Osborne to the EU: 'Get your house in order'

Thursday, 6 January 2011 12:00 AM

By Ian Dunt

The chancellor has called on Europe to "put its own house in order" this year so that confidence can return to the euro.

Writing in the Financial Times, George Osborne demanded imaginative and bold responses to the economic malaise facing Europe.

The UK is heavily dependent on a strong European economic performance for its exports and continued uncertainty on the continent constitutes a major headache for the coalition.

"On deficits, growth and banks, 2011 is the year Europe must put its own house in order," Mr Osborne wrote.

"The sense of crisis may have eased, but wide spreads and high market interest rates still stalk several European economies."

Mr Osborne singled out the banking tests on the continent for particular criticism.

Tests were conducted on 91 banks in July, with the overwhelming majority passing only for the Bank of Ireland and Allied Irish Banks to both be propped up months later by the state.

That action led to Dublin's multi-billion euro rescue package from the European Union (EU) and the International Monetary Find (IMF).

"It is revealing that the tests conducted last July identified a capital shortfall of just 3.5 billion euros yet less than six months later Irish banks alone required ten times that amount," Mr Osborne wrote.

"That is why the UK has already gone much further with tougher stress tests and now has banks that are among the best capitalised in the world.

"European cannot repeat the same mistake again," he continued.

"We should look at ways of strengthening the credibility of these tests, including validation by bodies such as the International Monetary Fund."

The chancellor also railed against "badly thought through" regulation from Brussels which could threaten the UK's role as a financial centre.

"No one should doubt that Britain is determined to remain a global financial centre serving Europe and the world," he said.

Mr Osborne delivered the warning ahead of an economic conference in Paris.

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