EU leaders hint there's little to gain by choking off the City's air in Brexit deal

Christian May
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Dombrovskis extended something of an olive branch to the City in an interview with City A.M.
Dombrovskis extended something of an olive branch to the City in an interview with City A.M. (Source: Getty)

Pragmatism is rearing its head on the continent.

Alongside recent comments from German finance minister Schauble, who has stressed the importance to Europe’s economy of finding a workable and balanced Brexit deal, we can now add EU commissioner Valdis Dombrovskis.

In an exclusive interview with City A.M. today, he says it is not the EU’s aim to punish the UK. Dombrovskis is not a man to give much away but it’s notable that he could have sent a warning to the City ahead of his arrival this morning – instead, he chose to extend something of an olive branch.

Read more: The language of love sweet-talks the City

That’s not to say negotiations will be straightforward, or that the City doesn’t have much to lose in the coming process, but it’s increasingly clear that senior figures both in member states and in the EU’s headquarters recognise just how little it has to gain by choking off the City’s air.

If they squeeze too hard, it will be New York that benefits in place of the smaller, regional financial centres such as Dublin and Frankfurt. Their success post-Brexit is linked to London’s survival as a global financial centre.

Read more: Brexit-ready? Inside Dublin bid to win financial services power from London

Meanwhile, it’s worth remembering that Brexit is just one item on the Commission’s to-do list.

The proposed Capital Markets Union dominates much of their time and thinking, along with a broader question of how open versus how protectionist the EU wants to be. A debate now rages within the EU over what – if any – say the British will have in the ongoing conversations regarding the future of financial regulation and policy on the continent.

Those in the EU who lean more towards the Anglo-Saxon way of thinking are terrified of losing the British voice, whereas those who have never shared an enthusiasm for finance and free markets think we should be shut out of the room already – since we won’t be in the club when new rules and structures come into play.

Read more: Dodd-Frank reform could force UK to loosen financial services regulations

There is little appetite in the City to move away from Europe-wide regulation in financial services, given that many want as smooth a transition as possible to life outside the single market.

With this in mind, it seems likely that British voices will still be part of the conversation on the continent, despite Brexit.

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