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According to the Financial Times, the UK is preparing to set out its position on financial services post-Brexit, and is calling for an ambitious deal based on “mutual recognition” of regulations. The model, which according to a source would be a “dynamic reciprocal mutual recognition model”, would see the UK committing to keeping its financial regulations in line with EU rules. It would also require a joint dispute resolution mechanism in the event that any of the parties was seen to be in breach of the agreement. Chancellor Philip Hammond is reportedly expected to endorse the proposal in a speech next week. It has also received the support of the City, with chief executive of TheCityUK lobbying group, Miles Celic, saying, “This has been our plan A, plan B and plan C for about 12 months or more.”
Elsewhere, Joachim Wuermeling, an executive board member of Germany’s central bank, yesterday said, “London will not, as some have suggested, maintain its current role as the financial centre of the EU after Brexit,” adding that while no city in continental Europe could manage to take over London’s role, other financial centres could be better off after Brexit. Wuermeling argued, “New York, in particular, could well benefit from Brexit, as could other global financial hubs such as Singapore or Hong Kong.” He also said that Brexit could have negative consequences for European funding channels, adding, “From the point of view of financial-market efficiency, financial-market integration, financial stability, but also real economic development, a scenario such as this is clearly harmful.”
Bloomberg Financial Times
The Institute of Directors, a business organisation for company directors, has released a report calling for the UK to remain in a partial customs union with the EU covering trade in industrial goods and processed agricultural products. The IoD argues that this will allow the government to maintain an independent trade policy while protecting the UK’s place in European supply chains for key industries. Stephen Martin, the director general of the IoD, has said, “In the long term, the UK should consider remaining in a narrowed customs union to mitigate the disruptive effects for business and ensure manufacturing remains competitive and attractive for inward investment.”
Prime Minister Theresa May is set to hold talks on post-Brexit trade and security with German Chancellor Angela Merkel later today. This comes ahead of May’s speech at the Munich Security Conference tomorrow, in which she is expected to present the government’s vision on future UK-EU security relations.
Elsewhere, former NATO secretary general Anders Fogh Rasmussen has urged May to present “very concrete ideas” on the UK’s vision of a post-Brexit security relationship with the EU. Speaking on the BBC Radio 4’s Today programme, he said, “I have urged the negotiators on both sides to start negotiations on security issues already now…It’s very, very complicated. When it comes to trade, you have the WTO (World Trade Organisation) tariffs as a fallback. But when it comes to security, you don’t have any fallback option. That’s why you have to address these issues in due time.” He also warned that the UK would likely have to continue observing some EU regulations on data as part of a security deal , adding, “And also I think the Brits should realise that, while you are leaving the EU, you will still have to comply with rules that are decided within the European Union – for instance on data protection, including the European Court of Justice.”
In an interview with Le Monde, Minister for the Cabinet Office David Lidington said of future UK-EU relations, “I hope this relationship will recognise the fact that we remain the closest neighbours and allies, as part of a trade and investment partnership with the least friction possible. We hope [to achieve] very close cooperation on police and criminal justice. We also want our strong partnership on foreign and security policy to continue…The UK-France relationship will be an important element in the construction of our partnership with Europe.” He also said, “I have seen statements in the French press saying that the UK secretly wants to disrupt the EU…We want the EU to succeed – it is in the UK’s interest and the interests of our continent.” Lidington added, “Our high standards, for example in the area of workers’ rights, will continue after Brexit – we didn’t put these in place because the EU required it, but because it was important to do so.”
The US is demanding a written guarantee that the EU will not replicate defence structures of NATO, according to the German press agency DPA. Speaking at a summit in Brussels yesterday, US defence minister James Mattis stressed that defence was “exclusively a task of NATO.” Elsewhere, Mattis reportedly also urged European NATO allies to increase their defence spending commitments. Following a statement by German Defence Minister Ursula von der Leyen, who said that contributions to the alliance where not “just about dry figures…It’s also about who is ultimately doing what,” Mattis reportedly responded, “Cash, capabilities and commitments are not interchangeable. It’s not either-or.”
EU foreign ministers yesterday met in Bulgaria to discuss the Western Balkan strategy for EU membership unveiled by the European Commission last week. Bulgarian Prime Minister Boyko Borisov warned, “If there’s no enlargement now, there’ll be no other time for enlargement…Otherwise what China, Russia, Turkey are planning for the region, they will start today.” Meanwhile, Hungarian Foreign Minister Peter Szijarto argued the target set by the EU for Serbia and Montengro to join by 2025 was “very late,” adding, “It is obvious the US has a strategy on the Western Balkans, Russia has a strategy on the Western Balkans, Turkey has a strategy on the Western Balkans — it is only the European Union which is extremely slow.” Poland, Italy and Austria are reportedly supportive of increasing efforts to engage with the Western Balkans, but Germany is cautious, underlining the rule-of-law concerns amongst member states such as Poland and Hungary.
Writing for CapX, Open Europe’s Pieter Cleppe comments, “There is little reason for the EU not to grant Britain at least the rights [of] other “rule-taking” non-EU members that enjoy full access to the Single Market [during the Brexit transition]. And yet, in various ways, Brussels is refusing to do so.” He explains that EFTA-EEA countries have an “emergency brake…to restrict freedom of movement” and a “right to reservation…[which] is effectively a ‘right to delay’” the implementation of new EU laws. He also questions the EU’s demand for Britain to seek permission to conclude trade deals, given that “the other three non-EU countries that enjoy full access to the Single Market can happily talk trade with anyone.” And he criticises the EU’s position that “the UK ‘may, upon invitation and on a case-by-case basis, exceptionally attend meetings’ where EU rules are decided,” highlighting that Norway has a “right to be informed.” He concludes, “Doesn’t it increase the chance that Britain won’t be happy to take over EU rules, which would ultimately endanger a cliff-edge Brexit that would be very damaging to the EU as well?”