Britain's mixed messages deepen Brexit rifts with EU

October 27, 2016 5:08 AM EDT

Britain's Prime Minister, Theresa May, leaves 10 Downing Street to attend Prime Minister's Questions in the House of Commons, in London, Britain October 26, 2016. REUTERS/Peter Nicholls


Get daily under-the-radar research with StreetInsider.com's Stealth Growth Insider Get your 2-Wk Free Trial here.

By Noah Barkin , Elizabeth Piper and Alastair Macdonald

BERLIN/LONDON/BRUSSELS (Reuters) - In the hours before Theresa May stepped to the podium in Birmingham earlier this month to lay out her vision for a "fully independent, sovereign" Britain, she made a discreet round of telephone calls to European leaders.

Her aim, according to British officials, was to head off any surprise or confusion in Berlin, Paris, Brussels and other capitals over the message she was about to deliver to hundreds of her Conservative Party colleagues.

In the speech, May described the Brexit referendum in June as "the biggest vote for change this country has ever known." She promised to trigger divorce proceedings with the European Union by the end of March next year and she rejected the notion that Britain might opt for a deal similar to those of Norway or Switzerland – two non-EU countries that adhere to the bloc's rules on free movement of people in exchange for privileged access to its lucrative single market.

The message proved a hit with the eurosceptic Brexiteers in the audience, just as May's aides had hoped. But investors took fright, pushing the British pound to its lowest level against the dollar in over three decades. And May's attempt to soften the blow with her European partners backfired. The basic facts may have matched what she told her counterparts in Europe, but the tone of her speech and the strident tenor of the Tory conference in general sent shockwaves across the continent.

In Berlin, German Chancellor Angela Merkel was mystified by May's metamorphosis from a quiet "remain" supporter to what seemed like a passionate crusader for a hard break from Europe, according to people in her entourage. The British seemed intent on "talking themselves into isolation," an official close to the chancellor said.

Within days, Merkel and others hit back. European Commission President Jean-Claude Juncker promised the EU would be "intransigent" with Britain. European Council President Donald Tusk described the choice for May's government in binary terms – either "hard Brexit" or no Brexit. The message from Europe was clear: If a rupture was what May wanted, then that is what she would get.

In recent weeks, confrontation has given way to widespread confusion. May has appeared to row back, sending what officials on the continent view as contradictory messages about what she wants. Divisions in her cabinet have deepened the sense of disorientation.

Senior British officials and European diplomats fear the standoff may be symptomatic of a broader problem: a profound disconnect between May's inward-focused government and an EU that is focused on self-preservation. Positions are hardening not only because of what has been said, but because of what neither side is willing to say. The absence of clear messages or willingness to compromise is deepening the sense of distrust, leaving both sides bracing for a clash.

"There is a risk that we find ourselves in a vicious circle with the rhetoric escalating on both sides," one European diplomat told Reuters. "This is high risk stuff. It could reinforce the hardline positions. And it could end up becoming very expensive."

Former Spanish foreign minister Ana Palacio said this week: "The longer it takes for pragmatism to re-enter the debate, the higher the chance that the chilling effect of the unknown will cause permanent damage to both the United Kingdom and the European Union."

CARTOON CHARACTER

The frictions come after months of exasperation on the continent at what is perceived as a cavalier, almost cocky attitude towards Brexit from the new British government, according to more than a dozen officials in Berlin, Brussels and Paris who spoke to Reuters for this story.

Some believe that May and her ministers have still not fully grasped the enormity of the Brexit challenge. Others fear that by giving Brexiteers what they wanted in Birmingham, May has boxed herself into a corner from which there may be no escape.

A French diplomat likened the British government to a cartoon character that has run off a cliff but not realized it yet: "They're still in the air now, but at some point they're going to look down and fall."

European officials recall May's predecessor David Cameron in the run up to the Brexit vote and say they have a sense of déjà vu: They see a risk that May and her entourage, a group with little experience outside the UK, will get bogged down in domestic debates and misread the EU.

NARROWING OPTIONS

The British take a different view. Aides to May say she wants to give away as little as possible about her negotiating strategy until she gets an indication from EU leaders of what she can get from the talks.

Her hope is to bypass the bureaucrats in Brussels through one-on-one meetings with leaders such as Merkel. One aide said the aim was to get other leaders to focus on "what she says, her actions," rather than being guided by other sources, such as Britain's often eurosceptic media.

Complicating the task, though, is a lack of communication from May's inner circle, which includes two close advisers from her years as interior minister, Fiona Hill and Nick Timothy. This has left British diplomats on the continent largely in the dark, preventing the kind of informal back-channeling that might help the opposing sides in the Brexit standoff understand each other better.

May is described by people who have worked with her as detail-oriented. In contrast to Cameron, who preferred pithy summaries to lengthy briefing papers, she has been demanding extensive notes on the complex issues surrounding Brexit.

Cameron communicated freely with those around him. During EU summits, when aides are not allowed into the dining room, he often texted his advisers - giving a running commentary of the discussions, punctuated by the odd joke, one official said. That is not May's style.

In the absence of clarity from May, government officials in the major European capitals are avoiding substantive talks with their British counterparts.

"If May came up with a clear concept of what she wanted and presented it to Merkel before she invokes Article 50, I'm sure she would get some indication of what we think," one German official said. "But first she has to have a concept and from what we've seen there is none."

The big challenge will not be the separation itself but clinching an interim agreement on Britain's trade ties with the European Union within the two-year deadline for leaving triggered by Article 50 of the EU treaty. Such an agreement would tide Britain over until a final deal, which might take anywhere from five to 15 years to negotiate, is sealed.

Until Birmingham, the assumption in many continental capitals had been that Britain might opt for some variation on the Norway model for a transitional period. But May appeared to rule that out, even as an interim solution, in her speech.

"If Norway is excluded, the baseline scenario is you get to the end of the two year divorce talks with no agreement on the future relationship," said the German official. "That is the scenario that we need to look at now."

British diplomats dispute that. If Britain were able to accede as a third party to the EU's pending trade agreement with Canada, they say, then disaster might be averted. But that deal is itself at risk of collapse because of opposition from the Belgian region of Wallonia.

GOODWILL

A central problem for May's government is that Article 50 puts the country that is exiting the EU in a position of great weakness, says Charles Grant, director of the Centre for European Reform, a think tank in London. EU countries can simply hunker down while the two-year clock ticks away, raising pressure on the leaver.

May, therefore, would be wise to avoid an approach that alienates the EU, Grant believes. Attempts from the British side to strengthen its negotiating position through veiled threats to slash corporate tax rates or veto European defense cooperation risk backfiring.

"If Britain wants a decent deal, it will need a massive amount of goodwill from its EU partners. And for this you need to keep the negotiations technocratic and serious," Grant said. "The diplomats understand this, but I'm not sure anyone else does."

What Brexit observers may be underestimating is the impact developments on the ground could have on May's negotiating strategy.

A sharp economic downturn in the coming months could shift the debate, reducing enthusiasm for a hard Brexit. Another complication is a legal complaint challenging the UK government's right to invoke Article 50 without the backing of parliament. A final verdict is expected from the Supreme Court in December. Should it rule against the government, it would probably not stop Brexit; but it could force May into making concessions to lawmakers who oppose a hard break from the EU.

A further challenge is to find a solution that keeps Scotland and Northern Ireland, whose populations voted to remain in the EU, on side. At a meeting with their leaders this week, May warned them against undermining the UK's negotiating stance by seeking separate settlements with the EU.

"I can't undermine something that doesn't exist," retorted Scotland's First Minister Nicola Sturgeon. "It doesn't appear to me at the moment that there is a UK negotiating strategy."

(Additional reporting by Paul Carrel and Andreas Rinke in Berlin, Elizabeth Pineau in Paris, and Guy Faulconbridge in London. Edited by Simon Robinson and Richard Woods)



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In






Related Categories

Reuters

Add Your Comment