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Yesterday’s general election delivered a hung parliament, with the Conservatives failing to obtain an overall majority. The latest BBC projection suggests the Conservative party will take around 318 seats, 8 seats short of a parliamentary majority and 13 below their pre-vote majority. Labour has won 261 seats, in line with the BBC forecast, gaining 29 seats on their 2015 performance. The Scottish National Party (SNP) took 35 seats in Scotland, a fall in 21 seats, with most losses going to the Conservative party. The SNP’s shock defeats included leader in Westminster, Angus Robertson, and former First Minister Alex Salmond, both of whom lost their seats to the Conservatives. The Liberal Democrats have gained 4 seats, but former leader Nick Clegg lost his seat. Overall turnout was 68.7%, up 2.6% from the 2015 general election. Number 10 have insisted that Prime Minister Theresa May will not resign. May was returned to her seat with over 37,000 votes. In her acceptance speech she said, “As we look ahead and wait to see what the final results will be, the country needs stability and the Conservative party will ensure we will fulfil our duty so that we can all, as one country, go forward together.” The election arithmetic may give significant influence to the Democratic Unionist Party, as their ten seats could provide the Conservatives a chance to govern. Labour leader Jeremy Corbyn has called on Theresa May to resign, and declared himself ready to form the next government.
Meanwhile, French Prime Minister Édouard Phillipe said “I don’t believe that one should read into [the result] as a shift in the position expressed by the British over Brexit.” EU Budget Commissioner Gunther Oettinger said, “We [the EU] are ready. It remains to be seen in the next hours whether the other negotiating side [the UK] can start too because without a government there no [Brexit] negotiations.”
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Prior to polls closing yesterday, Politico reported that Prime Minister Theresa May had instructed UK civil servants to begin preparing an opening negotiating offer on EU citizens’ rights. A senior Whitehall source is quoted as saying, “We have been asked to prepare a big offer for the week following the election. There will be quibbles about the dates [after which new arrangements apply to arrivals from the EU] but fundamentally it’s pretty generous. Just how generous depends on who you are, but the intent is to offer something very generous.” The source said that, while the proposals were being “driven by the Home Secretary,” it would be necessary to secure “cabinet-level clearance” due to the implications for policy covered by other government departments, including benefits through the Department for Work and Pensions, as well as other areas under the Ministry of Justice, the Attorney General’s office and the Cabinet Office.
The European Central Bank yesterday closed the door on reducing interest rates, acknowledging improved economic performance, but warned that inflation is likely to be weak for the foreseeable future. ECB President Mario Draghi said, “We consider that risks to the growth outlook are now broadly balanced,” and, while suggesting that risks of ultra-low inflation had gone, he said, “If these risks were to reappear, we would certainly be ready to lower rates.” The ECB said it now forecast inflation to be 1.5% this year, down from a previous forecast of 1.7% and below its target of 2%, while economic growth is forecast to be 1.9%, up from a previous 1.8% forecast. Eurozone economic performance has enjoyed its strongest period since the financial crash.
Yesterday, the EU, including the UK, approved plans for the so-called Military Planning and Conduct Capability, a new military command centre in Brussels tasked with running foreign training missions in Somalia, Mali, and the Central African Republic. The UK dropped its long-held opposition to the plans, while insisting on the use of legal language that limited its scope, requiring that the new centre will not be called a military headquarters. France and Germany, both strong supporters of the plan, said that the centre should eventually develop into a bigger headquarters to coordinate more efficient European missions. EU High Representative for Foreign Affairs and Security Policy Federica Mogherini said that the decision is “a very important operational decision to strengthen European defence.”
The European Union yesterday set out plans to “reboot” its Capital Markets Union (CMU), a project to strengthen Europe’s financial system by providing sources of financing and investment. The plans come in preparation for London, the region’s biggest financial centre, being outside the bloc, and set out a list of new initiatives. These include creating a more integrated European market in covered bonds, implementing clearer rules on the ownership of securities and claims, and making it easier to invest in private equity. European Commission Vice-President Valdis Dombrovskis said, “The CMU remains at the heart of our efforts to boost European investment and create jobs and growth. As we face the departure of the largest EU financial centre, we are committed to stepping up our efforts to further strengthen and integrate the EU capital markets.”
According to Reuters, Credit Suisse is to cut around 1,500 jobs in London by the end of 2018 in an effort to reduce costs worldwide, taking its London staff to around 5,000. Andreas Venditti, an analyst at Swiss bank Vontobel, said, “For the Swiss banks, it was always important to be in London, not least to be close to your wealthy customers. With Brexit, London has certainly lost some significance.” He added, “For Credit Suisse, which was under pressure to cut costs anyway…the timing is fortunate. Brexit is a good opportunity.”
Bloomberg reports that German Chancellor Angela Merkel and French President Emmanuel Macron are backing Bulgaria to join the European exchange rate mechanism, ERM II, the precursor to adopting the single currency. Following a meeting with Bulgarian Prime Minister, Boyko Borisov, Merkel said, “From our point of view, Bulgaria should be able to participate in everything as quickly as possible,” adding that the EU must foster a “vista of hope” in the Balkans. Macron said he would also support Bulgaria’s bid to join the EU’s visa-free Schengen area.