Schaeuble Sees Difficult Path for U.K. Banks to Retain EU Rights

  • German finance chief to U.K.’s May: muscle-flexing not helpful
  • EU, U.K. shouldn’t start talks by ‘threatening each other’

German Finance Minister Wolfgang Schaeuble said any negotiations for U.K. banks to gain access to the European Union market will be “very difficult” if they lose so-called passporting rights as Britain exits the EU.

In his first response to U.K. Prime Minister Theresa May’s speech on Tuesday outlining her Brexit stance, Schaeuble said Germany and the EU will do their best to make relations between U.K. and Europe as close as possible, recognizing that London “is an important place and will remain an important place” as a global financial center. At the same time, he urged negotiators to avoid shows of force before talks have even started.

Wolfgang Schaeuble at Davos, Jan. 19.

Photographer: Jason Alden/Bloomberg

“The trade agreement doesn’t include financial services,” Schaeuble said on a panel at the World Economic Forum in Davos, Switzerland, on Thursday. “Therefore, to negotiate the adequacy of regulations for financial goods and services and products and the financial markets is a very difficult and sophisticated thing and requires a lot of time.”

May has signaled that a trade accord is her preferred new mode of cooperation with the EU. May, who is also in Davos, plans to meet Wall Street executives to hear concerns that Brexit will cost banks passporting rights, which enable them to sell their services to the rest of the EU from bases in London.

EU officials and member governments have been adamant that leaving the single market removes those rights, which would threaten tens of thousands of jobs in the U.K. financial-services industry. May plans to trigger the Article 50 exit clause, which starts a two-year clock for negotiations, in March.

“We should not start the negotiation with threatening each other,” Schaeuble said in response to questions about May’s speech, in which she warned Europe that rejecting the model she was proposing would be “an act of calamitous self-harm.”

“We know everyone has his muscles,” but those muscles may not be “as strong as they’d like” when it come to negotiations, Schaeuble said.

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