Thursday

22nd Oct 2020

UK bank chief fears Paris, Berlin will push for eurozone political union

As trouble surrounding the Greek economy escalated earlier this year, Britain's top banker warned the US that France and Germany will push for political union inside the eurozone currency club and that this could damage London's influence within the EU.

The thoughts of Bank of England Governor Mervyn King were relayed to Washington by US Ambassador Louis Susman after the two men talked in February of this year, as revealed by a leaked cable from whistleblower site WikiLeaks.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Greater euro cohesion could hit Britain's influence inside the EU, warned Mr King (Photo: Downing Street)

"Germany and France will ultimately have no choice but to offer explicit guarantees of Greek debt, argued King," according to the cable.

"The eurozone could not risk a Greek default and euro devaluation would not be an acceptable political option for Germany or France. Germany and France will likely, as a condition of any guarantee, require the ability to scrutinize if not exercise some control over the Greek budget. Longer-term, the drive for greater political cohesion will accelerate."

In May, Greece was handed a €110 billion EU-IMF bail-out.

At the same time, the EU's statistics agency, Eurostat, was given greater powers to scrutinize member state economic data, and the subsequent setting up of a €750 billion eurozone rescue mechanism, only days later, further increased the determination of European leaders to better co-ordinate their economic policies.

A decade after warnings about monetary union being unstable without a parallel political union to co-ordinate economic policies were ignored, EU leaders appear to be coming round to the idea.

French President Nicolas Sarkozy has put forward plans for a European "economic government," while European economy commissioner Olli Rehn has repeatedly said it is time to finally put the 'E' in Economic and Monetary Union (EMU).

Already in February, Mr King worried that this drive for eurozone consolidation could sideline Britain's influence inside the EU.

"The eurozone's move to greater political cohesion could poise some disadvantages for the UK, King speculated," reads the US ambassador's cable.

As an example, the central banker apparently pointed to a meeting of EU finance ministers earlier in February, during which "eurozone governments politely listened to chancellor [Alistair] Darling when he commented on the situation in Greece, but he was not invited to attend internal discussions since the UK is not part of the eurozone."

Mr King went on to warn: "It would be incumbent for the UK to demonstrate that it has something meaningful to say and to be constructively engaged in the EU, should this greater political cohesion among the eurozone governments occur."

Separately, former French President Valéry Giscard d'Estaing has insisted that the eurozone is not in danger of breaking apart, arguing that it would be impossible for any state to leave and reclaim its former currency.

"It is impossible. Imagine a country decides to return to a national currency. Its citizens do not want. What could they do well with a currency devalued by 40 percent? There is no space for a small change," he told Le Parisien on Thursday

Green Deal

EU farming deal attacked by Green groups

EU agriculture ministers at around 4am on Wednesday reached a common position on the bloc's farming policy post-2020, including ring-fencing part of the CAP budget for initiatives that protect the environment - but with much flexibility for member states.

France vows tough retaliation for teacher's murder

Muslim NGOs targeted by the France's retaliatory response to the brutal murder of a schoolteacher claim the government is labelling "innocent Muslims as 'Islamists" just to be able to say that they are doing something".

Opinion

All eyes on EU court for decision on religious slaughter

The European Court of Justice is currently facing a major question: can religious freedom coexist with animal welfare? The decision of whether religious slaughter can continue is expected in a matter of weeks.

News in Brief

  1. Commission to press Croatia on migrant 'abuse' at border
  2. Belarus opposition awarded 2020 Sakharov Prize
  3. Belgium's foreign minister in intensive care for Covid-19
  4. MEPs restrict CAP funding for bullfighting
  5. Coronavirus: Liège is 'the Lombardy of the second wave'
  6. UK to keep out EU nationals with criminal past
  7. Report: EU to restrict travel from Canada, Tunisia, Georgia
  8. Pope Francis supports same-sex civil unions

Opinion

All eyes on EU court for decision on religious slaughter

The European Court of Justice is currently facing a major question: can religious freedom coexist with animal welfare? The decision of whether religious slaughter can continue is expected in a matter of weeks.

Investigation

EU money used by neo-Nazi to promote Holocaust denial

A prominent Holocaust-denier has made the cover of an EU-funded newsletter, which was published by an avowed German neo-Nazi with a lengthy criminal record. The lack of clear labelling of the MEP behind it violates European Parliament rules.

Stakeholders' Highlights

  1. UNESDAMaking healthier diets the easy choice
  2. Nordic Council of MinistersUN Secretary General to meet with Nordic Council on COVID-19
  3. UNESDAWell-designed Deposit Return Schemes can help reach Single-Use Plastics Directive targets
  4. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  5. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  6. UNESDAReducing packaging waste – a huge opportunity for circularity

Latest News

  1. Nato and EU silent on Turkey, despite Armenia's appeal
  2. EU tells UK to decide on Brexit as deal 'within reach'
  3. EU farming deal attacked by Green groups
  4. France vows tough retaliation for teacher's murder
  5. All eyes on EU court for decision on religious slaughter
  6. 'Big majority' of citizens want EU funds linked to rule of law
  7. EU declares war on Malta and Cyprus passport sales
  8. EU Commission's Libya stance undercut by internal report

Join EUobserver

Support quality EU news

Join us