ECONOMY

Draft directive on financial services reveals rift within European Union

A war between big, opposed interests broke out last week within the EU, with the unveiling of a draft directive on financial services and regulated markets. The war pits big UK and German investment banks, «the London and Frankfurt establishment,» as the European press has said, against participants in the Euronext (the Paris, Amsterdam and Brussels stock markets) and the Milan Stock Exchange, which are opposed to the creation of unregulated, local, over-the-counter markets and the facility given to investment banks to possess and trade shares without going through the markets. Opponents of this kind of liberalization claim that it will drain the regulated bourses of their liquidity, damaging them permanently. The draft directive presented by the European Commission on November 20 is still a long way from the implementation stage. It still has to go through the relevant ministerial councils and the European Parliament. Still, inside sources talk about the severe pressure levied by British and German banks to adopt the directive by modifying it further in their favor. Already, representatives of these banks have directly attacked Commission President Romano Prodi and have darkly hinted at a «conspiracy» organized by the authorities of the Paris and Milan stock markets. This unprecedented attack was caused by the fact that the draft directive includes articles about investor protection, by which the banks that are allowed to trade shares directly are obliged to inform authorities of each transaction. These «transparency clauses» show that the Commission is trying to balance competing interests and that it is not prepared to give in completely to the demands of the British and German banks. French newspaper Le Monde commented, in a front-page article, that the London market and the banks may have thought they would win more concessions from the EU but that their optimism was mistaken. This directive comes on top of two other important developments. First, the adoption of the «common passport» allowing banks and stock markets to offer their services throughout the European Union; second, the provision given to all EU firms to be listed on any market within the EU.