PM May’s Pyrrhic victory at Chequers gave support to her ‘soft Brexit’ proposal but at the cost of three of her most vocal ministers. EU officials hinted at flexibility towards the new plan, now that their biggest and most debated project - the banking union - has been put to rest until December.
Graham Bishop/Paula Martín Camargo
Organised by the Centre for the Study of Financial Innovation (CSFI) with co-presenterFiona Wright (Brunswick)This blog covers the key subjects since our last meeting that I hoped to cover but, as always, we ran out of time to deal with them all. As a Friend, you can watch the 34th `structured’ CPD web-cast with CISI. These Notes may be read to record a further 30 minutes of `structured CPD’, including a dipping into the links to the underlying stories.
Highlights from the “Brussels for Breakfast” meeting
We could not avoid the Brexit implications flowing from the Chequers Cabinet meeting but first we reviewed the build-up to the June EU Council meeting. The starting point was the Meseburg Declaration – was the Franco-German motor of the EU springing back to life? The short answer was `not really’. Though President Macron had put forward many ideas, Chancellor Merkel felt too weakened by the election to respond fully. With pushback from the northern EU states grouped in the “Hanseatic League”, the Summit fell well short of the hopes built up in the past few months but some items were agreed by the Euro Summit: agreement to finalise the Banking Union package by year-end, `start works on a roadmap towards’ EDIS and the ESM to provide the backstop to the SRF.
The Chequers statement was discussed in some detail as it was all about “common rulebooks for goods” but stated baldly that regulatory flexibility for services would be retained. So there would not be the current levels of access to EU markets as the plan would not replicate passporting (and equivalence would not last long either). In effect, the City has been thrown into the Thames!
The issues surrounding de-risking banks took quite bit of time. Finally – after decades of trying – insolvency procedures seem to be advancing. The pressure is on to improve processes as a key part of CMU. On the one hand for bondholders, but on the other hand to enable banks to work down their NPLs by gaining control of the collateral. As an example this can take three years in Italy – but there is a wide dispersion between Courts – suggesting States do not need to wait for EU-level legislation before acting to improve matters. [...]
Key issues of the rest of the month included:
Theresa May has managed to get her cabinet on board for the ‘softest of soft Brexits’ – as an economist and prominent Brexiteer denounced in mid-June, after May appeared to see off a Tory rebellion - after the meeting of ministers at Chequers, the UK Prime Minister’s country retreat. But the compromise reached claimed its first victims and threw May’s team into disarray with the resignations of top UK’s Brexit Secretary David Davis, his deputy at the Department for Exiting the EU, and Foreign Secretary Boris Johnson - Davis being replaced by fervent Brexiteer Dominic Raab and Johnson by Remainer Jeremy Hunt.
The British PM had played hardball at Chequers, challenging conflicting members of the toughest Eurosceptic wing within her government to back her ‘soft Brexit’ approach. She ultimately reached an agreement on a so-called ‘free trade area’ that would keep the UK as close to the EU as possible. But will the terms agreed fall within Brussels’ red lines?
As for now, May’s eleventh-hour deal may have averted a split in her warring cabinet by making dissenters quit and everyone else sign up to her plans, but it is far from securing the EU’s approval since it would establish a very special deal for a single third country with the bloc, effectively meaning the cherry-picking of parts of the EU’s four freedoms. The wording of the proposal tries to divert from the single-market access for goods’ bid rejected in its initial form by some EU leaders as a nonstarter: heavyweights like France, Germany and Spain would block any attempt to combine single market membership with immigration curbs, the new Spanish foreign minister warned.
European officials and member states previously expressed their concern about the tortuous progress of the negotiations and the ‘huge, serious divergences’ EU’s Chief Brexit negotiator Michel Barnier warned that still exist between both parts’ plans, and cautiously await for May’s much-vaunted Brexit White Paper, due to be published later this week. [...]
Full article available for clients here
Hover over the blue highlighted
text to view the acronym meaning
over these icons for more information
No Comments for this Article