Brexit Bulletin: Unity Cracks
Chief European Union negotiator Michel Barnier says there’s no way the U.K. can get a post-Brexit deal that lets its banks operate freely in the single market. The view from the 27 EU member states offers London’s finance center a bit more hope.
Bloomberg surveyed the 27 governments and, while nearly all put maintaining European unity as their main priority, a few take a softer line on what the U.K. can expect for its crucial financial services industry. Luxembourg Prime Minister Xavier Bettel called for “pragmatism” and rejected “binary thinking” on the matter, Ian Wishart and Stephanie Bodoni report.
“While I stick to the principle that there can be no cherry-picking, I still think that we should refrain from an orthodox or binary thinking,” Bettel told Bloomberg. “My top priority would be to limit the negative impact for both sides. Pragmatism will be needed in these negotiations on both sides.”
That will be welcomed in London, although financial-services companies aren’t waiting around to see how the negotiations pan out. They have led the way in contingency planning and leasing office space on the continent so they can continue to operate as they do currently – whatever happens between now and exit day in March 2019.
While EU governments all show strong public support for Barnier, national interests diverge and there’s a risk for the EU side that those preferences will break out into the open as the second phase of talks gets under way. Dutch and Spanish finance chiefs met last week and while backing Barnier, they agreed they both wanted the softest deal possible to keep the U.K. close, according to a person familiar with the situation.
Discussions on the future relationship are scheduled to start in March and end in October. The EU says that it will offer the U.K. a deal like the one it gave Canada, which doesn’t include financial services or much in the way of services at all. The thinking is that because the U.K. plans to control immigration from the bloc and break free from the jurisdiction of European courts, it shouldn’t also enjoy the advantages of countries that accept EU free-movement and judicial rules. The U.K. is pushing for closer ties, and failure to secure access for its key service industries could undermine support for Brexit at home.
Boris and Farage Afraid | Foreign Secretary Boris Johnson has warned allies that Brexit is far from certain and that they still face a big fight to deliver it, the Sun reports. He’s worried that the U.K. will end up signing an agreement that leaves Britain taking rules from Brussels, making it “just another Norway.” The Sun quotes him as saying: “I’d rather us stay in than leave like that.” His comments follow those of former U.K. Independence Party leader Nigel Farage that Brexit could be overturned.
Leaving It to the Lords | Prime Minister Theresa May’s Brexit implementation legislation returns to Parliament this week, where pro-EU rebel Conservatives who defeated the government last year will hold their fire, leaving the fight for more changes to allies in the upper house. Instead of rebelling again, they will use the debate to send signals to the House of Lords, where members are overwhelmingly anti-Brexit, Alex Morales reports. The European Union Withdrawal Bill returns for debate in the lower chamber on Tuesday and Wednesday. It’s due for its first two days of debate in the upper chamber on Jan. 30 and 31. Meanwhile Labour and the Scottish National Party both said they would oppose the bill – the key piece of legislation for transforming EU rules into U.K. law – in its current form.
Barnier Meets the Rebels | Barnier meets U.K. lawmakers who want to keep close ties to the EU, including Labour’s Chuka Umunna and Chris Leslie, and Tory rebels Dominic Grieve and Anna Soubry. Barnier has met U.K. politicians from across the spectrum in recent months, including Farage.
No Drama | Luxembourg Finance Minister Pierre Gramegna called on politicians to “de-dramatize” Brexit. “We have benefited quite a lot from the whole Brexit issue. Brexit is not good for Europe, it is very bad for the United Kingdom,” he said in Hong Kong, while noting that a lot of companies have chosen Luxembourg to set up subsidiaries to maintain single-market access. “We have to de-dramatize the situation and I am confident that we are going to find solutions.”
Brightest and Best | U.K. Immigration Minister Caroline Nokes said the government is determined to cut immigration in a “manageable and sustained way,” but wants Britain to continue to attract the “brightest and the best” to work and study. The government is listening to businesses and universities, she said.
Labour’s Stance | Labour leader Jeremy Corbyn said the U.K. can’t stay in the single market after Brexit, prompting criticism from pro-EU lawmakers who pointed out that’s exactly the Norway model. Emily Thornberry, the party’s foreign affairs spokeswoman, reiterated the party line that they don’t want a second referendum but would have to reconsider if “90 percent of the population” wanted to stay in the bloc.
Coming Up | May plans to make a speech outlining her Brexit policy during the Feb. 8- Feb. 20 parliamentary recess, the Sunday Times reports. Then May can go to Brussels with clear demands on the future relationship with the bloc. A summit at the end of March is penciled in as the start of discussions about the future trading relationship.
Bloomberg has launched a Facebook group, Brexit Decoded, a new community to discuss Brexit – and in particular what it means for business. We will have regular Q&A sessions with members of our Brexit team, starting this week. You can sign up here.
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