Bankers bonuses saga augurs badly for UK’s EU reform

The UK is now the most right-leaning of the major EU members. This doesn’t augur well for Cameron’s promise to radically renegotiate the UK’s relationship with the EU

Bankers: The latest under fire from the EU?
George Robinson
On 14 March 2013 10:47

It’s been less than two months since David Cameron gave salve to his Party faithful and declared his intention for a referendum on EU membership in the next Parliament. Shortly thereafter, he went to Brussels and declared a ‘historic victory’ in cutting the EU’s long-term budget, building a coalition of like-minded, hardworking northern Europeans and reining in the feckless south.

Striding across the continent, some areas of the national press delighted in portraying the PM as a master of negotiation, bending the wills of unruly member-states to his bidding.

The narrative was convincing. Almost as convincing as when the PM vetoed the proposed change to the Lisbon Treaty in December 2011; the veto which lasted until people realised it wasn’t actually a veto at all. The EU juggernaut rumbled on regardless, creating changes which, while not affecting the UK directly, deeply affected the economic landscape that it was operating in.

With this example of how success can quickly curdle into failure, history is repeating itself in the form of a European Parliament amendment to the impressively titled Capital Markets Directive 4. This amendment, from a Parliament that is only now beginning to flex its considerable post-Lisbon muscle, seeks to cap the bonuses available to bankers operating throughout the EU to 100 percent of their annual salary, increasing to 200 percent with shareholder approval.

There can be no doubt that this move is an error of huge proportions. If you want to get out of a recession, you don’t shackle your financial services – especially when many of these wealth creators are already sick of the sight of the European continent.

In a world where money has never been a more liquid resource, it will settle into wherever it finds the conditions most amenable, taking the most bright and gifted (and upper tax bracket payers) with it. The UK, already struggling in this regard, will now only find it harder to attract and keep such capital.

The UK Government did put up something of a fight; the Chancellor, George Osborne, was sent off to the Ecofin Council (a key decision making body of the EU) with the thankless task of veering his fellow finance ministers from this course, but was given little more than a fait accompli. Despite his arguments to the contrary, he was outvoted by a margin of 26-1.

So why was this allowed to happen? Many will point to the UK’s anti-EU rhetoric and threats to leave. As the much maligned president of the European Council Herman Van Rompuy has said, “How do you convince a room full of people, when you keep your hand on the door handle”.

Such reasoning would be far too simplistic. With or without a referendum, this outcome would have been the same. One must instead look to the EU’s new-found proclivity for pandering to populist sentiment, after an all too brief period of fiscal sanity, and one which has been painful to its own popularity.

This change of heart has been spurred on by the complicity of previously responsible governments such as those of Germany and the Netherlands, who have hitched onto the plans. While the EU Parliament has always had a social democratic, federalist bent, the unmistakeable leftward drift of national politics throughout EU member states has taken away the safeguards that would otherwise have been found in the European Council and the Council of Ministers.

The UK is now, by some distance, the most right-leaning of the major EU members, making it all too susceptible to isolation.

This doesn’t augur well for Cameron’s promise to radically renegotiate the UK’s relationship with the EU, for if a core national interest is not protected from the EU’s grasp, then what actually is? The one saving grace for the PM is that when negotiations do come around, the pile of powers to repatriate is ever growing. Whether any actually will be is another matter entirely.    

George Robinson is a parliamentary researcher for the Conservative Party

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