22nd October 2015
Bank of England governor Mark Carney has warned that increased openness with the European Union makes the UK more vulnerable to economic and financial shocks from the continent.
In a speech on Wednesday at Oxford University, discussing the Bank’s study on EU membership, Carney, highlighted the benefits enjoyed by Britain but he cautioned that it was essential integration did not upset Britain’s financial stability.
The governor said that EU membership has likely increased openness of UK economy and enhanced its dynamism.
Carney said: “Broadly speaking the evidence suggests that the UK has successfully harnessed the benefits of openness afforded by its EU membership while avoiding some of the drawbacks of reduced flexibility from which some continental European economies suffer.”
He added that it is important that any future EU legislative measures, designed to meet the needs of deeper integration in the euro area, do not adversely affect the Bank of England’s ability to ensure the stability of the UK financial sector or compromise the single market.
“It is desirable, particularly given the weight of the ECB and of the members of the single currency within the EU, that there are clear principles to safeguard the interests of non-euro member states,” Carney said.
He stressed future EU regulatory and legislative developments should recognize that “the EU comprises multiple currencies with multiple risks”, adding that necessary future actions to try and develop the eurozone’s competitiveness and make it a more sustainable entity through further integration should take into account their impact on other members of the EU.
Howard Archer, chief UK and European economist at IHS Global Insight said that despite Carney’s stressing that his speech and the Bank’s report is not a comprehensive view of the pros and cons of UK membership of the EU, Archer’s strong suspicion is “that the pro-EU membership camp will find more to grab hold of and champion than the out camp”.