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The final, frenetic hours that broke the Brexit deadlock



Exhausted negotiators finally unlocked the deal that will define the future of the UK and EU’s £660bn trading relationship after a flurry of last-minute bargaining over fishing rights worth a tiny fraction of that amount.

The last miles of the marathon negotiations, which began in March under the shadow of the first wave of the Covid-19 pandemic in Europe, were largely devoted to hammering out painful compromises over EU fishing quotas in UK waters.

Against a chaotic backdrop of virus-induced travel bans that left trucks stranded in queues stretching for miles and Britain cut off from the continent, Britain’s prime minister Boris Johnson and European Commission president Ursula von der Leyen took hands-on control of the talks.

The final hours of the negotiations hinged on the fate of a fraction of the EU’s existing fishing quota rights, which are worth an estimated €650m per year.

“Spreadsheets on fish are even less interesting than they sound,” sighed one exhausted member of the team, as talks dragged beyond lunchtime on Christmas Eve. “We all want to get home but the champagne is on ice.”

On the brink

Less than a month ago the prospects for a deal looked far more gloomy. Michel Barnier, the EU’s chief negotiator, and his UK counterpart David Frost had just called a break after tense talks in London, telling their political masters on December 4 that negotiations were deadlocked. 

As Mr Barnier and his team trudged into St Pancras station the next morning to take the early Eurostar back to Brussels, the talks were entering a crisis period that took the negotiations to the edge of collapse.

The crucial sticking point at that stage of the talks was over an issue that had bedevilled the negotiations from the very beginning: how to satisfy the EU’s demands for a regulatory “level playing field” that would protect its companies from unfair competition. 

Mr Johnson insisted at the outset that his Taskforce Europe trade team — made up of around 100 officials — could not cede ground on a central principle: Britain would not accept EU law as the price for a free trade agreement.

British officials say that objective was secured as early as July after Mr Barnier agreed to restructure the EU’s demands in a way that removed any direct reference to the bloc’s regulations and any role for the European Court of Justice.

But negotiators remained stuck on the central issues of how to enforce any deal on fair competition, and on how to meet demands from EU leaders, such as French president Emmanuel Macron, that any “level playing field” must endure over time. 

Leaders try to break deadlock

On December 5 — a day after the two chief negotiators conceded the talks were stuck — Mr Johnson and Ms von der Leyen held what would be the first of numerous discussions that would define the course of the final phase of negotiations.

Ursula von der Leyen, European Commission president, welcomes Britain’s prime minister Boris Johnson as he arrives in Brussels for a dinner to discuss the progress of negotiations
Ursula von der Leyen, European Commission president, welcomes Britain’s prime minister Boris Johnson as he arrives in Brussels for a dinner to discuss the progress of negotiations © Aaron Chown/AP

The EU side had been pushing for a “mechanism” that would allow either side to sound the alarm if it felt that differences in regulations — for example in environmental law — had placed its companies at an unfair disadvantage. 

Under the proposal, the disadvantaged side would have the right to impose tariffs — unilateral “lightning tariffs” according to Downing Street insiders — if consultations failed.

Dinner in Brussels fails to deliver a breakthrough

One ally to Mr Johnson said the move would have destabilised UK-EU relations for years to come, forcing Britain to mirror Brussels rules or face punitive sanctions on the flimsiest of grounds.

The dispute was at the heart of Mr Johnson and Ms von der Leyen’s contacts in early December — a dialogue that led to the two leaders agreeing to meet in Brussels for dinner on December 9 in a bid to overcome the impasse. 

However, any hopes that a face-to-face encounter over turbot and coconut sorbet would help to melt the ice ensnaring the trade negotiations quickly dissolved. 

In the sterile surroundings of the European Commission’s Berlaymont headquarters, Ms von der Leyen and Mr Johnson failed to find a way through. Flanked by their negotiators, the dinner — preceded by an awkward photo call — stayed rigidly formal.

The following day the prime minister told Britons that there was “a strong possibility” talks would fail. Ms von der Leyen gave a similar message to EU leaders at a summit in Brussels.

But amid the gloom and the sabre-rattling there were signs that both sides still urgently wanted a deal.

Crisis defused

Lord Frost and Oliver Lewis, Mr Johnson’s Europe adviser, spent days working on alternative proposals to allow the UK to maintain its freedom to set its own rules while giving the EU comfort it could retaliate if things went too far.

“That’s something that we were probably most pleased about — it was pretty unique in trade agreements,” said one British official. Their key partner in those talks was Stephanie Riso, a top adviser to Ms von der Leyen and a veteran of the negotiations on the EU-UK divorce treaty. “With Steph there was a real discussion,” the official said.

Meanwhile Mr Johnson prepared to brand the new mechanism “a freedom clause” to reassure anxious Tory MPs that Britain would have regulatory autonomy, even if that might come at a cost in terms of access to the EU market.

In a brief phone call at lunchtime on Sunday December 13, Ms von der Leyen and Mr Johnson defused the crisis over the level playing field, acknowledging progress, and agreeing to allow their negotiators to keep talking — setting the scene for the frenetic final weeks of talks in Brussels.

Mr Barnier told EU ambassadors the following day that Britain had now accepted the principle of the level playing field mechanism, provided that enough safeguards were built in to prevent the EU hitting UK products with tariffs on spurious grounds. 

Lord Frost, right, and Tim Barrow, the UK’s permanent representative to the EU, leave the British Consulate in Brussels last week
Lord Frost, right, and Tim Barrow, the UK’s permanent representative to the EU, leave the British Consulate in Brussels last week © Geert Vanden Wijngaert/Bloomberg

From the British perspective, the compromise included important changes: it would include an arbitration system, remove the threat of “automatic” sanctions, and contain other safeguards against abuse. But the EU side still felt it gave them the security it needed. 

Still stuck on fishing

Fisheries, however, remained a seemingly intractable issue until the end. British negotiators admit they underestimated the EU’s determination to hold its ground on fish — an issue that loomed over the talks until the final hour and which was of key importance to Mr Macron.

Even at the start of this week, Britain and the EU remained far apart over the fate of the bloc’s current fishing rights in UK waters.

The negotiations centred on a transition period that would guarantee the EU fleet access to UK waters for a limited time, and on how far EU fishing quotas would be reduced during that period. 

As recently as Tuesday, Mr Barnier branded British offers as unacceptable. 

Mr Johnson held numerous calls with Ms von der Leyen in the end game of the negotiations. “They weren’t straightforward calls — they spoke a lot and they were very frank in the end,” said one person on the call.

British officials insist that a deal remained “in the balance” until about midday on Wednesday. “Just when you got optimistic, they would always throw another thing on the table,” said one ally of Boris Johnson.

Issues other than fish also threatened to destabilise the endgame, notably EU demands resisted by the UK for cross-retaliation powers that would have allowed Brussels to hit other UK sectors — such as car exports — if a dispute on fisheries spiralled out of control.

The penultimate day of talks featured an eclectic mix of fish and cars. Britain made a last minute push on the trading conditions for parts for electric cars — a crucial issue for Japanese carmakers Nissan and Toyota with major operations based in the UK. With that resolved, and breakthroughs on fish secured, a deal came into view.

By Wednesday night, when Mr Johnson convened his cabinet to outline the deal, a rare mood of Christmas optimism was in the air after a year in which the prime minister has been battered by the Covid-19 crisis.

“The PM insisted that the deal had delivered what was in the manifesto — that we were taking back control,” said one participant on the call.

‘Leave Brexit behind’

EU officials said that negotiators were kept up through Wednesday night by the task of fine-tuning adjustments to fishing rights. A night-time pizza delivery to the European Commission’s Brussels headquarters signalled the long hours of work that still lay ahead.

The work stretched on into Thursday afternoon as exhausted officials ploughed through the highly technical task of recalibrating quota-shares. 

Setting fishing rights in waters close to the UK coast, rich in lucrative species such as scallops, was a big part of the overnight effort, said people involved in the talks.

Diplomats from both sides blamed the other for the repeated delays to being able to announce an agreement — with allegations that the EU side had erred in its calculations, requiring numbers to be revised, and that the UK had sought late changes to the deal. 

But one official close to the talks said on Thursday that the challenge of calibrating the quotas was simply “goddamn hard”.

On Thursday afternoon both sides could finally confirm that a gruelling negotiation was over. 

Ms von der Leyen said that the deal left her feeling “quiet satisfaction and, frankly speaking, relief”.

“We can finally leave Brexit behind us,” she said. “Europe continues to advance.”


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German regulator steps in as Greensill warns of threat to 50,000 jobs




Germany’s financial watchdog has taken direct oversight of day-to-day operations at Greensill Bank, as the lender’s ailing parent company warned that its loss of $4.6bn of credit insurance could cause a wave of defaults and 50,000 job losses.

BaFin appointed a special representative to oversee Greensill Bank’s activities in recent weeks, according to three people familiar with the matter, as concern mounted about the state of the lender’s balance sheet.

The German-based lender is one part of a group — advised by former UK prime minister David Cameron and backed by SoftBank — that extends from Australia to the UK and is now fighting for its survival.

On Monday night Greensill was denied an injunction by an Australian court after the finance group tried to prevent its insurers pulling coverage.

Greensill’s lawyers said that if the policies covering loans to 40 companies were not renewed, Greensill Bank would be “unable to provide further funding for working capital of Greensill’s clients”, some of whom were “likely to become insolvent, defaulting on their existing facilities”.

In turn that may “trigger further adverse consequences”, putting over 50,000 jobs around the world at risk, including more than 7,000 in Australia, the company’s lawyers told the court.

A judge ruled Greensill had delayed its application “despite the fact that the underwriters’ position was made clear eight months ago” and denied the injunction.

Greensill Capital is locked in talks with Apollo about a potential rescue deal, involving the sale of certain assets and operations. It has also sought protection from Australia’s insolvency regime.

Greensill was dealt a severe blow on Monday when Credit Suisse suspended $10bn of funds linked to the supply-chain finance firm, citing “considerable uncertainties” about the valuation of the funds’ assets. A second Swiss fund manager, GAM, also severed ties on Tuesday. Credit Suisse’s decision came after credit insurance expired, according to people familiar with the matter.

While the bulk of Greensill’s business is based in London, its parent company is registered in the Australian city of Bundaberg, the hometown of its founder Lex Greensill.

In Germany, where Greensill has owned a bank since 2014, BaFin, the financial watchdog, is drawing on a section of the German banking act that entitles the regulator to parachute in a special representative entrusted “with the performance of activities at an institution and assign [them] the requisite powers”.

The regulator has been conducting a special audit of Greensill Bank for the past six months and may soon impose a moratorium on the lender’s operations, these people said.

Concern is growing among regulators about the quality of some of the receivables that Greensill Bank is holding on its balance sheet, two people said. Regulators are also scrutinising the insurance that the lender has said is in place for its receivables.

Greensill Bank has provided much of the funding to GFG Alliance, a sprawling empire controlled by industrialist Sanjeev Gupta.

“There has been an ongoing regulatory audit of the bank since autumn,” said a spokesman for Greensill. “This regulatory audit report has specifically not revealed any malfeasance at the bank. We have constructive ongoing dialogue with all regulators in all jurisdictions where we operate.”

The spokesman added that all of the banks assets are “unequivocally” covered by insurance.

Greensill, a 44-year-old former investment banker, has said that the idea for his company was shaped by his experiences growing up on a watermelon farm in Bundaberg, where his family endured financial hardships when large corporations delayed payments.

Greensill Capital’s main financial product — supply-chain finance — is controversial, however, as critics have said it can be used to disguise mounting corporate borrowings.

Even if an agreement is struck with Apollo, it could still effectively wipe out shareholders such as SoftBank’s Vision Fund, which poured $1.5bn into the firm in 2019. SoftBank’s $100bn technology fund has already substantially written down the value of its stake.

Gupta, a British industrialist who is one of Greensill’s main clients, separately saw an attempt to borrow hundreds of millions of dollars from Canadian asset manager Brookfield collapse.

Executives at Credit Suisse are particularly nervous about the supply-chain finance funds’ exposure to Gupta’s opaque web of ageing industrial assets, said people familiar with the matter.

The FT reported earlier on Tuesday that Credit Suisse has larger and broader exposure to Greensill Capital than previously known, with a $160m loan, according to two people familiar with the matter.

Additional reporting by Laurence Fletcher and Kaye Wiggins in London

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FT 1000: Europe’s Fastest Growing Companies




The latest annual ranking of businesses by revenue growth. Explore the 2021 list here — the full report including in-depth analysis and case studies will be published on March 22

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EU plans digital vaccine passports to boost travel




Brussels is to propose a personal electronic coronavirus vaccination certificate in an effort to boost travel around the EU once the bloc’s sluggish immunisation drive gathers pace.

Ursula von der Leyen, European Commission president, said on Monday the planned “Digital Green Pass” would provide proof of inoculation, test results of those not yet jabbed, and information on the holder’s recovery if they had previously had the disease.

“The Digital Green Pass should facilitate Europeans‘ lives,” von der Leyen wrote in a tweet on Monday. “The aim is to gradually enable them to move safely in the European Union or abroad — for work or tourism.”

The plan, expected to be outlined this month, is a response to a push by Greece and some other EU member states to introduce EU “vaccination passports” to help revive the region’s devastated travel industry and wider economy. 

But the commission’s proposed measures will be closely scrutinised over concerns including privacy, the chance that even inoculated people can spread Covid-19, and possible discrimination against those who have not had the opportunity to be immunised.

In an immediate sign of potential opposition, Sophie Wilmès, Belgium’s foreign minister, raised concerns about the plan. She said that while the idea of a standardised European digital document to gather the details outlined by von der Leyen was a good one, the decision to style it a “pass” was “confusing”. 

“For Belgium, there is no question of linking vaccination to the freedom of movement around Europe,” Wilmès wrote in a tweet. “Respect for the principle of non-discrimination is more fundamental than ever since vaccination is not compulsory and access to the vaccine is not yet generalised.”

The travel sector tentatively welcomed the news of Europe-wide vaccine certification as a way to rebuild confidence ahead of the crucial summer season, but warned that regular and rapid testing was a more efficient and immediate way to allow the industry to restart.

Fritz Joussen, chief executive of Tui, Europe’s largest tour operator, said “with a uniform EU certificate, politicians can now create an important basis for summer travel”. But he added that testing remained “the second important building block for safe holidays” while large numbers of Europeans awaited a jab.

Marco Corradino, chief executive of online travel agent, said he feared the infrastructure needed would not be ready in time for the summer season: “It will not work . . . at EU level because it is too complicated and would not be in place by June.”

He suggested that bilateral deals, such as the one agreed between Greece and Israel in February to allow vaccinated citizens to travel without the need to show a negative test result, had more potential.

Vaccine passport sceptics argue it would be unfair to restrict people’s travel rights simply because they are still waiting for their turn to be jabbed. 

Gloria Guevara, CEO of the World Travel and Tourism Council, said it was important not to discriminate against less advanced countries and younger travellers, or those who simply cannot or choose not to be vaccinated. “Future travel is about a combination of measures such as comprehensive testing, mask-wearing, enhanced health and hygiene protocols as well as digital passes for specific journeys,” she added.

A European Commission target to vaccinate 70 per cent of the bloc’s 446m residents by September means many people are likely to go through summer unimmunised.

While some countries around the world have long required visitors to be vaccinated against infectious diseases such as yellow fever, a crucial difference with coronavirus is that those inoculations are available to travellers on demand. 

Questions also remain about the risk of people who have already been vaccinated passing on coronavirus if they contract the disease.


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