The City must be protected against an “over-powerful banking bloc” emerging from the eurozone crisis, Nick Clegg warned today.
The Deputy Prime Minister said that the Square Mile was already part of a “banking union-lite” through the single market in financial services.
Britain also wanted a eurozone banking union to succeed, he said, adding: “At the same time, we need to make sure it doesn’t prejudice the UK.”
The Liberal Democrat leader was due to say in a speech at the Mansion House: “The worst outcome would be the creation of an over-powerful banking bloc, able to undermine the single market, able to undermine what remains — by far — Europe’s largest financial centre: the City of London.”
Addressing financiers at TheCityUK event, he urged them to defend the Square Mile by highlighting its importance for the whole of the EU.
“The rest of Europe needs to be crystal clear,” Mr Clegg was set to say. “If they integrate in a way that hurts the City, they potentially hurt Europe as a whole.”
He also stressed that rules governing the relationship between the European Central Bank, in its new supervisory role, and the Bank of England — and the role of the European Banking Authority — had to be “settled in a sensible manner”.
Mr Clegg’s language will surprise some at Westminster as it echoes arguments voiced by many Tories.
But he was also striking a different note by saying that Britain must engage “fully and properly in the debate” rather than threatening vetoes.
He rejected a Europe-wide financial transaction tax, unless it was adopted by other financial centres including America.
The European Commission yesterday backed plans for 10 countries including France and Germany to press ahead with such a levy.
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Mr Clegg has also backed David Cameron’s insistence that the EU budget for 2014 to 2020 should not rise by more than inflation.
