Spain Insists U.K. Agree Brexit Bill Before Starting Trade Talks

The U.K. government needs an outline deal on how much it will pay on leaving the European Union before any talks on a possible trade agreement can begin, Spain’s deputy minister for European affairs said.

“Before starting to negotiate the future framework of the relationship between the EU and the U.K., we have to agree at least the basic principles of the financial implications of the exit agreement,” Jorge Toledo said in Madrid Tuesday.

Toledo pushed back against British efforts to open up divisions between the other EU members as the bloc prepares a mandate for its top negotiator Michel Barnier. He said that Barnier has Spain’s full support in representing the interests of all the other 27 EU states.

While it’s in Spain’s interest to avoid disrupting its close economic links to the U.K., protecting the European project is a priority for the government in Madrid, Toledo said earlier at a conference in the capital.

“We can’t allow the U.K. situation outside of the European Union to be as good as or better than it was within the European Union,” said Toledo, who previously was an adviser to Prime Minister Mariano Rajoy, focused on European affairs and the Group of 20 nations. “If that was the outcome, it would spell the end of the European project.”

EU leaders will probably approve an outline plan for the negotiations at an extraordinary summit late April or early May, Toledo said. British Prime Minister Theresa May is due to notify the EU of the U.K.’s intention to leave on March 29.

“It’s a very important moment because all the red lines that the 27 states have should be approved by then,” said Toledo.

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.

One month of the U.K.’s two-year negotiating window will elapse before EU leaders get around to settling on their position at an April 29 summit.

“We must do everything we can to make the process of divorce the least painful for the EU,” EU President Donald Tusk told reporters in Brussels on Tuesday as he announced the summit date. “Our main priority for the negotiations must be to create as much certainty and clarity as possible for all citizens, companies and member states that will be negatively affected by Brexit.”

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 policy makers warned the British government that it must have realistic expectations as it leaps into the unknown.

Q&A: What Comes Next Once Article 50 Is Triggered ?

“Before starting to negotiate the future framework of the relationship between the EU and the U.K., we have to agree at least the basic principles of the financial implications of the exit agreement,” Spain’s deputy minister for European Affairs, Jorge Toledo, said in an interview in Madrid on Tuesday.

May said Monday that Britain will file formal divorce papers on March 29, triggering a two-year countdown to Brexit. While the EU hasn’t had even informal talks with the British government since the June referendum, 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.

The bloc plans an initial response within two days of May triggering Article 50 of the Lisbon Treaty, Tusk said on Monday.

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.

‘Great Consensus’

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,” 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 on Monday that the government is making contingency plans in case Brexit talks collapse without a deal, though he insisted he’s expecting a successful negotiation.

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.

Brexit Bill

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. While the EU estimates the bill to run to around 50 billion pounds ($62 billion), some members of the British government want the U.K. to pay no more than 3 billion pounds, the Times reported on Tuesday.

The U.K.’s financial obligations aren’t open to political negotiation so they are something “the lawyers can deal with,” German Finance Minister Wolfgang Schaeuble told reporters in Brussels on Tuesday. “These liabilities don’t expire with departure” from the EU, he said.

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 stability and the commitment of its remaining member states to the postwar project of deepening economic and political union.

Published Tumbit 21 March 2017

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