Britain’s decision to veto the new European plan for more stringent fiscal oversight has been widely interpreted as a choice to broaden the distance between the nation and its crumbling neighbors. While the U.K. has typically toed the line between directly involving themselves in the decisions of the eurozone and operating outside of it, Prime Minister David Cameron’s latest resolution may irreparably change the relationship between Britain and the remainder of the eurozone. Early speculation surrounding the impact of England’s refusal to adopt the new plan has been mixed. While Cameron’s conservative party has celebrated the space the move will create between Britain and its neighbors, others believe it will be ineffective in protecting Britian’s financial industry from the increased regulation.
Cameron said that the treaty failed to offer adequate safeguards and had the potential to suffocate the nation’s prosperous financial services industry, potentially putting Britain’s economy at risk. Cameron was up front with his desire to protect this industry, stating prior to the conference that he would not go along with any changes to the Lisbon Treaty that did not keep Britain’s best interests, specifically their financial interests, in mind. Among the potential threats Britain was looking to avoid was a Europe-wide bank transactions task that would have been felt more dramatically by London.
In return for Britain’s failure to go along with the other European nations on the plan, Prime Minister Cameron’s requests that the European Banking Authority continue to reside in London and that US financial institutions based out of London would be offered protection were not granted. Cameron’s consistent requests for a unique set of rules for Britain were consistently rejected, with France’s Nicolas Sarkozy being particularly vocal about his disappointment with the U.K.
Aside from the immediate fall out with Sarkozy, who facetiously said a deal involving all 27 states was made impossible “thanks to our British friends,” the impact of the decision could be more far reaching. The Labour Party within Britain for its part, has waxed philosophy on how the exclusion from major Euro decisions will bar the nation from protecting itself in the future. They added that the choice did little to actually guard London from increased regulation around Europe. The Labor party only represents one opinion. Other members of British government believe the nation will continue to participate in decisions involving the eurozone and feel that the choice has been effective, maintaining London’s status as a major financial hub in avoiding the “Robin Hood Tax.” Additionally, the nation will likely be protected from having to put more money into bailout funds for more troubled Eurozone nations.
Britain could still be affected, however, as while banks have mostly only indirect exposure to Italy, Greece and other weak links, a financial crisis could result in an unstable France. British banks have quite a bit invested in France and the nation’s financials institutions, which have provided tremendous aid to Italy and Spain are in a danger zone. Should France’s banks become a fatality of the crisis, the UK would feel that impact directly in its borrowing abilities, according to the BBC. Furthermore, if the weakening continues, it’s worth noting that 50 or more percent of UK trade is performed within the European Union, accounting for between 5 and 6 percent of the nation’s GDP. This number would decline considerably and have a deleterious impact on the economy Cameron has worked so hard to protect in his recent decisions.
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