Friday 18 October 2019

Door will stay open for UK as Europeans press ahead

Britain under fire from EU leaders over decision to opt out of 'fiscal compact' but Van Rompuy confident of agreement

Steven Johnson

European Council president Herman Van Rompuy yesterday expressed disappointment that Britain had shunned the agreement reached at an EU summit last week, but made clear the door would remain open for London.

"They recognise the euro is a common good," Mr Van Rompuy said in a speech to the European Parliament in Strasbourg, commenting on those in the agreement. "Then, early March at the latest, this fiscal compact treaty will be signed."

The 'fiscal compact' is meant to allow closer scrutiny of countries' spending to stop a similar debt crisis recurring and potentially making it more palatable for the European Central Bank to step up its purchases of distressed eurozone debt to hold down borrowing costs.

US and European stocks rose as higher oil prices lifted energy shares, but German opposition to increased firepower for a European bailout fund pushed the euro to an 11-month low.

German Chancellor Angela Merkel was quoted as telling a closed-door meeting of her conservative party that she rejected any suggestion of raising the ceiling on Europe's future bailout fund, according to participants.


"Any hope of more money that is stifled triggers such a strong market reaction at the moment," a Frankfurt stock exchange trader said.

Ms Merkel was responding to Mr Van Rompuy's comment in parliament that a review of whether the €500bn limit on the planned European Stability Mechanism was adequate would be completed in March.

Foreign-exchange traders cited a clear bias to sell the euro on any bounce, noting the threat of further sovereign downgrades after European Union leaders failed last week to move decisively to tackle the region's debt crisis.

Fitch Ratings said leaders failed to provide a "comprehensive" solution to the crisis and Standard & Poor's warned of a possible downgrade to 15 eurozone countries.

Traders were "on pins and needles waiting to hear from a ratings agency," said Kevin Flanagan, chief fixed-income strategist at Morgan Stanley Smith Barney

Meanwhile, European Commission President Jose Manuel Barroso said Britain's demand for special treatment for financial services at last week's EU summit would have harmed the bloc's single market.

"The United Kingdom, in exchange for giving its agreement, asked for a specific protocol on financial services which, as presented, was a risk to the integrity of the internal market.

"This made compromise impossible," he said in a speech yesterday to the European Parliament.

Worried about being dictated to by a eurozone moving towards centralised control of national budgets, British Prime Minister David Cameron rejected treaty changes to try to maintain its influence, but now appears isolated.

"To use a British expression, when you are invited to the table, you are either a guest or you're on the menu," said Guy Verhofstadt, the leader of the alliance of liberals in the European Parliament, to loud applause.

Mr Van Rompuy took a more conciliatory tone and sought to calm British fears of being sidelined in the future framework.

"This will not be the start of discrimination," he said. "At some stage, we will be 27 around the table and will be able to hammer out something which we were unable to agree on just a few days ago." (Reuters)

Irish Independent

Also in Business