My Views On The EU Veto
09 Dec 2011
David Cameron had a difficult meeting in Brussels where the agenda was to save the Euro. We wanted to see him stand up for the UK and that is exactly what he did.
The decision to effectively veto the EU Lisbon Treaty which is trying to solve the Euro crisis comes with high conviction from Cameron that this is not in the best interest of the UK. The stumbling block was Mr Cameron's insistence on allowing the UK to opt out of proposed changes on financial services. The outcome was that a treaty change involved all EU countries except the UK, much to the vocal disappointment of French President Mr Sarkozy.
The Europe debate is a double-edged sword; there are benefits and drawbacks to the UK on either side of the argument.
One benefit is that this acts as a clear reminder that the UK is a financial powerhouse. We are not in the Euro and with the growing number of Euro sceptics at home, looks like we never will be. This means unlike the other nations, we have the power to manage our own fiscal stimuli and austerity measures, should we choose.
The UK remains a hub for large plc companies. By not entering into the agreement, the UK does not agree to the proposal on financial transaction tax. This would have made the city and our financial services industry less competitive. In theory this latest move continues to make the UK an attractive proposition to large corporations. Companies such as Google and WPP left the UK to move their offices to Ireland in recent years; it is these types of large names that may be encouraged back.
Whilst there will be concerns that this could impact on the ability for the UK to trade effectively with other European countries this is not likely to be the case. Cameron failed to win assurances that the institutions representing all 27 nations will work in our interests, so there are worries that we could become isolated. However this is not going to be an overnight problem.
It has to be remembered that Cameron was joined by nine other non-Eurozone members who indicated that they may follow suit after consulting their national parliaments. This could be the start of the two-tier EU that has been mooted and a shift in the balance of power.
So far the UK stock market has reacted favourably to the news. UK markets were up by 0.4% by 1.30pm today, and European markets up by typically 1.5% on average.
There is likely to be more to come on this story, and for investors it does nothing to stop the volatility, but this in itself always creates good buying opportunities.
It is in the UK's interests that the Euro zone is saved however not at the expense of protecting our national interests. It appears that plans are to go ahead, despite not having the UK involved, we will have to see whether Cameron made the right call. What is refreshing to see is a politician standing up for the UK and I have to applaud him for that.
Tom Biggar is Head of Investments at TQ Invest. Follow Tom on Twitter.
