27 June 2016

Osborne breaks silence in bid to calm markets, as Merkel sees “no need to be nasty” to UK in EU exit talks

Chancellor George Osborne this morning made his first statement since the EU referendum in a bid to calm the turmoil in financial markets that has followed the UK’s vote to leave the EU last Thursday. Osborne stressed that the UK government is “ready to deal with the consequences” and that the UK economy is strong. However, he also warned that there will need to be “a period of adjustment” and that “there is going to be an impact on public finances”, although he said any new budget would be a job for the new government. He insisted he doesn’t “resile” from any of the forecasts made during the campaign. He added that he agreed with the decision to delay triggering Article 50 of the EU Treaties – which sets out the process for leaving the EU. The pound has continued to fall this morning and is down close to 3% against the US Dollar, while the FTSE 100 is down 1% and the FTSE 250 down 3.5%.

Former London Mayor and leading Leave campaigner Boris Johnson MP writes in his weekly column in The Daily Telegraph, “I cannot stress too much that Britain is part of Europe, and always will be. There will still be intense and intensifying European cooperation and partnership in a huge number of fields: the arts, the sciences, the universities, and on improving the environment. EU citizens living in this country will have their rights fully protected, and the same goes for British citizens living in the EU” – while also suggesting that the UK would have a points-based system for EU migrants. He goes on to argue, “As the German equivalent of the CBI – the BDI – has very sensibly reminded us, there will continue to be free trade, and access to the single market.”

Meanwhile, the foreign ministers of the six founding members of the EU – Germany, France, Italy, Luxembourg, Belgium and the Netherlands – met in Berlin on Saturday to discuss the political fallout of the UK referendum. German Foreign Minister Frank-Walter Steinmeier told reporters after the meeting, “We say here together, this [EU exit] process should get under way as soon as possible so that we are not left in limbo but rather can concentrate on the future of Europe.”

European Commission President Jean-Claude Juncker told German public broadcaster ARD, “It’s not an amicable divorce [between Britain and the EU], but it was not exactly tight affair anyway.” Lubomir Zaoralek, the Czech Foreign Minister, called on Juncker to resign in the wake of the UK’s vote to leave the EU, telling Czech TV, “In my opinion, he is not the right person for that position. We have to ask who is responsible for the result of the referendum in Britain.”

German Chancellor Angela Merkel took a more cautious approach to the upcoming EU exit talks, as she said that there was “no need to be particularly nasty [to the UK] in any way in the negotiations. They must be conducted properly.” She added that the exit process “shouldn’t take forever, but I would not fight for a short timeframe.” French President François Hollande has said, “What was once unthinkable has become irreversible.” The two leaders have stressed that they are “in full agreement” on how to handle the fallout from the UK referendum.

Separately, The Daily Telegraph cites senior EU sources as saying they can wait “until Christmas” for the UK to trigger Article 50 of the EU Treaties and begin exit talks. The Open Europe team continued to feature widely on broadcast media across Europe. Raoul Ruparel appeared on the BBC Radio 4 Today programme on Saturday. Nina Schick appeared on German public broadcaster ZDF’s Morgenmagazin, Mittagsmagazine and Heute Journal programmes analysing the outcome of the referendum. Pawel Swidlicki appeared on BBC News, Polish radio and several BBC regional radio stations. Pieter Cleppe appeared on Austrian public broadcaster ORF, Deutsche Welle, Al-Jazeera English and Slovenian radio. Vincenzo Scarpetta appeared on Italy’s Radio 1 Rai and the politics talk show Omnibus on TV channel La7.

Source: The Financial Times The Daily Telegraph: Johnson The Times The Daily Mail BBC News

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France keen on speedy EU exit talks, as Germany urges restraint

French Finance Minister Michel Sapin told France 2 that the UK should quickly trigger Article 50 of the EU Treaties, setting out the process for leaving the EU, adding, “We cannot have an uncertain and undefined situation.” French Economy Minister Emmanuel Macron said that, in the wake of the UK referendum, “One needs to articulate a new European project which will then be submitted to the popular vote.”

Peter Altmaier, the Chief of Staff at the German Chancellery, said however that British politicians should be allowed to take “the time to reflect on the consequences of the referendum.” German MP Michael Fuchs, a senior figure in Angela Merkel’s CDU party, told the BBC Today programme this morning that, if the UK wanted to retain access to the single market once it left the EU, it would be possible, “but not for free…You have to see with Norway, with Switzerland, you have to pay a certain fee. And the per capita fee of Norway is exactly the same as what Britain is now paying into the EU. So there won’t be any savings.”

Italian Prime Minister Matteo Renzi told public broadcaster Rai, “The game is up. Now we turn the page. We can’t spend another year discussing Britain’s exit from the EU.” He added that, “Should there be difficulties [after the Brexit vote], the Italian government and the European institutions stand ready to intervene to give certainties to Italian consumers and savers.” The Irish Times reports that Ireland will oppose any punitive attitude towards the UK in the upcoming EU exit talks.

Meanwhile, the foreign ministers of Germany and France, Frank Walter-Steinmeier and Jean-Marc Ayrault, have travelled to Prague to meet leaders from the central and eastern ‘Visegrad Four’ (V4) EU member states – Poland, Hungary, Slovakia and the Czech Republic – to discuss the fallout from Brexit. The Financial Times reports that the V4, which will negotiate as a bloc, will “play hardball” over European migrant rights in the UK, and quotes Czech Europe Minister Tomas Prouza as saying, “Nobody will want to negotiate a new arrangement for the UK right now. The danger is that others pick up the anti-free movement line and we will see a further east-west divide.”

Separately, Polish Foreign Minister Witold Waszczykowski said that the UK should not be forced to exit the EU quickly and added, “We need more time to think.” He added that more should have been done to keep the UK in the EU and criticised Franco-German proposals for deeper Eurozone integration, saying they would cause divisions in the EU.

Source: The Financial Times Die Welt BBC Reuters EUObserver AGI The Irish Times

UK’s EU Commissioner Lord Hill resigns and warns UK may end up having to sign up to financial rules written by the rest of the EU

The UK’s EU Commissioner Lord Hill resigned on Saturday saying he didn’t feel it was “right” he should carry on in light of the referendum result. His role as Financial Services Commissioner will be transferred to Commission Vice President Valdis Dombrovskis for the time being. David Cameron will not be appointing another UK Commissioner. In an interview with the Financial Times, Hill warned, “The nature and the shape of the financial services industry in France or in Germany…is pretty different from what it is in the UK. So the direction of how policy will evolve will reflect those different voices, without the British voice in there to balance…The nature of the rules you have to be equivalent to, or passporting into, are going to shift.” Hill also suggested that the ECB may now make another attempt to move the clearing of euro trades backing inside the Eurozone – which could force some business to move from the City of London.

Source: Lord Hill statement The Financial Times

Sturgeon says second Scottish independence referendum “highly likely” as she raises the spectre of Scotland vetoing Brexit process

Scottish First Minister Nicola Sturgeon said yesterday that a second independence referendum was “highly likely” and confirmed that her government was drawing up the necessary legislation. Sturgeon warned any UK government against blocking such a proposal in the event it was put forward. Furthermore, she also suggested that the Scottish Parliament might veto legislation around Brexit, adding that she found it “hard to believe” that a “legislative consent motion” from the Scottish Parliament would not be needed. However, Scottish Secretary David Mundell said he did not think Scotland could “block Brexit”. Finally, Sturgeon said the most important point for her was the UK staying in the single market, suggesting membership of the European Economic Area (EEA) might suffice. A Survation poll of Scottish voters for the Daily Record found that 48% said they would now back Scottish independence, while 41% would not.

Source: BBC News The Daily Telegraph The Financial Times

Spanish re-run election again delivers fragmented parliament

The centre-right Partido Popular (PP) of caretaker Prime Minister Mariano Rajoy was the most voted for in yesterday’s Spanish repeat election and secured 137 of 350 seats in the lower chamber of the Spanish parliament – 14 more than in the December 2015 general election, but still 39 short of an outright majority. The Socialist Party (PSOE) finished second with 85 seats – five fewer than six months ago. The hard-left Unidos Podemos (UP) ticket, comprised of Podemos and the United Left, secured 71 seats – the same as in December, but with over one million fewer votes. The centrist Ciudadanos won 32 seats, down from 40 in December.

Speaking after the vote, Socialist leader Pedro Sánchez did not clarify whether he would let PP stay in power or would again try and form a government himself. Open Europe’s Vincenzo Scarpetta is quoted by Bloomberg as saying that Rajoy “played the card of stability and experience [during the second election campaign] and has been rewarded for that.” Vincenzo also told Reuters and The Wall Street Journal, “We are heading for more rounds of complex negotiations, whose least bad outcome could be a weak government. The pressure on the Socialists to let Rajoy at least form a minority government and get on with business will be enormous.”

Source: Bloomberg Reuters The Wall Street Journal

Labour in chaos as a number of shadow cabinet ministers resign in protest to Corbyn’s leadership

Up to twelve Shadow Cabinet ministers have resigned or been sacked due to their lack of confidence in Jeremy Corbyn’s leadership of the Labour Party. A number of people cited his lack of leadership during the EU referendum campaign as the final straw. Corbyn will also face a vote of no confidence from Labour MPs. However, so far he has refused to resign and said he will name a new Shadow Cabinet today. Corbyn also received the backing of a number of trade unions.

Source: The Times The Daily Mail The Financial Times

Leave campaigners under fire after retreating from key campaign pledges

During an interview on the BBC’s Andrew Marr show, when asked how the pledge to spend an additional £350m per week on the NHS could be squared with maintaining funding for existing UK recipients of EU grants, former Work and Pensions Secretary Ian Duncan Smith argued, “Those areas that are being funded in structural and regional funds, would be funded… and we would stand by the commitments that have been made to things like agriculture. The rest were all just a series of possibilities of what you then could do beyond those main commitments.” He added that, while the “lion’s share” of the remaining funds would go to the NHS, the £350m per week claim was “not a promise broken. I never said that during the course of the election.” Meanwhile, Conservative MEP Daniel Hannan has come under fire from other Leave campaigners after he told the BBC that he wanted to remove EU nationals’ “legal entitlements to live in other countries, to vote in other countries and to claim welfare and to have the same university tuition”, but that “we never said there was going to be some radical decline…we want a measure of control.”

Source: BBC Andrew Marr show The Times

Banks begin to prepare for changing UK relationship with Europe

The Financial Times reports that a number of large banks, particularly those from the US, are preparing plans to move some staff to other parts of the EU to ensure full access to the single market in financial services. Such moves could take a year or more for all licences and regulations to be in place. However, a number of banks have also suggested they will wait and see what the new relationship looks like before making any decisions.

Source: The Financial Times The Times

German voters think Brexit will not trigger domino effect

A new Forsa poll for Handelsblatt suggests that Germans don’t think Brexit will trigger a ‘domino effect’ across the EU. 51% of respondents said that there would not be a domino effect, whilst 42% disagreed. Meanwhile, 71% said that they did not want to hold an EU referendum in Germany.

Source: Handelsblatt

Italian government considering injecting up to €40bn into its banks

Italian media reported this morning that the Italian government is considering injecting up to €40bn into the country’s banks after their share prices plummeted following the UK’s vote to leave the EU. The injection would be funded by the issuance of new debt by the government. Italy is reported to be suggesting that the situation be classed as an “exceptional event” in order to avoid the limits of the EU’s state aid rules.

Source: Reuters

After Brexit: Where next?

Open Europe and The Institute of Directors (IoD) invite you to attend our ‘EU Referendum post-match analysis’ in central London on Tuesday 28th June from 6.45–8.30pm, days after the result of the vote is known. Leave or Remain, win or lose: both sides and the rest of the EU will have to engage with the result, the other side, and lay out a strategy for the way forward. We will delve into the result of the Referendum, and its immediate implications.

Speakers include a leading pollster to help assess the winning result: demographics, voting trends and turnout; a foreign voice to delve into the Continental European response; and representatives from Open Europe and the IoD  to examine how Remain and Leave can reconcile post-Referendum, and to dissect what the vote means for British businesses and Government.

Joe Twyman: Head of Political and Social Research for Europe, Middle East and Africa, YouGov
Carsten Herz: London Correspondent, Handelsblatt (The leading German business daily)
Allie Renison: Head of Europe and Trade Policy, The Institute of Directors
Raoul Ruparel: Co-Director, Open Europe

Register to attend here. Places are limited and will be allocated on a first-come, first-serve basis.