IRSG response to Balance of Competences Review – Economic and Monetary Policy

Published 10/07/2014

At the time the euro currency was launched in 1999, concerns existed that the UK’s position as the leading global centre for international financial services might be damaged as a result of not being a founding member of EMU. However, since then, the UK has maintained its position in many global wholesale financial markets has continued and, in some cases, even strengthened. Today, London and the wider UK have the leading share of trading in many international financial markets such as foreign exchange trading (41% of the global total), OTC derivatives trading (49%), cross-border bank lending (17%) and international insurance (22%). It follows that it is in the UK’s interests for there to be a successful single currency in the euro area, and to support it.

In its response to HM Treasury’s call for evidence in response to the Balance of Competences Review – Economic and Monetary Policy, the IRSG sets out the following key messages:

  • Appropriate economic and monetary governance in the euro area is conducive to the stability of the financial system in Europe. The UK should support efforts, as an engaged EU member, toward stronger post-crisis EU governance and economic recovery, with stability in the euro area a desirable outcome for UK interests.
  • The UK has a special interest in the working of EU economic governance: this springs directly from the UK’s unique position with regard to its obligations relating to economic and monetary policy as a result of its opt-out from Economic and Monetary Union and the single currency.
  • Implementing necessary reforms (e.g. Banking Union) and focusing on the effectiveness of all institutions charged with euro area governance is positive for the euro area but will bring challenges as well as potential positive developments for non-euro Member States.
  • One of the major challenges facing the EU is to find mechanisms to ensure that the integrity of the Internal Market is maintained while the euro area integrates more closely. The UK also needs to ensure compliance with the principle of non-discrimination already set out in the Treaties.
  • The UK should support the reforms of euro area institutions as well as playing a full role in Internal Market institutions.
  • In these areas, the technical expertise and political leadership of the UK will have a crucial role in securing outcomes that will preserve the UK's role as Europe's financial centre through strong, multi-layered UK engagement.

You may also be interested in the IRSG's response to the Balance of Competences Review on Financial Services.