Wednesday 5 December 2007

EU clears Northern Rock aid; but why?


Amongst other more exciting stories today, the EU commissioner (Neelie Kroes, pictured) has as expected cleared the UK Government on the Northern Rock bail out. Interestingly the wording is vague enough to allow for a continuation of the situation beyond the normal 6 month deadline:


"These aid measures can be authorized as rescue aid in line with Community guidelines for rescuing and restructuring firms in difficulty...Under those rules, rescue aid must be given in the form of loans or guarantees lasting no more than six months, although certain exceptions in the banking sector to allow for prudential requirements, have been applied in this case."

So the Government may see light for an extension here is the auction process falls apart. This may happen, as although the Government is desperate for Branson to win, if the NR has virtually no savings at all after Xmas, which is a possibility, then really there is only a distressed book to sell off.

As Hatfield Girl pointed out in the comments yesterday, the EU is currently looking to expand its regulations on financial services over the UK. I have a hunch that it sees this as a very useful stick to beat us with and therefore is quite willing to leave our regulatory authorities and government swinging in the wind and giving them less room to manoeuvre out of greater EU interference with our Financial market regulations.





12 comments:

Mark Wadsworth said...

Why? Why?

Because the EU is all about power. If they 'allow' us to do what is the half-way sensible thing this time, then next time, we'll have to turn a blind eye to the shenanigins of the French, German and Italian state banks.

Then after that, we'll have to accept that the ECB are allowed to 'regulate'* and, ultimately, prop up banks across the Continent, after which we get something worse than nationalisation, to wit EU-nalisation (if that's a word?). And the UK taxpayer will be cordially invited to foot the bill.

And so on.

* For regulate, read "Fuck over the Anglo-American banks" - the UK must allow free access to Santander, BNP, UniCreditoHypVereinsBank, but we are buggered if the nasty Anglospherical banks are setting foot in our countries.

CityUnslicker said...

MW - the capitalists must bow before the 'social democratic' model...

James Higham said...

As you might expect, the last paragraph and Mark Wadsworth's comment above are the whole rationale.

Where you and I might differ, CUS, is that you consider it to be just one of those things in financial life whereas I consider it to be something known to be one likely scenario from a partley induced event - induced not proactively but by neglect in critical areas.

James Higham said...

As you might expect, the last paragraph and Mark Wadsworth's comment above are the whole rationale.

Where you and I might differ, CUS, is that you consider it to be just one of those things in financial life whereas I consider it to be something known to be one likely scenario from a partley induced event - induced not proactively but by neglect in critical areas.

James Higham said...

As you might expect, the last paragraph and Mark Wadsworth's comment above are the whole rationale.

Where you and I might differ, CUS, is that you consider it to be just one of those things in financial life whereas I consider it to be something known to be one likely scenario from a partley induced event - induced not proactively but by neglect in critical areas.

Matthew Sinclair said...

I almost get the sense that this doesn't just undermine future attempts to enforce state aid rules upon other countries. By undermining our own case against economic nationalism we could be hurting Britain's ability to argue against the CAP and other interventions on principle as well.

Old BE said...

It's a very smart move by the EU authorities. As ever the UK has been out-manoeuvred.

Why do we even play the game we can never win?

Anonymous said...

I think you have got this on its head surely?

The UK is not isolated in this case. Sure, NR is in a crisis situation, but arguably the situation in German, France, Spain and Ireland is far worse.

What the EU is saying is "We would really like to enforce the rules on you euro-sceptic British bastards, but we can't because we know half the banks in Europe are going to need some sort of bail out and we daren't tie our hands"

Fact is that the EU is rapidly entering a desparate situation of its own from which there seems to be no escape. Ever since the Euro was invented there has been a belief amongst many that a "one size fits all" economic policy would not work. With Ireland, Holland, Spain and some Eastern European states now facing a dramatic bust after a protracted and ill-founded boom at the same time that France Germany and Italy struggle to find growth, we are soon to see the Euro zone under huge pressure. The ECB has more important things to think about than NR.

Its going to be a good few years if you are a EU-sceptic Tory who enjoys a bit of schadenfreude.

CityUnslicker said...

Anon - you speak the truth re the situation in europe.

but the key here is the politics not the economics. Economic failure will be the excuse for greater social democratic regulation.

we will be in a worse position to resist if they can threaten us re NR; whether the euro banks are in the same schtick or not. they already control their destinies...

Anonymous said...

I understand your POV CU, but personally I think it will operate the other way. When push comes to shove the real power lies with national governments (since the EU has no army to impose its will on subject nations). Up until Maastricht the EU had very limited power to impact citizens lives, so it was effectively beyond reproach, but in the last ten years that has changed. The creation of the single-interest rate, single-exchange rate Eurozone always had the possibility of seriously impacting peoples wealth. The EU is going to find that when it took extra powers it had to be able to show it was capable of wielding those powers succesfully. But it can't. EU ministers are no better than national ministers. In fact mostly they are rejects. They want the power but they are too stupid to use it wisely. So they will be seen to fail, and then national governments will put all the blame on the EU and demand the powers are returned.

The EU has started to realise this - they are holding the economic firecracker and the national governments are smugly grinning to themselves happy in the knowledge that they won't get the blame when everything goes bang. They will be only too happy to blame the EU when it does. Meanwhile the EU will jump through hoops to avoid the firecracker going bang in the first place. But it seems to me inevitable that it will since the Eurozone was ill-conceived in the first place.

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