According to Luc Frieden, who has held several portfolios within the Luxembourg cabinet over the past few decades, U.K. financial services firms will definitely not be able to carry on business as normal within the European Union (EU) after it leaves the bloc.
“We need a strong partnership with the United Kingdom, it’s our neighbor and it’s going to remain an important financial services center. Yet at the same time, ‘out’ is not ‘in’ and therefore I think the United Kingdom must know that it’s not going to benefit anymore over the passporting rights it used to have,” Luc Frieden said on Friday in Luxembourg.
“So with those two pillars, I think in between a deal can be found but it will be very difficult and it will take a lot of time,” he added, noting that he anticipated the just over 18 months remaining on the timeline was wholly unrealistic.
Running of operations and offering of services throughout the European Economic Area (which consists of the EU member states as well as Norway, Iceland and Lichtenstein) are allowed by the so-called passporting rights for financial services firms within the EU.
And been flagged as a key discussion topic for exit negotiations is the question of the country’s ability to hold onto these rights once it has left the trading bloc given the U.K. economy’s weighty dependence on financial services.
Yet, the example of Switzerland when he asserts that the U.K. will not be able to maintain these benefits is pointed out by Frieden, who has, at various times, served as Luxembourg’s Minister for several portfolios including Finance, Defence, Justice and Treasury and Budget.
“I think the United Kingdom can in no way get this passport in the future. Look at the Swiss. The Swiss have always asked for this and they’ve never got it,” he declared.
“In these negotiations we always have to keep in mind that we have a partner and a friend that is Switzerland. So these negotiations – Brexit – and the ongoing negotiations with Switzerland have to be kept in mind and have to develop in parallel,” Frieden explained.
With some circles around it, he believes there should be a core Europe which resembles a much more federalist structure, Frieden says while articulating his vision for the future of the trading bloc. The outer circle will be for countries such as the U.K. and Switzerland where the ties are much looser and the core inner circle that could represent countries within the single market.
“A kind of Olympic Rings model for the European Union is probably the most realistic one. It’s not an ‘a la carte’ as that will be too chaotic,” he opined.
Frieden said that now is the time for member states to seize upon the momentum and deepen their internal relations, speaking to the renewed vigor in the union since the May election of French President Emmanuel Macron who ran on a strongly pro-European platform.
“Suddenly Europe becomes again something positive. People dare to talk about Europe,” he affirmed.
(Adapted from CNBC)