Tories accuse Brown of selling out the City in deal with France

Author: By Andrew Grice, Political Editor, and Sean O’Grady, Economics Editor

The Tories claimed the Prime Minister made a secret deal with Nicolas Sarkozy
in which the French President backed the Labour peer Baroness (Cathy) Ashton
as Europe’s “foreign minister” on Thursday, in return for being
able to put his man in as the commissioner in charge of financial services
and the internal market.

That important post is expected to go to Michel Barnier, a former French
foreign minister, when the new Commission team is named in the next few
weeks. He would be the first Frenchman to take charge of the single market,
and would also become a Commission vice-president, the same rank as Lady

The Tories say the French government has the City in its sights and that Mr
Barnier’s appointment would help Paris’s cause. William Hague, the shadow
Foreign Secretary, said: “If Gordon Brown has done a deal that would
mean a French commissioner being in charge of the economic issues that
affect Britain the most then that could be a serious concern. Our French
partners have a different view on market issues that touch on Britain’s
vital economic interests. I look forward to the Government taking this
opportunity to be completely open about what has been agreed.”

In a letter to the Foreign Secretary, David Miliband, Mr Hague said: “The
financial services sector is an area of extreme sensitivity for the British
national interest. It is of crucial importance to the future of a pro-growth
EU that there is no retreat from the principle of a free market within the

Downing Street dismissed the Tory claim as “absurd”. A spokesman for
Mr Brown said: “Under the Tories, the UK wouldn’t have had the High
Representative [foreign minister’s] job. We would be totally sidelined.”

Many in the City have long entertained the theory that the French government
secretly covets London’s position as the world’s second-largest centre for
hedge fund activity, after New York.

The proposed European directive on “alternative investment funds”
already threatens closer oversight of the sector across Europe, and is
thought by some to be an attempt to erode London’s competitive edge. Many
hedge funds are based in Mayfair, and some are already said to be
considering moves abroad to escape higher taxation and tougher regulation.

Longer term, the new French Commissioner will also have a powerful influence
on the choice of chief for the new European Systemic Risk Council, a body
that will oversee financial stability across the Union, and who must be the
head of a European central bank.

Given that the UK remains outside the eurozone and the mixed record of the
British regulators in preventing the financial crisis, some believe that the
chairmanship of that body will go to another Frenchman ? Jean-Claude
Trichet, currently head of the ECB.

The Governor of the Bank of England, Mervyn King, would be a strong contender
for the deputy role, given London’s existing pre-eminence in financial
services. But the preponderance of Frenchmen in key economic positions might
tip the balance back in Mr King’s favour.

A number of other European financial regulatory bodies are also planned,
roughly along the lines of the UK’s Financial Services Authority. How much
power they will be given vis-a-vis national bodies is being hotly debated in
Brussels, and again Mr Barnier will have powerful a say in that. The
Treasury has made no secret of its hostility to the European “supervisory
authorities” being granted the authority to override national

Michel Barnier: The silver fox


9 January 1951


Silver fox

*Former positions

French foreign minister, French agriculture minister, French EU affairs
minister, European Commissioner for regional policy

*Other strings to his bow

Co-organised 1992 Winter Olympics in Albertville and was awarded the
Chevalier de la Légion d’honneur

*On himself

“My line is to look ahead. I am someone who is very practical”

*On France

“France is not great when it is arrogant. France is not strong if it
is alone”

*On French-bashing

“In the end, the most inaccurate cliches are obscuring the most
obvious truths”

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