How to Profit from United Kingdom's Veto of EU Treaty Changes

British Prime Minister David Cameron has become the target of intense criticism over his veto of changes to the European Union treaty. Prime Minister Cameron said that he used his veto of the proposed EU changes at a meeting of European Union leaders on Friday in order to protect the interests of the United Kingdom but many critics have come out to say that using his veto was a short sighted move that will do more harm to the United Kingdom than good. Cameron said that he vetoed the proposed treaty changes in part to protect the City of London's important financial services industry but the move could have the effect of giving United Kingdom less leverage over any proposed reforms to financial regulations within the European Union. The opposition Labour Party's David Miliband called Prime Minister Cameron's veto foolish because the other European Union members would simply move ahead with the proposed changes and leave the United Kingdom without a say in any future discussions. More damaging to Cameron were the comments of Deputy Prime Minister Nick Clegg, leader of his coalition partner the Liberal Democrat party, who said that it was “untenable” for him to support the veto and that “there is now a real danger that the United Kingdom will be isolated and marginalized within the European Union.” German Chancellor Angela Merkel and French President Nicolas Sarkozy want to push through a set of reforms that would see national governments giving up much of their fiscal powers to European Union authorities. The reforms would give the elected leaders of the European Union less control of their federal budgets, while granting the European Union additional oversight powers. Supporters of the proposed changes to the European Union treaty say that they are needed in order to restore the financial markets' faith in the ability of eurozone members to improve their countries' fiscal health. In theory, giving the governments of countries like Greece and Italy less ability to run fiscal deficits in the future should lower their borrowing costs now. However, critics of the planned changes to the European Union's treaty say that the countries failed to keep earlier promises related to deficit spending, so there's no reason to believe they won't do the same again. The proposed changes would also undermine the very idea of democratic government by taking powers away from elected governments and giving them to unelected European bureaucrats. This could grow into a greater threat to the survival of the European Union because protests have erupted across the EU against governments that have proposed sweeping austerity measures that included tax increases and spending cuts. If more of these reforms were pushed onto national governments by European Union officials, citizens of countries like Greece, Spain and Italy could rise up and call for their governments to withdraw from the eurozone altogether. ACTION ITEMS:

Bullish:
Traders who believe that Prime Minister Cameron's veto will benefit the British economy might want to consider the following trades:

• British banking stocks like HSBC Holdings HBC and Barclays PLC BCS could do well if the veto proves that the United Kingdom won't back down from protecting its financial services industry.

Bearish:
Traders who believe that Prime Minister Cameron's veto was a foolish move may consider alternate positions:

• European banks like Deutsche Bank DB and Banco Santander STD could see more business headed their way if Cameron's veto ends up marginalizing the United Kingdom and leaving it without any say in European Union financial services reforms.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.