Germany changes national labor code to lure bankers after Brexit

Source: Xinhua| 2018-09-05 21:34:56|Editor: Yurou
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BERLIN, Sept. 5 (Xinhua) -- Germany will exempt high-earning bankers from parts of its strict national labor code in order to attract financial service business from the United Kingdom after Brexit, Chancellor Angela Merkel (CDU) announced on Tuesday night.

Speaking to industry representatives in Frankfurt, Merkel said that her coalition government had reached an agreement on weakening protections against the dismissal of employees who are engaged in risk-taking behaviour and earn more than 234,000 euros per year. She emphasized that Berlin was dedicated to creating "attractive framework conditions" which would lure Brexit refugees from the City of London to Germany and its principal financial hub of Frankfurt and the surrounding Hesse region in particular.

Back in May, Thomas Schaefer (CDU), Hesse's regional finance, complained in a widely-publicized letter to the federal finance minister Olaf Scholz (SPD) that Berlin was less assertive than Paris in promoting the competitiveness of the two Eurozone member's respective financial sectors after Brexit. He highlighted the engagement on behalf of French President Emmanuel Macron to strip the United Kingdom of the right to host Euro-clearing activities, as well as expanding the European Securities and Markets Authority (ESMA) in Paris in this context.

According to Schaefer, the establishment of uniform EU-wide regulatory and supervisory mechanisms which served the narrow interest of France were part of a strategy to "establish Paris as the leading financial center in the EU after Brexit."

Frankfurt and Paris are the two main competitors to host new European headquarters created by British-based banks after the United Kingdom leaves the European Union (EU) in March 2019. The British financial services lobby group "TheCityUK" estimates that 70,000 jobs could be lost in the domestic industry if Britain does not remain in the single market after Brexit as is now widely expected.

So far, the two cities have run neck-and-neck in vying for financial services business from London. The lobby group "Frankfurt Main Finance" reported that as many as 20 banking institutions were firmly set on expanding or creating new corporate entities in the city.

Frankfurt is already home to three major regulatory bodies, the European Central Bank, German Central Bank (Bundesbank) and German Federal Financial Supervisory Authority (BaFin), potentially giving it an edge over other continental rivals. However, Paris' post-Brexit prospects were recently enhanced by a decision to re-locate the European Banking Authority (EBA) there from London alongside the ESMA headquarters which are already based in the French capital.

In spite of the setback, the Frankfurt-based stock exchange operator Deutsche Boerse remains hopeful that it will be the principal beneficiary from a prospective transfer of Euro-clearing activities from London to the German city. On Tuesday night, Merkel promised that the company could count on her government's support in its quest to secure these Brexit spoils.

"The logic speaks certainly does not speak against (a transfer from London to Frankfurt). Politically, I can easily explain that Euro-clearing must take place in the Eurozone and in that case Frankfurt is certainly an excellent location", Merkel said.