China and Egypt sign currency swop deal
EU GOVERNMENTS are preparing to issue British Prime Minister Theresa May a stark ultimatum: seal a deal for the UK’s post-Brexit trade ties or lose out on a transitional phase wanted by businesses.
EU leaders are closing in on a consensus to allow key British industries such as financial services and auto manufacturing a period after Brexit to adjust to the new arrangements, according to three officials familiar with the matter.
The price of such protection was that May and others in the EU must first agree just what the UK-EU trade relationship would look like beyond Brexit, said two of the officials, who spoke on condition of anonymity because no final decision has been taken on the EU approach.
In order to prevent the buffer becoming permanent, the length of the transition with a clear expiration date needed to be set out in advance, as did the details of the final EU-UK arrangement in each policy area to take effect after the interim phase, one of the officials said.
While bankers and executives would welcome clarity about the UK’s long-term plan and a transition to it, May is reluctant to give too many details about her ambitions early on for fear she would hand a negotiating advantage to her interlocutors. Refusal to sign up to the EU’s offer, though, would risk leaving the UK without a safety net in the event it cannot secure a permanent trade pact within the 15 months that talks are now expected to last.
In a sign that relations between the UK and EU remain brittle, Dutch Finance Minister Jeroen Dijsselbloem said yesterday that Brexit “can be smooth, it can be orderly, but it requires a different attitude I think on the part of the British government”.
“The things I’ve been hearing so far are incompatible with smooth and orderly,” said Dijsselbloem, who also chairs the group of euro-area finance ministers. “There are different options that are not available and if the UK wants to have access to the internal market, it will have to accept rules and regulations that go with the internal market.”
May said the UK was “looking to negotiate the best possible terms we can”. Chancellor of the Exchequer Philip Hammond said Britain wanted “to keep all options open” and would only strike a “deal if it’s in Britain’s interest”.
Officials from the EU will meet on December 12 to discuss their strategy ahead of a summit of leaders on December 15 in Brussels.
May has acknowledged that a “cliff edge” existed for businesses if Britain left the EU before a new trading relationship was established, subjecting them to the tariffs under the World Trade Organisation and bureaucratic hurdles to conducting commerce with the UK’s biggest market. CHINA and Egypt yesterday concluded an 18 billion yuan (R36bn) three-year bilateral currency swop, a move that importers and economists said would facilitate trade and improve foreign currency liquidity in cash-strapped Egypt.
Egypt’s central bank said the arrangement could be extended by mutual consent. “This bilateral currency swop is a mutually beneficial arrangement,” it said.
The People’s Bank of China said the move was aimed at promoting trade and investment and maintaining financial stability in both countries.
China has carried out swops with more than 30 central banks globally to increase the use of the yuan as a global reserve currency and to stimulate bilateral trade.
Neither bank gave details on how the Egyptian currency swop would work, but economists and business people expect it to have a positive impact on Egypt’s foreign reserve.
“The position of the central bank is definitely increasing, with more firepower denominated in foreign currency to stabilise the Egyptian pound when needed,” said Hany Farahat, a senior economist at Cairo-based CI Capital.
“So this is definitely something positive,” he added.
Egypt has struggled to revive its economy since a popular uprising in 2011 drove away tourists and foreign investors, major sources of foreign currency. Reserves tumbled from $36bn (R491bn) in 2011 to about $16.56bn at the end of August.
Egyptian importers said the deal with China would allow them to source yuan directly, facilitating imports from China while reducing demand for dollars and easing pressure on the Egyptian pound.