Banker dismisses Brexit threat to EU

Banker dismisses Brexit threat to EU

The City of London is feeling the heat. Source: Wikipedia

A German central banker is claiming that the European economy will emerge from the UK’s departure largely unscathed and has criticised British Prime Minister Theresa May’s attack on the Bank of England’s response to the Brexit vote.

Andreas Dombret of the Bundesbank’s executive board said that he did not believe that “if Brexit hampered the banking sector, it might impair the financing of the European economy”.

He told the British Bankers’ Association: “Brexit and its possible repercussions for the City of London [the financial district] are unlikely to be an issue for financial stability or the financing of the EU’s real economy.”

In reference to the argument between May and Mark Carney, the central bank’s governor, Dombret issued “a friendly reminder that central bank independence is not debatable”.

Earlier in October, the prime minister criticised the bank’s reaction to the Brexit vote by warning that there were “bad side effects” from quantitative easing and minimal interest rates. Carney said he would not “take instruction” from politicians.

The UK’s “minister for Brexit”, David Davis, has admitted employers face a damaging “cliff edge” if Britain misses its two-year deadline for striking a new EU trade agreement.

Davis told Parliament that he agreed with Labour MP Emma Reynolds who outlined the dangers if exporters were forced to “fall back on WTO rules” in 2019, after the two-year process to leave the bloc ended.

Business representatives have warned that defaulting to trading by World Trade Organisation rules would leave 90 per cent of trade with the remaining members of the EU subject to higher tariffs.

That would mean 20 per cent in extra costs for the British food and drink industry and 10 per cent for car producers, the Confederation of British Industry and the EEF, a manufacturers’ organisation, argued in an open letter.

Reynolds challenged Davis that other EU members had yet to agree to trade talks alongside the two-year Article 50 exit talks.

The Labour front bencher said: “The truth is that business are concerned that we are going to have to fall back on WTO rules.

“What, therefore, [are you] going to do to avoid the cliff edge in March 2019, when we leave the European Union, possibly falling out of the EU single market and falling back on WTO rules?” she asked Davis.

Davis replied: “She’s quite right that we need to conclude this within the two years to avoid any cliff edge.”

It marks the first time a cabinet minister has acknowledged the “cliff edge” threat if Britain is unable to agree on new trading arrangements before the two-year window closes.

Davis claimed that transitional arrangements were under discussion to protect London’s financial sector and “all possible options” were being explored.

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