EU being ‘pulled apart’ from within as divergence deepens among member states

EU: Yanis Varoufakis hits out at 'economic imbalances'

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The European Union hopes to start giving out money from its 750 billion euros coronavirus economic recovery fund before the end of the summer, the bloc’s top officials said on Friday as they finalised approval of the landmark stimulus. European Commission President Ursula von der Leyen, European Parliament head, David Sassoli and Portugal’s Prime Minister Antonio Costa called on the bloc’s 27 member states to move quickly now to approve a linked decision to allow the Brussels-based EU executive to borrow the funds on the market. But political expert Yanis Varoufakis said the bloc is being pulled apart by new institutions like the fund.

Speaking to the Economic Research Council, Mr Varoufakis said: “Deflation processes that have been undermining the European Union over the past few years, since 2008 at least, they are going to accelerate.

“We have a disconnect.

“The narrative in Brussels is that we have greater integration but in the foundations of the EU’s economy, we have forces pulling us apart.

“The new institutions that are being created like the Economic Recovery Fund are very well put together from a propaganda point of view but economically and financially, they are not fit for purpose.

“We have widening economic imbalances within the countries and between the countries in the EU.”

He added: “The political dialogue and debates in Germany and France, in particular, are becoming increasingly irrelevant and disconnected from the real issues.”

Bank of England Governor Andrew Bailey urged the EU on Wednesday not to pick a fight with Britain over its huge financial services industry after Brexit, and said the bloc was demanding more of London than of other trade partners.

The City of London has been largely cut off from the EU since January 1 and Brussels has said it won’t be rushed into decisions on granting access for financial firms in Britain, saying it wants to see how far UK rules will diverge.

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“This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself,” Mr Bailey said in a speech to financial executives on Wednesday.

“We have an opportunity to move forward and rebuild our economies, post-COVID, supported by our financial systems,” he said. “Now is not the time to have a regional argument.”

London is the only financial centre in Europe that can compete globally with the likes of New York, and still dominates trading in the multi-trillion-dollar currency markets.

“London will undoubtedly continue as one of the world’s leading if not the leading financial centre,” Mr Bailey said.


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Rules for the financial services industry had to adapt as the world changes, Mr Bailey said. But he ruled out a sudden easing of rules in Britain after its exit from the EU, as sought by some in the industry.

“Let me be clear, none of this means that the UK should or will create a low-regulation, high-risk, anything-goes financial centre and system,” he said.

Britain’s new trade deal with the bloc, which took effect on Jan. 1, does not cover financial services. The City of London is likely to get only limited “equivalence-based” access to the EU financial market for the foreseeable future.

Mr Bailey noted that the EU has granted long-term market access for securities clearing houses from the United States but not for their UK counterparts even though they comply with the same rules.

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