Theresa May: We shouldn’t necessarily adopt off-the-shelf models for post-Brexit UK-EU relations
Speaking alongside her Italian counterpart Matteo Renzi in Rome yesterday, UK Prime Minister Theresa May said of UK-EU relations after Brexit, “I think we should be developing the model that suits the UK and the EU – not adopting, necessarily, a model that is on the shelf already.” Asked about the rights of Italians and other EU nationals already living in the UK, May said, “I want to be able to guarantee their rights in the UK. I expect to be able to do that and I intend to be able to do that, to guarantee their rights. The only circumstances in which that would not be possible would be if the rights of British citizens living in other EU member states were not guaranteed.”
Renzi said, “Brexit is Brexit…We can’t now open the discussion whether Brexit is right or wrong. [UK] citizens have voted, and if there were to be consequences that do not correspond to their vote, this would put the credibility of our leadership into question.” He called for “a lot of common sense” and a “clear timeline” for the upcoming UK-EU exit negotiations.
Mrs May will continue her tour of European capitals with visits to Slovakia and Poland today. Open Europe’s Pawel Swidlicki is quoted by Bloomberg as saying, “An absolute red line for Poland is the rights of Poles already in the UK. They would also like some kind of non-discriminatory route for migrants in the future, and for Britain to continue contributing to the EU budget.” He added, “Poland specifically, but more generally Eastern Europe, sees Brexit as an opportunity to put Brussels in its place.”
Sources: The Guardian, The Times, The Sun, Bloomberg , Adnkronos
Mixed signals on the economic impact of Brexit so far
Lloyd’s Banking Group has announced that it will be cutting 3,000 jobs and closing 200 branches, partly due to greater uncertainty following the UK’s vote to leave the EU and the increased likelihood of lower interest rates for longer. Meanwhile, an index of consumer confidence from YouGov and CEBR fell to its lowest level since 2013 and posted the sharpest fall in six years. The CBI also said that retail sales fell sharply between June 28 and July 14, the sharpest fall since the financial crisis, but added that “we should be careful about reading too much too soon” as consumers “err on the side of caution.”
Separately, mortgage lender Nationwide said that house prices grew by 0.5% in July from June, up 5.2% compared to last year, adding that there is yet to be any sign of impact from Brexit but that it may still show up at a later stage. The Royal Institution of Chartered Surveyors said that growth in construction activity slowed following the vote, with growth only seen to be 1% over the next twelve months compared to a forecast of 2.8% at the start of the year.
Car output rose by 10% from June 2015 to June 2016, but the Society of Motor Manufacturers and Traders warned, “These decisions were based on many factors but, primarily, on tariff-free access to the single market, economic stability and record levels of productivity from a highly skilled workforce…To ensure the sector’s continued growth, and with it the thousands of jobs it supports, these must be priorities in future negotiations.”
Separately, McDonald’s has announced that it will create 5,000 new jobs in the UK by the end of 2017. The new Government has also given the go ahead for a £344m expansion of the London City Airport.
Sources: Reuters, The Daily Telegraph, The Guardian
David Frost: Liam Fox may be a virtual minister – but he's vital to Britain's future success
Writing for The Daily Telegraph, David Frost, a former senior UK trade negotiator and Open Europe Advisory Council member, argues that, while EU membership still constrains him, there is a lot that International Trade Secretary Liam Fox “can – and must – get on with.” Frost adds that Fox “should make clear that, although we will have to inherit the EU’s trading rules at the WTO in the short run, we intend rapidly to reduce as many as possible of these tariffs and quotas to zero. That would be a powerful statement of confidence in Britain’s openness to the world and ability to sustain ourselves as a global trader.”
Source: The Daily Telegraph: Frost
Trade body says Irish firms should stick with UK markets despite Brexit vote
The Irish government-backed Enterprise Ireland (EI) group has said Irish firms would be missing out if they opted to look away from the UK market following the Brexit vote, the Irish Independent reports. “Despite understandable concern over the UK’s vote to leave the EU, our nearest neighbours will remain a natural first market for Irish exporters due to proximity, a shared language and similar business cultures”, said Marina Donohoe, EI’s UK and Northern Europe Director, in an update provided to the agency’s client companies.
Source: Irish Independent
European Commission gives Poland three months to address concerns over Constitutional Tribunal
The European Commission yesterday stepped up its dispute with the Polish government over the changes to the country’s Constitutional Tribunal – widely considered to impede its effective functioning – by formally concluding that “there is a systemic threat to the rule of law in Poland” and setting out several concrete recommendations for how these ought to be resolved within a three-month timeframe. The Commission notes that “if there is no satisfactory follow-up within the time limit set, resort can be had to the Article 7 procedure” which, if enforced, could see a member state stripped of its voting rights in the EU Council of Ministers.
A spokesperson for the Polish government described the move as “premature”, given that the Polish parliament only passed a new Act last week intended to address many of the concerns. In an interview with Bild, former Polish Prime Minister and leader of the ruling Law and Justice party, Jaroslaw Kaczynski, says that the Commission’s entire rule of law mechanism is “outside of the scope of the EU Treaties” and is nothing more than “a jolly endeavour for the amusement of the European Commission and its bureaucrats.”
Sources: European Commission press release , Rzeczpospolita, Bild
Spain and Portugal avoid fines for excessive deficit as EU Commission admits fears of negative political fallout
The European Commission yesterday decided not to propose any fines against Spain and Portugal for breaching EU deficit rules. EU Economics Commissioner Pierre Moscovici told reporters in Brussels, “Even symbolic sanctions wouldn’t have allowed us to correct what had happened in the past and would have been hard to understand by populations that have undertaken significant efforts in recent years. A punitive approach we didn’t feel would have been most appropriate at a time when people are questioning Europe.” The Spanish and Portuguese government have also been granted additional time – two years and one year respectively – to bring public deficit below 3% of GDP.
Handelsblatt reports that German Finance Minister Wolfgang Schäuble intervened personally to lobby against the fines. According to high-ranking EU diplomats cited by the newspaper, Schäuble was on the phone with all EU Commissioners from the centre-right European People’s Party (EPP) group – including Germany’s Günther Oettinger. Eurogroup Chairman Jeroen Dijsselbloem said, “It is disappointing that there is no follow-up on the conclusion that Spain and Portugal did not take effective action to consolidate their budgets.” Open Europe’s Vincenzo Scarpetta is quoted by the AFP and Danish daily Politiken as saying that the move to drop the fines “shows that politics trumps the rules at the end of the day.”
Sources: AFP, Politiken , Reuters, The Financial Times, Politico, Handelsblatt
AfD leader: Without radical EU reform, exit question will be raised in Germany
In an interview with the Financial Times, the leader of the German anti-immigration AfD party, Frauke Petry, said, “I think we must finally set a deadline for the EU or all EU governments: if we don’t achieve any radical reforms in five years then the [exit] question will be raised also in Germany.” She predicts other countries may follow Britain out of the EU, including the Netherlands, Denmark and “at some point” Austria. Germany is behind the rest but is “waking up” to the possibility, Petry argues.
Source: The Financial Times: Petry
EBA Chairman “bullish” on capital position of European banks
European Banking Authority Chairman Andrea Enria has said in an interview with the Financial Times that he is “bullish” on the capital position of European banks, although he added, “Does this mean that the banking sector adjustment is over, everything is in good order and we can all go on holiday? Of course not.” He also admitted that the EBA was “lagging behind” US regulators in cleaning up Europe’s banking system. Enria said the decision on where the EBA moves to from London following Brexit will be up to the European Commission.
Source: The Financial Times: Enria
AIG offers European executives ‘Brexit insurance’
US insurance firm AIG is offering ‘Brexit insurance’ to European executives based in the UK. This liability cover would, for example, cover the cost of any legal challenge if the person’s attempt to become a permanent resident failed. The insurance also applies to UK executives in the EU.
Source: The Financial Times
EU Commission believes bankers’ bonus cap is working but admits it could be less burdensome
Bloomberg reports that, according to an internal European Commission document, the EU’s bankers’ bonus cap rules are “working” and have “proven useful tools to curb excessive risk-taking by staff.” However, they could also be made “more proportionate and less burdensome” by exempting smaller firms from the rules.
Source: Bloomberg
Catalan parliament defies Madrid and embarks on path to unilateral secession
Catalonia’s regional parliament yesterday endorsed the conclusions of a report drawn up by a special committee tasked with studying the “constituent process” to secession from Spain. The conclusions note that “there is currently no room for action to recognise the Catalan people’s right to decide within the Spanish constitutional and legal framework” and suggest engaging a process of unilateral “disconnection” from Spain.
This process would involve calling “constituent elections to form a constituent assembly” in charge of writing a Catalan constitution – which would then be put to a referendum. The caretaker government of Mariano Rajoy has already said that it will take legal action against the Catalan regional government at the Spanish Constitutional Court.
Sources: Catalan Parliament, El Mundo, El País
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