Sven Giegold, the German MEP who has been involved in much of the EU legislation affecting the fund industry in recent years, is not a man to mince his words.
We have been speaking for just a couple of minutes when he makes clear his position on a British exit from the EU — or Brexit — and its impact on the asset management industry.
The City of London, the UK’s financial hub and the European headquarters of many of the world’s biggest asset managers should not expect any special treatment as Britain negotiates to leave the EU in the wake of the recent referendum, he says.
“There cannot be passporting without accepting all the obligations of the common market,” says the Green MEP, referring to the practice that allows UK-based asset managers to sell financial products and services to investors in other EU countries from London.
“It is not about punishing the UK, but applying the same rules as others face who access the single market. I want it to be fair.”
Mr Giegold, who studied economic policy and development at the University of Birmingham in the UK, admits he is “really sad” about the result. Britain voted by 51.9 per cent to sever its relationship with the EU.
In the immediate aftermath of the vote, sterling fell to a 31-year low and stock markets around the world plummeted.
The 46-year-old says: “Brexit is bad for Europe and dreadful for the UK. People were not told the truth about the costs [of voting to leave the EU].
“[Voters] were mislead about so-called savings to the UK government budget that will not materialise.”
In the run-up to the referendum, British voters were told by Leave campaigners that an exit from the EU would mean the UK had £350m a week more to spend on the country’s healthcare system because it would no longer have to make contributions to the European budget. They have since backtracked on this promise.
The Leave side, headed by Boris Johnson, the former mayor of London, also promised the UK would take back control of its borders.
But Mr Giegold, who has been an MEP since 2009, says that for the UK’s financial centre to be able to access the EU’s 500m citizens, Britain will have to continue to pay into the European budget and allow free movement into the country by EU citizens.
“The UK wants and needs access to the common market, but for this it will have to accept freedom of people’s movement. And if you are part of a common market, you will have to make contributions [to the EU] budget,” he says.
“You cannot have access to the common market with its four freedoms [the freedom of movement of goods, services, capital and people] without having the obligations that come with it.
“If you want freedom for capital to move, you have to accept freedom for people to move. You cannot have one without the other.”
Mr Giegold, who sits on the Committee on Economic and Monetary Affairs at the European Parliament, dismisses any suggestion that the UK will be able to negotiate a good deal for the City that allows for easy trade with the EU without unrestricted immigration. “Forget it,” he says laughing.
“We have to protect the integrity of the European institutions and of the markets. That means negotiating so that there is no cherry picking [of rules]. That is not to take revenge on the UK or tell the British what to do. It is about the integrity of the market.
“The way to destroy European integration would be to give the UK a privileged deal. This would lead immediately to totally the wrong incentives. There will not be a privileged deal. I don’t [know] anyone who disagrees with this [view].”
Mr Giegold’s tough stance will be unwelcome to many in the City, where there are still hopes that, despite Brexit, it will remain straightforward for UK-based fund managers to sell products and services to the EU.
Some have suggested that as long as London-based asset managers have some presence in an EU country, they should not face any restrictions when it comes to selling their products into the single market.
But the politician who led the campaign to curb excessive pay for bankers and asset managers in 2013 is dismissive of this argument.
“You cannot grant the City of London, directly or indirectly, market access [without the UK playing by EU rules],” he says. “There must be a priority to avoid any bad incentive structure.”
He adds that there should be no “grandfathering” of rules, meaning that funds that are already sold to EU investors from the UK should not be given any preferential treatment.
The MEP plays down concerns that European investors could suffer if it becomes harder for UK-based asset managers to sell their products in Europe.
“I think it is much more realistic that companies will make sure they can sell there [in the EU],” he says, suggesting this has negative consequences for London.
Frankfurt, Paris and other European cities, he says, are already rolling out the red carpet for asset managers and other financial service providers looking to relocate from the London. Frankfurt held a press conference last week to welcome finance companies to the German city, he adds.
Mr Giegold is at pains to point out that it is not his place to tell Britain how to act; its people have voted and now it is up to the government to put their will into practice.
But before he rushed off to an extraordinary meeting about Brexit with fellow Green politicians, he says: “The longer the period of uncertainty drags on, the higher the investment cost. Not calling and finishing the process will increase the economic cost.
“It is in [everyone’s] mutual interest to act quickly, because this investment insecurity is very unhelpful and damaging.”
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