Britain and EU headed for financial services showdown

A major chunk of trading in euro-dominated shares has been moving from London to European continental exchanges since the beginning of the week, after the U.K. left the European Union single market, and the two sides are now headed toward uncharted confrontation over the future of European finance.

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The outlook: The U.K. and the EU have pledged to negotiate a “memorandum of understanding” by March to sort out the rules under which financial players could operate in each other’s markets. The EU seeks to repatriate business and jobs, and London wants to keep its financial might without having to abide by EU regulations.

But pledging to negotiate is not the same as pledging to strike a deal. The only hope is that the talks, most likely led by bureaucrats and civil servants, won’t be as politically weighted as the long negotiations over the trade deal last year. That should in theory make some form of agreement easier, even though the two sides’ respective interests remain at odds.

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