Because the European Union was unable to achieve full 100 % support with only 26 of 27 EU countries showing approval for the new fiscal pact, it means that the proposed “fiscal pact” is unable to be fully written into a new EU treaty and it has the potential to unravel legal support for future EU fiscal policies.
Although Britain remains unwilling to go along with Europe’s new fiscal treaty in the future, they will continue to remain a member of the European Union, albeit on the margins of Europe.
Britain refused to go along with the EU fiscal agreement because they have concerns about the future ramifications of relinquishing their national sovereignty in critical areas that aid their economy such as the national budget and powerful banking sector.
All seventeen Euro-zone countries went along with the new pact, including 6 non Euro countries: Bulgaria, Denmark, Latvia, Lithuania, Poland, and Romania.
Britain was not the only country that expressed some reservations about the new EU fiscal pact. Sweden and Czech Republic explained that will have to consult their national parliaments before deciding. Sweden said that might refuse to go along. According to a recent BBC article , Sweden’s party leader, PM Frederik Reinfeldt, said no last Friday.
Despite his negative remarks, Sweden somehow managed to have been swept away in the new fiscal fervor that circled through Brussels last week at the EU Summit and they have not officially refused to participate in the pact such as Britain has already done.
Hungary was initially reluctant to go along with the fiscal pact but they did not want to stand outside the European Union and said they will re-think their position.
Britain was the only country that firmly chose to veto the EU fiscal pact.
PM David Cameron said that he wants to protect the U.K.’s financial services industry from future EU regulation and ensure its sovereignty to enforce its own regulations.
Some European journalists have been questioning whether Britain’s decision to veto the new EU pact will result in a freezing of relations between Britain and other EU countries. The growing concern for Britain is over concerns that the EU will pursue new financial regulations that require future business transactions to be squarely in the center of the euro zone and not in London.
There are concerns that the clearing house for derivative transactions will be sent to the euro zone. Another concern that Britain has comes from a proposed financial transaction tax that the European Commission has already indicated that they want to raise within the EU in 2014. Read more about it on this blog. The proposal is for raising 57 billion euros across Europe with 40 billion coming from Britain. But what will happen if Britain refuse to go along?
Wall St. Journal recently published a new article ” Legal Uncertainty Imperils EU Agreement ” that cites senior European officials who said on Tuesday that it could be difficult to convert last week’s summit accord for tougher budget discipline among euro zone governments into a water tight legal pact.
Enforcing budgets for a wide variety of EU countries and enacting sanctions to EU countries that violate the pact is no simple task, especially given the volatility and nationalism that the sea change fiscal shift may cause down the road if it manages to fail.
* Yesterday the Euro fell close to an 11 month low against the dollar.