Osborne: EU Deal Will Protect British Business

  • Chancellor holds out prospect of renegotiation deal at summit
  • EU safeguards would protect London as a financial center

Osborne has battled to ensure the U.K. is not forced to take on costs inherent to the euro area, and to protect the City of London against rules he argued would jeopardize its position as a financial center.

Photographer: Simon Dawson/Bloomberg

Chancellor of the Exchequer George Osborne said European Union proposals will protect Britain as a non-euro member as he held out the prospect that a deal safeguarding London as a financial center can be reached this month.

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The draft agreement, which includes principles setting out safeguards for nations outside the euro area, would also establish a mechanism allowing countries to escalate discussions on draft EU legislation from finance- minister level to summits of government leaders -- effectively acting to slow down unwelcome legislation. This would be particularly effective in protecting the City of London from EU legislation Britain says would damage its global competitiveness.

"For me as the finance minister, and for me looking at where the European Union is going in the future with further euro-zone integration, this has been the most important part of the package," Osborne said in an interview in Rome on Wednesday, the day after EU President Donald Tusk published the draft agreement. The principles and their defenses "ensure that we can’t be discriminated against because we’re not in the euro or that companies based in the U.K. can’t be discriminated against."

Osborne Battle

Osborne has battled to ensure the U.K. is not forced to take on costs inherent to the euro area, and to protect the City of London against rules he argued would jeopardize its position as a financial center. The draft settlement still needs the endorsement of all 27 other EU leaders at their Feb 18-19 summit.

Executives from Barclays Plc to Goldman Sachs Group Inc. began 2016 by intensifying lobbying for the U.K. to remain a member of the EU. Among the concerns of bankers is that “Brexit” would not only damage the economy, but also subject their businesses to greater trade barriers and prompt an exodus of talent. 

London is the center of global currency trading and last year passed New York to be named the most competitive financial hub in the world by Z/Yen Group. The U.K.’s financial services industry employs over 7 percent of workers and produces about 12 percent of economic output, according to lobby group TheCityUK.

The chancellor, who has taken a lead role in negotiations, was speaking at the British Embassy in Rome after meeting with Italian officials to gauge support for the proposals. At the same time, Prime Minister David Cameron was in London, defending his negotiations in front of lawmakers in Parliament and hinting that the referendum on whether to remain in the EU or leave could be held as early as June 23.

Osborne said he was confident Tusk’s proposals would lead to a better deal for Britain, and that while the U.K. was "not driven by a particular referendum date" a deal was looking more likely.

"After this week we’re in a pretty good place to make progress," he said.

Osborne said the safeguards would directly relate to the guiding principles set out in the proposal, playing down concerns they could be used by the U.K. as a weapon against unwelcome pieces of financial legislation.

Second Line

"The safeguard mechanism -- which is if you feel these principles are being violated you can elevate it to the European Council -- is a second line of defense," Osborne said. “It’s a safeguard mechanism but arguably the more important is that you have the principles in the first place.”

The deal could also pave the way for two-track banking rules for euro-area countries and those outside the currency bloc.

The draft settlement says “prudential requirements for credit institutions” and other rules needed to bolster financial stability may need to be “conceived in a more uniform manner” for application in the euro area, with its single supervisor and resolution authority, than in the EU’s nine non-euro states.

This may give non-euro authorities more flexibility in implementing EU banking law, handing the U.K. greater control over British financial legislation. It would apply to secondary law -- technical rules rather than primary legislation.

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