12 January 2018

EU27 ambassadors consider extending post-Brexit transition period

According to the Financial Times, ambassadors from the EU27 yesterday discussed the possibility of extending a post-Brexit transition period between the UK and the EU. They reportedly expressed concerns that trade negotiations are unlikely to be fully concluded and ratified by December 2020, the end of the planned transition period. Hungary reportedly raised the idea of including an extension clause in a transition agreement, however, the Financial Times reports that Germany and France strongly opposed it and it is unlikely to appear in the draft negotiating directives. One EU diplomat said, “We can do it if we need it,” while another senior EU official said, “It will take a lot of money.”

Meanwhile, the European Commission has presented EU27 diplomats with a series of options for upholding a post-Brexit trade agreement, Bloomberg reports. The options would include the possibility to set up a joint committee. Bloomberg suggests that most of the precedents illustrated by the Commission would imply that the European Court of Justice retains a say. But EU diplomats said more clarity on the UK’s preferences for a post-Brexit agreement were needed before staking out their own position on the issue.

Source: Financial Times Bloomberg

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Liam Fox: Mayor of London’s Brexit report is not “cataclysmic”

Speaking in the House of Commons yesterday, International Trade Secretary Liam Fox described the independent report commissioned by Mayor of London Sadiq Khan on the potential impact of different Brexit outcomes as “anything other than cataclysmic”. Fox said the report’s “worst assessment was less than half the assessment that was given to us before the European referendum on what our loss of market share might be if there was no deal whatsoever.” He argued, “I don’t believe that we will necessarily lose our share of market … We want to maintain an open agreement with the European Union and they will want to maintain an open agreement with us because we are the fifth biggest economy in the world and a major trading partner for them.” Regarding the government’s progress in scoping potential post-Brexit trade deals with non-EU states, Fox insisted, “We’ve already established a series of fourteen working groups, and high-level dialogues with key trade partners.” Fox is on a foreign visit to Turkey today, and is expected to discuss post-Brexit trade relations with Turkish President Erdoğan.

Meanwhile, discussing the possibility of a second Brexit referendum on Channel 5’s The Wright Stuff programme, former UKIP leader Nigel Farage said, “My mind is actually changing on all this […] maybe, just maybe, I’m reaching the point of thinking that we should have a second referendum on EU membership … I think that if we had a second referendum on EU membership we would kill it off for a generation.” He also predicted that the share of the Leave vote in a second referendum “would be very much bigger than it was last time round. And we may just finish the whole thing off.” Meanwhile, a government spokesperson yesterday rejected the idea of a second referendum, and Farage has since clarified his comments in a piece for the Telegraph, saying, “To be clear, I do not want a second referendum, but I fear one may be forced upon the country by parliament.” This comes as a ComRes survey reports that only 43% of respondents support a second referendum with 51% opposed, and if there were to be a second referendum, 51% would vote to remain and 43% to leave.

Source: The Guardian Daily Express Interactive Investor Parliamentlive.tv The Telegraph The Mirror

German industry lobby group demands clarity from UK on post-Brexit relationship

The president of the Federation of German Industry, an influential lobby group, Dieter Kempf, yesterday responded to Chancellor Philip Hammond’s speech in Berlin on Wednesday, saying, “I was surprised to hear the Chancellor say yesterday that it was now up to the EU to make an offer to the UK on how to deal with the UK in the future […] I understand that you [UK] don’t want to be like Norway. I understand that you don’t want to be like Switzerland. I understand that you don’t want an agreement like the one with Canada. But for God’s sake, give us a bit of an idea of what you want.” While a transition period would provide a “breather” to businesses, Kempf insisted that the UK would need to keep in place all EU regulations for this period. On the dynamics in the upcoming rounds of negotiations, he added, “For us there is a clear primacy of politics in this area. The talks are between the European Commission and the government of the UK.”

Meanwhile, a new study by Deloitte suggests that the UK leaving both EU Single Market and customs union could threaten up to 14.000 jobs and €3.8bn in sales in Germany’s automobile industry.

Source: Financial Times Reuters

German exploratory coalition arrive at positive outcome

According to the German press agency DPA, the exploratory talks between German Christian Democrats (CDU), Christian Social Union (CSU) and Social Democrats (SPD) have come to a positive result. The negotiators will now recommend their parties to open formal coalition negotiations, a move that still has to be approved by the leadership committees of the three respective parties.

Source: DPA Die Welt

Business Secretary: UK seeking “close association” with Euratom post-Brexit

In a written parliamentary statement yesterday, Business and Energy Secretary Greg Clark said the government is seeking “close association” with Euratom, the European Atomic Energy Community, after Brexit. Euratom is an international organisation that manages the European civil nuclear industry. Clark said that the government is aiming to ensure “continuity with current relevant Euratom arrangements” and “that the UK maintains its leading role in European nuclear research.” He also committed to putting in place necessary measures by the day of the UK’s withdrawal from the EU “to ensure the nuclear industry can continue to operate.”

Source: Press Association

Theresa May: Brexit will strengthen environmental standards

Prime Minister Theresa May yesterday vowed that Brexit will not mean a lowering of environmental standards. Unveiling the government’s 25 Year Environmental Plan, she said, “We will use the opportunity Brexit provides to strengthen and enhance our environmental protections – not to weaken them.” May also reiterated that the UK will incorporate all existing EU environmental regulations into domestic law when it leaves. She added, “We will set out our plans for a new, world leading independent statutory body to hold government to account and give the environment a voice. And our work will be underpinned by a strong set of environmental principles.”

Source: GOV.UK: Prime Minister's speech on the environment: 11 January 2017

Bank of England proposes easing burden of EU insurance rules

The Bank of England (BoE) has proposed easing the burden of European Union capital rules for insurers, following a lobbying effort from politicians and industry groups. The BoE’s Prudential Regulation Authority (PRA), which supervises banks and insurers, published a consultation paper yesterday which proposed easing some of the reporting requirements under the EU’s Solvency II rules. The PRA said the proposed changes take into account recommendations for reform made by the Association of British Insurers (ABI), and by parliament’s Treasury Select Committee, and hoped that the proposals would be particularly useful for smaller firms. Responding to the BoE proposals, Steven Findlay, the ABI’s head of prudential regulation, said that there “remains plenty of opportunity for the PRA to go further to ensure our insurance industry is able to fulfil a vital role in helping Britain thrive post-Brexit.”

Source: Financial Times Reuters

Bulgaria pushes to join Eurozone

Addressing journalists yesterday marking the start of Bulgaria’s six-month presidency of the EU Council, the country’s Finance Minister Vladislav Goranov said Bulgaria was ready “to file a formal application” to apply to join the ERM-2 exchange rate mechanism this year, “even if we are not convinced that the reply [from Eurozone members] will be ‘yes’.” Bulgarian Prime Minister Boyko Borissov added, “We have done our homework for the euro zone… Any moment they invite us, we can enter it.” But, according to the Financial Times, the country faces the resistance of other Member States, including Germany, in doing so.

Lilyana Pavlova, the government minister in charge of Bulgaria’s presidency said, “We are absolutely unfairly treated, because Bulgaria fulfilled all the existing criteria for Schengen membership six years ago.” Recognising the obstacles ahead, she also added, “We can work really hard on the western Balkan states’ European perspective, but we can’t work miracles or establish firm dates for accession or for opening and closing chapters [in EU membership talks].”

Meanwhile, Bulgarian PM Borissov also advised Council President Donald Tusk against interfering in Polish domestic politics, saying, “We [the European Council] have to remain neutral, impartial.”

However, in his speech yesterday marking the beginning of the country’s presidency, European Commission President Jean Claude-Juncker struck a more positive note, telling the Bulgarians, “Your place is in Europe. And your place is in Schengen. And your place is in the euro. We will work for that.”

Source: Financial Times Reuters Politico European Commission

Henry Newman: Staying in the EU customs union after Brexit would be disastrous for Britain

Commenting on reports that the Labour Party may propose staying in a modified customs union with the EU post Brexit, Open Europe’s director Henry Newman writes in the Guardian, “For some time now Labour has tried to argue that it does not want to be defined by structures when it comes to Brexit policy. But international law and agreements are precisely about structures: either you are a member or you are not; either you have a trade deal or a customs union or you don’t. The idea that we could persuade the EU to agree to a modified customs union – allowing the UK a continued say over trade policy as a non-EU member – doesn’t seem realistic.” He adds, “It might be possible to agree a new customs agreement with the EU’s customs union. Turkey, Andorra and San Marino have such an arrangement.” Newman warns, “We would have less power, less control, to determine our economic future.” He concludes, “Of course we should seek a deep trade deal with the EU, including full cooperation on customs. But politicians need to be honest about the fact that leaving the customs union will come with costs. As Open Europe has argued, in our Nothing to Declare report, a half-in, half-out approach would entail the worst of both worlds, so we should accept those costs and set about maximising the potential benefits of designing our own trade policy.”