Merkel will not back down to the new British PM: UK needs to clarify intentions quickly

By Updated at 2016-07-12 08:58:21 +0000

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Theresa May is expected to trigger the formal process to quit the European Union by the end of this year.

But German Chancellor Angela Merkel says Britain "will have to quickly clarify how it wants to shape its relationship to the European Union in the future."

According to German news agency dpa, the chancellor made the comment Monday night at a reception for diplomatic corps near Berlin.

She said simply that it is now up to the United Kingdom to officially tell the EU that it wants to leave the bloc — only then can the procedure begin.

"I am dealing with the realities and I am most certain that this motion will be put in place," Merkel told the German national broadcaster ZDF, referring to Article 50 of the Lisbon Treaty, which will initiate two years of exit talks between the EU and Britain. I absolutely believe that the request will be made." The UK would not get to leave the EU and keep all the privileges of EU membership, Merkel added.

According to the dpa, Merkel also said that, "I'm firmly convinced that the European Union is strong enough to absorb this break as well."


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Bank of England records no dissent over lowering bank capital buffer after Brexit vote


No Bank of England policymakers objected to a decision to cut banks' capital requirements at a meeting in the wake of Britain's vote to leave the European Union, a record of their meeting showed on Tuesday.

Last week the BoE's Financial Policy Committee lowered a capital requirement for banks, reversing a decision made in March in an attempt to cushion the expected shock to Britain's economy from the referendum result.

"As the outlook evolved, the FPC stood ready to take any further actions deemed appropriate to support financial stability," the record said in language which echoed its half-yearly Financial Stability Report from July 5.

Sterling has fallen by more than 10 percent to a 30-year low against the dollar and British banks' share prices have tumbled after the referendum result.

But spreads on lending rates between banks - a key gauge of stresses to the financial system - have risen by far less than they did in the 2007-09 financial crisis.

The record also showed that Britain's Financial Conduct Authority briefed the central bank on the risk that real estate funds would have to suspend withdrawals by investors, several days before this started to take place.

More than 18 billion pounds in property funds aimed at retail investors was frozen last week after redemption requests flooded in following the June 23 Brexit vote.

The Bank could cut interest rates as soon as Thursday, after its monthly Monetary Policy Committee meeting, although most economists who took part in a Reuters poll last week expected a first rate cut only in August.

The BoE has also made more than 250 billion pounds available for banks to avoid a liquidity crunch in financial markets and Governor Mark Carney said on June 30 he expected the Bank to pump more stimulus into the economy over the summer.

Before the BoE's decision to lower a capital requirement designed to make them set more reserves aside during upswings in lending, influential former BoE official John Vickers had said banks still held too little capital to deal with a future financial crisis.

However, no FPC member appeared to share this view.

"There was consensus on this course of action," the record of the FPC meeting said.

The record showed members saw no need to loosen liquidity requirements for banks, as the BoE had introduced weekly auctions of six-month funds for banks after the referendum.

Carney was due to speak about the FPC's most recent measures in Britain's parliament at 0900 GMT on Tuesday.

(Reporting by David Milliken and Huw Jones)

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