Responding to thinly-veiled threats from Eurocrats that the EU could freeze the City out of European business, the Bank of England governor reminded leaders on the continent that Britain’s capital is “the investment banker for Europe”, and that more than half the equity and debt raised by eurozone companies was issued “in the UK, by firms based in the UK, quite often to investors in the UK”.
He added: “These activities are crucial for firms in the European real economy and it’s absolutely in the interests of the EU that there is an orderly transition and that there is continual access to those services.”
Mr Carney’s intervention comes after Mario Draghi, president of the European Central Bank, claimed Britain would “first and foremost” feel the pain of Brexit, and said there would be questions of “sovereignty” regarding where eurozone financial trades take place.
Draghi suggested other parts of Europe wanted to bring parts of the financial system into their territories in order to take advantage of the large amount of tax revenue paid by financial professionals.
He said: “Following the outcome of the British referendum, there will certainly be issues of sovereignty in various parts of our payments framework, infrastructure framework, clearing systems and so on.”
Carney said Britain and Europe would have to cooperate to ensure financial stability
The banking chief branded London the "investment banker of Europe"
But Mr Carney argued that costs would rise significantly if European countries forced businesses to operate solely inside the Eurozone.
The banking chief added that the customers of London’s financial services “benefit very importantly from the agglomeration benefits, economies of scale, and economies of scope that exist because they are part of the world’s leading financial centre that serves not just Europe but Asia, Africa, the Middle East and the rest of the world”.
In his first public speech since Theresa May triggered Article 50, Mr Carney described Brexit negotiations as a “litmus test” for responsible financial globalisation.
Mario Draghi has warned Britain would feel "first and foremost" the negative impact of Brexit Brexit debate in pictures: Farage blasted by EU boss Wed, April 5, 2017
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The debate in the European Parliament in Strasbourg will focus on key issues of the Brexit talks including reciprocal rights for EU citizens, the peace process in Northern Ireland and trade
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Nigel Farage gestures during speeches at the European Parliament in Strasbourg, eastern France
He said it is “all to easy to give into protectionism”, and urged leaders in Europe and Britain to take the “high road of mutual cooperation” after Brexit negotiations have taken place.
Mr Carney also warned that taking a direction where “trust and cooperation diminish, fragmentation hardens, capital flows are disrupted and trade and innovation are curtailed".
He argued such a path would damage jobs and growth, as well as heightening domestic economic risks.