EU Makes U.K. wait to start Brexit talks as May sets trigger day

Monday , March 20, 2017 - 2:00 PM

Ian Wishart and Tim Ross

(c) 2017, Bloomberg.

The European Union signaled its intention to keep Theresa May waiting before engaging in negotiations over the U.K.‘s exit from the bloc, in an early indication of how the British prime minister will see leverage slipping away as soon as she files for divorce.

As EU leaders insisted they are fully prepared for the Brexit talks, they canceled provisional plans to hold a summit on April 6 to agree on the outlines of their negotiating position, indicating May’s announcement that she will invoke Article 50 of the Lisbon Treaty on March 29 comes too late for that. The summit will be arranged for the end of April or early May, eating into the U.K.‘s two-year negotiation period.

With disagreement between the U.K. and the EU already evident on such issues as Britain’s financial commitments, the structure of the talks themselves and how much a future trade deal can be wrapped up inside two years, European policymakers warned the British government that it must have realistic expectations as it leaps into the unknown.

Britain needs “realism on the sequence of things, realism on the price it’s going to cost, realism on the complexity and so the time needed, because up to now I’ve missed this very much from the U.K. government,” Dutch Finance Minister Jeroen Dijsselbloem told reporters in Brussels.

The pound fell after the date was announced by May’s spokesman James Slack, giving up earlier gains. It traded at $1.2352 at 5:15 p.m. in London, down 0.4 percent on the day, after touching $1.2436 earlier, the strongest level this month.

Europe has been waiting for the U.K. to announce when it would officially send notification of its decision to leave the EU since a referendum on June 23 last year. While the EU hasn’t entered into even informal talks with the British government since then, the 27 countries have spoken to one another to formulate a common position.

Highlighting the EU’s relaxed attitude to the start of negotiations, German Chancellor Angela Merkel said she isn’t surprised by May’s announcement because the prime minister had “always put her cards on the table” regarding the Brexit timeline.

Some parts of the EU have been concerned Article 50 would overshadow a meeting of the 27 leaders in Italy on March 25 to celebrate 60 years since the Treaty of Rome, but “it’s of absolutely no importance whether the submission comes a day beforehand, three days later or a week later” than that, Merkel told reporters in Hanover, Germany.

The bloc plan an initial response within two days of May triggering Article 50, EU President Donald Tusk said.

While EU leaders will gather in April or May for a summit to agree on the “framework” for the Brexit talks, actual discussions with the U.K. can’t begin until ministers from the 27 nations officially approve more-detailed negotiation directives to be drawn up by the Brussels-based European Commission. This could take several weeks, meaning the two sides may not be able to start discussions until late May or June.

Then German elections in September could serve as a distraction.

Frenchman Michel Barnier, a former European commissioner, will lead the negotiations on behalf of the bloc. While he will carry out the day-to-day talks, he’ll remain in contact with the 27 governments to ensure that the U.K. isn’t playing them off against each other.

“I feel there is great consensus about what are the red lines” among the 27 EU member states, Portuguese Secretary of State for European Affairs Margarida Marques said in an interview. “The worst outcome would be not reaching an agreement.”

Brexit Minister David Jones told a panel of lawmakers in London that the government is making contingency plans in case Brexit talks collapse without a deal, though he insisted he’s expecting a successful negotiation.

“It’s quite possible that either the negotiations will turn out to be impossible to conclude, or there may well be a negotiated settlement whereby we leave on other terms,” Jones told the U.K. Parliament’s EU scrutiny committee.

An early flashpoint will be the exit bill that Barnier wants to present to Britain. EU officials say they aren’t willing to discuss trade until that’s settled and that the matter could take until early 2018 to resolve in a best-case scenario. A worst case would see the talks break down prematurely. Other issues to be discussed early on include border issues and rights of EU citizens residing in the U.K. as well as Britons living in the bloc.

In a sign the U.K. is preparing to fight the EU over the exit payment, Jones said he welcomed an “extremely helpful” recent report from lawmakers that said Britain could legally quit the bloc without stumping up anything.

May’s team wants to discuss the exit and the new free-trade deal together, to save time, give businesses certainty and to preserve bargaining power. The two sides may also have to line up a transitional phase to bridge leaving the bloc and new trade rules with banks threatening to shift staff from London if they don’t get time to adjust.

“I would envisage a transition period to get Europe and the U.K. across the line to a new relationship,” Irish Finance Minister Michael Noonan said in Brussels. He said Britain shouldn’t expect negotiations to conclude within two years. “My view is that it will take longer than that,” he said.

For the EU, the focus will be on ensuring there is no easy ride for the British as the bloc tries to safeguard the stability and the commitment of its 27 remaining member states to the postwar project of deepening economic and political union.

Asked how he responded to May’s Article 50 announcement, German Finance Minister Wolfgang Schaeuble told reporters in Brussels that he was “pale, but composed.”

---

Bloomberg’s Joao Lima, Rainer Buergin, Corina Ruhe, Arne Delfs and Marine Strauss contributed.

brexit-bg-1stld-writethru

Keywords: BREXIT-TRIGGER1

Sign up for e-mail news updates.

×