19 February 2017

Financial Times: Brussels focuses on UK’s €60bn exit bill before trade talks

[...] “He thinks we will be discussing money and acquired rights [of expatriate citizens] until December,” said one senior eurozone official in contact with Mr Barnier. “No trade, nothing about the future, just the past.” 

Five other national diplomats involved in Brexit talks confirmed Mr Barnier’s rough year-end timetable. Many noted Theresa May, Britain’s prime minister, had so far avoided acknowledging the break-up challenges and outstanding budget liabilities.

“If we don’t get them down to earth early in the game then we never will,” said one EU-27 diplomat involved in talks. Another senior adviser to a northern European leader said: “At this stage only the Brits are saying they want it all solved in parallel.”

However, the EU-27 have different views on the details of exactly how talks are staggered. If, as expected, Britain invokes Article 50 next month, it will be the most sensitive unresolved question facing union leaders when they draw up “guidelines” for Mr Barnier. A special summit is expected in early April. At one extreme some of the EU-27 — including some French officials — want Britain to honour its financial commitments as a first step. Others are concerned a hardline money-first approach will fail unless the “sweetener” of trade discussions is offered to keep the UK engaged. Spain, for instance, opposes “strict procedural requirements” and has backed early discussions about the future relationship.

Britain is banking on more trade-minded EU-27 leaders keeping Mr Barnier in check. Most EU-27 countries, however, do back the idea of some conditionality, which ties progress on trade talks to British co-operation on the divorce and Britain’s exit bill.

“You need some parallelism,” said one diplomat closely involved in Brexit preparations. “But the leaders won’t be fooled by vague promises [on the divorce]. In the end you need to tackle the bill.”

Mr Barnier’s plan would expect Britain to agree a basic methodology for the exit bill, while leaving the precise figure until the final Brexit package is agreed. A deal on principles around money and citizen rights is hoped for by December, allowing EU-27 to give a green light to trade talks at their summit that month. It could move faster if Britain gave clear early assurances on money and rights so it could quickly move to trade talks.

Britain will also be seeking clear assurances by the end of the year on an “implementation” period to avoid a Brexit cliff-edge. Given the EU-27 want to leave this to the last stage of talks, Charles Grant, director of the Centre for European Reform, argues the timing for transition talks will be “particularly contentious”.

“The UK will want interim arrangements to be fixed as soon as possible in the separation talks, to dissuade footloose companies from quitting the UK,” he wrote in a CER paper released on Monday. “But the EU may well exploit this British requirement by demanding concessions in other parts of the negotiation.”

For the EU-27 “it would not make sense to talk of a transition without knowing the outlines of the future FTA,” he added. “Yet there will not be time to grapple with the [free-trade agreement], they say, until difficult Article 50 issues are sorted out.”

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Related article on The Telegraph: Europe wants Britain to pay billions into EU schemes up until 2023

The suggestion that Britain should pay in installments up until 2023 was made at a meeting earlier this month between Michel Barnier, the European Commission’s chief Brexit negotiator, and senior officials from the 27 remaining EU member states.

The aim of the payments would be to help smooth over the €10bn-a-year black hole left in the EU budgets by Britain’s departure from the EU, which could see richer countries like Germany and France paying more, or poorer countries, like Poland and Hungary receiving less.

“The Commission wants the UK to pay in installments from the day of departure in 2019 up until 2023, which is when the financial demands of the EU’s seven-year budget cycle are at their highest,” said an EU diplomatic source with knowledge of the meeting.

The meeting between Mr Barnier and the EU member states also revealed a deep split between France, Germany and the European Commission over how to calculate what Britain owes prior to "B-day", scheduled for March 2019. [...]

Full article

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