Bank of England governor Mark Carney has urged the eurozone to follow the example of the Union joining together the nations of the UK by making a “bold” move towards shared tax and spending arrangements.
He accused the 19-nation bloc of being “relatively timid” in some of the reforms needed to drag it out of stagnation and urged it to embrace “mechanisms to share fiscal sovereignty”.
Mark Carney, the Governor of the Bank of England, has made a pro-EU speech based upon a report by Sir Jon Cunliffe begun in May this year…the BBC thinks it gives the green light for the pro-EU camp to start cheering……
Although the Bank does not use these precise words, EU membership has made the UK richer and more successful.
The Bank’s analysis concluded that the increased openness of the UK economy owing to EU membership “reinforces the dynamism of the UK economy.
Not sure how Peston comes to that conclusion when the speech actually tells us that the UK’s economy succeeded despite the EU and precisely because it was not integrated into the EU system…Carney himself babbles some double-speak claiming the we succeeded because of the EU and yet EU countries themselves, those in the Euro, suffer due to being in the EU……
“Broadly speaking, the evidence suggests the UK has successfully harnessed the benefits of openness afforded by its EU membership while avoiding some of the drawbacks of reduced flexibility from which some continental European economies suffer.”
What the BBC doesn’t mention is that both Carney and Cunliffe are very pro-EU integration and want the EU to become even more integrated with fiscal and political union….you can’t have one without the other.
What is also missing from the BBC report is the fact that Cunliffe has been an EU mandarin deeply embedded in the system…..
Cunliffe has been the UK’s permanent representative to the European Union since January 2012, covering policy issues including negotiations on the banking union and a number of financial services dossiers.
He was advising the prime minister on Europe and global economic issues between 2007 and 2011.
Cunliffe began his examination supposedly of the consequences of Brexit but which in fact turned into a pro-EU bit of cheerleading whilst refusing to say if a Brexit would be good or bad…
Mr Cunliffe declined to say whether a Brexit scenario, where the UK left the EU single market, would reverse some of those benefits. ‘That’s a counter factual which I can’t know,’ he said.
Well it’s counterfactual to claim we only succeeded because of our connection to the EU….if we hadn’t been so connected we may have been as successful if not more.
And do you know what…in January this year both Carney and Cunliffe made speeches that whilst curiously urging ‘more EU’ admitted that the stagnating EU wasn’t working and that the UK was succeeding despite the EU….
Here is Cunliffe…his first point shows that the conclusion in the latest report was already a foregone conclusion back in January….ie ‘dynamism’ of the UK economy was as a result of being in the EU…
The motivation to create a single, integrated, capital market in the EU is not new. As I have noted, the potential benefits to economic growth and “dynamism” at a time when growth in Europe was sluggish drove the efforts in the 1980s to liberalise capital accounts and create the single market in financial services. The reforms inspired in the 1990s by the Giovannini report aimed to create an integrated, well-functioning financial market to “help the EU economy by encouraging the right investments to be made in the right places” and so to “contribute to higher economic growth and employment.”
However he admits that it is really global regulation that is important not the EU…as shown in the last crash in 2008….
The UK is the home to financial firms and infrastructure that are truly global in their reach and activity. While much of this activity involves the EU, a very large amount does not. If EU regulation and internationally agreed standards diverge materially, it will both create barriers to that activity and opportunities for regulatory arbitrage making it more difficult to ensure UK financial stability.
Here is Carney in January…
Curious that whilst in his speech today he tells us that membership of the EU is the secret to economic success here he reveals that the EU is in fact itself a basket case due to its own policies…how then does the UK succeed?….
The challenges for monetary policy are much greater in the euro area than in the UK.
Since the crisis, euro area nominal GDP has increased by a mere 5% in almost seven years. Consumer
price inflation is already below zero. Core inflation has been running at or below 1% for over a year.
This is potentially dangerous. Low nominal growth is intensifying the euro area’s debt burden (Chart 4).15
The fear of stagnation is holding back spending and investment.
The good news is that European authorities recognise the need to re-found the euro area financial
union on the principle of risk sharing.
As the Presidents of the European Council, European Commission, Eurogroup and European Central Bank
argued in their report, European Monetary Union will not be complete until it builds mechanisms to share
Here he compares the EU and the UK….the UK is better off…..
Consider the following comparison between the euro area and the UK.
In the euro area, the private sector continues to generate surplus savings of 3½% of GDP (Chart 7). Those
must be recycled effectively to generate an expansion. The UK no longer faces that challenge. Its private
sector is in balance.
The euro area unemployment rate of 11½% is twice that in the UK.
Gross general government debt in the euro area is roughly the same as in the UK and below the average of
The weighted average yield on 10-year euro area sovereign debt is around 1%, compared to 1½% in the UK.
And yet, the euro area’s fiscal deficit is half that in the UK. It structural deficit, according to the IMF, is less
than one third as large.
Here Carney explains why the UK is succeeding…and you know what…it ain’t got nothing to do with being in the EU…precisely the opposite in fact……
How the UK is escaping its debt trap
In recent years, the UK economy has shown increasing signs of normalisation. Non-financial private debt has fallen by around 30% of GDP since its peak, the economy has grown consistently above trend, and
unemployment has fallen from a peak of 8.5% to less than 6% today.
This performance underscores several structural features necessary to escape a debt trap.
The first is an integrated financial system which channels savings from one part of the economy to investment in others. Since the near collapse of the UK banking system, bold steps have since been taken to shore up its resilience.
£140 billion of new bank capital has been raised in recent years, and banks’ performance in the recent UK stress test suggest growing confidence in the resilience of the system is merited.
Second, the UK’s fiscal policy framework helps insure against severe systemic shocks The UK had the space to allow its automatic stabilisers to cushion the impact of the recession.
Third, the UK economy is open and flexible.
With a high degree of openness – its imports and exports summing to 60% of GDP – and a flexible exchange rate, the UK has a safety valve that can be used to recycle surplus savings to the rest of the world without driving down domestic demand, wages and prices.
The UK labour market is also highly flexible. The fall in real incomes caused by the depreciation of sterling was absorbed by employees, effectively purchasing faster job creation.
In addition, large inflows of foreign capital – now financing a current account deficit of 6% of GDP – mean spending and investment are higher than would otherwise be possible. This underscores the value of the UK maintaining its attractiveness as an investment destination through a competitive tax system, deep human capital, a flexible economy and ready access to a wide range of markets.
Carney and Cunliffe both want the EU to become more financially integrated….and that can’t be done without political union as well, something that the pro-EU campaign and the BBC tend to avoid mentioning…..if the EU moves towards ever closer union how can the UK remain a partial member? The UK would have to choose, fully in or out with the freedom to negotiate its trading deals with the EU….and to claim that suddenly we would be unable to trade with the EU is clearly a nonsense as we are also a huge market for the EU to sell to…and they want our goods as well. If they put up barriers to trade it wouldn’t serve anyone’s proposes.
It is apparent that this ‘report’ by Cunliffe was nothing more than him putting down on paper what he already believed regardless of any other evidence or considerations. Carney also seems to be very gung ho for the EU regardless of his previous admission that the UK was succeeding because it was outside the EU strait-jacket.
Shame the BBC doesn’t bother to look further than its own prejudices and bias and delve a bit more into the motivations behind Carney and Co’s pro-EU circus.