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Bank of England's Carney stresses EU's boost to UK economy

Thursday, October 22, 2015 - 06:52
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Bank of England Governor Mark Carney delivered an upbeat assessment of Britain's membership of the European Union on Wednesday but said the bloc had to give fair treatment to countries outside the euro zone.

[LONDON] Bank of England Governor Mark Carney delivered an upbeat assessment of Britain's membership of the European Union on Wednesday but said the bloc had to give fair treatment to countries outside the euro zone.

British Prime Minister David Cameron plans to hold a referendum before the end of 2017 on whether the country should remain in the EU. Recent opinion polls have shown public opinion is split on the issue.

Carney, aware of the risks of dealing with one of the most divisive issues in British politics, stressed in a speech that he was not weighing up the pros and cons of Britain's EU membership, but rather its implications for the Bank of England.

However, he said Britain was possibly "the leading beneficiary" of the EU's single market of 28 countries. Membership has helped drive its economic performance in the four decades since it first joined, he said.

Carney used the Oxford University speech to outline the BoE's thinking on Britain's biggest geopolitical decision in decades. "Overall, EU membership has increased the openness of the UK economy, facilitating dynamism but also creating some monetary and financial stability challenges for the Bank of England to manage," he said. "Thus far we have been able to meet these challenges." On the sensitive issue of immigration, he said the free movement of labour could ease skills shortages and boost growth.

Carney said Britain was not immune to risks from Europe, such as the economic damage it suffered when big trading partners in the euro zone slid into a debt crisis in recent years. "As a result of closer integration within the EU and, more recently with the euro area crisis, this may have increased the challenges to UK economic and financial stability," he said.

His speech was welcomed by pro-EU campaigners, who said it was an endorsement at the highest level of their arguments.

Will Straw, who leads Britain Stronger in Europe, a new group, said the arguments of the "out" camp were falling apart."It is now incumbent upon them to start backing up their assertions with evidence of similar weight and stature," he said.

But Steve Baker, a lawmaker from Cameron's Conservative Party who is campaigning for a British exit, said Carney had sent "a clear warning" about the dangers for Britain as euro zone countries centralise powers in Brussels.

Carney, echoing one of the concerns of Cameron and finance minister George Osborne, said the EU needed to safeguard the interests of non-euro zone countries, such as Britain, when drawing up rules for the financial sector as the single currency area gets increasingly integrated.

Britain, which is home to a banking and financial services industry bigger than any other in Europe, has clashed with the bloc over limits to bankers' bonuses and the details of plans to make banks issue debt that can be converted into equity.

Cameron is seeking to reform Britain's relationship with the EU before holding the referendum.

Osborne said he welcomed Carney's view of the gains to Britain from the EU as well as his assessment of the risks for non-euro members of the EU. "That is why these safeguards are at the heart of our renegotiation," he said in a statement.

Carney's speech came as the Bank published a 100-page report on the same issue and campaigning is intensifies before the vote, which could take place as early as next year.

Most opinion polls have shown more Britons favour staying in the EU rather than leaving. But the lead has narrowed and two recent polls have shown a narrow majority supporting an exit.

REUTERS

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