Cable fires a warning shot at the bankers (and Osborne)

Business Secretary attacks the banks as "disingenuous in the extreme" for attempting to delay reform

Vince Cable built his reputation in opposition as the hammer of the bankers, so it's no surprise that he's taken exception to their recent behaviour. In an interview in this morning's Times (£), the Business Secretary criticises the "special pleading" of those banks attempting to use the eurozone crisis to delay structural reform. He declares: "It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen".

While the likes of Angela Knight, the chief executive of the British Bankers' Association, argue that reform should be postponed until the economy has recovered, Cable takes a diametrically opposed position: recovery is impossible without reform. As he argues: "The fact that we continue three years after the 2008 crisis to still have anxieties about big financial institutions is all the more reason for grappling with this issue."

In other words, banks' retail and investment arms must be split, or at least ring-fenced, in order to ensure that institutions are no longer "too big to fail". As Mervyn King recently noted in an interview with the Daily Telegraph, it is the knowledge that the state will bail them out "on the downside" that allows banks to pay their staff such extravagant bonuses.

The context for Cable's intervention is the imminent publication (12 September) of the final Vickers report into banking. The Business Secretary is willing to accept the imposition of a ring-fence between banks' retail and investment divisions (the solution proposed by Vickers' interim report and endorsed by George Osborne in his Mansion House speech) but only on the condition that it can be "as effective as a full separation". But while the banks accept that some kind of structural reform is inevitable, they are prepared to do everything in their power to delay it. The fear among Lib Dems is that Osborne is prepared to appease them. As the FT reported earlier this month, the Chancellor is considering a plan to endorse ring-fencing but give banks until 2019 to implement the changes.

Should Osborne agree to an eight-year delay, he will find himself on a collision course with Cable. The Business Secretary accepts that any changes would require legislation and would not take place immediately. But it's safe to say that 2019 is not the date he has in mind. As Lord Oakeshott, Cable's representative on earth, told the Independent: "The banks are like car-makers who say they cannot afford proper brakes. There is no possible excuse for delay. Every day that goes by with no action on the Vickers report puts the British economy at more risk."

Cable's fear is that the banks view the postponement of reform as a prelude to its abandonment. But should the status quo survive, a repeat of the crash is not just possible but inevitable. The stakes could not be higher. For the sake of the economy, Cable must prevail.

George Eaton is political editor of the New Statesman.

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Who is the EU's chief Brexit negotiator Michel Barnier?

The former French foreign minister has shown signs that he will play hardball in negotiations.

The European Commission’s chief Brexit negotiator today set an October 2018 deadline for the terms of Britain’s divorce from the European Union to be agreed. Michel Barnier gave his first press conference since being appointed to head up what will be tough talks between the EU and UK.

Speaking in Brussels, he warned that UK-EU relations had entered “uncharted waters”. He used the conference to effectively shorten the time period for negotiations under Article 50 of the Lisbon Treaty, the legal process to take Britain out of the EU. The article sets out a two year period for a country to leave the bloc.

But Barnier, 65, warned that the period of actual negotiations would be shorter than two years and there would be less than 18 months to agree Brexit.  If the terms were set in October 2018, there would be five months for the European Parliament, European Council and UK Parliament to approve the deal before a March 2019 Brexit.

But who is the urbane Frenchman who was handpicked by Commission President Jean-Claude Juncker to steer the talks?

A centre-right career politician, Barnier is a member of the pan-EU European People’s Party, like Juncker and German Chancellor Angela Merkel.

A committed European and architect of closer eurozone banking integration, Barnier rose to prominence after being elected aged just 27 to the French National Assembly.  He is notorious in Brussels for his repeated references to the 1992 Winter Olympics he organised in Albertville with triple Olympic ski champion Jean-Claude Killy.

He first joined the French cabinet in 1993 as minister of the environment. In 1995, Jacques Chirac made him Secretary of State for European Affairs, teeing up a long and close relationship with Brussels.

Barnier has twice served as France’s European Commissioner, under the administrations of Romano Prodi and José Manuel BarrosoMost recently he was serving as an unpaid special advisor on European Defence Policy to Juncker until the former prime minister of Luxembourg made him Brexit boss.“I wanted an experienced politician for this difficult job,” Juncker said at the time of Barnier, who has supported moves towards an EU army.

 

Barnier and the Brits

Barnier’s appointment was controversial. Under Barroso, he was Internal Market commissioner. Responsible for financial services legislation at the height of the crisis, he clashed with the City of London.

During this period he was memorably described as a man who, in a hall of mirrors, would stop and check his reflection in every one.

Although his battles with London’s bankers were often exaggerated, the choice of Barnier was described as an “act of war” by some British journalists and was greeted with undisguised glee by Brussels europhiles.

Barnier moved to calm those fears today. At the press conference, he said, “I was 20 years old, a very long time ago, when I voted for the first time and it was in the French referendum on the accession of the UK to the EU.

“That time I campaigned for a yes vote. And I still think today that I made right choice.”

But Barnier, seen by some as aloof and arrogant, also showed a mischievous side.  It was reported during Theresa May’s first visit to Brussels as prime minister that he was demanding that all the Brexit talks be conducted in French.

While Barnier does speak English, he is far more comfortable talking in his native French. But the story, since denied, was seen as a snub to the notoriously monolingual Brits.

The long lens photo of a British Brexit strategy note that warned the EU team was “very French” may also have been on his mind as he took the podium in Brussels today.

Barnier asked, “In French or in English?” to laughter from the press.

He switched between English and French in his opening remarks but only answered questions in French, using translation to ensure he understood the questions.

Since his appointment Barnier has posted a series of tweets which could be seen as poking fun at Brexit. On a tour of Croatia to discuss the negotiations, he posed outside Zagreb’s Museum of Broken Relationships asking, “Guess where we are today?”

 

 

He also tweeted a picture of himself drinking prosecco after Boris Johnson sparked ridicule by telling an Italian economics minister his country would have to offer the UK tariff-free trade to sell the drink in Britain.

But Barnier can also be tough. He forced through laws to regulate every financial sector, 40 pieces of legislation in four years, when he was internal market commissioner, in the face of sustained opposition from industry and some governments.

He warned today, "Being a member of the EU comes with rights and benefits. Third countries [the UK] can never have the same rights and benefits since they are not subject to same obligations.”

On the possibility of Britain curbing free movement of EU citizens and keeping access to the single market, he was unequivocal.

“The single market and four freedoms are indivisible. Cherry-picking is not an option,” he said.

He stressed that his priority in the Brexit negotiations would be the interests of the remaining 27 member states of the European Union, not Britain.

“Unity is the strength of the EU and President Juncker and I are determined to preserve the unity and interest of the EU-27 in the Brexit negotiations.”

In a thinly veiled swipe at the British, again greeted with laughter in the press room, he told reporters, “It is much better to show solidarity than stand alone. I repeat, it is much better to show solidarity than stand alone”.

Referring to the iconic British poster that urged Brits to "Keep Calm and Carry On” during World War Two, he today told reporters, “We are ready. Keep calm and negotiate.”

But Barnier’s calm in the face of the unprecedented challenge to the EU posed by Brexit masks a cold determination to defend the European project at any cost.

James Crisp is the news editor at EurActiv, an online EU news service.