If the EU and the UK are each to achieve a win-win outcome in the Brexit trade talks, the EU must become more accountable politically to its own citizens.
For financial services, accountability has yet to kick in. Michel Barnier has announced that the UK cannot expect a binding arrangement to cover financial services trade, something which could have a significant impact on citizens' living costs across the 27 member states. And if there cannot be such an agreement, it makes little sense for the UK to persevere in the negotiations as currently structured.
The UK should call the shots over any deal for trade in goods – it has a large trade deficit with the EU. But without services included, the result will not be two-way. To reach an acceptable deal, the UK should stop proceedings to allow member state democratic processes to operate. The UK should explain what is needed and what it would see as a "bad deal", one pointless to negotiate, which currently seems likely.
What is the default position if there is no deal? For goods, UK consumers could redirect much of their current EU27 expenditure elsewhere to buy quality goods then subject to the same tariff costs, and any EU-facing tariffs of the UK could be used to compensate affected UK manufacturers.
The UK could unilaterally apply the latest technology to keep its Irish border frictionless, leaving the EU to decide whether to establish a hard border facing the south. The provisional "phase 1" (December) agreement on citizens' rights reflects what the UK would anyway declare.
And the ex gratia exit payment is just that – not owing in law. UK taxpayers might rightly ask: what is the UK to get in return for its payment? Unless the EU moves, the answer will be "not enough".
A no deal outcome would damage the EU, but the negotiations have so far ignored the democratic forces within the EU27 which would demand a comprehensive Brexit trade deal across goods and services. The EU responds to economic facts, but only when democracy gives them voice. The recent decision to divert funding from Eastern Europe to the troubled Eurozone south reflects the urgency of ameliorating southern stagnation, particularly in Italy as the polls threaten Brussels' hegemony.
So now the UK must make clear that it expects to have mutual access for financial businesses through the mutual recognition of standards. This would benefit everybody, giving EU consumers a continuation of the status quo and the lowest priced access to capital.
To read Barney Reynolds's piece for City A.M. in full, click here.