EU Veto on Deutsche Börse and LSE Merger Shows Hard Brexit Risks

Reuters is reporting that the European Commission is preparing to veto the proposed merger.

The merger between Deutsche Börse and the London Stock Exchange is reportedly on hold according to a Reuters report. The European Commission is allegedly in the process of exercising its veto power to block the deal.

Just before the UK triggers Article 50, the European Commission is already seemingly on the offensive in negotiations. Several senior officials have voiced a number on Brexit which is required from the UK just to start negotiations. The sum is rumored to be €60 billion (£51.7 billion).

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The blockage of the LSE and Deutsche Börse merger deal is signaling that Eurocrats will have little to lose in their negotiations with the UK.

Reuters is citing several sources for its report, stating that the veto will be announced in the coming days. Next Wednesday, the UK is preparing to trigger Article 50, formally starting the Brexit process.

The lack of clearance doesn’t come as a surprise to the market, with the European Commission demanding that the LSE part with its Italian trading platform MTS.

Several German politicians have been calling on a move of the joint headquarters of the new entity to Frankfurt. In the aftermath of the Brexit, Deutsche Börse and the LSE have continued with the deal, despite arising political complications.

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Brexit Complications Just Starting to Bite

The UK economy was seen as one of the most vibrant among the G7 countries last year. This trend has been helped by the declining value of the British pound, a more accommodative monetary policy and relatively subdued impact of the Brexit.

Difficult negotiations are yet to start and both sides of the aisle appear to be far from a consensus. The LSE – Deutsche Börse deal is just a taste of the complex negotiating process which will supposedly last over two years.

Access for UK companies to the EU single market hinges on the negotiating skills of both sides.

A Complex Process of Legal Restructuring

After the formal triggering of Article 50, the 27 EU member states will formally designate the European Commission as chief negotiator. In May, the UK will start the Great Repeal Bill, which is set to repeal the European Communities Act of 1972 and selectively accommodate EU law into domestic law “wherever practical”.

The main part of talks will begin in December 2017, a phase which should extend well into next year. The EU’s chief negotiator, Michel Barnier, aims at October 2018 as the deadline for an agreement.

By April 2019, the process should be complete, however an extension to the deadline cannot be ruled out.

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