EU THROWS MAY BREXIT LIFELINE Edelman
20 October 2017
Pawel Swidlicki Brexit Analyst Pawel.Swidlicki@Edelman.com
EU leaders have thrown embattled Prime Minister Theresa May a lifeline by agreeing to begin internal preparatory discussions over the transition period and future UK-EU relations ahead of December’s summit at which these could be formally initiated. In general, EU leaders adopted a much more positive and conciliatory tone, although this is likely to provide cover for May to make further concessions – most notably over the Brexit bill – beyond those made in her Florence speech.
EU TO BEGIN INTERNAL TALKS ON ‘PHASE TWO’
This is important because the value of the transitional deal diminishes the closer we get to the Article 50 event horizon; unless businesses know they will be able to rely on the existing rules up until 2021 at least, they may initiate contingency plans premised on the worst-case, no deal scenario. In an additional win, the EU’s internal discussions will ‘take account’ of the future partnership papers published by the UK. This gives May a win of sorts to bring home, giving her some much needed breathing space vis-à-vis those Brexiteers who have been urging her to be ready to walk away from the talks. Indeed, May has used her domestic weakness to her advantage in Brussels by making it clear to her fellow leaders that a lack of progress makes it more likely she would be replaced by a proponent of a harder form of Brexit.
The mood music ahead of this week’s European Council summit was far from encouraging. Last week, Michel Barnier, the EU’s chief negotiator, said the talks had reached a disturbing deadlock with the media being briefed that Paris and Berlin were even more hawkish than the Commission over the question of the Brexit bill. Meanwhile, in the UK, Brexiteers ramped up the ‘no deal is better than a bad deal’ rhetoric.
The EU also welcomed the progress made on citizens’ rights and acknowledged that on Ireland, “there has been some progress on convergence on principles and objectives.”
However, following a short presentation by May at last night’s dinner, this morning EU leaders were much more positive, conciliatory, and explicit about their desire for close ties post-Brexit, including on trade.
However, nothing comes for free in Brussels and the price of unlocking trade talks in December is to go further than the £20bn May tentatively put on the table, or in the EU’s words, to translate her Florence pledge that no member states would lose out from Brexit “into a firm and concrete commitment.” May conceded as much over dinner, and a Number 10 source later confirmed Florence “was not the final word” on the bill.
They also unanimously agreed to start internal preparatory discussions “in relation to the framework for the future relationship and on possible transitional arrangements.” Although this falls short of May’s initial objective of getting these talks underway immediately on a bilateral basis, it is a key win nonetheless, as it means that, if as expected, “sufficient progress” has been met in December, UK-EU transition talks will not have to begin from scratch.
UK TO GO EVEN FURTHER ON SETTLING BREXIT BILL
Key bones of contention include spending commitments made under the current EU budget framework but where the actual cash payments are due post-2020, the method for calculating EU officials’ pension obligations, and whether or not the UK will continue to pay some of its foreign aid via the EU.