Simon Lovegrove: The power of the UK veto

At this meeting the eurozone economies agreed that there should be much tighter fiscal discipline as part of restoring market confidence. In his statement of 12 December to the House of Commons the prime minister confirmed that this was something that the UK recognises as being necessary in a single currency.

However, the split came as to how greater fiscal discipline in the eurozone could be achieved. The stumbling block appears to have been the safeguards that the UK requested on the single market and on financial services. In particular, in his statement the prime minister said that the government intended to “respond positively” to the measures set out in the Vickers’ report and one of the things it wanted to do was to make sure that it could go further than European rules in regulating banks. Another important issue was the proposed EU financial transactions tax which the UK government has opposed since its inception.

So has the use of the veto achieved anything?

The UK remains a full member of the EU and is still subject to key EU financial services legislation like MiFID, the CRD and MAD. Furthermore it will be subject to forthcoming EU financial services legislation. All these measures will be approved by qualified voting by member states which means that even if the UK opposes them they may still become law if the UK is outvoted. The key concern which has now been expressed is whether, because of the use of the veto, the UK has effectively reduced its influence at the negotiating table. However, on the issue of taxation unanimity from member states is required so it should be back to the drawing board for an EU financial transactions tax.

It is clear that much of the collapse of the council meeting was about financial services regulation. There is a significant connection between the highly technical regulatory debate that is currently happening in relation to MiFID, MAD, CRD IV and high politics. This is something which the industry will need to manoeuvre around and perhaps it is this which is the real challenge for this year.

Simon Lovegrove is a lawyer for the law firm Norton Rose LLP