Chancellor George Osborne is unlikely to find support in discussions at a European Union Ecofin meeting in Brussels today. Osborne will be disussing the EU bankers bonus cap. Allister Heath has given three reasons to oppose the legislation today in a Counterpoint video.
Some have said that the European Union will see the UK as already having gained enough from recent discussions:
"The UK has got all of its other issues delivered on, such as flexibility to apply the retail ring fence (for banks) and many other issues to help the wider economy," Vicky Ford, a British member of the European Parliament who played a role in negotiations, told Reuters. "But we can't have everything."
But retail ring fencing won't help the wider economy. In fact it obscures the causes of the last financial crisis, and is based on a misunderstanding of investment banking. Dr Piotr Konwicki explains:
Analysis of the number of US retail bank failures between 1934 and 2012 confirms this. There were only two years in which no bank failed – 2005 and 2006. There has never been another two year period since 1934 with no retail bank failures. And although the 1950s and 1960s saw relative stability, this was an aberration. It reflected the fact that deposit insurance was limited and the macroeconomic background was unusually stable.
There is no such thing as a safe bank, despite the efforts of politicians to portray retail banks as such. Maybe it is a failure of us academics to convey this message strongly enough in our teaching. It is easy to forget Friedrich Hayek’s famous words: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
So it seems the UK could lose out to both EU decisions.