Cameron dilemma: euro 'banking union' could force Tobin tax

PM knows the eurozone needs to form a 'banking union' to escape crisis, but he fears the consequences for the City

Column LAST UPDATED AT 10:24 ON Thu 7 Jun 2012

CHANCELLOR George Osborne gave the game away this morning when he signalled Prime Minister David Cameron will be pushing German Chancellor Angela Merkel today to go for a 'banking union' to end the eurozone crisis. But Osborne was sure to make clear that Britain will be demanding safeguards for the City.

In an interview on the BBC's Today programme, the Chancellor hinted that Cameron's greatest fear is that the 17 eurozone countries will agree a banking union, and then gang up on Britain and force London to swallow a 'Tobin tax' on all transactions to raise billions of euros to bail out the single currency.

Merkel and the new French president Francois Hollande both support the transaction tax, a levy on all financial deals, and that could be the price they will demand from Cameron for agreeing to the idea of a banking union, which, in effect, would mean Germany and France underwriting the Spanish and Greek banks.

Osborne told the BBC's Evan Davis: "There is no way that Britain is going to be part of the banking union. We are not part of the eurozone... I think Britain will require, if there is a full blown banking union, certain safeguards. If you cast your mind back to the European council in December where David Cameron vetoed the fiscal compact, he was asking for safeguards on banking and financial services. We were ahead of the game there."

Osborne claimed the veto was wielded because of concerns that the City of London might end up with "a banking union on [its] doorstep"
without "safeguards" to ensure that the new single market in financial services did not force new financial regulations on the ten EU member states that are outside the single currency.

So it leaves Cameron in the unlikely role today of being the champion of closer integration in Europe in order to make the euro work.

Osborne brushed off Davis's suggestion that this a pretty odd position for a Tory eurosceptic to be in. The Chancellor said Tories who argued against Britain joining the euro over a decade ago could take some satisfaction that they have been proved right.

The Daily Mail's Alex Brummer suggests this morning that Cameron is on "mission impossible" with his talks to persuade Merkel to bail out Spain and Greece, but he will have a sweetener.

Cameron had talks on the trans-Atlantic link with US President Barack Obama on Tuesday night and agreed a new strategy for getting the world out of the global economic doldrums. It has raised expectations that the Bank of England this afternoon will announce a fresh injection of quantitative easing along with the US Federal Bank and other European capitals in a coordinated CPR job on world economies.

However, the Cameron-Osborne strategy for a closer economic union among the 17 members of the eurozone also raises a further question which Cameron and Osborne are likely to find more difficult to answer the growing calls for a referendum in the UK on whether Britain should stay in or leave the EU.

Davis put it to Osborne that the calls will become irresistible if most of the states in the EU create a 'United States of Europe'. Tory MPs who see UKIP gaining support from grass roots Tory voters want Cameron and Osborne to concede a referendum if the EU is changed so radically to deal with the euro crisis. Osborne insisted that the coalition has already promised a referendum if there is a transfer of power to the EU because he knows that won't happen.

But for the Conservatives that is not enough. They see the EU changing dramatically from the original common market in the coming months as a result of the euro crisis, and their demands for a vote on Britain's relationship could become unstoppable.

Just on cue, Dr David Owen, the former leader of the SDP, surfaces from the political grave to lead the calls for a referendum in today's Times. Today's talks with Merkel could be just what the doctor ordered. · 

Disqus - noscript

Europe doesn't have the will to integrate itself politically and economically - a pre-requisite for a unified currency. Europe is like the US under the Articles of Confederation. We know that didn't work!  Europe has no equivalent of the US Federal Reserve which can expand and contract demand without running up real debt. The function of a currency is to express demand and the ability to meet it; it is not the size of one's stock of gold. This is a make or break time for the idea of a fiscally united Europe in which EU members are invited to pool their sovereignty. Cameron's concerns are utterly understandable but  if Europe is to stand beside Brazil, Russia, India and China it's a choice that deserves attention. Before waxing nostalgic about separate nations across the continent, ponder Europe's dark 20th century. Of course Brussels is corrupt but not everybody involved is corrupt, and UK involvement as boring old John Major and other PMs and Chancellors of ours have said, 'let's get into the heart of Europe' and influence it for the better. The British are good at government, they know how to balance political vision and administrative skill better than any other nation in the union. 

This is insanity within the einstein definition of doing the same thing over ansd over again and expecting a different result.  Borrowing new money into existence is not the solution. Do a search on Dyson + positive money and Bill Still on OZ and watch.  Cameron is simply building a banking bonanza with this rotten idea.

 "Of course Brussels is corrupt" And so is the Government of Italy, Spain, Greece, Belgium, - I cd go on. Who in Britain should imagine that the confederation of European states will work in our interest now, then, and forever? Because there will be no way back. "Europe" is a sub-continent that doesn't have to "stand alongside" the BRICs or the USA - but as a single trading bloc it can defend its interests. That is all that's needed, all that was ever needed, and what I hope and pray can be rescued from the shambles created by Clegg, Owen and their friends.

But to work as a 'trading bloc' don't you need fiscal union - or some stabilising equivalent?

We need a referendum - and whichever party delivers it will be a shoo-in at the next general election.

The ECSC was originally created to prevent another war between France and Germany through those two countries - which have led Europe to destruction three times since 1870 - sharing sovreignty in coal and steel production and movement. So let the eurozone be led by France and Germany, whose politicians got us into this mess by ignoring warnings about weaker countries joining the Euro.

And let's have a referendum.

" Dr David Owen, the former leader of the SDP, surfaces from the political
grave to lead the calls for a referendum in today's Times"Self-important pontificating Owen. I had hoped we'd seen the last of him. We've got more than enough current clowns as it is.

Cameron must be stark staring mad!   Why on earth is he trying to save the Euro?   This ill-considered artificial currency was doomed to fail from the outset under the original terms and conditions of its existence - those terms and conditions have not changed - ie "one size fits all" - which, of course it does not and can not.

By propping up the Euro and, by extension, saving the political faces of the original and current exponents of the "European Project", Cameron is working very much against the interests of the United Kingdom.   If he thinks that a "reassurance" from Merkel and Hollande that the City will be excused this monstrous Transaction Tax, in exchange for agreeing further fiscal integration, he must be very naive (which, of course, I fear  he is!) - down the line, of course, further attempts will be made to impose this iniquitous tax on the City and either Cameron, or very likely, and sooner than later, his successor will have to fight this battle again or concede that Europe has, once again, outmanouevred our floppy-haired boy blunders in Downing Street.