Angela Merkel seeks to stiffen German resolve on Brexit

Merkel Said to Close Off Banks-for-Cars Brexit Deal Before Talks.

Chancellor Angela Merkel is seeking to stiffen German resolve on Brexit, singling out the car industry as vulnerable to any British attempt to strike market-access deals ahead of the U.K.’s exit from the European Union. In a closed-door meeting with German lawmakers, Merkel said some industries might press for such accords with the U.K. government and that political leaders should oppose them, according to two people who attended. In particular, allowing U.K. banks to do business in the EU in return for Britain granting market access to European carmakers is a non-starter, Merkel was quoted as saying by the people, who asked not to be identified because the meeting was private.

  • German leader said to cite risk of car industry breaking ranks
  • Chancellor takes tough stance to uphold ‘no cherry-picking’
Angela Merkel and Wolfgang Schäuble
Angela Merkel and Wolfgang Schäuble

The comments are the most specific signal yet of German concern that Prime Minister Theresa May’s government might try to sidestep the other 27 EU governments and seek sector-by-sector advantages before Brexit talks have even begun. As Merkel seeks to enforce the EU’s insistence on a package deal, some ministries in Berlin earlier instructed officials to avoid back-door contacts with U.K. counterparts for the same reason. “Merkel is rightly warning against special deals for individual industries,” Heribert Hirte, a lawmaker in the chancellor’s Christian Democratic Union, said in an interview. “We can’t enable cherry picking.” A German government spokesman declined to comment on what Merkel told lawmakers in the meeting last week, saying her position on Brexit — that the U.K. must accept the EU’s free movement of people, capital, goods and services to have full market access — is unchanged.

The U.K. government has underscored the auto industry’s importance by giving assurances that persuaded Nissan Motor Co. to keep investing in Britain while May tries to balance taking the country out of the EU with safeguarding investment and jobs. For Germany’s auto industry, the stakes may be even bigger.

The U.K. produced 1.59 million passenger vehicles in 2015, including Toyota, Mini and Jaguar models. That compares with 5.56 million vehicles made in Germany by domestic manufacturers including Volkswagen, Porsche, Mercedes and BMW, according to figures from the European Automobile Manufacturers Association. German passenger-car sales in the U.K. are expected to decline by 8 percent next year to about 2.4 million units, in part because of the weaker pound, according to the German Automobile Manufacturers Association. A Berlin-based spokesman for the group declined to comment on whether German automakers would back a sectoral deal. “What’s clear is that a ‘hard Brexit’ could have negative fallout for the Western European market as well as Britain in the medium and long term,” Matthias Wissmann, the German car association’s head, said on Dec. 2. “Right now, it’s hard to predict where we’re headed.”

Sources: QGN, Gulf Agencies, Bloomberg.