, has laid out plans to collect national funds from all EU member states to help prevent further economic crisis. The plan to gather 1% VAT from all EU member states is an attempt to provide an income to reorganise or stem issues in failing banks. The second major idea is to collect a levy on all financial transactions, providing a central kitty. The European Commission sees this as a collective response to preventing future financial malfunction. Barnier states that these measures could produce a combined total of 60 million Euros, increasing the budget until 2020 to around a trillion Euros.
The UK has rejected this idea on the basis of it being a ‘moral hazard’. George Osborne, Britain’s Chancellor of the Exchequer feels that “The purpose of the bank levy is to raise money for general expenditure purposes” and therefore believes that a levy solely for banks is similar to an insurance premium, making banks feel entitled to a bail-out if they find themselves in trouble. France is said to have similar concerns over the financial plan. Osborne goes on to say that “If we walk away from this table with 27 countries all having gotten some kind of concession for their national banking issues, we will have completely failed and it won’t just be a political failure; it will be potentially a serious economic failure for our continent.”
Despite the drawn out meeting, the EU commissioner threw out the idea of complete agreement being necessary and was happy to settle on a majority vote. In terms of Britain, he suggested that if they were not in agreement, they would have to “go it alone”. German government officials have commented on the disagreement by suggesting that both Britain and France’s obstinacy is concerned more with needing the funds to ease their own national budgets than being a “moral hazard”.
