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UK Prime Minister Theresa May woos Wall Street

Tuesday, September 20, 2016 - 15:19
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Theresa May isn't feeling the chilly winds blowing in from eastern Europe.

[LONDON] Theresa May isn't feeling the chilly winds blowing in from eastern Europe.

After Poland on Monday joined a string of neighbours in warning they might veto a Brexit deal, the prime minister dismissed the threats by saying it's in everyone's interest to reach an agreement. 

The 27 EU countries "will sign up to a deal with us," Mrs May told reporters en route to New York. 

"A good deal for the UK can also be a good deal for the other member states. I believe in good trading relations."

Polish Deputy Foreign Minister Minister Konrad Szymanski said Monday that he won't support a pact that's not "balanced".

That came after Slovak Prime Minister Robert Fico said his country, along with Hungary, Poland and the Czechs, were ready to block any deal which gave Britain access to the EU single market while ending the right of their citizens to move to the UK.

British Trade Secretary Liam Fox was also on a charm offensive on Monday, promising an audience in Dubai that the aim was to ensure Brexit meant "minimal disruption" for the rest of the EU.

Mrs May last night used a New York meeting of executives from major US companies to assure them that Brexit shouldn't be a reason to withdraw investment from the UK.

Among the companies she met: Goldman Sachs, Morgan Stanley and BlackRock.

Many US companies find Britain an attractive place to base their European operations, but the country's vote to quit the EU could jeopardise that.

While at the United Nations General Assembly, she hopes to talk about aviation security, migration and modern slavery. But she's also put two business events into her schedule. 

"Something like a million people in the UK wake up each morning and then go to work for an American company," Mrs May told reporters traveling on her plane.

"I will be talking to them and hearing from them what their emphasis is in terms of the issues they want us to address."

For all Mrs May's resolve, the warnings from the east make a hard Brexit even more likely. 

The influence of post-communist countries cannot be ignored, because all EU leaders must agree unanimously on the guidelines for Brexit talks before passing an actual exit deal via qualified majority.

Ratifying a new trade accord is even more complex.

As John Springford of the Centre for European Reform argued in a report yesterday, eastern European countries have a comparative advantage in providing low-value added services.

"Free movement is the only way that most such services - in construction, retail and so forth - can be traded. Poland will be unwilling to allow UK services companies to take market share while its citizens are denied equivalent opportunities in the UK."

Not all in Europe are adopting aggressive stances. Sweden struck a conciliatory tone. EU Minister Ann Linde said during a Bloomberg panel event in Stockholm that "we will try to get the rest of the EU to find different solutions" in the hope of discovering "some kinds of compromises on both sides."

The European Central Bank may be wrong footed by Brexit.

Economist Jamie Murray of Bloomberg Intelligence reckons the euro area economy will be 0.5 per cent smaller in 2018 than if the UK had chosen to stay in the EU. 

That's worse than ECB President Mario Draghi and colleagues expect and could force it to ease monetary policy even more, according to Mr Murray.

As for which European economies will be hurt the most by Brexit, David Owen of Jefferies studied trade flows and investment exposures to list Luxembourg, Ireland, Malta, Cyprus, the Netherlands and Belgium as the most at risk.

Conservative lawmaker Jacob Rees-Mogg is as euroskeptic as they come, but even he wants Britain to impose sweeping new EU rules on financial markets.

Mr Rees-Mogg is among those arguing the UK should introduce the EU market-rule overhaul known as MiFID II as intended in Jan 2018, John Glover and Silla Brush of Bloomberg News report today.

His reasoning is that not doing so would complicate Brexit negotiations and that the government can always revise the rules for governing trading in stocks, bonds and derivatives once it's out of the bloc.

The pound may have less sway over British stocks than it did when its decline lifted multinational companies following the Brexit referendum.

Now investors are focusing on economic indicators for direction, with stocks and the pound moving in the same direction for the last five sessions, the longest streak since the vote, reports Sofia Horta e Costa.

The Bank of England's Financial Policy Committee meets today, with the agenda potentially featuring a review of any early side effects on the banking system from its post- referendum interest-rate cuts.  

The Daily Telegraph newspaper has a cunning plan for negotiating Brexit. It wants the government to recommission the royal yacht "Britannia" which was retired in 1997 and is now a tourist attraction in Scotland. 

The idea is to use the vessel again for negotiating the trade deals the UK will need to win to ensure life outside of the EU is smooth sailing. 

BLOOMBERG