The Other Side of the Table: The EU is destined to find the Brexit process long and complex as well

The initial political choreography of the invocation of Article 50 last week might perhaps have been a little smoother. Theresa May was accused by some of threatening to withdraw security co-operation if she did not secure an exit deal that she liked, hence ‘blackmailing’ the EU-27, while the UK media had one glance at the draft guidelines issued by Donald Tusk, President of the EU Council, and took the most significant aspect of them to be an attempt by Spain to exercise influence over Gibraltar. Matters then temporarily teetered on the surreal as Lord (Michael) Howard raised the prospect of a military conflict over the Rock, a notion that the Prime Minister felt obliged to shoot down swiftly. There will be a lot of these sorts of spats over the next two years if only because it is meat and drink to the media circus which will cover these discussions. The fact that the dialogue is largely being conducted in private, many of the details are extremely technical (and rather dull) and that some of the key players are not household names only increases the chances of hyperbole and of distortion. Distinguishing between the signal and the noise between now and March 2019 will be a challenge. An even more difficult assessment, however, will be attempting to divine what the bottom lines are for each side as the talks develop, and that is harder on the EU ‘side’ than for the UK Government. There are at least five elements which make the Brexit process complicated for the European Union.
Who is really in charge of the EU negotiating position?
This is not an easy question to answer. The letter triggering Article 50 was delivered to Mr Tusk in his role as EU Council President. It was he who then issued the draft guidelines (which were broad to the point of vague in many respects) which will be debated at an EU-27 Summit at the end of this month.
The official European Chief Negotiator, though, is Michel Barnier, who was appointed not by Mr Tusk but by Jean-Claude Juncker, the President of the European Commission. Mr Barnier, who is supported by Sabine Weyand - a German national who may end up being a pivotal figure, albeit one with close to zero name recognition - was chosen in part because last Autumn he was seen as likely to be highly acceptable to the French centre-right, which was then perceived as poised to win both the presidential and National Assembly elections. This would now appear to be a miscalculation.
As well as Mr Tusk and Mr Barnier, the European Parliament decided that it would choose a Chief Brexit Negotiator of its own in Guy Verhofstadt, an ex-Prime Minister of Belgium, on the logic that as the final departure agreement has to be endorsed by the Parliament it should be a player at the outset (the fact that Article 50 of the Treaty of Lisbon does not explicitly call for such a role is immaterial). At what point, if at all, he actually enters a room to engage in dialogue (and on what) is uncertain. Brexit is thus another example of a subject that is caught in a power struggle between institutions.
How do the ‘divorce’ and the ‘future relationship’ aspects to this work with each other?
There is plenty of ambiguity on this one as well. The Prime Minister asserted in her letter that the discussions over the ‘divorce’ settlement and the ‘future relationship’ should occur in parallel. The original stance of the EU appeared to be that the former should be completely settled before the latter could be contemplated. Mr Tusk, in his draft guidelines, softened this somewhat in that his document stated that “substantial progress” needed to have been made on the first set of talks before formal negotiations could be initiated in the second area.
This is a pragmatic framework but it begs a whole series of further questions. Will the EU-27 Summit accept these words or insert others? What constitutes ‘substantial progress’? Who decides whether ‘substantial progress’ has occurred, Mr Tusk, Mr Barnier, someone else or member states? Who then has to agree with that analysis, the EU Council and/or the European Commission? Will the European Parliament via its Negotiator have a view (almost certainly it will)? What happens if there is a disagreement between these institutions?
On which area should the EU draw its red lines?
Whomever is in charge and whatever ‘substantial progress’ may be, the EU needs to make an early decision on where it intends to be firm and where it can be flexible. The one element in all this that all of those involved can agree upon is that the arrangements by which the UK leaves the EU must not be so attractive that they serve as an incentive for others to contemplate departing as well. Yet determining what a sufficiently large ‘price tag’ for withdrawal might be is far from a precise science and will be affected by political atmospherics.
If the defeat suffered by the far-right in Holland last month is followed by Marine Le Pen underperforming expectations in France this month then the EU may approach Brexit in a somewhat more relaxed spirit. If, on the other hand, Ms Le Pen won 45%+ of the vote on the second ballot on 7 May then alarm bells would be ringing throughout Europe. A different sort of crisis – real evidence that Greece was about to depart the Eurozone or a collapse in the Italian banking system – might, by contrast, lead the EU to conclude that it needed to complete an amicable arrangement with the UK without delay and move on to more pressing new priorities.
All of which is another way of stating that beyond certain high-level fundamentals – the integrity of the ‘four freedoms’ for instance – the EU does not really know what its red lines are at the moment.
When to move to the interim or transition arrangements?
Almost no-one believes that both the ‘divorce’ and the ‘future relationship’ aspects of Brexit can be settled within the present timetable, not least because, as numerous editions of BVCA Insight have observed, the real deadline is not March 2019 but October/November 2018 to allow for the agreement to be ratified by all those who need to endorse it. At some point, therefore, the camps have to determine what has been and can be settled in advance and what the nature of the interim or transitional arrangements will be to allow the time for a broader free trade agreement to emerge. There are a very wide range of options here ranging from the more formal, such as the UK joining the European Free Trade Area (EFTA) on a temporary basis, to it in effect ‘renting’ partial access to the single market for a fixed period of time in return for continued contributions to the EU Budget.
It is, even by the standards of this process, spectacularly unclear as to which individual or entity in the EU apparatus should make the decision as to when to focus on the interim and transitional, and what the nature of internal consultation to secure a consensus on that bargain might be. This will probably serve as the catalyst for certain member states to become much more publicly significant.
And finally, what does Germany want?
In the end, if she (or he) chooses to be (which she or he might not), the German Chancellor has the capacity to act as the arbitrator between the UK and the EU institutions with which it is in dialogue. Although the opinion polls in Germany have tightened since Martin Schultz, former President of the European Parliament, was anointed the Social Democratic candidate for Chancellor, it still looks as if Angela Merkel is more likely than not to remain in office, although what sort of coalition she heads, which politicians serve in what post and how long it takes to form an administration are up in the air. The best assessment is that it might be January 2018 before a new German Government settles in. That may be the moment when some of the previous questions posed here are addressed properly. And, at that point, the aforementioned, currently anonymous, Ms Weyand might come in to her own.
Tim Hames
Director General, BVCA