Brussels will act in a “political” manner and could bar the United Kingdom’s financial hub from its markets should Prime Minister Boris Johnson attempt to free the nation from burdensome regulations imposed by the bloc.
The Prime Minister of Croatia, Andrej Plenković, whose country is set to control the EU presidency, warned that the European Union will use access to its financial markets for the City of London as a bargaining chip in upcoming negotiations with Boris Johnson.
“I wouldn’t go into the vocabulary of weapons but what I have learned in international and European negotiations [is] that all arguments and considerations are treated as political,” said Plenković according to The Guardian.
Ursula von der Leyen, the president of the European Commission, backed up the assertion by the Croat leader, threatening that the UK stands to losing access to lucrative financial markets if Johnson does not capitulate on accepting EU regulations.
“We have to find a good balance between divergence and being close to the single market,” she said.
“There is a difference in being a member state and not. And there are trade-offs between regulatory divergence on one side and access to the single market. This room now has to be explored in the coming negotiations. In June we will take stock of the progress,” added von der Leyen.
The UK is scheduled to leave the European Union on January 31st, after which time formal negotiations on future trade can be held during an 11 month transition period in which the UK will remain within the Single Market and subject to EU regulations.
At a meeting with Ursula von der Leyen on Wednesday, Boris Johnson was reported to have said that the UK will be seeking an “ambitious free trade agreement” with the bloc. However, he stressed that under such an arrangement, the UK would not agree to an “alignment” on regulations.
The EU commission president informed Mr Johnson that should the UK seek independence from European regulations, access for the City of London to its financial markets would be on the chopping block.
“The more divergence there is the more distant the partnership has to be. A very important field, financial services — there too, all will change,” she said.
The increased pressure by the EU on financial market access comes in response by many in the City seeing an opportunity for the post-Brexit UK to become a “Singapore on the Thames” financial hub on the doorstep of Europe that, if freed from regulations, could undercut its European counterparts.
This week the europhile outgoing chief of the Bank of England, Mark Carney, came out in support of the UK freeing itself from European regulations.
“It is not desirable at all to align our approaches, to tie our hands and to outsource regulation and effectively supervision of the world’s leading complex financial system to another jurisdiction,” Mr Carney said on Wednesday.
Even the arch-Remainer George Osbourne, the former Chancellor of the Exchequer, admitted that “some freedom to be a globalised financial centre would not be a bad thing”.
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