EU Unyielding on Brexit Leaves May With One Choice: Pay the Bill.

Theresa May’s European Union counterparts are adamant that the U.K. must agree on a financial settlement with the bloc before talks can proceed to trade, according to a survey of the EU’s 27 other members that reveals the depth of resistance to British calls for flexibility.

As May prepares to update her government’s position on Brexit in a speech in the Italian city of Florence on Friday, the Bloomberg survey results suggest the prime minister needs to move a long way if she is to enable a shift in October to her goal of addressing Britain’s future relationship with its biggest market.

 

Governments concur that the scant progress made to date in negotiations on the terms of the divorce means that EU leaders meeting in Brussels next month will be unable to give the go-ahead for talks to move on to trade. Chief among the sticking points cited is the need for agreement on the U.K.’s outstanding liabilities to the bloc.

“The financial settlement is one of the key questions that must be agreed upon before the EU and the U.K. can begin to negotiate the terms of the U.K.’s new relationship,” Finnish Finance Minister Petteri Orpo said in response to a set of questions put to capitals from Lisbon to Ljubljana. “According to my knowledge, adequate progress has not been achieved on these topics, so I don’t consider it likely that we could move forward on the agenda in October.”

Bloc-Wide Resolve

Six months after the U.K. started the two-year countdown to its exit from the EU, due in March 2019, May faces a wall of unity among her fellow leaders. Support among continental capitals is unanimous for the EU’s position, with several praising the role of the bloc’s chief Brexit negotiator, Michel Barnier. That suggests a bloc-wide resolve to reject British efforts to lobby via back channels for a more accommodating stance from continental allies.

Worse for the U.K., Brexit simply isn’t a priority for the majority of those surveyed. More pressing international issues range from Germany’s focus on the future of a Europe Union of 27 to Italy’s preoccupation with immigration and, in Bulgaria’s case, integration of the Black Sea and Danube regions.

“For Sweden as for any EU country, Brexit is a very important issue with great concern,” said Swedish EU Minister Ann Linde. “But it’s not one of our top foreign-policy concerns.”

How Trade Sits at Heart of May’s Brexit Battle: QuickTake Q&A

A sense of frustration at the lack of progress came through in the responses. Even the U.K.’s traditional allies in eastern Europe and among the Baltic states were unwilling to peel away from the EU line. Estonia stressed the need to “maintain the unity of the EU-27,” Latvia hailed the “great job” being done by Barnier, while the Czechs spoke of “backtracking” by the U.K.

Nikos Christodoulides, spokesman for the government of Cyprus, referred to the former British territory’s “‘special relationship” with the U.K., while saying May’s government “has to honor its financial commitments” to the EU.

Bilateral Trade

EU governments are still concerned at the prospect of the U.K.’s departure. France sees an imperative to hinder any risk to bilateral trade worth a total of some $57 billion last year, with specific concerns over agriculture and cooperation on Airbus SE aircraft.

Athens is similarly worried about the consequences of a so-called hard Brexit that the Bank of Greece estimates could cost as much as 0.8 percent of Greek gross domestic product. Spanish Prime Minister Mariano Rajoy’s government in Madrid wants clarity on the future status of some 130,000 Spanish nationals in the U.K., not to say more than 300,000 Britons registered as residents in Spain.

A majority of governments were willing to consider a transitional arrangement with the U.K. to avoid the prospect of a disruptive exit without an agreement in place, but several stipulated that it must be clearly defined, limited and come at a cost.

“Italy is in favor of a transition period during which the U.K. would remain in the single market and the customs union,” Sandro Gozi, junior minister for European affairs, said in an interview in Rome. “There would be financial obligations for the U.K., but let’s see first if such a transition period is possible.”

Spanish Foreign Minister Alfonso Dastis, speaking in an interview with Bloomberg Television in New York, said he’s looking for answers from May’s speech.

“We need some clarity about what the U.K. really wants,” Dastis said.

Here is a sampling of positions from across the 27 EU member states:

GERMANY
Brexit is not the No. 1 priority for German Chancellor Angela Merkel, who faces elections this weekend after a campaign that has barely mentioned the divorce talks. For political as well as practical reasons, Merkel is focused on the future of the remaining 27 EU members, rather than on the one country leaving.

In the Brexit talks, Germany’s top priority is to settle the main withdrawal issues, including broad agreement on the financial settlement, before discussions can move on to the future EU-U.K. relationship. There’s “no free lunch” for Britain, German Finance Minister Wolfgang Schaeuble said on Sept. 6.

FRANCE
For France, there is no way around the financial settlement. The Brexit talks are a major concern for the government of President Emmanuel Macron, but not the only one. France is emphatic that EU chief negotiator Michel Barnier is leading the negotiations and that the EU governments are aligned behind him.

In the divorce talks, after the exit settlement and other withdrawal issues, France says it’s essential to ensure smooth ongoing trade relations, especially in agriculture. In financial services, an appropriate framework is critical with no increase in systemic risk, the government in Paris said.

ITALY
“Brexit is number four” on Italy’s priority list for Europe, behind immigration, euro-area reform and social justice, Sandro Gozi, junior minister for European affairs, said in an interview. Within the divorce talks, the U.K. must agree to pay outstanding liabilities. “It’s absolutely necessary, essential to enable a good negotiation in the second part of the talks,” Gozi said.

Italy is in favor of a transition period during which the U.K. would remain in the single market and the customs union. A transition would entail “financial obligations for the U.K., but let’s see first if such a transition period is possible,” Gozi said.

SPAIN
Spain is seeking a more definite answer on whether Britain wants to remain in the single market or the customs union after Brexit, even for a limited time. “We need some clarity about what the U.K. really wants,” Spanish Foreign Minister Alfonso Dastis said in a Bloomberg TV interview on Tuesday. “We want to know really that they are determined to achieve a deep and constructive partnership.”

The issue of citizens’ rights also is key for Spain, as more than 300,000 Britons reside in Spain, and there are 130,000 Spaniards in the U.K. The real number of Britons living at least part of the year in Spain may be as high as 1 million.

SWEDEN
“Brexit is a very important issue,” Swedish EU Minister Ann Linde told Bloomberg News on Sept. 11. “But it’s not one of our top foreign-policy concerns.” The government supports the EU in seeking a financial settlement and “would be very pleased” if sufficient progress is made on the withdrawal issues by the October summit of European leaders.

“Sweden doesn’t want to make a profit of Brexit, but we want the settlement to be fair,” Linde said.

DENMARK
The Danish government insists that Britain needs to come up with a solution to paying the Brexit bill before progress can be made in other areas. “We need a clearer sense of where the Brits are on the Brexit costs,” Danish Foreign Minister Anders Samuelsen said in a Sept. 15 interview with Bloomberg News.

Denmark feels there has been too little progress so far for talks to move on to the future EU-U.K. relationship by October. “It would be very nice if we could get a clear message on where the British are” from May’s speech on Friday, Samuelsen said. “The more concrete the message she gives, the better.”

FINLAND
Finnish Finance Minister Petteri Orpo says Brexit is not “a foreign-policy concern” for his government. “Rather it’s a family dispute that needs to be settled in a way that allows us to look each other in the eye in the future and continue to live in the same area,” Orpo told Bloomberg News on Sept. 15.

Finland agrees with the other EU nations that the financial settlement — along with citizens’ rights and the Irish border — must be agreed upon before talks can turn to U.K.’s new relationship with the bloc. “According to my knowledge, adequate progress has not been achieved on these topics,” Orpo said. “So I don’t consider it likely that we could move forward on the agenda in October.”

PORTUGAL
The U.K. “must assume entirely the financial commitments” it has made as an EU member, Portuguese Foreign Minister Augusto Santos Silva told Bloomberg News. “It’s clear for everyone that an agreement about the issue of citizens and the issue of financial commitments is the best way to ensure that negotiations on other issues conclude successfully.”

Portugal’s “main concern post-Brexit is that there is a good framework of cooperation” between the EU and the U.K. in security and defense, and in trade and investment, Santos Silva said.

GREECE
The Greek government considers Brexit an EU issue and not a top national priority. For Greece, the U.K. financial settlement is crucial for determining the bloc’s next multi-year budget.

The Foreign Ministry in Athens considers achieving “sufficient progress” on the divorce bill and other withdrawal issues doesn’t appear possible by the October summit. Greece would support a transition period. Within the Brexit talks, Greece’s top priorities are citizens’ rights and minimizing the impact of a potentially “hard” Brexit, according to the Foreign Ministry.

CZECH REPUBLIC
While Brexit is an “important issue” for the Czech government, “it cannot be the issue that defines or dominates foreign policy, both on the national and EU level,” Ales Chmelar, state secretary for European affairs, told Bloomberg News.

On the financial settlement, there needs to be “at least a clear methodology” for determining the final sum before talks can progress, he said. “I fully understand the precarious position the U.K. government finds itself in with regards to this topic, but it has to be addressed,” Chmelar said. “So far we have seen very little progress and, in fact, backtracking from the U.K.’s side.”

Chmelar said he “can imagine a transition period to avoid a pure cliff-edge scenario.” Such a transition “should be well defined” and agreed on by the other member states, he said.

ROMANIA
The main priorities for Romania are that the Brexit accord protect citizens’ rights and that the U.K.’s financial obligations are designated “in an equitable manner,” according to the Foreign Ministry in Bucharest. Romania also is keen to maintain EU-U.K. cooperation in defense.

Before the October summit, “the main objective is to reach an agreement about the means of calculation of the financial obligations,” the ministry said. In general, the Romanian government seeks “to minimize the negative impact of the process and take advantage of its opportunities,” it said.

HUNGARY
The U.K. financial settlement is an “important and sensitive” part of the Brexit negotiations from Hungary’s perspective. “London must as soon as possible specify its detailed plan on this question,” the State Secretariat for EU Affairs told Bloomberg News on Sept. 15.

“The exit must be made as smooth as possible for the market,” the government said. “In this regard — and while maintaining the current conditions — there can be talk of a transitional period after Britain’s exit.” Hungary urges that “as wide a cooperation as possible be maintained” between the EU and Britain on the economy, trade and investment.

CROATIA
The Croatian government backs the EU’s Barnier in seeking an agreement on the U.K. financial settlement before talks move on to future relations. “The leaders of EU-27 will decide together whether sufficient progress has been made in order to start discussing any transitional measures or future arrangements,” the Foreign Ministry said.

Overall, Croatia’s main concern is the status of its citizens residing in the U.K., the ministry said.

BULGARIA
The Bulgarian government wants the Brexit process to “ensure clarity and legal security” for citizens, businesses and international partners, the Foreign Ministry said. Bulgaria concurs that “sufficient progress” must be achieved on the financial settlement and other withdrawal issues before talks can move on to future relations.

“To this moment, this condition hasn’t been met,” the ministry told Bloomberg on Sept. 11. A decision on a transition period can be taken after the negotiations move on to future EU-U.K. relations, it said.

SLOVENIA
“Brexit is undoubtedly one of the most important questions within the EU and for Slovenia as well,” the Foreign Ministry in Ljubljana said. The priority for Slovenia is making progress on the withdrawal issues, including the financial settlement, before shifting to other aspects such as the future relationship.

Discussion of a possible transition phase can take place in the talks on future EU-U.K. relations, the ministry said. “For Slovenia, the unity of EU operations is important,” it said.

LATVIA
The main priority for the government in Riga is to ensure that there is a Brexit deal in place before the U.K. leaves the EU, Latvian Foreign Minister Edgars Rinkevics said.

“It is in the interests of both the U.K. and the EU to do everything possible to find a solution before March 2019,” Rinkevics said in a Sept. 14 interview. “This is very challenging, and each day that passes makes this task even more challenging.”

ESTONIA
Estonia’s main goal in the Brexit talks is to maintain the unity of 27 EU nations and to keep the negotiations constructive, the Foreign Ministry said. The methodology for the U.K. financial settlement must be agreed on before talks can move on, it said.

The second phase of the negotiations may discuss transitional arrangements. “Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms,” the ministry said.

The government in Tallinn wants the future EU-U.K. relationship to maintain close ties in the areas of security and defense, justice, and the fight against terrorism. The final agreement must preserve the rights of Estonian citizens in the U.K., the ministry said.

CYPRUS
The Cypriot government says the U.K. must honor its financial commitments to the EU without insisting on pinpointing an exact figure. “The most important thing is to be constructive and forthcoming during the negotiating process on budgetary issues,” government spokesman Nikos Christodoulides said.

“Cyprus has a special relationship with the U.K. and Brexit will affect this relationship,” he said. “So we are very much concerned about the direction that this negotiation will take.”

Source: www.bloomberg.com

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