EU Brexit negotiator warns of risk to financial stability

The European Union’s chief Brexit negotiator warned Saturday the bloc must be aware of the risk to financial stability during what are expected to be very tough talks with Britain.

Earlier, the Guardian newspaper reported that the negotiator, Michel Barnier, had told colleagues the EU would have to strike a “special” deal with Britain’s hugely important finance sector to keep credit flowing in Europe.

In a tweeted message, Barnier said however he had not been talking about an arrangement with the City of London, one of the world’s most important financial markets.

“When asked on equivalence I said: EU would need special vigilance on financial stability risk, not special deal to access the City,” he said in the message.

A European Commission spokesman told AFP on Saturday: “The minutes referred to in the article do not correctly reflect what Mr. Barnier said.”

British and especially international finance houses currently have full access to the European Union’s single market by virture of being based in Britain as a member state.

EU banks enjoy reciprocal rights and the key question is whether this mutual access will continue after Brexit.

British Prime Minister Theresa May has appeared to put the stress on regaining full control over immigration, at the expense of the freedom of movement which the EU regards as one of its core achievements.

May insists she will do her best to ensure full access for British-based banks but Brussels has repeatedly made clear it will not allow London to cherry-pick what it wants in its future relationship with the EU.

Barnier has taken a hard line on the negotiations for Brexit — which May says she will trigger by end-March — and has a reputation in the City of London to match from his time as EU Internal Market and Services Commissioner in 2010-14.

Bank of England chief Mark Carney warned earlier this week that Europe also had much to lose if no deal was reached, given how important London was as a financial market for European companies and governments.

There were “greater financial stability risks on the continent in the short term, for the transition, than there are for the UK,” Carney said.