This has been an interesting weekend. The UK vetoed the change of EU treaty based on the transaction tax that Merkel and Sarkozy wanted to impose on London.
The City is massive, on its own it is bigger then the rest of the EU combined and with its regulation regarding repo and collaterisation of capital not only does the rest of the EU depend on London for its funding, but even the US gets most of its funding for the financial system from London. We talk here aplenty of how big the FX market is (3trn a day) with the majority flowing through London (40%), but it is dwarved by the repo market (10Trn a day) and the collaterisation rules regarding capital requirements and holdings.
One of the biggest reasons all of the EU and US trading houses are in London is the liquidity the City provides.
Germany and France want to punish London as a knee jerk public relationship exercise that pleases the voters back home. Commerzbank and SocGen would disappear overnight if London did not provide it with the liquidity it does.
Cameron stood by his guns, as I posted last week that he would:
So where are we now. The UK vetoed a treaty change so the other 26 will now try to get it through without the UK by QMV (as I explained here months ago)
The UK does not oppose to helping out the euro, it does oppose any financial penalty imposed on the City.
Was Cameron right to veto the treaty change? Time will tell. The UK will now take the rest of the EU to court, based on proportionality clauses as outlined in the treaty of Rome.
Germany and France will use QMV to get their changes through, the UK will do anything it can in its power to stop them.
This is going to be an interesting week, Germany is trying to run the EU as it pleases and the rest of the lesser states meekly comply with the direction they are taking as they hold the money purse for the EU.
The City however holds the money purse for the banking system in the EU.
Popcorn to the ready.
The City is massive, on its own it is bigger then the rest of the EU combined and with its regulation regarding repo and collaterisation of capital not only does the rest of the EU depend on London for its funding, but even the US gets most of its funding for the financial system from London. We talk here aplenty of how big the FX market is (3trn a day) with the majority flowing through London (40%), but it is dwarved by the repo market (10Trn a day) and the collaterisation rules regarding capital requirements and holdings.
One of the biggest reasons all of the EU and US trading houses are in London is the liquidity the City provides.
Germany and France want to punish London as a knee jerk public relationship exercise that pleases the voters back home. Commerzbank and SocGen would disappear overnight if London did not provide it with the liquidity it does.
Cameron stood by his guns, as I posted last week that he would:
DislikedCameron doesn't really have a lot of choice, the UK can't afford to have the EU implode right now.
The big sticky point with Cameron is Germany's proposal from Sunday relating financial transaction tax, Cameron will never go for that, that will kill the City.Ignored
DislikedCorrect that happens in 2014, the EU has slowly gone from unanimity to the current qualified majority, to the new qualified majority in 2014, when a majority of 65% is needed for policy change (based on population), currently 75%. There is some "small minority" clause in there somewhere where under certain conditions a minority can ask for a "review" not a repeal. Not sure how that one works, need to read up on Lisbon again.
It is called the QMV and was accepted in the Lisbon treaty. So in effect, Germany/France/UK can run the...Ignored
DislikedI got a few minutes so I will bite.
We all use the term EFSF, even though technically it is wrong. The EFSF has been around for 2 years and is currently active, it is registered in Luxembourg and expires in 2013. The "EFSF" that most of us talk about here is actually the EFSM (European Financial Stabilisation Mechanism) that is going to replace the EFSF. It was Germany that considered it a change of treaty (the Lisbon one) so all members need to vote on it and ratify it unanimously.
The current EFSF can only supply money in conjunction...Ignored
Was Cameron right to veto the treaty change? Time will tell. The UK will now take the rest of the EU to court, based on proportionality clauses as outlined in the treaty of Rome.
Germany and France will use QMV to get their changes through, the UK will do anything it can in its power to stop them.
This is going to be an interesting week, Germany is trying to run the EU as it pleases and the rest of the lesser states meekly comply with the direction they are taking as they hold the money purse for the EU.
The City however holds the money purse for the banking system in the EU.
Popcorn to the ready.
