Islamic finance in the European Union may be taking a back seat as the continent is gripped with a dire euro zone sovereign debt crisis which has even impacted on sovereign Germany's attractiveness as a bond investment asset class.
Similarly, London's role as a hub for Islamic finance, investment and trade - the declared ambition of the previous Labor government and the current Conservative-Liberal Democrat Coalition - is stalling because of the disappointment of the UK Treasury deciding not to raise funds in the wholesale sterling market through a debut sovereign Sukuk. Luxembourg and France have also introduced tax neutrality measures to facilitate sukuk and other Islamic financial products, but have yet to commit to issuing a debut sukuk, claiming as the UK does it is not the right timing nor at the right price.
Southern Europe has had hardly a look in. The reality is that Spain, from a historical context, should be spearheading the dialogue and cooperation with Islamic finance. And yet it is the UK that has been leveraging its vast colonial experience with the Muslim world and its pre-eminent position as the world's largest financial center. Not surprisingly, London in the early 1980's emerged as the major center for structuring Islamic financial transactions such as commodity Murabaha and structured finance out of Europe.