Brexit Negotiations: Not without pain.
[NOTE: This is an English translation of the original German piece by Thomas Gutschker, Political Editor of the Frankfurter Allgemeine Sonntagszeitung (FAS), published on 23.10.2017.]
Theresa May asked for help with the Brexit negotiations this week in Berlin, Paris and Brussels. The Europeans remained tough. But they were trying to be nice.
Half a year ago, Theresa May was at the peak of her power. She had chosen “hard Brexit,” praised “global Britain,” initiated withdrawal from the European Union, and even called for new elections. May wanted even more power. When Jean-Claude Juncker sat at her table in Downing Street, pouring plenty of water into his wine, she stuck to the script. No bad news, please! She lives in another galaxy, the President of the Commission said afterwards.
Earlier this week, May and Juncker met again for dinner, this time in Brussels. But now everything was quite different. May did not talk herself up, she begged for help. She talked about the risk she had recently put herself at when she gave up the hard Brexit course, asking the EU for a transitional period of two years, in which everything is going to remain the same. She reminded him that she had moved on the delicate issue of finances. And she told him that, at home, friends and enemies are breathing down her neck, waiting for her to fall. She had no room for manoeuvre, said May — so the Europeans would have to make it for her.
Theresa May seemed anxious to the President of the Commission, despondent and discouraged. A woman who hardly dares trust anybody, but is not ready for an act of liberation either. May’s facial expressions and appearance spoke volumes — that’s how Juncker later described it to his colleagues. Everyone can see it: the Prime Minister is drawn from the struggle within her own party. She has deep circles under her eyes. She looks like someone who does not sleep for nights on end. She rarely laughs, though clearly, she has to for the photographers. But it looks forced. Previously, May could literally pour out laughter — her whole body shaking. Now she has to use her utmost strength to avoid losing her composure.
May asked Juncker for the appointment at the last minute. She had telephoned Chancellor Merkel and French President Macron beforehand too. This is commonly called a “charm offensive,” but that didn’t apply here. They were calls for help. May knew that the EU heads of state and government were not ready to proclaim “sufficient progress” in the negotiations at the end of the week. This blocked the way to the second phase of the negotiations, where the future relationship would be discussed. The Prime Minister wanted at least to pave the way for a move: could the EU chief negotiator Michel Barnier not be given a mandate talks about the transitional phase that she had asked for?
EU wants to talk about money
For May this would have been a great success. It would have softened the EU’s strict negotiating plan. And it could have soothed businesses fears in the UK. With every day that a chaotic, uncontrolled exit looms closer, business is becoming increasingly nervous. Several banks have already begun to execute their emergency plans: they are hiring offices in Frankfurt or Paris, and relocating business units. Others are preparing for it. In business, no one can rely on hope or desire. And as a rule of thumb: jobs and production sites no longer return once they are gone. Moving twice is not worth it.
The Europeans are only too aware of the needs of the British — it is their biggest leverage in the negotiations. That is why Merkel, Macron and Juncker could not be softened. All three insisted on further progress, especially on the sensitive issue of money, before there could be direct talks about the future. Brexit was not wanted, and one could not be expected to solve the problems of the British, was the dry response from the Chancellery. May didn’t hear anything different in Brussels or Paris. The Europeans had agreed.
Nevertheless, it could not look as though they sent the Prime Minister packing. Merkel, Macron and Juncker know exactly, after all, how fragile her situation is. At the same time they recognize that May is no longer under any illusions about the effects of Brexit. Her initial threat that, “no deal is better than a bad deal” does not play any role in the negotiations at all. Macron has publicly pointed this out, and it is confirmed in Berlin.
With her Florence speech May has already changed tack. She acknowledged how bad it would be for the British economy if the country were catapulted from the single market overnight. Boris Johnson, the Foreign Secretary, is quite different: he still tells people that Britain is going to have a “great future,” even without a deal. Better to negotiate with a realistic May than with the dream-merchant Johnson — that is the calculation on the Continent. That was why May’s defeat had to be packaged nicely at least.
Pictures of the day deceive
Juncker said good-bye to her after supper. He can do it like no other. In the communiqué, a “constructive and friendly atmosphere” was mentioned. Yes, efforts should even be “accelerated”. That’s how May’s people could sell it to their media as a success for half a day — until the chief negotiator Barnier soberly pointed out that it would take two for talks to speed up.
When the Chancellor arrived at the European Council on Thursday, she said a few friendly sentences. The progress in the negotiations is not yet “sufficient” but “encouraging, to continue the work, in order to reach the second phase in December.” Merkel and Macron then entered the meeting hall together — May in their midst. The three were in excited conversation, these were the pictures of the day. One could not see that they were not talking about Brexit, but about the nuclear deal with Iran.
In the Council conclusions on Brexit, Mays’s last-minute diplomacy did not change anything. EU ambassadors had voted on them a week before the Summit. The EU governments and the Barnier team would, according to the conclusions, undertake “internal preparatory discussions” on future relations with London and a transitional phase. This is a positive response to May’s Florence speech. In negotiating circles, it’s explained that without such preparations one cannot enter into the second phase anyway.
Notable progress has been made in the divorce negotiations so far only with regards to the rights of the four million citizens, who will be directly affected by the UK’s withdrawal, because they will live on the “other” side after Brexit. London has already ceded ground on eighty percent of the EU’s demands, it is said internally. The biggest issue is to be cleared in the coming weeks: but the British negotiators are now open to the idea that the European Court of Justice will settle disputes after Brexit.
Finances were taboo
On the other hand, the subject of Northern Ireland is very complicated. It is true that both sides agree that there should be no “hard land border” on the Irish island, but they have very different solutions. The path you choose depends on future relations. Which is why even with all its difficulties, the Northern Irish issue is not blocking the transition to the second phase of talks.
The real hurdle is money. The remaining 27 states require the United Kingdom to recognize all the financial commitments it made as a member. According to calculations by the Commission, this is well over sixty billion euros. The Council, as an institution of the Member States, comes to ninety billion euros. The difference is related to other items and cost estimates. But London must end up somewhere between the two numbers.
At first the British government did not even want to engage on this: finances were taboo. Then May made ceded ground in Florence: First, she said that the UK would continue to contribute to the EU budget until the end of 2020, even after leaving the EU in March 2019. This equates to a good twenty billion euros. Curiously, in doing so she addressed the weakest position in the exit account of the Europeans. This amount was only agreed in the context of medium-term financial planning, but not by budget resolution. Having said that, May could have been following a tactical consideration.The sum is the easiest for her to sell politically. If the UK is allowed to stay in the Single Market for two years after Brexit, it would have to pay anyway.
Second, May also uttered a simple sentence in Florence: “The United Kingdom will recognize the commitments we made during our membership.” That was a good thing from the point of view of the Europeans. But what does it mean exactly? What obligations? From the EU perspective, it is a question of unpaid bills (31 billion euros), future pension burdens (9 billion), special funds (4 billion) and the assumption of liability risks. Nobody requires London to come up with concrete numbers right now. The bill would only come when it exits, and could be staggered over a long time. May had to acknowledge, however, the individual items on the receipt.
The clock is ticking
However, she is still balking from doing so. Of course Brexit hardliners would moan loudly at the Tories and in the media — they wanted to get out of the European Union precisely because of the British budget contributions. Johnson, or perhaps Brexit minister David Davis, could then make a lethal blow on May. Nevertheless, Europe’s politicians do not want to give in on this point. Berlin and Paris cannot do it because they are the biggest net contributors themselves. It would be a super bail-out for Britain.
The clock is ticking, as chief negotiator Barnier reminds at every opportunity. The next EU summit will take place in mid-December. In Brussels, a man with great political experience formulated the challenge for the UK in next few weeks: May must explain to her public why the costs of a chaotic Brexit would be much higher than the bill presented by Brussels. And how will that work? From now on, any bad news would be good for Brexit, says the man. The gloomier the prospects, the more likely the UK will be to open its wallet.
So maybe it was not such a bad week for the Prime Minister. The British Treasury reported a 3% inflation rate — prices are rising. A research institute estimated that ordinary families would be 300 euros worse off each year, if trade with the Continent were subject to tariffs again. And the OECD, the club of the industrialized countries, recommended that the Brexit should be called off altogether — but failing that, that the UK should follow the “closest” relationship with the EU.
