Bank of England's Carney accused of wading into politics with EU speech

By William Schomberg

LONDON, Oct (HKSE: 3366-OL.HK - news) 22 (Reuters) - Britain's central bank governor's upbeat assessment of the European Union's membership is regrettable, a prominent campaigner for a British exit said on Thursday, accusing Mark Carney of overstepping the mark and venturing into politics.

Ahead of a referendum on whether to leave the EU that Prime Minister David Cameron has promised by the end of 2017, Carney's emphasis on the economic benefits of membership was seen as a thinly veiled intervention in the sensitive political debate.

Carney said membership had opened up Britain's economy, made it more dynamic and promoted competition, making it possibly the biggest winner from the bloc's single market.

But he also cautioned that the EU had to make sure the interests of non euro zone countries, such as Britain, were protected when drawing up rules for the financial sector as the single currency area gets increasingly integrated.

"I found his speech regrettable," Nigel Lawson, a former British finance minister who now helps lead a group of Conservative Party lawmakers opposed to membership.

"I have known many governors over the years and I can't think of any previous governor who would weigh in in a political way on an issue such as this," said Lawson (Other OTC: LWSOF - news) who served as Margaret Thatcher's finance minister from 1983 to 1989.

Carney's comments were welcomed by pro-EU campaigners and by British finance minister George Osborne who has also stressed the importance of safeguarding the interests of non euro-zone countries.

But Lawson said Carney had failed to address the "growing mass of regulation coming from Brussels which is a huge burden."

A British EU exit would shake the Union to its core, ripping away its second-largest economy. Pro-Europeans warn a divorce could hurt Britain's economy and lead to the break-up of the United Kingdom by triggering another Scottish independence vote.

Opponents of membership say Britain would thrive outside the bloc.

Carney, a former Goldman Sachs (NYSE: GS-PB - news) investment banker who took up his post at the Bank of England in 2013, stressed in the speech that he was not weighing up the pros and cons of Britain's EU membership, but rather its implications for the Bank of England.

"The speech will be seen as another foray by Carney into a heated political debate, and it's tone comes across as friendly to the campaign for keeping the UK within the European Union," Allan Monks, an analyst at JP Morgan, said in a note to clients.

Monks said Carney's remarks, while stopping short of an explicit endorsement, added to a call this week from employers group CBI for Britain to stay in a reformed EU.

"The impact of these interventions may not be visible in the opinion polls right away, but we would expect them to grow in significance as the referendum draws closer," Monks said.

A speech by Carney on currency unions delivered before Scotland's independence referendum in 2014 was cited by opponents of a breakaway as a reason why Scotland would be unable to keep on using the pound if it split from Britain.

Carney was accused of venturing too far beyond his central banking brief in September after he made a speech warning of the risks of climate change to investors. (Writing by William Schomberg, editing by Guy Faulconbridge and Susan Thomas)