Theresa May the winner of 1st round of vote to replace Cameron

Theresa May the winner of 1st round of vote to replace Cameron as a Conservative Party leader,
and ...looks like a neutral candidate who doesn't want to trigger Article 50 until next year will be in.

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Theresa May ?

A candidate for new UK Prime Minister post Michael Gove announced that UK will not use the Article 50 this year. Actually, Gove was asked today to give up his candidacy to replace David Cameron, thus leaving Theresa May alone.

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Brexit ongoing…

Facts from UK:

-          Political meltdown in UK – as no one wants to take the full responsibility and act

-          Unfortunately, the leaders of Leave camp admitted in after referendum aftermath that not all what they said in the campaign was really truth

-          Lafarge from UKIP didn’t hesitate to express his desire to be good friends, neighbors and trading partners with the EU. How ironic it is…

-          Leave camp doesn’t have any B plan

-          Boris Johnson likely to be put aside

-          David Cameron is trying to buy some time as he doesn’t want to be the one who uses the Article 50 of EU Treaty and starts formally exit process

Facts from EU:

-          Very clear disappointment from UK vote

-          Strong commitment to keep EU together from all 27 leaders

-          No formal or informal talks before Article 50 is activated

-          UK must accept and honor referendum results; can not bypass results to avoid exit from EU

-          UK can not cherry pick or used the facilities of the Club without being a member of it

-          UK must accept all four pillars of EU ( for example free movement) in order to keep the access to single market

-          EU is strongly pushing for quick activation of Article 50, so all settle das quickly as possible and uncertainty removed

-          Likely it won’t happen until UK has a new leadership in Sept/Oct 2016

-          EU Summit – special relationship will be on the table but not only Germany and France will play tough

-          Lots at stake at EU side as well – likely will try not to take hostile approach towards UK.

The character and maturity of the nations as well as individuals is being tested…

Mr Hawk

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Brexit going real…

Draghi (ECB) and Carney (BoE) meeting for a Friday cup of tea? Why not, as there is really lots at stake. Don’t even forget about EUR clearing still taking place in London and not in Frankfurt or Paris what would many think.

As Brussels is putting more and more pressure on UK politicians to assume the full responsibility and start the exit talks immediately, the London’s City bankers are already firing at all cylinders in the field of lobbying. Well, losing the access to EU markets, especially for US banks would be very costly for years to come. The solution is a pass-porting but would Germans or French be even open to talk about it? 

So, where should London bankers find a refuge? Frankfurt is a first choice as there is ECB and strong pressure to bring EUR clearing there, then Dublin due to language, low taxes…etc. may be of interest, and definitely, Paris is also a place to go. What we may be a bit worried about is that the part of the business will end up in New York, in the light of a safe harbor kind of place with stable legal framework and predictability that is vital for top executives while making long term decisions.

Well, the period of uncertainty is coming as UK and EU would need to agree on divorce papers first, sign them and negotiate the new after-marriage deals, what in my believe will be very messy with unpredictable outcome.

In all of that market turmoil do no forget about lots of financial institutions still holding peripheral bonds on their books that are under pressure in “fleeing to safety” flows or Deutsche Borse – London Stock Exchange merger being questioned a lot. Maybe if Frankfurt is a HQ place for the group, the German regulator can approve it. The deal in this case will be questioned by LSE shareholders what for sure, will put an additional question marks about the deal.


What’s next for the EU ?

Monday through Wednesday – expecting busy calendar for EU leaders, Draghi…etc., that will be topped with EU Summit where Cameron would have a time to explain a lot. The second part of EU Summit will take place without his presence. Actually, there is no point at this time to speculate about the outcome as the situation is very fluid and evolving…

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