Pound plummets as Johnson clashes with EU over what he signed before Brexit negotiations even begin

The pound has plunged more than 1 per cent against the dollar as fears among traders of a no-deal Brexit intensified following major speeches by UK Prime Minister Boris Johnson and EU chief negotiator Michel Barnier.

At midnight a pound was worth 1.318 dollars, but by midday on Monday it was down to 1.305 dollars – a fall of 1 per cent as Boris Johnson accused the EU of reneging on promises before Brexit negotiations have even started.

The falls particularly hit from 10am onwards, as Mr Barnier laid out a draft mandate calling for a “level playing field” with the EU and “reciprocal access” for fishing vessels if a free trade agreement is to be signed. Mr Johnson then said he would be willing to walk away from the year-long talks if the EU did not fall into line and agree to his demands.

The Prime Minister said: “There is no need for a free trade agreement to involve accepting EU rules on competition policies, subsidies, social protection, the environment or anything similar, any more than the EU should be obliged to accept UK rules.”

This totally contradicted the Political Agreement he signed along with the Withdrawal Agreement last year.

On Sunday Number 10 fired an opening salvo in what is likely to characterise the negotiations that lie ahead over every aspect of the UK’s relationship with the EU – negotiations the EU have insisted are unrealistic within the 11 months time frame Boris Johnson insists on.

Using sympathetic press – in this case the Sunday Telegraph – Number 10 accused the EU of lying before they would be caught out.

Downing Street accused the European Union of reneging on promises in insisting EU courts have jurisdiction should any disputes over European Union law arise following the Brexit deal. The Government also insisted that the UK would not be aligning itself with EU rules as part of Brexit.

But this new stance actually goes against what Boris Johnson signed in the Political Declaration that accompanied the EU Withdrawal agreement agreed with the other EU nations.

The political declaration Boris Johnson signed already accepts the European Court of Justice will be the arbiter of Union law. The deal Boris Johnson signed also said that market access to the EU would depend on a regulatory “level playing field” with the EU – the tighter the alignment with EU standards – the more access the UK will have to the EU market.

Investors have consistently warned against a no-deal Brexit, with businesses concerned trade could be hit significantly.

Currency markets, which operate 24 hours a day, tend to be a better indicator of business concerns in the UK because the majority of FTSE 100 listed businesses are focused on international markets.

Neil Wilson, chief market analyst at Markets.com, said: “The way the two sides have come out, traders are starting to consider no-deal risks again. No deal is not the base case by any means but the EU and UK look in very different places right now at the start of talks.”

“The British government has come out swinging over the weekend with plenty of fighting talk,” he added. “But they’re up against a tough opponent.”

Ranko Berich, head of market analysis at Monex Europe, added: “Today’s sterling price action has a feel of groundhog day: signs of tension in EU-UK trade negotiations have caused the pound to drop some 1 per cent today. But on the whole, although Barnier and Johnson have indeed set out markedly different visions for trade relations, the UK Prime Minister was careful not to emphasise any of the sort of red lines that sunk his predecessor’s negotiations with the EU.”

Warning 11 months not enough time for Brexit deal covering all aspects 

French and Spanish trawlers would be allowed to continue fishing in British waters under the European Union’s plans for a deal with the UK.

Other measures set out in the European Commission’s draft negotiating mandate include a call for “robust commitments ensuring a level playing field for open and fair competition” – aimed at preventing the UK slashing standards or subsidising British firms.

Commission president Ursula von der Leyen said “time is short” to reach a deal by the end of the year, adding “we will defend EU interests, and the interests of our citizens, right until the end”.

The December 31 deadline will come into play because Boris Johnson has ruled out asking for an extension. Brussels’ chief negotiator Michel Barnier said all aspects of the envisaged agreement would not be completed within 11 months.

EU position: fisheries agreement and ‘level playing field’ necessary for Brexit trade deal with UK

Mr Barnier said an agreement on fisheries and the “level playing field” – both elements where there are likely to be clashes with the UK – were “inextricably linked” to a trade deal.

The draft mandate calls for reciprocal access for UK and EU vessels to each other’s waters and markets. The position is explicitly set up to protect the livelihoods of EU fisheries workers.

“It should aim to avoid economic dislocation for Union fishermen that have traditionally fished in the United Kingdom waters,” the document said.

Boris Johnson however insisted that under any agreement “British fishing grounds are first and foremost for British boats”.

Despite Boris Johnson’s assertions, the level of access that the UK will get to European markets under its trade deal will be linked to how closely it aligns with EU standards, as detailed in the Political Declaration of the Withdrawal Agreement.

 At a press conference in Brussels, Mr Barnier said the more the UK was prepared to maintain common standards with the EU, the higher quality access it would get to EU markets.

“This will be up to the UK to decide. Will it continue to adhere to Europe’s societal and regulatory model in the future or will it seek to diverge?” he said. “The UK’s answer to this question will be fundamental to the level of our ambition of our future relationship. The UK must know this.”

But setting out his position the Prime Minister diverged form the Political Declaration he had signed, insisting: “There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar any more than the EU should be obliged to accept UK rules.”

Mr Barnier said that the proposed security partnership between the UK and EU would depend on the European Court of Justice playing a full role – something likely to be rejected by Mr Johnson and Brexiteers.

“Where a partnership is based on concepts derived from European law, obviously the European Court of Justice should be able to continue its role in full,” he said.

The terms of any deal would not apply to Gibraltar, instead separate agreements would have to be reached – with Spain having a veto over arrangements relating to the territory it claims sovereignty over.

Mr Barnier said: “There will be a separate, parallel table and the Kingdom of Spain will have to be involved and give its agreement to all the elements in a specific agreement on Gibraltar.”

In a sign that this too could be yet another flashpoint in the negotiations, Mr Johnson told reporters: “The UK will be negotiating on behalf of the entire UK family and that certainly includes Gibraltar and the sovereignty of Gibraltar remains, as everybody knows, indivisible.”

@BenGelblum

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