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“There is a tendency in the EU still to see the UK as primarily an internal disciplinary matter rather than an external relationship building issue,” he says. “It is not clear they really have a clear vision of what they want their relationship with the UK to be — even though we will be one of their most important trading partners.” [...]
“Brexit is not really about the UK in some ways,” he says. “It has also become a prism through which the 27 see themselves. So France, for instance, sees it as an opportunity to reshape the bloc in a manner that suits its interest.”
As for the government’s hope that concerned German manufacturers might shape the Brexit debate by demanding access to the UK market, Mr Browne is cautious. “German manufacturers are very concerned about the political integrity of the EU,” he says. “Of course they want to trade with the UK, but if it is a choice between that and the risk of weakening the single market, preserving the latter is more important to them.” [...]
He does not think the present logjam will stick forever. The 27 may be united around the EU’s negotiating mandate — especially on getting what he calls the demand for “free money” from Britain to balance the EU budget up to 2020. But beyond that their priorities tend to diverge.
The eastern European countries and the Baltic states are focused heavily on security questions, while those that trade most closely with Britain, such as Ireland, Belgium and Holland, worry more about the disruption that might follow from a hard exit. Both are concerns that, he thinks, make these states sympathetic to the idea of a positive post-Brexit relationship and not one soured by punishment.
Mr Browne points to an April meeting between Ireland, Denmark and the Netherlands, where they discussed the UK negotiation. “They got a ticking off from Merkel for caucusing, which may have struck them as a bit rich given the meeting the original six had immediately after the Brexit vote in 2016,” he says. “It shows that on some of these issues the member states aren’t entirely in the same place.”
Similar divisions cloud the EU’s attitude to financial services. The past nine months have seen a number of countries pitching fiercely for London-based banks and institutions to relocate some of their activities. Most institutions have picked one of Frankfurt, Luxembourg or Dublin as their EU base, although they haven’t yet determined how many people to move there.
“There is a big strategic choice the EU hasn’t yet addressed, which is whether the strategic aim is to establish centres that are complementary to London, or really to supplant it,” he says.
Many of the member states that have succeeded in wooing banks tend to fall naturally into the complementary camp, he thinks. “Dublin and Luxembourg know they aren’t going to replace London but can become very successful satellites,” he says. “But if the EU ever had a financial centre, they wouldn’t be it.”
At the other end of the scale is France. Despite an aggressive marketing pitch that attracted only one large financial institution, HSBC, French officials and politicians remain keen on a deeper realignment with the EU developing its own onshore hub. “There is no way Paris would accept the idea of being an enhanced satellite,” says Mr Browne.
He is hopeful that the advocates of complementarity will win out, not least because Germany is ambivalent about becoming a financial centre, despite attracting a lot of business to Frankfurt. “Berlin didn’t really weigh in behind Frankfurt’s campaign,” he says. “They don’t see big finance as a badge of honour.”
How the debate plays out may determine what sort of deal the City gets from Brexit, on issues such as euro clearing and the access financial groups get to EU customers.
Mr Browne is hopeful a deal can be struck on the basis of “mutual recognition” — a partnership where both sides would accept each other’s rules even if they were not identical. That would be perhaps the most attractive outcome for the UK. But it is also one that, Mr Barnier warned this week was “impossible”. Mutual recognition deals were unacceptable, he claimed, because they would allow Britain to influence the EU’s legal order from outside. [...]
Full article on Financial Times (subscription required)