At a crucial moment during the Napoleonic Wars, Admiral John Jervis, first Earl of St. Vincent, famously wrote in a dispatch, “I do not say, my Lords, that the French will not come. I say only they will not come by sea.” Over 200 years later, St. Vincent’s prediction is coming true: the French are coming to sack and burn London, and they aren’t coming by sea. A report in the Financial Times notes that London’s all-important banking sector is increasingly coming under fire by new EU regulations driven by the powerful Franco-German axis:
Myriad Brussels proposals have left Britain’s financial world reeling. Ministers see many measures hurting the sector or crimping UK regulatory powers. That nervousness – or unfounded paranoia, as critics see it – has burst into the open, with David Cameron recently describing the City as “constantly under attack”. For the prime minister – and figures from the UK’s financial industry – the problem is not one single issue nor even a few misdirected proposals but rather a deeply worrying trend. “Red tape, ill-informed tax initiatives, protectionist policies and high ‘pass on’ costs will damage the international reach of the City,” says Anthony Belchambers, chief executive of the London-based Futures and Options Association.
As Britain’s largest export, the financial sector plays a central role in the country’s economy, explaining London’s horror at the new regulations being proposed. While no one measure is an existential threat to London’s financial dominance, the trend is clear: continental Europe wants to call the shots on financial regulation on all of the EU’s banks — even those in perennially Eurosceptic England. Already some British banks are being courted by Frankfurt and Paris, and as the EU is poised to implement a standard set of rules everywhere, many are questioning the benefits of remaining in expensive London.While many continental powers profess to see these new regulations as innocently technocratic and unbiased basic protections against the excesses which led to the current financial crash, to the British this is no less than a direct attack on their economic crown jewels. The power of the City and Canary Wharf banks are the last remaining source of London’s status as a world city and are the country’s chief moneyspinner. The UK is a bit like New York; the loss of all its other industries means that finance is more crucial than ever. Even British socialists turn pale at the thought of losing the tax base that the financial industry provides; no City, no welfare state.Now the Cameron government finds itself in an extremely difficult situation. Britain has never been able to crack the Franco-German alliance at the heart of the modern European project and has always been on the outside looking in when the big decisions were made. The Franco-German alliance is tightening in the face of the eurozone threat, and with countries like Italy, Greece, Portugal and Spain increasingly dependent on France and Germany for economic support, the power of that alliance within the EU is at its highest point in decades.Attacking the London financial industry is something that, for slightly different reasons, both the French and Germans would very much like to do. Prime Minister Cameron is likely to find his own country united behind efforts to protect the City, but safeguarding British interests in the maelstrom now engulfing Europe is going to be very hard.