By Huw Jones
LONDON, July 12 (Reuters) - The European Union's financial services chief intensified criticism of Britain's push for an effective veto on EU rulemaking, saying it would cripple a market for nearly half the country's exports.
Michel Barnier urged Britain, which plans a referendum on its membership of the EU in 2017, to stay in the bloc as a 'pick and mix' single market is not possible.
Britain worries that as euro zone countries form a banking union, it is being overruled on rules like caps on banker bonuses and a financial transaction tax which could harm one of its most important economic sectors.
Some UK lawmakers want rulemaking in financial services 'repatriated' or given back to national governments or for countries to be able to veto rules.
Barnier said this would not be not possible.
'I've heard some people suggest that financial services should be repatriated. It's the wrong cause to fight for,' Barnier said during a visit to London.
Britain has a 'strong voice' and depends on the EU to sell products and it was why 40 percent of new financial institutions chose London as their base in the past seven years, he said.
'Repatriating full policy responsibility for financial services would mean leaving the single market as a whole and de facto the EU,' Barnier said.
A national veto on EU regulation would spell the end of the single market for everyone, said Barnier, who also met Mark Carney, new governor of the Bank of England to discuss regulation.
Barnier will propose in October a law to implement ideas put forward in a review of bank structures earlier this year by Finnish central bank governor Erkki Liikanen.
It will impose Europe-wide consistency after Germany and France announced national initiatives to curb bank risks. 'We need to go further in separating risks in banks,' Barnier said.
His term as a commissioner ends next year and his other remaining proposals include draft laws on money market funds and regulating benchmarks, both due in September.
Next week he visits Washington and to try and persuade the administration to include financial services in a proposed EU-U.S. trade pact, a move the United States has so far rejected.
Europe will have a better chance of persuading America if it speaks with one voice in financial services, Barnier said.
He faces pressure from the United States to take a tougher line on banks by speeding up the introduction of a leverage ratio or curb on lending as a proportion of capital.
(Editing by David Cowell) Keywords: EU BARNIER/
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