EU Trade Commissioner says UK would have to revert to WTO rules between finalising exit talks and agreeing new UK-EU trade deal

In an interview with BBC Newsnight, European Trade Commissioner Cecilia Malmström said that once Article 50 of the EU Treaties is triggered, the subsequent negotiations will only cover the terms of the UK’s exit from the EU, and then the UK and EU would hold a second round of negotiations to determine their new trading relationship. After Brexit, the UK would become a “third country” in EU terms, she said – meaning trade would be carried out based on World Trade Organisation rules until a new deal was complete. She acknowledged that this would also be damaging for EU economies, but added that “the vote was very clear.”

Meanwhile, Irish Prime Minister Enda Kenny stated, “There will be no negotiations between the UK and EU until such time as the Commission is informed by Britain of the intention to withdraw from the Union. The clock starts to tick then…The period then, is a two year period for those negotiations. There may be a short extension given to that towards the end. If it’s not concluded within that time then it automatically moves on to World Trade Organisation conditions for trade and so on. What’s best for Ireland’s interests is that the UK would still have access to the single market.”

German Vice-Chancellor Sigmar Gabriel reiterated the German government’s position that there cannot be any “cherry-picking” in the UK-EU exit negotiations, adding, “Whoever does not want to belong to the EU anymore can no longer make use of the associated benefits.”

Slovak Foreign Minister Miroslav Lajčák told reporters in Bratislava, “I would support any measure that will help reverse the position of the British people, which we have to respect but also regret. I deeply regret it – an EU with a UK is a better EU – but it’s in the hands of the British people and politicians.” Meanwhile, the country’s Prime Minister, Robert Fico, also suggested that Slovakia could help broker a ‘velvet divorce’ between Scotland and the rest of the UK in the event of Scottish independence, adding that “Slovaks and Czechs have a unique experience of peaceful separation and we are willing to share our experience with anyone who is interested.”

Open Europe’s Stephen Booth appeared on Ireland’s RTE Prime Time show discussing Britain’s post-Brexit trade options with the EU, while Open Europe’s Nina Schick appeared on Dutch public TV’s flagship political show Nieuwsuur discussing the political fallout in Westminster and on Bloomberg’s What’d You Miss programme arguing that the UK’s exit will make the EU more protectionist and more likely to rally around the euro.

Carney suggests further monetary policy easing is on the cards following Brexit

Bank of England Governor Mark Carney said yesterday, “In my view, and I am not prejudging the views of the other independent Monetary Policy Committee members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer…In August, we will also discuss further the range of instruments at our disposal.” However, Carney also warned that the Bank of England could not do everything and said the UK’s growth prospects would be driven by “much bigger decisions; by bigger plans that are being formulated by others.” The Pound fell by over 1% against the US Dollar in response to the prospect of further easing.

Meanwhile, Douglas Flint, chairman of HSBC, has rebuffed suggestions that Paris, Frankfurt or any other EU financial hubs would easily be able to steal business from London, saying, “Markets go where the expertise and liquidity are…It is not a question of saying, ‘Please take us’. It is a question of saying, ‘We’ve got something of great benefit to you’.” He also confirmed that HSBC would stick to plans to keep its headquarters in London.

Source: Bank of England The Financial Times Reuters Bloomberg The Times

Boris Johnson makes surprise decision to pull out of Tory leadership race

Boris Johnson yesterday shocked supporters by pulling out of the Conservative Party leadership contest. The move came after Justice Secretary Michael Gove announced his intention to stand and his belief that Johnson is unfit for the job of Prime Minister. Bookmakers have made Theresa May the favourite at 8/13, Gove second at 10/3 and Energy Minister Andrea Leadsom third favourite at 4/1. Work and Pensions Secretary Stephen Crabb and former Defence Secretary Liam Fox remain outsiders.

The Times reports that it was claimed last night that Johnson offered to pull out of the race in return for an assurance from Theresa May that she would stand down before the 2020 election. Separately, The Daily Mail argues in a leader today, “For the sake of a Conservative Party that is at risk of imploding and a normally tolerant Britain that is currently so divided, this paper believes MPs and the nation should unite behind Mrs May as quickly as possible. The need for a new era of cleaner, more honest, gimmick-free politics has never been greater.”

Source: The Financial Times The Times The Daily Telegraph

Police pledge to deal with 400% increase in hate crimes after Brexit vote

The Times notes that reports of hate crime have increased by more than 400% in the week since the UK voted to leave the EU, police revealed yesterday. The 331 incidents reported to True Vision, an online police portal, were more than five times the weekly average of 63, according to the National Police Chiefs Council (NPCC).

Source: The Times Reuters

Die Welt: Juncker “does not give a damn” about European democracy

Die Welt’s political commentator Alan Posener writes in a front page editorial, “Juncker is not fit for office…The President of the European Commission does not give a damn about European democracy.” The article follows the European Commission’s decision that CETA, the recently concluded EU-Canada free trade deal, does not need to be ratified by the national parliaments of the 27 member states.

Meanwhile, Czech Foreign Minister Lubomir Zaoralek writes in the Financial Times, “It is tempting to pin all blame on the recklessness of British politicians and voters. But it would be dishonest. After all, Brexit is a symptom of a wider crisis of trust and the collapse of the EU’s political capital.” He goes on to argue, “The Brussels institutions, in particular the European Commission, share some of the blame [for Brexit]. The bodies that are meant to instil a sense of common purpose have become symbols of alienation. Instead of protecting the unity of the EU, they have contributed to national division and public mistrust, especially in their response to the refugee crisis.”

Source: Die Welt: Posener The Financial Times: Zaoralek

New poll: 62% of German voters want EU to hand powers back to member states

An Emnid poll for German TV channel N24 has found that 62% of German voters think the EU should hand powers back to member states. A third of voters said that more powers should be handed to the EU, while 8% favour the break-up of the bloc. 45% of voters under the age of 30 said that they did not believe that Brexit would happen.

Source: Die Welt

New poll: Five-Star Movement would win a general election in Italy

According to a new Demos poll for La Repubblica, Italy’s anti-euro Five-Star Movement would win a general election under the country’s new electoral law. The Five-Star Movement would beat Prime Minister Matteo Renzi’s Democratic Party in the second round of a general election by 54.7% to 45.3%. In a run-off between the Five-Star Movement and a centre-right coalition comprised of Lega Nord and Silvio Berlusconi’s Forza Italia, the former would win by 59.3% to 40.7%. The poll also puts Renzi’s current approval rating at 40%. It was 64% when he entered office in February 2014, and had peaked at 74% in June 2014.

Source: Open Europe Blog La Repubblica Demos poll

New poll: Juppé maintains clear lead in contest for French centre-right presidential nomination

According to a new TNS Sofres poll for Le Figaro, former French Prime Minister Alain Juppé would win the first round of the preliminary ballot to select the centre-right candidate for next year’s presidential election with 37% of the vote – followed by former French President Nicolas Sarkozy on 30%. In the second round, Juppé would comfortably beat Sarkozy by 62% to 38%.

Source: Open Europe Blog Le Figaro

Poll suggests Corbyn has slim lead among Labour members in leadership contest

A YouGov poll for The Times has found that 50% of Labour party members say they would support incumbent leader Jeremy Corbyn in a new leadership contest, compared to 47% who say they would not. A previous poll in May showed 64% supporting him.

Source: The Times Reuters

Slovak PM wants greater role for newer EU member states and a lesser one for the Commission

Slovakia is set to take over the rotating presidency of the EU Council of Ministers, with Slovak Prime Minister Robert Fico saying that the bloc will have to “redefine” unsuccessful policies – particularly on immigration. He called for the newer EU member states to have a greater say, arguing, “The crucial decisions on the future of Europe cannot be defined by the decisions of one or two member states, or by the founding member states…Policy should be driven by the member states and the [European] Commission should turn it into legislation.”

Source: BBC News The Wall Street Journal The Slovak Spectator

Eurozone bailout chief suggests multi-currency EU harder without the UK but warns more Europe must not always be the answer

Klaus Regling, head of the ESM, the Eurozone’s bailout fund, told German weekly Wirtschaftswoche that, if the UK does really leave the EU, almost all EU countries will have to eventually join the euro. However, he also warned that “more Europe” cannot be the general answer now, since even before the UK vote many citizens did not want more Europe. Separately, Regling also expressed concerns about the Portuguese economy – as the current left-wing government is rolling back some of the economic reforms implemented by its predecessor.

Source: Wirtschaftswoche: Regling

European Commission approves Italian government’s liquidity support for Italian banks

The European Commission on Sunday approved liquidity support from the Italian government for its banking system in the wake of the UK’s vote to leave the EU. The programme includes €150bn in government guarantees. It will run to the end of the year and mirrors systems already in place in other states, with only solvent banks being eligible. It is not clear if the system has been tapped yet or will be. The liquidity support is separate to previously reported plans by the Italian government to inject €40bn of capital into its banks.

Source: The Wall Street Journal

Conflicting reports over potential next steps for the ECB in response to Brexit

Reuters reports that, according to unnamed sources, the ECB is not considering removing the restriction that sovereign bond purchases must be proportional to the capital key of the ECB. It cites a source as saying that it is “not on the agenda now” and any changes to the bond purchases would be “quite technical”, whereas the capital key requirement is “political”. This follows a report from Bloomberg yesterday, which suggested that the ECB was considering shifting the shares of debt bought from the capital key to the proportions of total outstanding government debt of Eurozone countries.

Source: Reuters Bloomberg

S&P downgrades the EU

Standard & Poor’s yesterday downgraded the EU’s credit rating from AA+ to AA following the UK’s vote to leave the EU. The rating agency said, “Going forward, revenue forecasting, long-term capital planning, and adjustments to key financial buffers of the EU will be subject to greater uncertainty.”

Source: Bloomberg

David Frost: Don’t panic, here’s how Brexit can make Britain a great trading nation

David Frost, CEO of the Scotch Whisky Association and a member of Open Europe’s Advisory Council, writes in an op-ed for The Daily Telegraph that, in the wake of the UK’s vote to leave the EU, “The only collapse is among commentators whose world view has disintegrated and experts whose expertise is suddenly a lot less valuable. They should stop flapping. The country is carrying on and is no more ungoverned than it is during a general election campaign.”

He goes on to argue, “There is a solution. It is to go for Norway status for now, but explicitly as a transitional arrangement. We should say that we intend, after exit, to retain this status for say five years and to use that period to reflect and if necessary negotiate a Free Trade Agreement like Canada’s, if that is what we want to do, or to keep Norway status if we don’t.”

He concludes, “Don’t rush, prepare well, and start to act for ourselves again. And let’s be positive. A new chapter is opening in our national story. We are a great country – all of us: all of our political parties, all of our nations. Whatever we do, we are going to be successful. Let’s make it happen.”

David writes in a personal capacity.

Leave a Reply