MNI SOURCES: Italian, German Firms Prepare For Hard Brexit

--No National 'Deals' With EU Negotiations Prevailing Over Nat'l Interests

By Silvia Marchetti

     ROME (MNI) - Italian and German companies are taking on a hard stance

towards the UK's departure from the union bloc, preparing for the worst case

scenario of a 'hard Brexit' and committed to pursuing European rather than

national interests, Market News has learned. 

     Sources from within Italy's leading industrial lobby, Confindustria, and

Germany's top business association, BDI, told Market News that the priority is

the further development of Europe and that business interests could never put at

stake the EU's current negotiations, especially as the UK will be the one to

lose the most from its own exit.  

     "Italian firms are already preparing for a hard Brexit scenario,

re-positioning elsewhere by boosting the bulk of key 'Made-in-Italy' exports in

other world markets like China and Russia," says Paolo Bastianello, head of

Confindustria's "Made In" technical committee, set-up to safeguard Italian

products. 

     "The truth is: the British are far too optimistic and confident that just

because of our Prosecco and mozzarella cheese exports to the UK, some sort of

deal will be struck at a later stage to favour bilateral trade between Italy and

the UK, but they're wrong. Our industry will survive without the UK market, but

the UK market, once out of the single EU market, will struggle," added

Bastianello.

     Prosecco sales have been steadily growing worldwide, outpacing even

Champagne, and Italian entrepreneurs are confident that British consumers will

continue to purchase Italy's iconic bubbly even if at higher prices, said a

Confindustria analyst. 

     Joachim Lang, director general at Germany's BDI, warned that "German firms

must prepare for the worst-case scenario of a very hard (Br)exit as anything

else would be naive" and that even though "German industry wants to keep a very

close relationship with Britain, we have no doubt: We prioritise the further

development of the EU," Lang said, despite German car manufacturers' strong

interests in the UK.

     The BDI has set up a task-force to identify potential and acute risks

associated with the UK's exit from the EU and to develop constructive solution

proposals.

     A Rome government official argued that it is too soon to discuss eventual

trade deals with the UK in a post-Brexit scenario, explaining that if in the

long run London and Brussels fail to implement an area of free trade, it would

be catastrophic for the UK.

     "There are two sets of negotiations that run parallel but are distinct, and

both are led by Europe as a whole because all EU members stand firm together. We

must tackle first the fiscal one, i.e. how much money the UK must return to the

EU," the official said. 

     "Only after this one is solved, can we face an eventual trade agreement but

it will only occur at a much later stage, not before 3-5 years, and it will

never be sectorial, diversified according to single business areas, but a

unified trade scheme," the source added. 

     Europe is not a "menu" for London to choose from at its own discretion, he

added, noting that the Brexit "loss" for London was higher than for the rest of

Europe, even for Italy alone. 

     "The UK's manufacturing sector is in deficit; 2016 has already registered a

fall in investments from E120 billion to -E25 billion and a 40-70% drop in UK

manufacture goods exports to Europe is expected in the short run. On the other

hand, Italy alone remains the fifth manufacturing country in the world in terms

of export volumes, Brexit or no Brexit," said the official. 

     The government source criticised the UK's shifting stance and excessive

"rhetoric" in the negotiations, above all the possibility that London might

eventually opt to abide by World Trade Organisations rules.

     "This is the worst case scenario for the UK, and London is underestimating

the disastrous impact this will have on its economy. The future of the UK solely

depends on its foreign policy choices, not on Europe. Were the UK to abide to

WTO regulation, it means it will have already entered into recession and have

turned into a much poorer nation," said the source. 

     "This would mean that all talks between Brussels and London regarding the

possibility of implementing a free trade agreement have failed, translating into

massive trade duties for London," he added. 

     Yet the timing and outcome of negotiations remain uncertain. BDI's Lang

argued that "there is no guarantee that even a single transitional regulation

will be in place on the date of withdrawal, let alone a final, equitable pact

regulating future relations between the EU and the UK".  

     "Should it become possible after all to agree on the exit conditions in the

near future and the focus shifts to developing transitional regulations, then

our task-force will intensively prepare its input on these," added Lang. 

     Confindustria's Bastianello noted that London had already paid Brexit's

highest price in terms of exporting financial services and losing its privileged

position as Europe's financial hub, with many banks and investment funds leaving

the City. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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