Britain’s City of London financial district would have to give up its role in processing euro currency transactions after it leaves the European Union, French President François Hollande warned on Wednesday (29 June).
Hollande said other European financial centres should be ready to take over from London, which is home to many banking clearing houses that deal with euros.
“There is no reason for Europe, and still less the eurozone, to allow a country that is no longer a member of the European Union and has never been a member of the eurozone to continue operations in euros,” Hollande said after a summit in Brussels.
Should the UK vote to leave the EU in a future referendum, the decision will have far-reaching and damaging consequences for London’s financial sector, writes Sajjad Karim.
The French leader added that European financial centres should “prepare to take on a certain number of operations that can no longer be done in Britain”.
In a separate interview with French business daily Les Echos, Hollande said France itself should “adapt its regulations, including fiscal (regulations) to make the Paris financial centre more attractive”.
On Tuesday (28 June), the president of Paris Europlace, a group that promotes French finance, met with Finance Minister Michel Spain to suggest ways of boosting the French capital’s ability to woo City bankers.
The Paris stock exchange plans to “assert its strength” to attract international businesses, taking advantage of the potential damage Brexit could do to the City of London, French sources said on Monday (30 May).
Britain’s shock vote last week to leave the EU has sparked questions over its role as Europe’s financial capital, with cities like Frankfurt, home of the European Central Bank, and Dublin also hoping to cash in on any move out of London by financial companies.
The issue of whether euro clearing houses can remain in the British capital is set to be one of the most contentious issues as Britain seeks to negotiate its future trade relationship with the EU after its departure.
Britain has jealously guarded its status and won a recent EU court decision against the European Central Bank in order to keep hosting the euro deals.
Jonathan Hill, a Briton, was the European Commissioner in charge of the coveted financial services portfolio until his resignation on Saturday following the referendum result.
If Britons vote to leave the EU, London’s financial centre faces losing one of its top money spinners – the trade in trillions of euros in derivatives – and the European Central Bank will be pushing hard for the business to move onto its patch.
Single market access
Meanwhile, Britain got its first taste of a future outside the EU on Wednesday as Europe’s leaders met without premier David Cameron and warned London it must accept EU migrants to win access to the bloc’s free trade zone.
The heads of government, meeting without a British representative for the first time in 40 years, said in a statement that Britain would be treated as a “third country” with both “rights and obligations”.
Continued access for to the huge EU single market of 500 million people “requires acceptance of all four freedoms, including freedom of movement,” EU president Donald Tusk told a news conference.
The UK would also have to “contribute financially” to the single market if wants to have access to it, Hollande explained. “Norway, for example, pays a certain amount to access the internal market, it would be the same at a much higher level, for the United Kingdom,” Hollande said at a press conference after the summit.
This is a blow to Brexit campaigners, who promised to restrict large-scale EU migration to Britain while assuring British companies would still be able to easily sell goods and services to the continent.
German Chancellor Angela Merkel has also warned that London cannot not “cherry-pick” the terms of the exit negotiations.
There are also concerns that with Euroscepticism growing in many member states, giving Britain overly favourable divorce terms will spark a domino effect of others leaving the EU.
If it wants access to the bloc’s single market, post-Brexit Britain must accept EU freedom of movement rules and the supremacy of the European Court of Justice, EU diplomats have warned ahead of a vital summit.
- European Council: Statement - Informal meeting at 27 (29 June 2016)