Brexit Bulletin: EU Seeks Unity While Banks Lobby for Certainty
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European leaders are meeting today without the U.K. for the first time in 43 years, aiming to build a shared vision for their post-Brexit bloc.
The trouble is the vision may be more blurred than shared.
At the summit in Bratislava, Slovakia's capital, some will be looking to deepen integration. Others, particularly those in the east, think the lesson of Brexit is to return power to the capitals. Germany sits in the middle.
The looming Brexit talks, a divisive refugee crisis, the rise of populist parties, differences over how to speed growth and upcoming elections all undermine the ability of governments to unite.
Yet failure to do so risks holding back the economy further and potentially plunging the EU into extended malaise or, worse still, another crisis.
"We need to be united," German Chancellor Angela Merkel told reporters as she arrived. "This is about showing that we can do better through action in the areas of security–internally and externally–fighting terrorism, cooperation on defense, that we can do better in the area of growth and employment."
Economists are worried too. As JPMorgan economists David Mackie and Malcolm Barr told clients in a report yesterday:
"In the absence of a clear sense of direction and purpose the EU is likely to behave defensively and seek to maintain the delicate constellation of political bargains that constitutes the status quo. The lack of vision in the rest of the EU will create problems for the U.K. as it negotiates its exit."
In a piece out today, Bloomberg View's Editorial Board says the EU should be guided by a "hard-headed calculation of its best interests" but should realize that cooperation with Britain is vital. "The EU's leaders should therefore keep the desire to punish under control."
Banks Start Lobbying
The world's biggest banks are appealing to the U.S. and other foreign governments to help them make the case for safeguarding London’s status as an international financial hub in the Brexit negotiations.
Worried that that their industry will be hurt when the U.K. leaves, executives are asking governments to lobby EU policy makers on the importance of London maintaining unfettered access to the bloc, Barclays Chairman John McFarlane said in an interview with Bloomberg's Gavin Finch and Stephen Morris.
"International advocacy would be the term we would use," said McFarlane, who chairs industry lobby group TheCityUK and also sits on a government panel for promoting the financial sector. "It's important."
Separately, U.S. financial industry lobby groups this week wrote to Treasury Secretary Jacob J. Lew to urge him to work with policy makers in the U.K. and EU to help avoid disruption in global markets. They warned that "Brexit, if not managed effectively, represents a significant risk to the financial markets and global economy."
About Those Talks...
So, when will the talks actually get under way? Bloomberg's John Follain is keeping a close eye on Foreign Secretary Boris Johnson, who has been in Italy and met his counterpart, Paolo Gentiloni.
Meeting Gentiloni in Florence on Thursday, Johnson told him formal negotiations will likely begin early next year, according to an official briefed on the conversation.
Johnson, who campaigned for Britain to leave the European Union, met with Paolo Gentiloni in Florence on Thursday, telling reporters afterward that the U.K. “must supply clarity, certainty” on its plans. Gentiloni said, “We need certainty on timings for Brexit.”
Corbyn Looks to Norway
Britain's opposition Labour Party is studying Norway's relationship to the EU as a potential model for Britain.
A member of the European Economic Area, Norway has free trade with the EU yet can still negotiate deals with other countries. The price? Accept the free movement of labor and contribute to the EU budget, both of which are red lines for some in the pro-Brexit camp.
Labour Leader Jeremy Corbyn told Bloomberg Television yesterday that he's dispatching foreign-affairs spokeswoman Emily Thornberry to Oslo to examine how officials there manage ties with the EU.
"Maybe we can learn a lot from Norway," Corbyn said.
On the Markets
Speculation is growing that the "bureaucratic nightmare" of Brexit negotiations (as the Telegraph puts it) will prompt the Bank of England to ease monetary policy once again. That pushed the pound toward its biggest weekly decline in a month.
Key European indexes were all trading lower on Friday, heading for their worst week in three months, with banks leading the move after the U.S. launched a $14 billion claim against Deutsche Bank.
Mark Carney has been taking questions from his toughest interlocutors yet: British schoolchildren.
The night of the Brexit referendum was the worst moment of the Bank of England Governor's career, he told them, who said he felt a "tremendous responsibility" to keep the financial system running. The bank had a "big fat plan," and he needed to make sure it was put in place.
Oh, and the children got one more factoid out of the Canadian: his childhood nicknames... "Carnage" and "Carnival."