Summit Showdown

Europe Searches for Brexit Response

Britain's Prime Minister David Cameron and EU Commission President Jean-Claude Juncker arrive at the EU Summit in Brussels, Belgium, June 28, 2016. REUTERS/Francois Lenoir
David Cameron and European Commission President Jean-Claude Juncker arrive at the E.U. Summit on Tuesday.
  • Why it matters

    Why it matters

    Europe’s leaders are at odds over how to respond to the Brexit vote, with Chancellor Angela Merkel in favor of giving Britain time to file its exit application and resisting center-left calls for deeper economic integration.

  • Facts

    Facts

    • At the E.U. emergency summit starting later on Tuesday, British Prime Minister David Cameron will face calls to start formal exit talks.
    • Boris Johnson, the leader of the Leave campaign, suggested a Brexit could remove all the disadvantages of E.U. membership but keep the benefits.
    • E.U. officials said Britain will have to pay a price for securing continued access to the single market.
  • Audio

    Audio

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The man who won the E.U. referendum had painted a rosy picture of Britain’s future on Monday. “British people will still be able to go and work in the E.U., to live, to travel, to study, to buy homes and to settle down,” Boris Johnson, the former mayor of London who headed the Leave campaign, wrote in The Telegraph newspaper.

“There will continue to be free trade and access to the single market,” he promised. “The only change – and it will not come in any great rush – is that the U.K. will extricate itself from the E.U.’s extraordinary and opaque system of legislation: the vast and growing corpus of law enacted by a European Court of Justice from which there can be no appeal.”

Keeping all the advantages of an E.U. member state and jettisoning all the disadvantages is how Mr. Johnson sees the future relationship between his country and the European Union.

Across the English Channel, on the European Continent, officials are astonished at those remarks. Access to the single market will come at a price, insisted E.U. officials in Brussels. Non-E.U. European countries such as Norway or Switzerland had to allow the free movement of labor and pay contributions to the E.U. budget, they said.

The European Union will have to wait some time to see whether Britain will agree to those terms because the country will have to quit economic bloc before the country can negotiate a new relationship with it. Any hopes for significant progress at today’s summit will likely be dashed.

Outgoing Prime Minister David Cameron, who resigned on Friday after losing his campaign to remain, will try to outline the political chaos his nation has been hurled into when he meets his E.U. counterparts for dinner. But he won’t invoke Article 50 — the formal process to leave the European Union. On Wednesday, he will be excluded from consultations among the other 27 government leaders.

Mr. Cameron vaguely signaled that the exit application may come in October, when his successor is in place, whoever that might be.  The Conservative Party said on Monday that nominations for new party leader must be in by Thursday and that an election would take place by early September.

“It could well be that the application will never come,” said one high-ranking diplomat, who asked to remain anonymous. The British government evidently doesn’t want to put itself under pressure. As soon as Article 50 is invoked, the clock will start ticking; the complex divorce proceedings will have to be completed within exactly two years. “That may not be enough time,” said an official in Brussels, who also asked not to be identified.

Hundreds, if not thousands, of complex details have to be sorted out. Britain’s contribution to the E.U. budget must be wound down, E.U. institutions based in Britain must be relocated, E.U. subsidies for British farms have to be reduced step-by-step, and the status of E.U. citizens living in Britain and Britons living in the European Union must be determined.

So the Brits are playing for time and forcing the rest of Europe to sit and wait. The European Commission, which is the E.U.’s executive body, and the European Council, which groups the national heads of government, have already set up two working groups for the Brexit talks. However, officials in Brussels acknowledge that nothing can happen before Britain formally applies to leave.

The president of the European Parliament, Martin Schulz, reacted with outrage to the British delay tactics, saying Britain’s ruling Conservatives were yet again holding the rest of Europe to ransom. Mr. Cameron should submit his exit application at today’s summit, said Mr. Schulz, who initiated a European Parliament resolution to increase the pressure on London.

And earlier on Tuesday, the European Commission president, Jean-Claude Juncker, told the European Parliament that it is not only up to the UK to decide what happens next. “We must decide what happens, not just those that wish to leave.”

But E.U. Council President Donald Tusk has sounded conciliatory, saying the Brexit vote has plunged Britain into a deep political and institutional crisis. Giving the country an ultimatum for today was “no realistic option,” said an official close to Mr. Tusk.

Arriving at the summit on Tuesday, Mr. Tusk told reporters that it is the British who have to initiate proceedings.

“This is the only legal way we have, everyone should be aware of this fact, which means that we also have to be patient if there is such a need. Europe is ready to start the divorce process even today.” Mr. Tusk added: “We have precise procedures; we have a ready work plan. But without the notification from the UK we will not start any negotiations on the divorce process or on future relations.”

The foreign ministers of the six founding members of the European Union – Germany, France, Italy, Belgium, Luxembourg and the Netherlands – had already piled the pressure on Britain at a meeting in Berlin on Saturday.

But at a meeting of 27 E.U. ambassadors on Sunday, the tone was already sounding very different. Some participants had called for a quick Brexit but others wanted to give the British more time, according to officials in Brussels.

“The second school of thought is gaining ground,” said one E.U. diplomat. Experts said that was a sensible stance.

“The handling of the Brexit referendum mustn’t become a lasting problem for Europe and our bilateral relations.”

Federation of German Industry

“Pressure from outside or from the founding states probably isn’t helpful,” said Guntram Wolff, director of the Brussels-based Bruegel research institute.

Britain had to solve its current constitutional crisis on its own, and the rest of Europe will have to wait until it does  “even if that could turn out to be expensive for the other economies and societies in the E.U.,” said Mr. Wolff

The European Union will have to be patient because it has no legal means to exert pressure. Neither Article 50 nor the rest of the E.U. treaty require any dates to be set for exit talks.

But Ms. Merkel appears to expect the new British prime minister to file the application by the fall at the latest. The British government is under economic pressure to resolve the uncertainty. Contrary to Mr. Johnson’s optimistic claims, it is by no means assured whether and in what form Britain will continue to have access to the European single market. That uncertainty is bad for British business. Luxury automaker Aston Martin on Monday called on politicians to clarify Britain’s future relationship with the European Union as soon as possible.

 

27 p7 Without the Brits, Europe Will Lose Part of its Power-01

 

German businesses, which employ 400,000 people in Britain, also urged the British government to hurry up. “Companies, employers and investors must be told how things are going to proceed in the coming weeks and months,” the Federation of German Industry, said in a statement. “The handling of the Brexit referendum mustn’t become a lasting problem for Europe and our bilateral relations.”

Meanwhile, Europe’s center-left parties plan to push for greater convergence in the wake of the Brexit vote. At this week’s summit, the Social Democratic government leaders in the European Union plan to call for a fresh start in economic policy including an end to austerity measures imposed on nations in the debt crisis.

The euro zone must “enter a new phase of economic convergence,” the foreign ministers of Germany and France, Frank-Walter Steinmeier of Germany’s Social Democrats and Jean-Marc Ayrault of France’s ruling Socialist party, said in a joint statement.

The ministers demanded a “completion of the economic and monetary union,” called for the Eurogroup of euro-zone finance ministers to have a permanent president and said the euro zone needed its own budget to fund investments in crisis-hit member states from as soon as 2018.

Fresh strife is programmed, because Ms. Merkel made clear in a telephone conference with leaders of her conservative Christian Democratic Union Monday that she was opposed to any deepening of Europe’s monetary union, according to people who took part in the call.

The European Union had to tackle other problems, like security, job creation and protecting the E.U. external borders, she said.

Mr. Tusk, the Council President and European Commission President Jean-Claude Juncker are also opposed to any push for deeper integration at present.

There’s also division in the German government on how tough to get with Britain, with SPD leader and Economics Minister Sigmar Gabriel calling on the European Union to pressure the British to apply to leave as soon as possible.

Ms. Merkel, however, wants to give the British time to analyze the mess there in and sort it out — if possible.

 

Ruth Berschens is Handelsblatt’s Brussels bureau chief. Thomas Sigmund is Berlin bureau chief. Regina Krieger is the paper’s Rome correspondent. To contact them: berschens@handelsblatt.com, sigmund@handelsblatt.com, krieger@handelsblatt.com

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