EU Referendum


Brexit: "in a different galaxy"


29/04/2017




When it comes to the UK government's attitude to the forthcoming Article 50 negotiations, two separate newspapers are reporting the same thing, but in such terms that they are getting their information from separate sources, rather than just recycling the same material.

The first of which we became aware was the Guardian, which referred back to the Merkel address in the Bundestag. From this, the reason the German Chancellor made comments about time-wasting delusions, it appears, is that she had been acquainted with the experiences of Commission President Jean-Claude Juncker and Michael Barnier, who had met Theresa May and her senior officials at a dinner the previous night at No 10.

They had come away with the idea that May's team has not "engaged with reality" on David Cameron’s promises to pay into the EU budget until 2020 – a promise Brussels insists the British must stick to. "They [the British] are not just on a different planet, they are in a different galaxy", said the source.

According to the Guardian, one EU diplomat added to this, saying: "I am deeply pessimistic that there will be a positive outcome from this negotiation", putting the chances of the UK crashing out of the EU without a deal as higher than 50 percent.

Then we have the Financial Times reporting that senior diplomats have come away from meetings with Theresa May, "especially alarmed over London's insistence that there need not be a significant exit charge, which the Commission estimates at up to €60 billion". One said the situation was "dangerous" while another said expectations were "unreal".

Mrs May's team, we are told by this newspaper, is confident that the EU's demands are an opening bid and that the negotiations will soon become more realistic over money, with many EU states keen to retain access to UK markets.

But here again, the €60 billion is an invention by the Financial Times. It has no substance in fact, and does not comprise a formal demand put to the UK Government by the EU's negotiating team. In fact, no formal demands of any nature have yet been made.

But, as we pointed out recently, the true figure for outstanding liabilities (RAL) is probably closer to £30 billion. And, since the sums only become progressively due, it is likely that we will be offered annual payments. I have suggested a sum of £4 billion a year for the next seven-year MFF period.

The thing is, as I remarked, payments were always going to be phased. That is the way the RAL works. Furthermore, there was never any question of the "colleagues" slapping a bill on the table. That isn't the way RAL works. The precise figures isn't known until after the end of the current MFF period. Even if it wanted to, the Commission could not yet tell the UK what the figure was.

That might help to put the issue more in context. And it would also explain why, according to The Daily Telegraph, a British official with knowledge of the UK negotiations says that "the European Commission's calculation that the UK owed €60bn were outlandish, even when including all the 'contingent' and other liabilities listed by the Commission".

"Even using their broadest parameters, we run the numbers and cannot get to €60bn", the source says, "a lot of the things being said by the European side now are simply unrealistic. Everyone is posturing and positioning. The negotiations will bring it all back to reality".

But here we go again. The Commission hasn't actually made any calculations yet. For the reasons explained, it can't. All that's happened is that some European notables have repeated the exaggerated FT figure and, like a virus, it's got stuck in the system.

What is more, the Merkel criticism goes a lot wider than just the money issue. The German Chancellor alluded to unrealistic UK expectations of wider market access and the retention of membership privileges, despite acquiring "third country" status once we leave the EU.

Nevertheless, in just money terms, it does appear that the UK could be prepared to compromise. According to The Telegraph, the UK could contemplate paying budget contributions up to 2020 and even beyond, "so long as the money opened the door to a reasonable transition period and a deep trade deal".

In that latter respect, though, the UK would probably be disappointed. While the EU has already signalled its willingness to discuss a (time-limited) transitional arrangement and (eventually), a trade deal, it is unlikely that it will accept any conditionality. The UK will be expected to draw up the heads of agreement on the financial settlement before the EU negotiators are prepared even to discuss the next stage.

This has been made abundantly clear by European Council President Donald Tusk. In a letter to the 27 Member States (but not the UK) inviting them to Saturday's European Council meeting, he has stated that agreement on "people, money and Ireland" must come before negotiations on the European Union's future relationship with the UK. A trade deal is not a priority.

In very explicit terms, he writes: "Let me highlight one element of our proposed guidelines, which I believe is key for the success of these negotiations, and therefore needs to be precisely understood and fully accepted".

He then goes on to refer to the idea of "a phased approach". This, he says, "means that we will not discuss our future relations with the UK until we have achieved sufficient progress on the main issues relating to the UK's withdrawal from the EU". It is simply not possible to be any clearer than that and, as Tusk says, this is not only a matter of tactics. Given the limited time frame we have to conclude the Talks, he explains, "it is the only possible approach".

With only a very slight softening, he declares that, "before discussing our future, we must first sort out our past". We need, he says, to secure the best guarantees for our citizens and their families. And he is not messing. Guarantees, he says, have to be "effective, enforceable, non-discriminatory and comprehensive". And they should be accompanied by simple and smooth administrative procedures.

At that point, he then says, "We should also agree with the UK that all financial obligations undertaken by the EU of 28 will be honoured also by the UK". No sum is mentioned. That is to come.

But his third point then puts Ireland on a par with the other issues. In order to protect the peace and reconciliation process described by the Good Friday Agreement, he says, we should aim to avoid a hard border between the Republic of Ireland and Northern Ireland.

It is good news, in a way, that the Council sees this as a priority, except that the intervention has been seen as the EU endorsing (or seeking) a united Ireland. And whatever the political implications, it is hard to see how otherwise a hard border can be avoided.

Come what may, all three points will have to be resolved before the negotiations can move on. Tusk re-iterates that, "only once we collectively determine in the European Council that sufficient progress has been made on all these issues, will we be in a position to hold preparatory talks on the future relationship with the UK".

And so high up the batting order is Tusk putting this, that he is asking the "colleagues" to unite around this key principle during today's meeting. He wants it clear that progress on people, money and Ireland must come first. Furthermore, he says, we have to be ready to defend this logic during the upcoming negotiations.

Thus, no one can say we haven't been warned. Our politicians can choose to reside in a different galaxy, or they can come down to earth and join the rest of us. But given where they've been all these months, they cannot expect a soft landing.