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UK, France at loggerheads on Brexit financial services free trade agreement

U.K. Chancellor Philip Hammond is expected to argue March 7 that financial services should be included in a post-Brexit free trade agreement with the EU, putting him at odds with European leaders.

In a speech, Hammond will argue that such a deal would be in the "mutual interest" of both Britain and the EU, and that the European bloc has attempted similar agreements with the U.S. and Canada in the past.

But French Finance Minister Bruno Le Maire, in a March 6 speech in London, said "We don't believe that financial services can be part of an FTA ... There will be no financial passport." Passporting allows financial firms based in one EU country to freely offer services in any other.

Le Maire said Britain would have to rely on the so-called equivalence system, the legal mechanism that gives non-EU states limited access to the single market. Such a mechanism can be revoked at short notice. The EU's chief Brexit negotiator, Michel Barnier, has also previously said a trade agreement that is open to financial services "doesn't exist," BBC News reported.

Le Maire also denied suggestions that France "is being the toughest in the current negotiations," saying: "It's not about being tough or soft. Once a country decides to leave, there are consequences. You simply cannot be 'in' and 'out' at the same time."

French officials have also said traditional U.K. allies like the Netherlands and Denmark share the same view that France's main objective in the Brexit talk was to maintain the unity of the 27 remaining EU states because their citizens would start asking for the same deal if the U.K. gets a free trade agreement, Reuters reported.

Paris is poised to gain from any shift away from London as Europe's financial center, and has made an effort to become more business-friendly following the election of President Emmanuel Macron, the newswire noted.