Sunday

2nd Oct 2022

Central bank chief: EU needs a more European UK

  • London: The British PM has promised an in-out EU referendum in 2017 (Photo: murphyz)

In an unusually politically comment, European Central Bank (ECB) chief Mario Draghi has said Europe needs a more European UK.

“I cannot say which of the two sets of arguments is stronger, the economic or the political ones, neither am I going to enter into a domestic policy debate, but what I can say is that Europe needs a more European UK as much as the UK needs a more British Europe,” Draghi said in a speech on Thursday (23 May) at the City of London Corporation.

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Draghi's remarks come as the UK government is locked in intense debate over the country's EU future.

British Prime Minister David Cameron has promised to renegotiate Britain's EU role and hold a referendum on its membership before the end of 2017, provided he wins the next general election in 2015.

Draghi went on to highlight the "deep interconnections" between the City of London - Europe's largest financial hub - and countries in the eurozone.

More than twice as many euros are traded in the City's foreign exchange market as in all the euro countries combined, some 40 percent of deposits placed with eurozone banks from outside the euro area come from the UK, while some 40 percent of all loans granted to non-euro residents are British, he said.

The eurozone is also the Britain’s largest export market and 40 percent of goods and services exported by UK businesses are delivered to the 17 eurozone countries.

"The UK and the euro area share a common interest: stability in the functioning of our economic system and particularly of our financial markets," Draghi said.

He explained that while the eurozone is "a more stable union today than it was a year ago," more steps, including "some transfers of national sovereignty" were needed for the financial crisis to be overcome for good.

“The answer to the crisis has not been less Europe but more Europe,” he said.

Draghi's comments also come as the British finance ministry is challenging in court what it sees as an attempt by the ECB to pull one of the world's biggest clearing houses inside the eurozone.

Finance minister George Osborne also launched legal action against a plan by 11 EU countries to introduce a tax on financial transactions.

The British government estimates that the City may be disproportionately be hurt by the "extra-territorial" principle in the tax plan as a large share of euro transactions go through the City and many European banks operate in the capital.

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