Brexit Negotiation

Hickory, dickory, dock: Time’s up

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Michel Barnier's ticking clock is about to become a stopwatch. Source: Reuters

The deadline for Britain’s departure from the European Union may be more than a year away, but the tipping point for negotiations will come in two weeks at the EU summit. Unless the 27 other member countries agree that sufficient progress has been made on exit issues to allow talks on post-Brexit arrangements, Britain could face immediate disruption as companies start to prepare for a “hard Brexit” with no transition deal.

“The clock is ticking,” the EU’s chief Brexit negotiator, Michel Barnier, warned the German Employers Convention in Berlin on Wednesday, repeating a phrase he has often used in the past few months. But now the time when it will stop ticking is much closer.

Mr. Barnier’s renewed admonition came amid reports that British Prime Minister Theresa May will meet the EU’s financial demands and is now ready to offer as much as a net £50 billion (€56 billion/$67 billion) to meet its financial commitments. In September, Ms. May was only willing to offer €20 billion. Now, according to EU diplomats, she has promised European Commission President Jean-Claude Juncker a new financial offer when they meet in Brussels next week.

“The British government has to budge, so that there can be a green light in two weeks for phase two of the negotiations.”

German business groups

But there are other outstanding issues as well, including the prickly question of what is to happen with the land border between the Republic of Ireland, an EU member, and Northern Ireland, which is part of the United Kingdom exiting the EU. Ireland wants to keep the free travel agreement with Northern Ireland and has threatened to veto any further discussion until that issue is settled. A third issue is the future of the 3 million EU citizens living in Britain, including thorny questions about social security claims of their children.

Britain is hoping that a green light at the December summit will pave the way for talks about a two-year transition phase after the actual Brexit in March 2019, as well as post-Brexit arrangements themselves. Britain wants to remain a member of the single market during the transition phase, still subject to EU rules, to cushion the blow for the economy.

As Ms. May yields ground in the Brexit negotiations, however, she faces resistance not only from the opposition Labor Party but also from the rank and file of her own Conservative Party. While members of her cabinet have come around, Ms. May faces criticism from both Leave and Remain supporters for any compromises.

It was only a year ago that Ms. May declared that the times when Britain transferred large sums to Brussels were past. In the end, however, she had little leverage to withhold payment, given that net takers in the EU like Poland are not ready to take less, while net givers like Germany don’t want to give more.

Failure to reach agreement next month would mean, among other things, that London-based banks needing to establish a presence in the EU would have to rush their applications for a banking license with the European Central Bank. Approval is anything but automatic since the ECB wants to have fully functional units in an EU country, not just an address for booking transactions.

In his speech to employers, Mr. Barnier remained cautious about the prospects for the December summit. The French official joked that he had never been divorced himself but he understood from friends that as a rule it can be very expensive. EU demands for Britain to fulfill its financial commitments were not about resentment or revenge, but simply what is owed to EU taxpayers, he told the meeting of top business executives.

Mr. Barnier had a busy day in Berlin, where he also addressed the Berlin Security Conference. In addition, he met with other business groups, including the Federation of German Industries (BDI) and the Association of German Chambers of Commerce (DIHT). The EU negotiator told them that Chancellor Angela Merkel had emphasized to him that the future of the EU was more important to Germany than Brexit.

The businessmen were quick to agree and added their voices to the pressure on Ms. May. “The British government has to budge, so that there can be a green light in two weeks for phase two of the negotiations,” BDI and DIHK said in a joint declaration after Mr. Barnier’s visit. “That entails fulfillment of the complete financial commitments at the time of exit.”

The English nursery rhyme “Hickory, Dickory, Dock” originated as a way to teach children how to tell time. Presumably, Ms. May learned this lesson and has gotten the message: The clock is ticking and it’s the eleventh hour.

Ruth Berschens is Handelsblatt correspondent in Brussels, Kerstin Leitel is correspondent in London, and Frank Specht is a reporter in Handelblatt’s Berlin bureau. Darrell Delamaide, editor for Handelsblatt Global in Washington, DC, adapted this story into English. To contact the authors: berschens@handelsblatt.com, leitel@handelsblatt.com, and specht@handelsblatt.com.

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