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Council Deal On Market Rules Is A Setback For City And For UK Influence In Financial Services

12.00.00am BST (GMT +0100) Wed 8th Oct 2003

Chris Huhne MEP for South East England

Commenting on the agreement reached in the Council of Economic and Finance Ministers yesterday on a common position on trading rules (investment services directive), Chris Huhne MEP, the economic spokesman for the European Liberal Democrats, said:

"It is unprecedented for five countries including Britain to be outvoted on a piece of sensitive financial services regulation such as this. It suggests that the Treasury has seriously mishandled the negotiation, particularly by refusing to show any flexibility over compromise proposals brought forward at the last minute".

"If the Council's view prevails in the final legislation, there is not only a threat to active marketing of no-frills stockbroking services but there is also a substantial increase in costs for investment banks that compete with stock exchanges in trading shares. One study puts that cost increase at a minimum of €450 million a year. If this happens, a lot of business will simply leave the EU and be done elsewhere in Zurich or New York."

"The key is now to ensure that the European Parliament stands firm in amending the Council common position in line with our first reading. We need 314 votes - half of our total number - to do so or the compromise will fall. This is a tall order but not impossible."

"This vote in Council is a serious diplomatic reverse for Britain and casts serious doubt on Gordon Brown's claim that he is as influential as ever within the European Union. More than a third of listed companies in the EU are listed in the countries that were outvoted, and the UK market is more than double the size of either the German or French markets compared with economic activity' said Mr Huhne."

At the end of last year, the UK market (excluding investment trusts and other investment firms) had a market capitalisation worth 106 per cent of gross domestic product (gdp). This compared with an EU average of 58 per cent, and with 61 per cent in France and 31 per cent in Germany, according to recent official Commission statistics.

Ends

Note to editors: Chris Huhne was responsible for guiding the European Parliament's successful amendment of a previous key directive on prospectuses for share and bond issues, in which the key interests of the City were safeguarded.

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