Luxembourg issues warning over ‘no deal’ Brexit

Punishing London to get a ‘chunk’ of the pie is a short term attitude from the EU and will only serve to harm it in the long run, a European financial expert has warned today.

Luxembourg Finance Minister Pierre Gramegna said a “no deal” Brexit would not benefit the EU, but send UK financial services to countries outside Europe.

Luxembourg, like Paris and Frankfurt are currently vying to lure banks, insurers and asset managers from Britain to Europe after Brexit.

But the Finance minister warned against being to short-sighted in its bid to punish Britain and that the City of London must remain the top global financial centre after Brexit to avoid its financial services drifting to other parts of the world.

Punishing London to get a “chunk” of the pie was a very short-term view, and a “no deal” Brexit would not benefit the EU, but send UK financial services to countries outside Europe, Gramegna said.

Britain would then, in a sense, drift away into the Atlantic, he added.

“I find that a balanced final agreement with the UK, specifically for financial services, is in the interests of Europe itself,” Gramegna said.

Britain and the EU have held several meetings to agree a divorce settlement, with too little progress to begin talks on future trading relations.

Gramegna declined to put a figure on Britain’s divorce bill, a key stumbling block.

“What is the value of access to the EU single market? Can you put a figure on that? I cannot. Money is really not what’s the most important,” he said.

As regards Britain’s future trading relations with the EU, he said Switzerland has shown how it could work when it comes to the free movement of people, which many Britons want to curb.

He urged British and EU politicians to “dedramatise” the divorce talks, avoid megaphone diplomacy, and focus on the factual.

“We must be neither complacent, nor try to punish the UK,” he said. Having no trading deal would be bad for both sides.

A transition period between Brexit and new trading terms was needed to reassure business, he said.

“The pressure on companies is much higher than what governments anticipated,” he said.

Financial technology firms in London, for example, have already met with Luxembourg, saying they need access to EU customers after Brexit.

“This is much more of an urgent matter than people think,” Gramegna said.