Brexit deal in tatters

Wednesday 06th December 2017 09:16 EST

The ongoing and tense negotiations have led to a broad agreement by the UK to a gross financial settlement of £89bn on leaving the bloc, although the British expect the final net bill to be half as much. The news brings the two sides close to agreement on a key obstacle to opening talks on a future free trade pact.

A senior EU official told major news broadcasters that the UK appeared ready to honour its share of the EU’s unpaid bills, loans, pension and other liabilities accrued over 44 years of membership. The EU's demands include London paying a share of post-Brexit EU spending on commitments made before Britain leaves in March 2019 as well as funding of EU staff pensions for decades to come.

Sources confirmed that work was still continuing ahead of May’s talks with European Commission President Jean-Claude Juncker and his chief Brexit negotiator Michel Barnier. But EU diplomats briefed on progress said the British offer was promising and that, on the financial settlement, the two sides were, as one said, “close to a deal”.

Minister Theresa May met European Commission President Jean-Claude Juncker for lunch in Brussels for what could be a breakthrough in Brexit talks. If both sides are happy with progress on divorce talks. The plan is to sign a joint declaration on progress so far in the talks. The key talking points still up proving to be a hindrance in negotiations moving forward is the Irish boarder. Investors are optimistic that are joint declaration is signed this afternoon.

It is thought a phone call between May and DUP leader Arlene Foster, which took place after a proposed solution to the Irish border question emerged, is behind the scuppered deal. In the morning it was revealed that Juncker had shown some MEPs a draft version of an agreement that talked of "regulatory alignment" between Northern Ireland and the Republic of Ireland after Brexit, which would avoid the need for a hard border.

However, that proposal was rejected by the DUP, with Foster saying she would not accept any regulatory divergence from the rest of the UK. Journalists understand that May spoke with Foster after the Northern Irish leader's press conference, which then put an end to hopes for a deal today.

The European Union statistics office, confirmed a preliminary estimate that euro zone gross domestic product (GDP) grew 0.6 percent from July to September from the previous quarter and on a year on year basis was 2.5 percent higher. The strong growth was powered by Germany, driven by buoyant exports and rising company investments in equipment.

Talks on forming a coalition government in Germany have collapsed, leaving Angela Merkel facing her biggest challenge in 12 years as chancellor. Germany's three would-be coalition partners went deep into overtime in talks as they sought enough common ground in climate and migration policy to form a government and stave off the prospect of a repeat election.

President Frank-Walter Steinmeier said Germany was facing an unprecedented situation and that he would hold talks with all parties. He said this would include parties that not had been involved in the talks so far and called on politicians to work together and make compromises for the "well-being" of the country.

The euro continued to recover after a series of European business surveys painted a positive picture for the growth outlook of the region. According to purchasing managers index, businesses in the region experienced their best monthly performance since 2011. The headline figure rose from 56 to 57.5 with all the main indicators of output, demand, employment and inflation at multiyear highs for the month of November.

Last month data in the US showed a surprise rise in retail sales last month as well as an uptick in underlying inflation, cementing expectations for an interest rate hike in December.

U.S. consumer prices barely rose in October as the boost to gasoline prices from hurricane-related disruptions to Gulf Coast oil refineries was unwound, but rising rents and healthcare costs pointed to a gradual build-up of underlying inflation.

The Labour Department said its Consumer Price Index edged up 0.1 percent last month after jumping 0.5 percent in September. Economists polled by Reuters had forecast the CPI nudging up 0.1 percent in October.

Fed Chair Janet Yellen stuck by her prediction that U.S. inflation will soon rebound although she is "very uncertain" about this. Yellen said that the US central bank is still reasonably close to its goals and should continue to stick to its planned monetary tightening path in order to kerb inflation and unemployment. However she did not rule out the possibility of prices remaining low for years to come and said that any increases in interest rates are likely to be gradual.

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