Hammond: EU leaders 'paranoid' that other nations will leave after Brexit

Philip Hammond in Rome

European leaders’ lack of enthusiasm for the future trade relationship between Britain and the European Union has been described as “backward-looking” and marked by “paranoia” by the UK chancellor, Philip Hammond.

In an interview with the German newspaper Die Welt that was supposed to round off a three-day charm offensive aimed at rallying German support for a future trade deal, Hammond complained that politicians across Europe were still fixated on punishing Britain for the outcome of the 2016 referendum.

“We hear a willingness and enthusiasm in the USA and from many other countries around the world to make new trade deals with us,” Hammond told Die Welt. “But we don’t hear that from Europe. We hear from Europe only backward-looking stuff. ‘Are you sure you want to leave?’ Or, ‘it’s a bad decision to leave.’ Or, ‘you must be punished for deciding to leave.’”

Hammond dismissed as “paranoia” his German interviewer’s suggestion that too soft a Brexit could offer an incentive for other member states to leave the trading bloc – language which is likely to raise eyebrows in Berlin.

“I can understand that paranoia. But imagine you are running a successful, thriving club. If one member leaves, you don’t immediately panic that all the other members might leave, but are confident they will want to remain.”

The comments come at the end of week in which the chancellor and David Davis, the Brexit secretary, visited Germany to prepare for the second phase of divorce negotiations between Britain and the EU, only to find themselves ignored by top politicians focused on coalition talks and rebuffed by German business leaders.

In the interview, Hammond ratcheted up demands that a future trade deal between Britain and the EU would need to allow British services access to the single market.

Asked if the UK would be willing to accept a free trade agreement with the EU that did not include services, Hammond said: “I don’t think that’s realistic proposition for us.” He stated that more than 80% of Britain’s economy was services-based and he saw the country’s opportunities for future growth in the same sector.

“In our goods trade with the rest of the EU, we have an annual deficit of €100bn whilst we have a surplus of €40bn in our trade in services. To enter into an agreement on goods with no agreement on services would be a very one-sided arrangement and I don’t think that could be attractive for us.”

The EU chief Brexit negotiator, Michel Barnier, has made clear that the UK’s intention to restrict immigration from Europe and break free from the European court of justice means it can only expect a trade deal modelled on the one the EU has with Canada, which does not include services and would lead to British banks losing their financial services passport.

Germany and France may feel little pressure to offer a get-out clause for the City of London since emergency planning by London-based banks is already leading to a boom in the financial districts of Paris and Frankfurt.

Asked what the UK could offer in return for access to the EU’s single market in services, Hammond told Die Welt: “Every time European firms raise capital through the City of London and do so more cheaply than they could raise it elsewhere in Europe, that makes those businesses that little bit more competitive. Why should you cut yourself off from the world’s leading financial centre right on your doorstep and find yourself beholden to other centres like Hong Kong, Singapore, New York or Tokyo? That would be crazy in my view.”

Speaking to business leaders at a private event in Berlin on Wednesday night, Hammond had insisted that the pressure to come up with a more creative solution did not lie with the UK alone – comments later rebuffed by at least one of the people present.

“I was surprised to hear the chancellor say yesterday that it was now up to the EU to make an offer to the UK on how to deal with the UK in the future,” said Dieter Kempf, the president of the Federation of German Industries. “I understand that you don’t want to be like Norway. I understand that you don’t want to be like Switzerland. I understand that you don’t want an agreement like the one with Canada. But for God’s sake, give us a bit of an idea of what you want.

“If everyone just points the finger at the other side and says, ‘You have to make an offer to me, you have to tell me what you want’, then I ask myself: what makes us so sure that 24 months of transition period will be enough? We can play that game for 48 months.”

In his interview with Die Welt, Hammond likened the current phase of negotiations to a romantic ritual: “It’s a courtship. We have to show a little of what we’re thinking and then we find out a little about what our partners in Europe are thinking.”

“To us, that sounds more like a poker game where one tries to pull a fast one on the other,” his interviewer responded.

Powered by Guardian.co.ukThis article was written by Philip Oltermann in Berlin, for The Guardian on Saturday 13th January 2018 00.01 Europe/London

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