Brussels is preparing for a late night meeting on Thursday, February 18, as the EU heads of state are to agree on a new deal with the UK. Talks may be difficult as there has been increasing concerns from euro countries lately that the UK could block further integration in the eurozone.

The demand that citizens from other EU countries, who work in Britain, should have to wait years to get access to social benefits, was initially seen as the most difficult part of the new deal that the UK wants to negotiate with the EU. A British referendum on EU membership is to be held later this year.

However, it now seems like the British Prime Minister David Cameron got some support on that issue from member states concerned, such as Poland.

Instead, another demand, on economic governance, could be a bigger obstacle for a deal on Thursday night. The UK wants safeguards that the British financial centre, the City of London, is not affected by decisions taken by euro area countries, something that euro countries oppose.

Teaser image NOW! video: Crunch time for EU-UK negotiations

City of London, wants to hinder decisions in the eurozone?

France objects to UK safeguards

France has been the most vocal opponent to that demand, supported by Germany. They fear that the UK could potentially be able to hinder decisions in the eurozone and that the City of London could get special treatment.

France wants that all EU member states, including the UK, follow the same financial rules. Paris calls for a clearer wording in the deal text, as vague formulations could open for the UK to have different rules, for instance on bank bonuses and capital requirements.

On Monday evening, Mario Draghi, also commented on the issue. The president of the European Central Bank (ECB) said that an unclear agreement with the UK would have negative implications for the eurozone, which needs more integration, not less.

“The unfinished status of our monetary integration may become a source of fragility. It’s one more reason to take this opportunity to deepen our integration,” Draghi said.

“And from this view point, of course, the agreement, whatever it will be, should not hamper any further integration movement for our monetary union.”

Karel Lannoo, Chief Executive Officer at the Centre for European Policy Studies (CEPS) shares these concerns. Already today it is difficult for the 28 EU countries to take common decisions, he argues.

Further obstacles, like giving national parliaments increasing powers to block European legislation, which is another part of the proposed deal with the UK, are not needed.

Teaser image NOW! video: Crunch time for EU-UK negotiations

City of London, the European centre for financial services

UK benefits from common financial rules

Lannoo also argues that the UK has and is, in fact, benefitting a lot from the common rules, also in the financial sector. The harmonised financial regulation and the common market have made the City of London the European centre for financial services. According to Lannoo, there is a clear correlation between deeper cooperation on the European market and the growth in the City of London. Therefore, they shouldn’t fear any European legislation.

“I don’t necessarily see how they could be discriminated against. It’s just the opposite, which is true. They have benefitted from this capacity to have things decided for the 28 as a whole,” Lannoo said.

“My question is why haven’t they been capable to explain this to the population, because I think it is clearly visible for every visitor who comes to London, who’s been there in the 80s, who’s been there in the 90s and who comes there today, how this city has grown. For me, to a large degree, as a result of the freedoms which we have in the treaty.”

Fragile deal to be hammered out

David Cameron is hoping to strike a deal on Thursday, which is good enough for him to convince the British public to say Yes to the EU in the referendum, which could be held already in June this year.

But what the deal will look like is still an open question. Donald Tusk, the EU Council President, who is the one trying to broker the deal, said earlier this week that all issues were open. And as the positions have hardened the last couple of days, he urged the parties to listen more carefully to each others arguments.

“This is a critical moment. But the risk of break-up is real. Because this process is indeed very fragile. Handle with care. What is broken cannot be mended,” said Donald Tusk.

  • Author: Andreas Liljeheden, Euranet Plus News Agency

Leave a Reply

Your email address will not be published.