Europe’s most influential central banker has taken a tough stance against the United Kingdom ahead of it beginning the process of leaving the European Union, while calling for the UK government to lay out its objectives "as soon as possible".
European Central Bank president Mario Draghi made it clear he thought Europe should not weaken the Single Market for the UK’s benefit. He said:
While the UK referendum did create uncertainty as far as the country’s participation in the Single Market is concerned, the Single Market cannot go backwards. It is imperative that its integrity and the homogeneity of rules and their enforcement will be preserved.
Membership of the Single Market gives nations free trade access to all of the member states. Some UK politicians have expressed a desire to remain in the Single Market, but continued membership would likely entail retaining the free movement of people. This could conflict with the desire to limit European immigration.
Answering questions on the EU's quantitative easing programme, Draghi stuck to the ECB's line that it would "assess the various options" at its meeting in December. The ECB has committed to continue buying bonds until March 2017.
On financial regulation, one of the thorniest issues of extricating the UK from the EU, Draghi said that there should be no "backward steps concerning the regulatory, supervisory and oversight framework".
He also described the Single Market as a "fundamental asset and a positive sum game".
According to Draghi, the economic effects of Brexit would "first and foremost" impact the UK economy, while having "limited adverse spillover effects on the euro area".
Draghi focused on the danger of a less open UK in his analysis of the consequences of Brexit.
If, in the long run, the risk of a less open UK economy in terms of trade, migration and foreign direct investment were to materialise, there would be a negative impact on innovation and competition and, thus, productivity and potential output.
Draghi was speaking to the European Parliament’s Committee on Economic and Monetary Affairs in Brussels.