Triumphal comments by France's president about the reassertion of a Continental finance model in Europe were met with dismay and scorn in Britain
Angela Knight, the chief executive of the British Bankers' Association, launched a scathing attack on Nicolas Sarkozy yesterday, accusing the French President of "undermining" the European Union. Her comments come as EU finance ministers moved unexpectedly quickly to agree a new range of measures for regulating financial institutions.
Responding to Mr Sarkozy, who on Monday said that the appointment of the Frenchman Michel Barnier as the EU's new internal markets commissioner would rein in the "free-wheeling Anglo-Saxon model" of banking, Ms Knight said: "President Sarkozy must surely recognise that he has undermined the EU with his statements and put a question mark over the impartiality of his nominated commissioner that will not be easily dispelled."
Speaking at a gathering of the Worshipful Company of International Bankers, a City guild, Ms Knight stressed London's importance as a financial centre, arguing that the entire EU benefited from London's position. "If anyone in the European project thinks for a minute that they are capable of subverting the years of effort it took us to make the UK the world's financial centre, they are sadly mistaken. At stake here are at least half a million jobs and the tax revenues which will contribute more than anything else to replenishing the Exchequer after this recession," she said.
"It also needs to be more widely recognised that the City brings benefits to all of the EU, not just the UK. The EU is the centre of much of the world's commerce, and it is important that it remains so."
Mr Sarkozy caused outrage in the City and in Westminster on Tuesday when he said that a European banking model had "nothing to do with the excesses of financial capitalism". Mr Barnier later tried to defuse the row in an interview with French radio: "I know the importance of the City. I know the importance of this major financial centre for growth in Britain and for all of Europe's economy," he said. "I have to work in Europe's interest to draw lessons from the crisis, including in the City's interest to support this financial centre, as well as others including Frankfurt and Paris."
Mr Barnier's words were not enough to soothe an angry response to the French President's comments, however. Richard Lambert, the director-general of the CBI, warned that "Mr Sarkozy needs to be very careful with his rhetoric because he is making the job of Mr Barnier much more difficult," while the Chancellor of the Exchequer Alistair Darling, said yesterday that the EU needed to work together to achieve "global excellence".
Ms Knight's comments came as EU finance ministers agreed to set up three new financial watchdogs, based in Paris, London and Frankfurt, to oversee the securities, banking and insurance industries respectively. As part of a complex arrangement, Britain has ceded ground by allowing the new body to force local regulators to act, but yesterday's agreement also fell short of French and German aspirations to create more powerful bodies.
While the agreement does create a more centralised system of regulation, the agencies will only be able to act as a last resort, and only if and when an order is backed by a majority of EU governments.