Barney Reynolds, a partner at Shearman and Sterling LLP, and a specialist in financial services law made his remarks after the launch of his new paper, Managing Euro Risk, in which he spells out why the world needs to be wary of the way the EU manages its monetary union. And he told Express.co.uk the Bank of England currently plays a crucial role in keeping tabs on the euro area – stressing the importance of the bloc agreeing to abide by UK rules, rather than vice versa, after the end of the year. He said: “Economists talk about the doom loop whereby the whole system can choke on itself, which is why someone needs to look at the system as a whole to make sure the entire system is safe.
“And at the moment, within the EU, the Bank of England is doing that.
“After leaving, they are saying ‘No, no, you’ve got to do exactly what we say, we’re going to control you, you must jump to our tune,’ which is absurd when we’re the ones managing this risk.
Mr Reynolds stressed: “If we’re going to allow for dealings with the EU 27 counterparties in a reliable way, and allow their financial institutions to have branches here which carry on dealing, as now, in the global markets, then we need a predictable equivalence arrangement, which means we need it to be binding, high level outcomes-based, subject to independent adjudication and absolutely crystal clear.”
And he stressed the alternative would be extremely unpalatable for Brussels.
The eurozone is like an elephant which Michel Barnier is trying to hide, said Barney Reynolds
Mr Reynolds said the eurozone had been compared to an 800 lb gorilla – Kumbuka here weighs 400lbs
It’s like being at the circus with some clowns in the corner noisily sweeping up elephant dung and then there is a black cloak over the elephant and they are pretending it is not there
He explained: “If we were to have to address this with the Americans and call a halt to all the EU’s current dealings, it is going to cause the most awful outcomes for the EU’s economy, which is in nobody’s interests.”
Mr Reynolds deployed a colourful metaphor to make his point, saying: “This is the elephant in the room.
“It’s like being at the circus with some clowns in the corner noisily sweeping up elephant dung and then there is a black cloak over the elephant and they are pretending it is not there.”
As for whether EU Brexit negotiator Michel Barnier and his colleagues were aware of the gravity of the situation, Mr Reynolds said: “Is it deliberate? Or is it just accidental? My belief is they don’t appreciate the full situation themselves.
The Bank of England performs an important role in keeping the eurozone in check, said Barney Reynolds
“I think lots and lots of tiny decisions on rulemakings have been taken and accumulated over time and each time people think it’s reasonable.
“But when you look at the whole grand reveal, the whole thing, it’s extraordinary.
“I don’t think there was a group of people under a cloak somewhere that was secretly beavering away thinking we can get away with this one.
“If their negotiators were aware of it, they are the best poker players in history.
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“I think that the EU needs a wake-up call on this key fundamental point.
“The point is they are not in a position to dictate terms to anyone. Least of all us – they need us to carry on mitigating this risk in the way that we’re doing now.
“They will have to accept that we will do it on such terms that we determine are fair, sensible and safe for the global market and forget the idea of dictating terms to us on financial services.”
Mr Reynolds also poured scorn on the EU’s insistence that there should be a “level playing field”
Currencies of Europe
He said: “They can’t with a straight face talk about level playing field stuff when they’re doing this.
“A lot of our people are still worried about the UK and think of us as pygmy facing an 800 pound gorilla.
“We need to rethink that because actually it’s not so – we are more than equals.
“The EU will be confronted over the next five months or so with a choice.
The European Central Bank in Frankfurt
“Do they do what the federalists are wanting which basically involves backing the whole thing financially and becoming part of an integrated whole with joint and several liability for each other’s debt – I think their answer is going to be no.
“Or do they accept that they haven’t got a level playing field, they are polluting the rest of the world with risk and they should come and ask the UK for the UK’s ideas on how safely and fairly to construct a trade deal that keeps the show on the road and protects everyone.
“We didn’t start this, we haven’t created this Frankenstein’s monster, that’s their choice.
“We’ve not done anything to them. We’ve not even commented on it really before now, we’re only now pointing things out to them.
“We’re just pointing out to our neighbours that their house is on fire and water is needed.”