Europe’s leaders offer Theresa May qualified support, but tougher challenges lie ahead
THERESA MAY, Britain’s prime minister, arrived in Brussels on October 19th for an EU summit with a cacophony of voices in her ears. Hardliners in her Conservative Party were urging her to stick two fingers up to the intransigent Europeans and walk away from the deadlocked Brexit negotiations. Business groups and Philip Hammond, her chancellor, were growing increasingly fretful over the urgent need to agree a “transitional” deal to avoid a regulatory cliff-edge once Britain leaves the EU in March 2019. As if to rub it in, soon after Mrs May arrived Lloyd Blankfein, the CEO of Goldman Sachs, tweeted mischievously that after Brexit he expected to spend a lot more time in Frankfurt, a European rival to the City of London, Britain’s financial heart.
This week’s summit was once supposed to mark the moment when the EU would agree that the Brexit divorce talks—focused on the rights of European citizens in Britain after Brexit, the status of the Irish border and a settling of financial accounts—had made, in the words of the negotiating guidelines, “sufficient progress” for discussions to start on a post-Brexit trade deal. But the talks have become bogged down over money. Time, then, to get political. Mrs May spent the past week frantically wining, dining and phoning EU leaders and officials to unlock the negotiations. Last night she asked all 27 of them to find empathy for her domestic political plight.
Up to a point, they are willing to help. Angela Merkel of Germany and Emmanuel Macron of France acquiesced to a request to accompany Mrs May into the summit before the cameras in a show of solidarity. Leaders of friendly countries like Leo Varadkar, Ireland’s Taoiseach, offered rhetorical shows of support. Donald Tusk, who as president of the European Council is charged with brokering deals among the EU’s disputatious chieftains, declared it his “obligation” to act as a “positive motivator” in the run-up to a summit in mid-December that has become the new deadline.
But friendly gestures will only get you so far in a hard-nosed battle over money. Last month in Florence Mrs May issued an ambiguous promise that Britain would “honour commitments” made during its EU membership, adding that no country would be left out of pocket during the EU’s current budget, which runs until 2020. Still to be resolved are matters such as pensions, contingent liabilities such as loan guarantees to Ukraine and Ireland, and in particular the reste à liquider—outstanding EU budgetary commitments that have not yet been discharged.
All this suggests a far larger bill than the €20bn ($23.6bn) implied in Mrs May’s Florence speech. “We are not halfway down the road,” said Mr Macron after the summit, and Mrs Merkel confirmed that settling accounts remained the “dominant issue”. If Europe’s leaders are consistent in their commitment to move to the second phase of talks, they are equally steadfast in insisting that they will not pay more (or receive less) to compensate for any Brexit-inspired budgetary shortfalls. One way or another, Mrs May will probably have to sign up to a bill of between €40bn and €60bn if she wants to talk about trade.
It had long been signalled that this month’s summit would not give the green light to trade talks. But Britain’s more pressing demand—to agree a transitional period lasting, in Mrs May’s words, “around two years” after Brexit day—has also hit a roadblock. Michel Barnier, the EU’s chief negotiator, was ready to discuss transition with Britain before sufficient progress was made on the divorce agreement. But he was shot down by, among others, Germany and France. Mrs Merkel’s government was even prepared to use a separate discussion over where to relocate two EU agencies currently located in London to convince other governments to back its Brexit line. Transition, which Mr Hammond recently described as a “wasting asset” as companies make plans to leave Britain, will now have to wait, along with everything else.
The biggest bone thrown to Mrs May in Brussels was an agreement that the 27 will begin preparatory post-Brexit trade talks among themselves. That will help them to hit the ground running when the negotiations proper begin with Britain. Mr Tusk said this exercise would “take account of proposals presented” by the British. That may be an invitation to London to clarify its priorities for trade with the EU, on which the cabinet is hopelessly split. It also sounds a lot like a preliminary form of the negotiations that the EU is supposed to have shelved. A shrewd prime minister would use this as leverage in the tricky discussions she must now have with her own party over money.
Yet this also points to a bigger argument ahead. Last night Mrs Merkel raised eyebrows by noting that negotiating trade with Britain would be “incomparably more difficult” than the divorce discussions. It may seem hard to believe, but Britain’s divorce from the EU may turn out to have been the easy part.
This week’s summit was once supposed to mark the moment when the EU would agree that the Brexit divorce talks—focused on the rights of European citizens in Britain after Brexit, the status of the Irish border and a settling of financial accounts—had made, in the words of the negotiating guidelines, “sufficient progress” for discussions to start on a post-Brexit trade deal. But the talks have become bogged down over money. Time, then, to get political. Mrs May spent the past week frantically wining, dining and phoning EU leaders and officials to unlock the negotiations. Last night she asked all 27 of them to find empathy for her domestic political plight.
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But friendly gestures will only get you so far in a hard-nosed battle over money. Last month in Florence Mrs May issued an ambiguous promise that Britain would “honour commitments” made during its EU membership, adding that no country would be left out of pocket during the EU’s current budget, which runs until 2020. Still to be resolved are matters such as pensions, contingent liabilities such as loan guarantees to Ukraine and Ireland, and in particular the reste à liquider—outstanding EU budgetary commitments that have not yet been discharged.
All this suggests a far larger bill than the €20bn ($23.6bn) implied in Mrs May’s Florence speech. “We are not halfway down the road,” said Mr Macron after the summit, and Mrs Merkel confirmed that settling accounts remained the “dominant issue”. If Europe’s leaders are consistent in their commitment to move to the second phase of talks, they are equally steadfast in insisting that they will not pay more (or receive less) to compensate for any Brexit-inspired budgetary shortfalls. One way or another, Mrs May will probably have to sign up to a bill of between €40bn and €60bn if she wants to talk about trade.
It had long been signalled that this month’s summit would not give the green light to trade talks. But Britain’s more pressing demand—to agree a transitional period lasting, in Mrs May’s words, “around two years” after Brexit day—has also hit a roadblock. Michel Barnier, the EU’s chief negotiator, was ready to discuss transition with Britain before sufficient progress was made on the divorce agreement. But he was shot down by, among others, Germany and France. Mrs Merkel’s government was even prepared to use a separate discussion over where to relocate two EU agencies currently located in London to convince other governments to back its Brexit line. Transition, which Mr Hammond recently described as a “wasting asset” as companies make plans to leave Britain, will now have to wait, along with everything else.
The biggest bone thrown to Mrs May in Brussels was an agreement that the 27 will begin preparatory post-Brexit trade talks among themselves. That will help them to hit the ground running when the negotiations proper begin with Britain. Mr Tusk said this exercise would “take account of proposals presented” by the British. That may be an invitation to London to clarify its priorities for trade with the EU, on which the cabinet is hopelessly split. It also sounds a lot like a preliminary form of the negotiations that the EU is supposed to have shelved. A shrewd prime minister would use this as leverage in the tricky discussions she must now have with her own party over money.
Yet this also points to a bigger argument ahead. Last night Mrs Merkel raised eyebrows by noting that negotiating trade with Britain would be “incomparably more difficult” than the divorce discussions. It may seem hard to believe, but Britain’s divorce from the EU may turn out to have been the easy part.
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