Merkel: UK’s exit from the EU and its future relationship with it should be discussed in parallel
UK Prime Minister Theresa May and German Chancellor Angela Merkel met in Berlin yesterday. Speaking at a joint press conference, Merkel said that it was "absolutely understandable" that the UK wants to work out its negotiating position before formally triggering Article 50 and beginning exit negotiations, adding that “It is to our advantage to have the UK define its negotiating stance in great detail and clarity and clearly outline how it sees its future relationship with the EU. These have to be parallel processes. You cannot completely cut off the bonds and then after a long, winding negotiating process come up with how one sees the future relationship, so a good negotiating process and a sensible and constructive one is in all of our interests.” Merkel did however also stress that “nobody wants a never ending story.”
May said that “We should strive for a solution which respects the decision of British voters, but also respects the interests of our European partners… Of course, the nature of our relationship is going to change as the UK leaves the EU, but we both want to maintain the closest possible economic relationship between our countries.” Asked specifically about the trade-off between immigration control and market access, she said that the government would deliver control over free movement while also getting the “right deal” on trade in goods and services.
Meanwhile, Luxembourg’s Finance Minister Pierre Gramegna described the UK as an “important commercial and financial partner” and warned that its exit could make the rest of the EU “less attractive” if it doggedly pursued policies that eroded its competitiveness. Gramegna suggested Luxembourg would not block a deal to extend Article 50’s two year negotiating window if an accord had not been reached within that time, adding that it was important that a split was reached by “mutual consent”. He also warned that the UK “cannot have its cake and eat it”. US Treasury Secretary Jack Lew said of the Brexit negotiations, “It is critical for all parties to look at this in a pragmatic way, in a flexible way and in an amicable way.” The Financial Times reports that the UK and EU are looking to agree a set of ‘ground rules’ that would apply during the exit negotiations in a bid to pre-empt misunderstandings or aggressive tactics.
Sources: The Daily Telegraph: Live Blog, The Wall Street Journal, EUObserver, Reuters, Reuters 2, The Daily Telegraph, The Financial Times, Frankfurter Allgemeine Zeitung, Süddeutsche Zeitung
Bank of England does not yet see any evidence of “sharp general” slowdown in UK economy following Brexit
In its summary of business conditions, the Bank of England said yesterday that following the UK’s vote to leave the EU, “As yet, there [is] no clear evidence of a sharp general slowing in activity,” adding that most firms were currently maintaining “business as usual” while figuring out how to respond to the vote. However, it did also warn that, “Following the EU referendum, business uncertainty had risen markedly,” and that “around a third of contacts thought there would be some negative impact on [investment and hiring] over the next twelve months.”
Separately, EasyJet has refused to publish its standard profit forecast due to uncertainty caused by the Brexit vote and recent security concerns in key destinations. According to a survey by the Royal Institute of Chartered Surveyors (RICS), 36% feel that the commercial property market is at the start of a downturn, with 54% saying this is true for the London market.
Sources: Bank of England, Reuters, CityAM
Italian government considers private sector solution for struggling banks as Five Star Movement calls for nationalisation
The Financial Times reports that the Italian government is considering a private sector solution to support Monte dei Paschi di Siena. It would involve using an existing privately backed bank fund to buy up some of the bank’s bad loans. However, the plan would still mean heavy involvement of a state backed bank and as such may still fall foul of EU rules on state support for banks. Meanwhile, Luigi di Maio, the leader of the Five Star Movement, has said “a bail-in now cannot be done” and called on the EU to allow the Italian government to bailout struggling Italian banks and even to nationalise them if necessary.
Sources: The Financial Times, The Financial Times 2
NI Secretary states that Common Travel Area is Brexit priority
Northern Ireland Secretary James Brokenshire has said the future of the Common Travel Area between the UK and Ireland will be a priority in Brexit negotiations. He also moved yesterday to effectively rule out a referendum on Irish unity. Brokenshire told MPs he does not believe that the conditions required to call a border poll have been met. “The conditions are set out very clearly in relation to the Belfast Agreement and I have been very clear that I do not think those conditions have been met,” he said. His comments came after Irish Taoiseach Enda Kenny raised the prospect of a future vote on Irish unity in the wake of Brexit.
Sources: Irish Independent, BBC, The Irish Times
Farage to go on European roadshow to encourage other 'independence' movements
Speaking at the Republic National Convention in Cleveland, outgoing UKIP leader Nigel Farage said he will be going on a tour of Europe later this year and “encouraging other independence movements”. He also added, “If by the 2020 general election, we haven’t got back our territorial fishing waters [and] immigration hasn’t fallen, then if you think you’ve seen fundamental change in British politics over the past month, then you ain’t seen nothing yet.” Farage also said he would be continuing in his role as a member of the European Parliament during the Brexit negotiations.
Source: The Financial Times
European Consumer confidence down post-Brexit
The European Commission said yesterday that a preliminary EU-wide measure of consumer confidence based on its monthly survey fell to minus 7.6 in July from minus 5.8 in June to reach its lowest level since December 2014. For the 19 countries that are members of the Eurozone, the measure fell to minus 7.9 from minus 7.2.
Source: The Wall Street Journal
Estonia to take over rotating EU presidency in place of Britain
Estonia will take over the six month rotating presidency of the EU in the second half of 2017, after Britain gave up its right to do so to concentrate on the forthcoming Brexit negotiations, a spokesperson for the European Council announced on Wednesday. Estonia had been due to follow the UK in the first half 2018, but the spokesperson that, “The solution is that everybody moves forward by half a year.” The agreement still needs formal approval from all EU member states.
Source: Reuters
Turkey declares three-month state of emergency as Erdoğan vows to clear “viruses” within armed forces
Turkish President Recep Tayyip Erdoğan has announced a three-month state of emergency in the wake of a failed coup attempt last week. “The purpose of the declaration of the state of emergency is, in fact, to be able to take the most efficient steps in order to remove this threat as soon as possible, which is a threat to democracy, to the rule of law and to the rights and freedoms of the citizens in our country,” Erdogan said. He guaranteed that all the “viruses” in the armed forces would be cleansed. “It is very similar to a cancer,” he said. “It is like a metastasis that is going on in the body that is Turkey. And we will clean it out.” Meanwhile ratings agency S&P downgraded Turkey’s foreign currency rating to BB from BB+, pushing it further into speculative or “junk” status. It said the medium-term outlook is negative.
Sources: CNN, Frankfurter Allgemeine Zeitung, The Wall Street Journal, Marketwatch
US Treasury Secretary hopes Turkish turmoil will increase urgency on Greek debt relief
US Treasury Secretary Jack Lew has said that he hoped the current turmoil in Turkey “would change the climate in which discussions of [Greek] debt relief happen, just because it’s the right thing to do on its own, and at a time when Greece is in a position [of] geopolitical significance that’s a good time to reinforce their fiscal future.”
Source: The Financial Times
NATO Secretary General: “America, you’re not alone in this fight”
In The Wall Street Journal, NATO Secretary General Jen Stoltenberg notes NATO’s increasing role in combating terrorism in the Middle East and its spread across the Mediterranean, and writes that “America, you are not alone in this fight”. He adds, “Last week, allied leaders went further and agreed to deploy rotating NATO forces in the eastern countries of the alliance. The US, Germany, Canada and the UK will each lead multinational battalions in Poland, Lithuania, Latvia and Estonia. NATO will also increase its presence in southeast Europe, with a multinational brigade in Romania.”
Source: The Wall Street Journal: Stoltenberg
UK set to be bound by new EU emissions targets
The Wall Street Journal reports that the European Commission yesterday unveiled binding greenhouse emission reduction targets for every European Union country from 2021-2030, including for the UK, based on an EU-wide target of reducing emissions by 40% compared to 1990 levels. The targets have been calculated based on the countries’ gross domestic product per capita, their size and the share of agriculture in the overall economy. They range from 0% for the EU’s poorest nation Bulgaria and 40% for Luxembourg and Sweden, which are among the wealthiest countries.
“The sounds we are getting from the UK is that they want to continue with EU climate policies. We’ll know more once [Brexit] negotiations start, but we can’t wait because we have our obligations to Paris, since all countries committed to a speedy ratification and implementation process,” European Commission Vice President Maroš Šefčovič said. “The existing rules on the EU climate change targets still apply and so we will continue to participate in negotiations to ensure we get the best deal for the UK,” a UK Government spokesperson said. Resistance is likely to come from Poland, where the new government had been advocating a 0% target, but for which the commission has calculated a target of 7%.
Source: The Wall Street Journal
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