Diplomatic relations between the UK and EU are fast approaching zero degrees Kelvin.
One day after Theresa May not only cemented, but allowed herself Brexit negotiating breathing room with her stunning, yet cunning decision to announce snap elections which would only boost the leverage of her party, Brussles has retaliated and as the FT reports, Brussels is starting to “systematically shut out British groups from multibillion-euro contracts” while urging companies to migrate to one of the 27 remaining EU members.
The Brussels note suggests that tensions between the UK and EU mey deteriorate to the point where even Bremainers may turn on Brussels:
In an internal memo seen by the Financial Times, top European Commission officials have told staff to avoid “unnecessary additional complications” with Britain before 2019, highlighting an administrative chill that is biting even before Britain leaves the bloc.
It explicitly calls on EU staff to begin encouraging the UK-based private sector to prepare for the “legal repercussions” of Brexit and consider the need “to have an office in the EU” to maintain their operating permits. Agencies are also told to prepare to “disconnect” the UK from sensitive databases, potentially on the day of Brexit.
Michel Barnier, the EU’s chief Brexit negotiator, has dampened hopes for a speedy UK exit and trade deal, warning talks will be bedeviled by details over the next two years.
“Theresa May’s [Article 50] letter seeks a rapid agreement, but quite clearly the devil is going to be in the detail. The six months work I’ve done so far points to that”, said Mr Barnier, addressing MEPs in Strasbourg on Wednesday.
The former French foreign minister, who will be carrying out Brexit negotiations on behalf of the EU, said Britain’s desire to carry out its divorce talks alongside arrangements for a free trade deal was a “very risky approach”.
“We are not proposing this to be tactical or to create difficulties. It is an essential condition to maximise our chances of reaching an agreement together in two years. It is our best chance to build trust before proceeding to the second phase.”
Eurozone 2017 GDP 1.6% vs 1.5% prior. 2018 1.8% vs 1.7% prior
Eurozone inflation 2017 1.7% vs 1.4% prior. 2018 1.4% unch
Eurozone unemployment 2017 9.6% vs 10.0% in 2016. 2018 9.1%
Eurozone aggregate budget deficit 2017 1.4% vs 1.7% in 2016. 2018 1.4%
Eurozone government debt 2017 90.4% vs 91.5% in 2016. 2018 89.2%
They see every EU member state growing in 2016/17 & 18.
For some reason Reuters has specifically noted that the EC see UK growth this year at 1.5% vs 2.0% last year, and at 1.2% in 2018. Official UK forecasts are 2.0% & 1.6% for those periods. Is the EC trying to say something? 😉
German investment to slow to 2.1% in 2017 vs 2.5% in 2016. 2018 2.5%
France budget def 2.9% of GDP 2017 vs 3.3% 2016. To rise above EC target again in 2018
Spain budget def 3.5% 2017 vs 4.7% 2016. 2018 2.9%
In the shadow of Donald Trump’s spree of controversial actions, the European commission has quietly launched the next offensive in the war on cash. These unelected bureaucrats have boldly asserted their intention to crack down on paper transactions across the E.U. and solidify a trend that has been gaining momentum for years.
The financial uncertainty amplified by Brexit has incentivized governments throughout Europe to seize further control over their banking systems. France and Spain have already criminalized cash transactions above a certain limit, but now the commission has unilaterally established new regulations that will affect the entire union. The fear of physical money flowing out of the trade bloc has manifested a draconian response from the State.
The European Action Plan doesn’t mention a specific dollar amount for restrictions, but as expected, their reasoning for the move is to thwart money laundering and the financing of terrorism. Border checks between countries have already been bolstered to help implement these new standards on hard assets. Although these end goals are plausible, there are other clear motivations for governments to target paper money that aren’t as noble.
On Friday, the US Commerce Department announced its plans to raise import tariffs for the Chinese stainless steel products from 63 percent to 190 percent citing a probe that found they were selling on US market at dumping-level price.
“China is disappointed that the United States continued to launch high taxes on Chinese steel export products and calls into question the unfair way the US conducted its investigation,” Wang said, as quoted by the South China Morning Post newspaper.
The United States did not take into the account the evidence previously submitted by the Chinese steel manufacturers and avoided cooperation with the Chinese government, violating the rules of the World Trade Organisation (WTO), the Chinese official underlined.
This is a second blow for the Chinese steel importers in the recent months. The European Commission imposed in January anti-dumping duties on Chinese stainless steel tubes and pipe butt-welding fittings to protect its industry from steel overcapacity.
According the European Commission, Chinese imports will be taxed with duties ranging from 30.7 to 64.9 as its investigation commission confirmed that Chinese stainless steel products had been sold in Europe at dumping prices.
The Greek government has just three weeks to secure a deal with the European Commission, the European Central Bank and the International Monetary Fund, to avoid the possibility of a Greek exit from the EU and a fresh debt crisis. Radio Sputnik discussed this with Dr. Marina Prentoulis, a senior lecturer at the University of East Anglia.
When asked whether there was any chance of a compromise that would appease both creditors and Greece, Marina Prentoulis said that the situation hasn’t changed since the first round of negotiations.
“There are different political forces involved and the creditors insist on the implementation of additional austerity measures. One thing the IMF doesn’t want to understand is that these measures have already had a catastrophic effect on Greece and also on the future of the European Union,” she noted.
Meanwhile, it looks like the Greek government is taking advantage of the political instability in the EU to secure a better deal for itself, knowing that if the country enters another debt crisis it could destabilize the already fragile EU.
After two previous taxpayer funded bailouts, and nearly five months of foreplay since the third largest Italian bank failed the latest European stress test at the end of July, in which the Italian government in September vow that “bailout for Italian banks has been ‘absolutely’ ruled out”, a third bailout, as we previewed earlier today, is now imminent.
According to Reuters, which cites two sources, Italy is preparing to take a €2 billion controlling stake in Monte Paschi as the bank’s hopes of a private funding rescue have faded after a fruitless five month search to secure an anchor investor, following Prime Minister Matteo Renzi’s decision to quit.
The government, which is already the ailing bank’s single largest shareholder with a four percent share, is planning do a debt-for-equity swap, and buy junior bonds held by ordinary Italians to take the stake up to 40%, the sources said. The bonds would then be equitized, converting the government’s bond stake into pure equity ownership, a troubling approach as it would effectively wipe out the existing equity tranche and position the bank for a potential bankruptcy fight in court where the government faces off with the equity committee.
This transaction would make the government by far the biggest shareholder, meaning the Treasury would be able to control Italy’s third biggest bank and its shareholder meetings, or in other words, the bank would be nationalized.
The sources said a government decree authorizing the deal, which would see the state buy the subordinated bonds from retail investors and convert them into shares, could be rushed through as early as this weekend. Italy’s treasury would buy the bonds held by around 40,000 retail investors at face value, the sources said.
The European Commission warned today that eight euro area countries are at risk of missing targets for repairing their public finances, as it published assessments of governments’ draft 2017 budget plans.
Brussels said that Belgium, Italy, Cyprus, Lithuania, Slovenia, Finland, Spain and Portugal were all “at risk of non-compliance,” although it acknowledged mitigating circumstances in certain cases.
The Commission nevertheless noted that both Spain and Portugal have outlined steps to rein in their budget deficits since a clash earlier this year with EU authorities.
Reuters reporting that the announcement will be made at 10.00 GMT Thursday
Further to my earlier post where reader Biscotti and FXL gave you the heads up that a ruling could be made tomorrow.
Reuters now reporting a tweet from a lawyer sitting on the case
London’s High Court will deliver its verdict on Thursday on whether British lawmakers, rather than the government, must trigger the formal process of leaving the European Union, lawyers involved in the case said.
The court heard a challenge last month from campaigners who argue Prime Minister Theresa May and her ministers do not have the authority to invoke Article 50 of the EU Lisbon Treaty, the mechanism by which a nation can leave the bloc, without the explicit backing of parliament.
Nicely timed to hit the markets before we get the latest BOE decision.
Bring it on!
Meanwhile GBPUSD has blown up through to 1.2328 helped by softer US ADP data. Offers up there and more into 1.2350 Large option interest at 1.2360