Britain’s quest for the right point in time

It’s all about timing. This is true for all walks of life: For work, for relationships, for international politics. As you might have discovered yourself, it matters a lot whether you find the right point in time to hand in your resignation. The right point in time to ask your partner if he or she wants to marry you. The right point in time to have kids.

The same goes for the world of business and politics. Timing can be crucial here, as the British have found out since the vote for Brexit. As there is no automatic start to the two year-long divorce proceedings, choosing the right point in time for the beginning of the negotiations might strongly influence the outcome.

This decision – when to trigger Article 50, the critical passage of the Lisbon Treaty – lies solely with the British government. Although they might want to, neither Jean-Claude Juncker, the President of the European Commission, nor the Members of the European Parliament or the 27 other Member States, can force Britain to trigger Article 50.

It’s important to realise that the decision over when to trigger Article 50 is one of the last cards the British government has left to play. It thus made sense that David Cameron, the former Prime Minister, did not trigger it straight away after the – for him – disastrous result of the referendum on the 23rd of June became known (although he had said before he would trigger it straight away). Quite the opposite, he left the decision to his successor.

Coming into office without any detailed plans on how to implement the result of the vote, Britain’s new Prime Minister, Theresa May, has spent the last two months trying to find out what the British position is for a life after the EU. Thanks to the decision in Whitehall not to engage in any prior, in-depth planning for the case of a vote for Brexit, May and her staff, as well the other members of her Cabinet, have found themselves frantically trying to close the gaps before the end of the summer break.

The same is happening on the other side. On Monday, Angela Merkel, French President Francois Hollande and Italy’s Prime Minister Matteo Renzi will meet in Ventotene in Italy. Then, the German Chancellor will head to Estonia and Poland. The goal for this “European Brexit Tour”, as the FT dubbed it, is clear: Coming up with a unified, European position towards Brexit.

Similar to the British, the Europeans don’t have much time left, as there is a big European summit looming which will be held on the 16th of September, in Bratislava. Despite the fact that some leading figures, among them Jean-Claude Juncker as well as Francois Hollande, have demanded the UK to start the divorce talks quickly, it seems that the Europeans have realised that Britain will take its time.

Initially, the autumn or the end of the year seemed like the most feasible time frame for Britain to begin negotiating its exit. Since then, the date has continuously been pushed back: From the end of 2016 to at least 2017. This scenario would give the British government some more time to find out what it wants: The Norwegian model? A Swiss-style agreement? Or maybe no agreement, resulting in a so-called “hard Brexit“? This option would also make it possible to see how the British economy digests the unexpected outcome of the referendum.

Some observers, among them EU-citizens living in the UK, have cherished the idea that Theresa May might kick the ball long into the grass. She could be waiting many more months, even years, they hope, and by that point have waited until the economy is in such a bad state that the electorate might be willing to let go of the idea to leave the EU. This is, of course, pure speculation, as are some of the other theories that are currently being tested.

Then, the Sunday Times made big headlines last weekend by running a story according to which Prime Minister May could wait until late 2017 or even longer before she triggers Article 50. This makes sense, given that both France and Germany will hold national (or federal) elections next year, with very unforeseeable outcomes. With the possibility of both Francois Hollande and Angela Merkel gone before the end of 2017, some more patience might be justified, as a change in government in important countries such as these will definitely influence the outcome of the Brexit-negotiations between London and Brussels.

However, this idea might not go down too well with the “hard“ Brexit-camp, the likes of Brexit Minister David Davis and Trade Minister Liam Fox. Both have campaigned for a quick Brexit in order to radically transform Britain’s relationship with the outside world. Thus, on Friday, there were widespread reports according to which the British government will not wait for the outcome of the French and the German elections before it triggers Article 50, letting the Pound Sterling tumble. From a market point of view, rumours like these are not welcome: The market does not like surprises, it wants ample time to prepare – in order to prevent the worst (In any case, the deployment of Article 50 will result in a heavy sell-off).

To me, it all comes down to how Theresa May squares the circle. How does she reach a common position between soft and hard Brexiteers? Will she manage to align David Davis and Liam Fox, as well as flip-floppers such as Foreign Secretary Boris Johnson? Depending on which position (The Norway model? A Swiss-type agreement? No agreement?) gains the upper hand, May will trigger Article 50 sooner or later. For observers, this will then provide some first insights into what the British government might be after.

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The Bank of England’s reaction towards the vote for Brexit

The “unreliable boyfriend”: That´s the nickname that the City of London has given Mark Carney, the Canadian who has been running the Bank of England since 2013. How did he earn that honour? Several times last year – with the EU-referendum still months and months away, the British economy presented itself in rude health – Carney hinted towards a potential rate rise, only to disappoint investors and analysts by leaving rates at the level they have been since 2009, 0.5 percent. Since then, the City never really trusted the comments that came out of Threadneedle Street.

About six weeks after the historic vote for Brexit, things have changed quite dramatically. As he proved on Thursday, Mark Carney no longer deserves his nickname. Contrary to the past, the head of the BoE met the expectations of the financial community: On Wednesday, the Monetary Policy Committee (MPC), the core decision-making organ of the Central Bank, decided to cut rates to 0.25 percent and to restart Quantitative Easing (QE). In addition to that, the MPC decided to create a new credit facility for banks and house-building societies.

With these measures in place, Governor Carney and the Chancellor of the Exchequer,  Philip Hammond, hope to moderate the negative impact of the EU-referendum on the British economy. Important indicators such as the most recent Purchasing Managers Index (PMI) point towards a drastic slowdown since the end of June. Because of this situation, the BoE has adjusted its forecast for next year: Instead of 2.3 percent as previously forecasted, the central bank only expects meagre growth of around 0.8 percent, the biggest amendment since 1983. After the expected rate cut, it remains to be seen whether the Central Bank will be able to prevent a hard landing. Ultimately, the core problem of the British economy is caused by the uncertainty about the future relationship between the UK and the EU – a problem that monetary policy cannot solve.

According to the report published on Thursday, the BoE expects an increase in inflation, more unemployment and less consumer demand after the vote for Brexit. At 4.9 percent, unemployment is currently at a historic low. However, it is supposed to rise again, to 5.4 percent in 2017 and 5.6 percent in 2018. Because of the expected slump in consumer demand, the MPC has decided to restart QE, a policy measure that hasn´t been used since 2013. Now, the BoE is allowed to buy British government bonds (gilts) of up to 60 billion pounds and, in addition to this, corporate bonds of up to 10 billion pounds. By including corporate bonds, the BoE follows the example of the European Central Bank (ECB) which started buying corporate bonds in early June as part of its QE-program.

The cut in interest rates will most likely reduce the profitability of British banks. Simon-Kucher & Partners, a strategy consultancy, expects operating profits of the 21 largest banks and house-building societies to decline by up to 1.4 billion pounds, now that rates have been reduced to their lowest level for 322 years. In order to prevent a new banking crisis, the MPC introduced a credit program for banks and house-building societies, the so called “Term Funding Scheme” which provides financial institutions with the opportunity to borrow money at rates close to the bank rate. Previous QE-programs included, the balance sheet of the BoE could swell to levels of up to 545 billion pounds thanks to the measures announced on Thursday.

Initially, analysts and markets reacted positively. However, it remains to be seen whether the measures of the BoE deliver the desired results. The underlying problem of the British economy is not access to capital and a lack of funding, but the heightened levels of uncertainty since the British voted for Brexit on the 23rd of June. As long as there is no clarity over the future relationship between the UK and the EU, monetary policy can only do so much to support confidence and investment.

It depends on the outcome of the negotiations between London and Brussels whether the British economy enters a long and severe crisis or whether it recovers relatively quickly and, maybe even more important, only with minor bruises. According to what Theresa May has said, it will take a while until the official start of the negotiations. The Prime Minister intends to wait until early 2017 before she triggers Article 50 of the Lisbon Treaty which will commence the divorce process between the UK and the EU.

Mark Carney is aware of this, as his letter to Chancellor Hammond indicates. “Many of the adjustments needed to move to that new equilibrium (the new relationship between the UK and the EU) are real in nature, and are not the gift of monetary policy makers. Nonetheless, monetary policy can still play a role in smoothing part of this adjustment by appropriately balancing the forces acting to push inflation above the target with those expected to push activity below the economy’s new path for potential output.” Analysts as well as business associations, such as the British Chambers of Commerce (BCC), remain sceptical as to whether the BoE’s actions will produce the desired results. “Lower interest rates may give a helpful boost to market confidence, but have little-long term effect on businesses when rates are already so low”, comments Adam Marshall, acting Director General of the BCC.

Independent of this, Chancellor Hammond seems to be confident regarding the future prospects for the British economy. “The UK economy is fundamentally strong – employment is at a record high, there are almost a million new businesses since 2010 and the budget deficit has been reduced by almost two-thirds as a share of GDP. This is a new chapter for Britain, but we are well-placed to deal with the volatility caused by the vote to leave the EU”, Hammond writes in a letter to the Governor of the Central Bank.

He continues by stating: “I am prepared to take any necessary steps to support the economy and promote confidence. The UK starts from a position of economic strength as we address the challenges and take advantage of the opportunities that will arise as we forge a new relationship with the EU.” Regardless of the slowdown that indicators such as the most recent version of the PMI point out, the BoE has left its growth forecast for 2016 unchanged. In the year of the EU-referendum, the British economy is supposed to grow by 2 percent, the BoE thinks.

After their decision on Wednesday, the members of the MPC will only reconvene in early November. By then, the impact of the vote for Brexit on the state of the economy should be more obvious than it is today. Should there be a further deterioration of sentiment, the MPC might reduce rates further, but not to zero. According to the statement put out by the BoE, the bank rate is supposed to remain a little above zero, potentially avoiding some of the problems that the European counterpart of the BoE, the ECB, finds itself in after the introduction of negative interest rates.

Not only the BoE, but also the Chancellor could be taking further measures soon. He will deliver his first Autumn Statement in November and is expected to announce fiscal stimulus for the ailing economy.

But will Hammond be able to take away some of the uncertainty British firms suffer from? We’ll see.

 

 

 

May and Merkel – will they get along?

The parallels are all too obvious. They are both females, in their late fifties or early sixties. They are both pastors’ daughters. They both studied untypical subjects (geography and physics). They are both known for being practical, having a strong endurance and, paying attention to details. In addition to all of this, they have fought their way to the top by beating the competition (mostly men) and by making sure that there is actually not too much competition left to challenge them in the future (Merkel has killed off all critics in her party while May was the last Tory-woman standing after a bruising Referendum campaign).

Both are known to be hard workers. Both have the reputation of wanting to get things done and, of just getting on with it, as people say here in Britain. Both Merkel, the German chancellor, as well as May, Britain’s new Prime Minister, have been around for a while (Merkel since 2005, May since 2010). Both are said to be a “safe pair of hands”, a safe bet. Neither of the two has the reputation of being too emotional, chatty, charming, or anything but business.

So, the question goes, will they get along, the German chancellor and her British counterpart? For sure, the relationship between Merkel and May will be crucial when negotiating Britain’s exit from the EU. Both will be studying each others previous negotiating quite closely, and they will be trying to predict the future by investigating the other’s past behaviour in negotiations where a lot was at stake.

From a German point of view, out of the two choices at hand – Theresa May and Andrea Leadsom – May is definitely the preferred option. This is not so much because she was a soft Remainer, but rather because she is expected to behave fairly rationally, pragmatically and reasonably. That’s not to say that Merkel and others should not expect some tough negotiating. Theresa May will, and I am sure that people in Berlin and Brussels will be aware of this, fight as hard as she can to get “the best deal for Britain”.

A lot will depend on the careful calibration of this relationship. Merkel might help May where other European partners don’t want to. But, as the leading representative of one of the most important trading partners of the UK, she can also play a huge role in massaging May into the desired direction.

As to the end result, I am not sure whether it makes a huge difference whether the two get along well, given the gigantic task that lies ahead of them. There is a fundamental issue here that needs to be resolved but that at the same time seems totally unresolveable. How do you keep full access to the Single Market if you plan to reduce the European Freedom of (Labour) Movement? Any negotiator will have to be very witty to achieve anything that comes close to this.

Depending on how the coming months unfold, Merkel could become May’s interconnector into Brussels and other European capitals. However, it could also be the contrary. Merkel might well become a strong adversary to May, should the British Prime Minister try to use the Europeans currently living in the UK as bargaining chips for the negotiations in Brussels.

However, we should not overplay the importance of the relationship between the two. Germany and the UK no longer have closely aligned interests (at least not as aligned as before June 23rd) and so each side will fight with might for what they want to get out of this situation.

British universities after Brexit

It’s her favourite topic: Europe. Helen Drake is a professor for French and European Studies at Loughborough University. For years, she has researched European politics, European integration and European history. This, the Brit fears, could become much more difficult, should the UK go ahead with its plan to exit the European Union. “European studies will lose a lot of their attraction”, the professor said when I interviewed her earlier this week. “My students are already less interested in Europe than in other topics.”

She believes that this is down to the ambivalence that has characterised the relationship between the UK and the EU for decades. For her, the vote for Brexit could also have personal consequences – Drake holds a chair for European Integration that is financed by the European Commission. “I have no idea whether I will be able to keep it beyond the initial funding period”, she stated.

These days, academic staff and students think along similar lines. They all worry about the future of the British university system, should the UK leave the EU, as requested by its people. Students and staff with European passports are equally worried. They fear that the cost of studying in the UK will go up and that European funding will no longer be available to British researchers.

Up until now, the vote for Brexit hasn’t had too many practical implications, neither for Europeans nor for Brits (except the pound/stock market crash). “There is no immediate change to the UK’s participation in the Erasmus+ programme following the EU referendum result”, the website of the British Erasmus office states. “All participants and beneficiaries should continue with their Erasmus+ funded activities and preparation for the published application deadlines in 2016 and 2017.” Every year, there are tens of thousands Europeans that come to the UK with the help of this program.

Many now fear that this could change within a couple of years. “It is understandable that there are fears among the 125.000 EU-students and the 43.000 staff from EU-countries”, Julia Goodfellow, the president of Universities UK, the association of British universities, commented recently.

It all depends on the negotiations between Brussels and London, once Article 50 is officially triggered. In the run up to this, the universities are only one of many parties that lobby the government. “The universities have to work hard to influence the government in order for them to keep the status quo”, said Charlie Beckett, one of my former professors at the London School of Economics and Political Science (LSE). For him, it is very difficult to forecast the impacts of a British divorce from the EU, at least at this point in time. “It does not change the fundamentals but many of the details”, he said.

One core area of concern is the freedom of movement. This could hit the universities hard: Europeans make up five percent of the student body, among the University staff, it’s 15 percent. “The end of the European freedom of movement could lead to many European students no longer coming here”, explained Julie Smith, a lecturer at the University of Cambridge and a Member of the House of Lords.

This is also what Ulrike Franke believes, a PhD student at the University of Oxford. “Not only with regard to the legal status, but also with regard to tuition fees, there is a lot of uncertainty”, the 28-year old German said when I phoned her. So far, Europeans pay the same amount of fee as British students, up to 9000 pounds per year. It is quite possible that they would have to come up with substantially more than that, should the UK treat them like overseas students.

With fees of around 35.000 pounds per year, a degree in the UK would become much more expensive. “In this case, many Europeans will consider going to the US instead”, Franke stated, “the UK would lose the cost competitiveness that has drawn a lot of Europeans here.” Two weeks after the historic vote for Brexit, she is still desperate. “I am heartbroken”, she said.

After the British exit from the EU, life for scientists and researchers could also become harder. “Because about the uncertainty around tuition costs, future job opportunities and the legal status, many professors and students will give it a second thought”, said Marc Szepan, another PhD candidate in Oxford.

Deans have started thinking about how to compensate for the loss of European funding after Brexit. Given that the UK is running a substantial budget deficit, they don’t assume that the government will be able to foot the bill. “The government simply cannot afford this”, Julie Smith from the University of Cambridge believes.

According to data from Universities UK, British universities received 836 million pounds during the 2014/2015 academic year, a similar amount came from the central government in Westminster and the NHS. Thus, the public sector would have to double its spending once the UK turns its back on the EU. The majority of income though, around 33.2 billion pounds, is provided by tuition fees.

Already now, a short time since the referendum on June 23rd, British scientists are receiving unofficial warnings to not apply for European funding after 2018. “Even if we were theoretically still eligible for European funding, we should not underestimate the subjectivity factor”, Helen Drake said. By that, she means that even in case the UK continued to qualify for European grants and funding, researchers or students might not be selected, because of anti-British feelings. So far, more than 60 percent of the research partners of British Universities come from other EU-countries, Universities UK has found out.

Interestingly enough, some German scientists are more optimistic than that. Theoretically, it could be the case that the UK is cut off from European projects such as Horizon 2020 (budget: 80 billion Euro), should it press on with its exit from the EU. However, “I don’t believe the EU will really do this”, said Markus Rudolf, dean of the German business school WHU. “It would reduce its own attractiveness if British universities were no longer part of the European network.” Contrary to this, LSE-professor Beckett believes that British universities will increasingly have to search for funding outside of the EU. “We are already seeing that funding agreements are being postponed or even cancelled”, he said.

Britain’s move to exit the EU will not only impact European students in the UK. “Also for British students, this will be dramatic”, said Ulrike Franke, the German PhD student in Oxford. “Even before the referendum, they spent less time abroad compared to other EU nationals.” Helen Drake has made similar observations. “The number of British pupils and students learning a foreign language has gone down continuously”, the professor stated. “This trend will be amplified in this current climate of euro-scepticism.”

Soulsearching

It was an easy question, at least from the perspective of the radio presenter who asked it. “So would you apply for a British passport if this would allow you to stay in the country?” The scene took place Monday early afternoon, at Western House in Central London, right next to Oxford Circus. I had been invited to share some of my experiences as a European in a post-referendum Britain, on the Jeremy Vine Show on BBC Radio 2, and there we were. Right at the heart of the question.

Imagining that the European Freedom of Movement could be restricted or even revoked after a British EU-exit, would I still want to live in this country and, secondly, would I apply for British citizenship in order for me to be able to stay? It´s an interesting thing to think about, especially for me. So far, I have merely seen the outcome of the referendum as an unexpected turn in British history. I have watched the pound crash, Cameron resign, EU-Commissioner Hill step down. Within days, Boris Johnson was knifed, George Osborne dumped his austerity goal and Nigel Farage quit.

As a journalist, I watched it with fascination – seldomly, we get the chance to witness decades happening in a couple of days – but I haven`t really contemplated on what all this means for me personally. I have been in the UK for three years now (four if you count the year that I did at the London School of Economics in 2011) and I always liked it here.

I find it disappointing that a country with so much potential is now slowly dismantling its reputation in the world, its relevance as Europe’s leading financial center, its relationship to Europe. Of course, from a journalist point of view, this is as exciting as it gets. But from a personal perspective, do I still want to be here?

The huge amount of racist incidents since the referendum has clearly not helped. These days, you watch videos in which Brits are telling Europeans to leave their country. You read about insulting behaviour on trains and trams, in streets and restaurants.

The more worrying to me though is the debate about Europeans living in the UK and the question of whether they will be allowed to stay, should the UK really trigger Article 50 and sever its ties with the EU. For a long time, we were told (and happily believed) that nothing would change for those who are already in the country, that there would possibly be grandfathering of those arriving between now and the formal exit.

However, over the course of the past days, the debate has changed a little. Theresa May, currently Interior Minister and one of the favorites for the job of Prime Minister Cameron, alluded that she might be using the Europeans currently living in the UK as a bargaining chip in the negotiations in Brussels.

On the Peston Show, May stated: “What’s important is there will be a negotiation here as to how we deal with that issue of people who are already here and who have established a life here and Brits who’ve established a life in other countries within the European Union. (…) There’s no change at the moment, but of course we have to factor that into the negotiations.” Foreign Secretary Philip Hammond made similar comments on Monday.

Although May and Hammond were criticised heavily for what they said – not only by Remain-supporters but also by Leave-campaigners – I guess these comments give us a bit of a foretaste how the negotiations between the UK and the EU turn out once the UK officially starts the divorce proceedings. May and Hammond have made clear that they might want to use the approximately three million Europeans currently living in the UK as bargaining counters. (According to the FT, May’s team rowed back on Tuesday, stating that “Her position is that we will guarantee the legal status of EU nationals in Britain as long as British nationals living in EU countries have their status guaranteed too.”)

Given that the negotiations will not start for a while, I find this development deeply worrying. With comments like these, and the amount of racist incidents that have been reported since the Brexit vote, the UK has already changed dramatically. To me, it seems to be a less friendly, less open place to live in. I know that it all depends on the outcome of the negotiations so I think there is no need for premature panic. But – many of my European friends share my worries and some of us fear that the climate will become more heated once the divorce talks are under way.

A long answer to a short question. Would I apply for a British passport, in some years from now, and give away my German passport that allows me to travel to a record 177 countries, visa-free, according to most recent edition of the Visa Restrictions Index? I don`t know. Maybe not. Hopefully, there will be an alternative solution to this.

Should we stay or should we go?

It has only been a week since we learned the results of the British EU-Referendum. Voters, politicians and business people are slowly coming to terms with the decision to leave the European Union. Although we can’t foresee all of the implications yet, it is quite obvious that the amount of change will be tremendous.

That’s especially true for firms that rely on accessing the European Single Market (e.g. Vodafone, the telecommunications company, or EasyJet, the low budget airline). Both Vodafone and Easyjet are headquartered in the UK, for now. Given that the UK might lose its access to the single market, these firms have, among others, announced that they could be forced to relocate their headquarters, should it be necessary for their businesses.

This news also got my editors interested. Ideally, they want me to find a company that will not wait whether and when Article 50 – the official start of the British divorce from Europe – is triggered, but that will be moving to Continental Europe any time soon. So far, I haven’t managed to find such a company.

According to what a German lawyer told me on Thursday, the reason for this is simple. Relocating your headquarters is a complex, time consuming and expensive business, not something you would do just in case, as a precautionary measure. “The starting shot will only be fired once we have clarity over the progress of the negotiations”, Marcel Hagemann, a partner at CMS Legal, told me.

Assuming that Article 50 will be triggered towards the end of the year, the UK has two years, until the end of 2018, to come to an agreement with the EU. His expectation is that by the end of 2017, we should see companies starting to relocate to the EU.

“You need some notice for this”, Hagemann said. From the legal side of things, it takes about a year to move a company from the UK to Europe, depending on what kind of legal process you want to undergo. According to the lawyer, there are two core solutions to this issue.

Firstly, there is the merger between the UK entity and a Continental European entity. For this, you can either establish a new company in Europe or buy an existing one. The only important thing is to merge this one with your British entity, making sure that the headquarter of the new entity is based outside of Britain. This is, Hagemann said, a relatively simple process, assuming that your company is not listed in Britain. If it is, it will lose its listing here in the UK (as it is not longer headquartered here).

The second solution to the problem is the creation of a European public company, a Societas Europaea (abbreviated SE). So far, the UK only has 34 of these whereas Germany has 350 SE-style companies. According to the lawyer, an SE is functioning similarly to a PLC. Whereas the founding of an SE is a bit complicated, moving the headquarters from the UK to Continental Europe should be relatively straight forward – as long as you finish the process before the UK officially leaves the EU.

When asked how expensive the whole process might be, Hagemann shrugged. Obviously, he did not want to be nailed down to a specific number. “It varies a lot, depending on the size of the company and the amount of people that will have to move”, he stated. Whereas he does not think that anyone will officially move their headquarters before the end of 2017, many firms have started searching for alternative locations.

Duesseldorf, where Hagemann is based, has already rolled out the red carpet to British telecommunication firms such as Vodafone. “They already have their German office there, so maybe this would be a good choice for the group headquarters as well”, Hagemann said.

Although the outcome of the referendum did surprise him, the German is still hopeful. “In the past, the British have been very good at negotiating in their favour”, he said. Plus: “Don’t forget that Germany has an interest in keeping them in the Single Market. We do have a strong voice here.”

Firms however will have to prepare for the worst. If they only learned one thing since the British referendum, it is that politicians don’t tend to stick to what they said before. Thus, they’d better be prepared if Britain’s EU negotiations break down in late 2018, leaving them with the prospect of a hard Brexit.

Some firms have already reacted. Siemens for example, the German industrials company, will not make further investments here in the UK before they have clarity over where the country might be heading. Two days ago, Virgin cancelled a deal that would have seen them take over 3000 staff. UOB, the Singaporean bank, stopped providing financing for British real estate projects.

According to Hagemann, we will see much more of this – but only once it is clear whether Britain remains part of the Single Market or not. “German companies will not start closing their factories straight away”, the lawyer said.

What a great relief. So watch out for 2017.

So what does Angela Merkel think?

In our post-Brexit world, there are some key figures that will strongly influence the outcome of the negotiations. One of them is Jean-Claude Juncker, the head of the EU Commission, a seasoned EU-politician who made us laugh earlier this week when he asked Ukip-leader Nigel Farage why he attended a session of the European Parliament, given that he was one of the driving forces behind the Leave-campaign.

Juncker did not speak English during that session and made sure that none of his staff or that of other EU-bodies enters any preliminary talks with the British before Article 50 of the Lisbon treaty has officially been triggered. According to Juncker, there “can be no preliminary discussions”. Since the referendum vote last Thursday, Juncker has played hard-ball. As the leading EU-representative, he is obviously not just angry about the British vote to leave but also afraid that it could lead to contagion among other dissatisfied EU-member states. The last thing that Juncker wants to see happening is more countries following the British example.

Then there is Francois Hollande, the French President who will face a general election next year and who has promised to not seek reelection should the unemployment rate stay at where it is. For Hollande, Britain’s vote for Brexit is a dangerous affair. After all, Mr. Hollande has a Ukip-like party in his home country as well, called Front National, a party that has been around since the early 70ties and that has gained some support by voters during the last years.

With France’s economy continuing to suffer and the population resisting reforms, their leader Marine Le Pen offers even more drastic solutions to the country’s problems than Nigel Farage in the UK. It is precisely this why France is relatively harsh towards the UK – to send a message to voters at home that populism does not lead to great results. Thus, the head of the French Central Bank declared over the weekend that UK banks will lose their passporting rights that currently allow them to trade in Europe should the UK leave the EU.

This week, President Hollande delivered a second blow by stating that the City of London would be losing its right to conduct Euro-clearing should the country separate from the EU. According to the FT, he said: “It can serve as an example for those who seek the end of Europe . . . It can serve as a lesson.” Thus, we can assume that France will – for domestic reasons – take a ruthless stance in the divorce talks.

Besides Juncker and Hollande, there is – of course – Angela Merkel, the German chancellor. Also in this crisis, Merkel has followed her previous success recipe. In Germany, we have gotten to know her for only taking sides and positioning herself once all or at least most of the other parties have voiced their opinion. It’s a strategy called “merkeln” that Merkel mastered during her early years in the Christian Democratic Union (CDU), at the time a hugely male-dominated club of guys that ran the show. By waiting them out, Merkel was over time able to gain control over the party.

Even when she became Chancellor, Merkel stuck to her strategy. On numerous occasions, we have seen it played out, both on the domestic but also the international front. No surprise then that it also came into play when Merkel started talking about the consequences of the British Brexit-vote. On Friday, just hours after the announcement of the result, Merkel warned against drawing “easy and hasty conclusions”. On Sunday, she said she would not “push for an immediate withdrawal”.

But before the European Summit on Tuesday, Merkel changed her tone. According to the FT, she said: “We will ensure that the negotiations will not be run on the principle of cherry-picking,” the Chancellor said. “We must and will make a palpable difference over whether a country wants to be a member of the family of the European Union or not. Whoever wants to get out of this family cannot expect that all the obligations fall away but the privileges continue to remain in place.”

To me, this was a clear sign that Merkel has synchronized her attitude towards the British question not only with fellow Christian Democrats such as Finance Minister Wolfgang Schäuble (“In is in. Out is out”), but also with her European allies. Even if we hear conflicting messages out of Brussels, the Leave-side should not take this too serious. Yes, there are different positions on how the EU should deal with the British exit but leading figures such as Merkel, Hollande or Juncker will make sure that there is a unified position in the end.

Instead of reading the tea leaves in Brussels, the British side should focus more on making up their mind and defining what kind of relationship they want with the EU. Unless they have reached that stage, there is no point in bowing and scraping in various European cities. Until Article 50 is triggered, the UK will not be able to strike any agreements with the EU, even if Merkel continues stating that there is no need to be particularly nasty towards the Brits.

Whoever succeeds David Cameron should not rely solely on comments made by German industrials like Markus Kerber, the head of the BDI, the equivalent to the CBI. Just because Kerber warned against trade curbs between the UK and Britain, this does not mean that this position is widely shared by decision makers. For Merkel and other Europeans, there is more at stake here than trade.