UK's Hammond And Davis Risk Brexit Tensions In Direct Appeal To Berlin

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UK's Hammond And Davis Risk Brexit Tensions In Direct Appeal To Berlin

Germany will demand the United Kingdom pay for the privilege of its financial firms having access to European Union markets after Brexit as Chancellor Angela Merkel's government maintains a hard-line stance against a bespoke trade deal.

In a joint article for German newspaper Frankfurter Allgemeine Zeitung published the same day, Hammond and Davis said they want a trade deal covering financial services to ensure that after the 2008 crash, "we do not put that hard-earned financial stability at risk".

But as the two senior ministers landed Brussels' chief Brexit negotiator Michel Barnier urged European companies with commercial links to the United Kingdom to start preparing for increased "friction" in trade.

The chancellor and Brexit secretary travel to Germany on Wednesday on a charm offensive they hope will shift the EU's implacable opposition to services being included in a final deal.

"This trade data won't exactly help United Kingdom plc in negotiations with Europe, as we begin crucial trade talks in earnest this year and with the Brexit deadline looming large", said Jacob Deppe, head of trading at online trading platform Infinox.

They said that work on ensuring that financial authorities worldwide can cooperate in setting rules and supervising large companies "shouldn't end because the U.K.is leaving the European Union".

Prime Minister Theresa May's government regards Germany's stance as crucial - both Chancellor of the Exchequer Philip Hammond and Brexit Secretary David Davis are due in Germany on Wednesday to meet business groups and make the case for a wide-ranging Brexit deal.

"We understand that Germany and other European Union countries want to protect the integrity of the single market, and that without all the obligations of European Union membership third countries can not have all the benefits", they wrote.

David Davis
David Davis

Hammond and Davis see financial services and the banking sector as part of their proposed new model of comprehensive economic cooperation.

Hammond and Davis said Britain was seeking a deal that "supports collaboration within the European banking sector, rather than forcing it to fragment".

Non-EU countries Norway and Switzerland do have access to Europe's financial services market, but they pay for the privilege. There is not a single trade agreement that is open to financial services.

Barnier added the outcome was the result of "the red lines that the British have chosen themselves".

In the joint article the two Cabinet ministers acknowledged that Germany and other European Union members want to protect the integrity of the single market "and that without all the obligations of European Union membership third countries can not have all the benefits".

He told reporters in Berlin that maintaining the unity of the EU's other 27 members remains "of paramount importance" and that will continue to be Germany's "focus". "Those priorities are not inconsistent with ours - a deep and special partnership with our closest trading partners and allies".

Chaperoned by Philip Hammond, the Brexit Secretary warned the European Union not to put "unnecessary barriers" to trade in goods and services between the bloc and the United Kingdom after Brexit.

The EU could treat some British financial regulation as equivalent to EU law after Brexit, but would not give financial firms a general "passport" to do business in the single market, Barnier said on Tuesday.

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