The German Chancellor has told her parliament that free access could only be granted under specific conditions
Britain cannot expect to “keep the privileges” of ties with the EU without any of the obligations, Angela Merkel has said, as the EU Commission President Jean Claude Juncker said he had imposed a ban on EU officials from holding secret Brexit talks with the UK.
In a clear rebuttal to Boris Johnson’s claim that the country could retain access to single market – seen as vital to the economy and jobs market – the German Chancellor told her parliament that free access to the single market was only for countries that accepted the free movement of people, capital and goods.
Meanwhile, in Brussels, Mr Juncker told MEPs that he had imposed a ban on EU commissioners holding informal or secret talks with the British about the country’s exit from the EU, until the UK government formally invokes Article 50 – the procedure for withdrawing from the bloc.
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The stance is backed by other EU leaders and, with David Cameron also making it clear that Article 50 should not be invoked until a new prime minister is in place, two months of deadlock in the UK’s exit talks with the EU are now likely.
The Conservative Party has said a new leader, who would automatically become prime minister, should be in place by 2 September.
The question of Britain’s single market access promises to be the key battleground in the Conservative leadership contest and the subsequent negotiations with the EU. Boris Johnson’s Vote Leave campaign won the referendum on a promise to control immigration, but the frontrunner to lead the Conservatives now insists that Britain could still have access to the single market.
Under Ms Merkel’s terms, this would mean losing some degree of control over immigration – a settlement that would anger many Brexit voters. Some countries in the European Economic Area, but outside of the EU, such as Norway and Iceland, have access to the single market, but they must accept freedom of movement.
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No immediate change in immigration status
The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay GettyMore expensive foreign holidays
The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more nito100And we wouldn’t even get our money back
All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget Getty ImagesDid somebody say recession?
Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018 AFP/Getty ImagesInterest rates might rise
The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output GettyHigher inflation
A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum AFP/Getty ImagesNigel Farage has already warned Mr Johnson against striking a similar a deal with the EU. He told Channel 4 News he was concerned about “backsliding” on the pledges made during the campaign.
The Ukip leader attended the European Parliament for Mr Juncker’s speech and was booed and heckled as he made his own statement. Sitting immediately to the right of Mr Juncker with a Union Jack on his desk, Mr Farage was asked by the EC President: “Why are you here?” “To some extent I am really surprised that you are here," he told him. "You were fighting for the exit, the British people voted in favour of the exit.”
In a sometimes rambling speech, Mr Juncker said he was personally hurt by the Brexit vote. “I’m not a robot, I am not a grey bureaucrat or technocrat,” he said. Denying that he was unwell, as some newspapers have reported, he said: “I’m not tired and sick…until my last breath I will fight for Europe.”