Anyone who thinks that it will be easy for the EU to grant the UK a bespoke deal on financial services needs to understand what the EU27 thinks is at stake. After all, the Great Financial Crash had its European headquarters in the City of London and has resulted in a re-structuring of the EU’s economic governance rules to give a hugely enhanced role for Eurozone bodies such as the Eurogroup. The crisis forced the whole thrust of financial regulation within the EU to move on from “mutual recognition” – pioneered by UK Commissioner Lord Cockfield in the 1990s – to a single Eurozone regulator such as the Single Supervisory Mechanism for the banking system.
A “Canada plus plus plus” deal – what is in CETA?
So we come back to the EU27’s proposal of Canada’s 'comprehensive and economic trade agreement’ (CETA) deal as the only plausible template. But “Canada plus plus plus” is vulnerable to a much bigger problem – as outlined by the UK Trade Policy Observatory. They argue the EU is likely to reject a bespoke “Canada” trade deal for UK for a very simple and basic reason. “The EU genuinely believes that countries are either in or out of the Single Market, even if it grants a few derogations from the rules to members and gives some non-members member-like market access in a few cases… The Most Favoured Nation (MFN) clause means that any CETA+ commitments made by the EU in an existing or future trade agreement with a third country (e.g. the UK after Brexit) must be
Accordingly, the EU27 Guidelines published in March are very clear: access for financial services will be entirely on EU terms. A bespoke deal for financial services that gives a special mutual recognition with the UK – or even equivalence – is an unrealistic expectation.