Brexit Bulletin: Europe Battles Back
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Europe is launching its fightback.
German Chancellor Angela Merkel lunches in Berlin with three other EU leaders today, Greek Prime Minister Alexis Tsipras huddles with five southern counterparts in Athens and the region’s finance ministers are together in Bratislava.
They are all looking at how to revamp Europe following the Brexit vote and amid an influx of refugees and record youth unemployment, reports Ian Wishart. Next week will see a heads of government summit in Bratislava, Slovakia, on Sept. 16–the first EU summit since accession in 1973 at which the U.K. won’t be represented.
EU President Donald Tusk summed up the challenge in remarks on Thursday:
“People are worried about the phenomena that seem to be out of control–migration, terrorism, external threats, and the consequences of globalisation. We have to confront those issues and demonstrate our determination and our capacity to ensure on the one hand the openness of Europe and on the other the protection of our citizens.”
Austrian Finance Minister Hans Joerg Schelling told Bloomberg that EU finance ministers need to schedule an extra meeting to prepare for the U.K. negotiations, while the likelihood the U.K. will leave is spurring the EU to take its capital-markets development drive to the next level, said financial-services chief Valdis Dombrovskis. “Deeper capital markets are crucial if we’re to support long-term investment and remain globally competitive,” he said.
Data Beats Expectations
Another batch of good economic data rounded off a week in which Goldman Sachs, Credit Suisse and Morgan Stanley all scrapped their forecasts for a recession.
Construction output was unchanged in July, better than the 0.5 percent decline economists had expected. Separate figures showed the trade deficit narrowing as exports to the European Union surged the most in almost six years.
Pub companies showed a mixed response to the referendum result. JD Weatherspoon reported full-year earnings beat estimates, with pro-Brexit Chairman Tim Martin telling Bloomberg that the U.K. should not insist on striking a trade deal with the rest of the EU. By contrast, rival Greene King Plc said it sees tougher trading ahead because of Brexit uncertainty.
Hammond Heeds Banks
Chancellor of the Exchequer Philip Hammond heeded calls from bankers by making the case for why the EU shouldn’t seek to dismantle the City of London financial district.
Addressing a House of Lords panel on Thursday, Hammond said EU companies that raise funding in London would be hurt if the City’s power were diminished, and he warned that robbing it of clearing services would only raise their cost and drive them to New York.
“London delivers not only for the U.K., but the European Union as a whole,” Hammond said.
Hammond also sought to placate concerns that a crackdown on immigration would deprive banks of foreign talent, insisting there would still be a way to “facilitate movement of highly skilled people.” He named November 23 as the day for the promised “reset” of fiscal policy.
Finance Seeks Timetable
London will keep its status as a global financial center regardless of when Britain leaves the European Union, the CEO of Britain’s second-largest insurer told Bloomberg’s Francine Lacqua.
“It is still a financial hub,” Aviva Chief Executive Officer Mark Wilson said. “Trying to unwind all of that is a pretty tall order and I don’t think that will happen.”
Still, the government must provide finance with more certainty about when it will trigger formal talks to leave the EU, he added.
“What the investment market and us want is certainty of time frame. There is an extraordinary amount of work to do and it’s up to businesses to have a say in that.”
Brexit could mean there are winners in Asia, according to Bloomberg Intelligence economists Fielding Chen and Tom Orlik.
That’s because Britain will be forced to deepen links with Asian trading partners and cut new deals allowing access to each others’ markets. Such a move will throw up opportunities for the likes of China, Japan and Hong Kong who already have the strongest investment, financial, tourist and trading ties to the U.K., the analysts say.
On the Markets
The falling pound means British consumers will be paying more for an iPhone 7.
The base level model and larger-screen iPhone 7 Plus, unveiled in San Francisco this week and available in the U.K. on Sept. 16, will set consumers back £599 ($797) and £719, respectively. That’s up 11 percent and 16 percent from the previous versions announced in September 2015.
Brexit is already providing the U.K. with some economic stimulus. Trade Secretary Liam Fox said he is looking to hire a new top civil servant for his department, while the office of chief Brexit negotiator David Davis revealed it has already spent £256,000 on legal fees.