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The future of an estimated 100,000 jobs has been plunged into doubt after a close political ally of the German chancellor, Angela Merkel, and president of the European commission, Jean-Claude Juncker, warned that a prized sector in the City of London must relocate to EU soil after Brexit.
Manfred Weber, the leader of the centre-right European people’s party – the largest political group in the European parliament, to which both the German chancellor and the commission president belong – said that euro-denominated clearing could no longer be undertaken in the City when the UK leaves the EU.
“EU citizens decide on their own money,” Weber said. “When the UK is leaving the European Union it is not thinkable that at the end the whole euro business is managed in London. This is an external place, this is not an EU place any more. The euro business should be managed on EU soil.”
London’s dominance in the sector has long been a source of contention within the EU, with the French government being particularly aggressive in attempts to get in on the trades.
Britain fought a four-year battle in the courts to block an attempt in 2011 by the European Central Bank to require clearing houses with significant euro-denominated business to be based in the euro zone.
Weber’s comments now make it more likely that the bank will mount a fresh challenge by re-establishing a controversial “location policy” for the euro or by changing regulations.
The British government has sought to lobby that any attempt to split off euro-denominated clearing would not benefit the EU, with business instead drifting to New York.
However, Weber, speaking ahead of a debate on Brexit in the European parliament, said he feared too many British citizens and politicians did not understand the full repercussions of the country’s decision last June.