Brexit Bulletin: Tusk Gets Green Light
European Union President Donald Tusk’s draft negotiating guidelines emerged unscathed from their first review by national governments.
Aides to the EU’s 27 remaining leaders backed his tough language at a meeting in Brussels on Tuesday, according to five diplomats with knowledge of the discussions.
The meeting focused on the rights of EU citizens already in the U.K. and the exit bill the EU wants to impose, with some states calling for the language on both to be toughened up. There was no attempt to remove the line that no deal between the U.K. and the EU will apply to Gibraltar without Spain’s agreement, Ian Wishart and Esteban Duarte report.
The guidelines are due to be approved by EU leaders when they meet on April 29. The preparations will continue in the week before that: Officials are scheduled to meet again April 24 and Brussels-based diplomats will hold technical talks April 26, before European affairs ministers finalize the draft on April 27.
Even after those meetings, meaningful talks may take a while to begin because of elections in France and then Germany.
Although the French presidential vote will be wrapped up by the end of May, Germans don’t elect a new lower house of parliament until Sept. 24. And while the vote crowns the electoral calendar, political horse-trading doesn’t stop there, according to Bloomberg’s Eddie Buckle.
No single party has won a German parliamentary majority since World War II, so a multiparty coalition is always needed. Since Germany was reunified in 1990, it has taken an average of a month and a half after an election to form a coalition government.
“It is likely that no real discussions over Britain’s withdrawal from the EU will take place until after November this year,” said Alex de Ruyter, director of the Centre for Brexit Studies at Birmingham City University
Banks Put on Notice
The European Central Bank has a message for banks planning to swap London for the continent: attempts to game the rules won’t work.
Banks looking to shift to mainland Europe may have to wait six months for a licence, the ECB said. The warning underlines how the central bank’s supervisory arm plans to prevent lenders taking advantage of the rules, or seeking to be regulated by the least demanding supervisor.
“The governance and risk management mechanisms should be commensurate with the nature, scale and complexity of the business and fully comply with European legislation,” the ECB said in a report. “Establishing an ‘empty shell’ company would not be acceptable.”
Meantime, the European Securities and Markets Authority on Tuesday bid for broader powers to manage bank moves related to Brexit, and Handelsblatt reported that the EU wants to make a swift decision on the European Banking Authority’s relocation from London. In the latest relocation news, Credit Suisse may apply for a full banking license in Ireland, according to the Irish Times.
While several banks are eying the exits from London, employment agency Robert Walters said that there had been a “notable upturn” in hiring at home. A lot of the new positions have been in specialist areas including risk management, cyber security and investment management, it said.
“I suspect the banks, like everybody else, have got a bit bored with Brexit, and it’s business as usual,” said Chief Executive Officer Robert Walters.
On the Markets
The cost of hedging against declines in the Euro Stoxx 50 Index has surged to its highest level since June’s Brexit referendum as investors race to protect gains before the first round of the French presidential elections. A gauge tracking volatility expectations for equities has also climbed for 10 straight days, the longest streak since November.
For more on France’s election, check out Bloomberg’s graphical guide.
- Foreign governments such as Russia and China may have been responsible for a crash in the U.K.’s voter registration website in the weeks before the Brexit referendum, according to Parliament’s Public Administration Committee
- Chancellor of the Exchequer Philip Hammond will say on Wednesday that the U.K. must continue to attract “the brightest and the best” from abroad and chase new business in booming financial technology to boost its economy after Brexit
- Scottish First Minister Nicola Sturgeon says she wants voters to make an informed choice on whether to accept Brexit as she tries to build the case for another independence referendum
- The bilateral trade deals Prime Minister Theresa May hopes to land with big countries such as China and the U.S. may leave the U.K. worse off. Kwok Tong Soo of Lancaster University found that there is a positive relationship between the size of an economy and the relative price of exports to imports. So the larger a country is, the more it can charge for its exports, which would cost the U.K.
- Brexit could hurt international supply chains, which would make economies more prone to inflation when unemployment declines, according to Goldman Sachs economist Timothy Munday
- American Express says survey of 100 U.K. chief financial officers found most planning to increase investment despite uncertainty
- The U.K. must do more to link its industrial strategy to the Brexit negotiations, says a committee of lawmakers.
The government rejected a bid to grant the Loch Ness monster permanent U.K. residency after Brexit. According to the Daily Mail, a group of artists from Glasgow filled out the application for Nessie amid concern the beast might want to “leave the U.K. to settle in a new lake within the EU” after Brexit. They paid a £65 fee and sent passport pictures of the elusive creature, but the Home Office rejected the application as “inappropriate.”