Hoping for a deal

Germany drafts plans for Brexit transition

germany, brexit, plans, dual citizenship
So close, yet so far. Source: AP

It’s not just London and Brussels that have to prepare for Brexit. Berlin is also getting ready. Germany’s foreign ministry has proposed legislation that would essentially enshrine Britain’s transition out of the European Union into law, and it could include dual citizenship status for some Britons.

The legislation, shown to Handelsblatt, concerns the period from March 2019 to the end of 2020. During that time, Britain will technically no longer be a member of the European Union but has pledged to effectively keep the status quo. Britain will follow all EU rules, make financial contributions and remain a member of the single market and customs union that governs trade across the 28-nation bloc.

The foreign ministry’s proposal establishes “legal clarity for the transition phase” from the German side, saying rules in German law that apply to European Union membership would apply to its relationship with Britain as well. Each country in the EU will have to decide for itself how to deal with the country post-Brexit.

Significantly, the draft law would give Britons special status if they apply for German citizenship during that time. If they are naturalized in the transition phase, they could still keep their British passport, too. EU citizens are allowed to do this, but people from non-EU nations typically have to give up their other passport upon becoming German. What happens after the transition period is still not entirely clear: The long-term status of Britons living in the EU and EU citizens in Britain has remained a thorny issue in the Brexit talks.

But we need a deal first

Of course, all of this only applies if there is a deal between Brussels and London to establish the terms of Britain’s EU departure. A “no-deal” Brexit could mean no transition phase, either. The German government sees an increasing risk of talks collapsing between now and March 2019, when Britain is set to leave the bloc. For any deal to be ratified in time, it really has to be reached by October.

The prospect of a hard Brexit is increasingly inciting hand-wringing among European companies that are forced to plan for the worst. A survey by Britain’s Chartered Institute of Procurement and Supply found that one in seven European firms with supply chain connections to Britain has already shifted business out of the country. The International Monetary Fund also fears significant economic consequences (see graphic below).

“It is no longer five minutes to midnight. It is now two minutes to midnight,” German Foreign Minister Heiko Maas warned in an interview earlier this week with Funke, a regional German newspaper group.

statistics gdp decline hard brexit europe

But for the moment, neither side is budging on the issues of what a future trade relationship might look like. Britain’s White Paper released earlier this month proposes a close relationship to the EU on trade in goods (manufacturing) but more separation on services (finance, digital companies).

Though the EU has so far been restrained in its reactions to the proposals, Mr. Maas made clear that they were not acceptable in their current form. Britain was still challenging key principles of the European Union’s single market, which foresees common rules for trade in goods and services and the free movement of people. The EU is determined to maintain an “undivided internal market that Britain cannot cherry-pick from,” he said, repeating a common EU refrain throughout these talks.

Robin Walker, an undersecretary of state in London’s Brexit ministry, played down the prospect of a disorderly exit, but said it was London’s responsibility to prepare for such worst-case scenarios. In an interview, he pointed to the transition phase as a means of giving businesses some planning certainty at least until the end of 2020. He still hoped to provide additional security about the future relationship by October of this year, but echoed British Prime Minister Theresa May’s line that no deal would be better than a bad deal for Britain. “It is essential that we don’t lose control over Brexit,” he said.

Torsten Riecke, Carsten Volkery, Kerstin Leitel, Martin Greive and Jan Hildebrand of Handelsblatt contributed to this story. Christopher Cermak adapted and contributed to this story for Handelsblatt Global. To contact the authors: Leitel@handelsblatt.com and Cermak@handelsblatt.com

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