Brexit nightmare: Switzerland warned UK ‘EU will take your economy hostage’

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Switzerland is currently negotiating with the EU over an institutional framework agreement. Negotiations for the partnership began in 2014, but are still to reach a formal conclusion. In recent years, the Swiss have been embroiled in a feud with the EU over stock market trading. In 2019, Brussels no longer recognised Switzerland’s equivalence – meaning investment firms in the EU were no longer allowed to trade on the Swiss stock exchange.

Switzerland retaliated by banning the trade of Swiss shares in EU markets.

Jos Dijsselhof, CEO of SIX Group, which runs the SIX Swiss Stock Exchange, warned that the treatment of Switzerland by the EU could serve as a warning for the UK post-Brexit.

He argued that the EU’s tactics indicated that Brussels was getting tougher with third party countries outside of the bloc.

Mr Dijsselhof told CNBC: “Switzerland is technically equivalent, the EU has just used this as a political means to hold the Swiss hostage to talk about the overall framework agreement.

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“You do see that the stance of the EU against third party countries is hardening more and more, and we in Switzerland have seen that, and you see that also in the EU-UK discussion, so it is an example of how hard it can be.”

After securing the post-Brexit trade deal with the EU, Prime Minister Boris Johnson admitted his agreement didn’t achieve what he’d have hoped on financial services.

He said the trade deal with the EU “perhaps does not go as far as we would like” over access to EU markets.

As the EU warns it will not grant UK financial services access to the single market, figures within the industry have said that Britain will be forced to diverge from Brussels’ rules.

EU officials said Brussels would not grant equivalence to UK firms unless the Government explained how far it planned to diverge from EU rules.

However, Michael McKee, partner at British multinational law firm DLA Piper, argued that the EU may not be able to maintain its tough stance on equivalence with Switzerland and the UK.

He said in 2019: ″[Equivalence] has been used in an informal fashion as a tool to get outcomes but usually directed towards getting other countries to make changes to the law or adapt a little more to the EU approach, and usually with smaller countries, not mid-level, well developed countries like Switzerland — it is the first time that a country has really stood up to the EU other than large economies like the US or China.”

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He added the “concrete impact in Switzerland has not been significant in financial markets terms,” and claimed that the UK was in a stronger negotiating position than Bern.

Mr McKee continued: “The UK stock market and stocks on that market collectively are much more substantial, so if the EU was to take on the UK like this, the volumes of the London Stock Exchange and the FTSE 100 are a bit more balanced against the stocks being traded on the various EU countries’ markets.”

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