What about the EU side?

Is no deal at all really better than a bad deal? Neither side can look with delight at the prospect of falling off the cliff into total darkness. Both are in dire need of a mutually beneficial deal as both have much to lose if negotiations fail.

Paradoxically of the two sides involved in the negotiation it is UK which seems aware, even if grudgingly, of this sober assessment. The EU partners are much less conscious of the uphill struggle they will have to face over the future of their own policies. This prospect should encourage them to be more open in the pursuit of an acceptable deal, but they are still a long away from coming to this understanding.

A fair deal has already been argued extensively by the British. A balanced compromise would imply specific access for UK firms to the relevant sectors of the EU single market, control on the free movement of persons, reciprocity arrangements for citizens of both sides living abroad and tailor-made provisions for security and defense cooperation. If far from easy to deliver, this result looks nonetheless like the kind of outcome which in the end could fulfil the interests of the British people.

Surprisingly this setting out of a rough starting point is missing for the other side. EU 27 remains an odd entity whose interests so far in these future talks have been loosely identified. Risk of possible dissent among the EU member states is often mentioned as an excuse for sticking to a restrictive approach. So is the need to avoid any concession to Britain which might benefit the narrative of populist movements around Europe.

But much less is said about the outcome for the EU 27 of the Article 50 negotiations (or their breakdown).

The UK’s European partners have much at stake in these talks – beyond the ongoing reflections over the long term future of the EU. Most of the challenges in fact stem from the budgetary hole Britain will leave behind after it departs. Leaving aside the issue over the share UK will have to pay to dissociate itself from EU assets and liabilities (the “money bill”), the inevitable loss for the EU budget will amount at approximately €10 billion per year. This new budgetary reality will force the remaining EU partners to figure out how they manage their own finances in the future.

Possible options are but a few: increased contributions for the remaining members; spending cuts probably (in the range of 10 to 12%); a combination of both to alleviate some of the inconveniences brought by each option alone. Yet the political reality of what may be seen as a mere technical choice is that European leaders in the end will have no choice. They are doomed to reshape some of the EU common policies they have adopted over the last 30 years.

For the EU 27, in spite of what will be said about fire walling the Brexit divorce from the internal matters of the Union, these domestic implications will become an intricate part of the Article 50 talks. EU member states will be scrutinizing any possible concession to the British camp according to the impact it could have on their own interests.

They will ponder the financial consequences according to their position as a net beneficiary or contributor to the EU budget. And they will also thrive to preempt to their advantage any potential change in EU common policies, be it the common agricultural policy, the structural funds, research programs or Erasmus.

The internal debate among the EU 27 can only aggravate the complexity of the Article 50 negotiations. Each member state will apply tactical considerations often loosely related to the Brexit issue. This process will contribute to an already complicated pattern where Brexit issues could well become one element among many others. Under pressure at home from populist movements, many member states will have little room for concessions, especially on financial matters.

As a result both sides need to understand their mutual internal challenges. For where the British negotiators will tend to see unfriendly and malevolent tactics from its EU partners, the latter will be in reality struggling with their future financial perspectives. For lack of understanding this confusion could rapidly extinguish the scarce resources of goodwill existing on both sides.

If this scenario is to be avoided, a few guidelines need to apply in order to give the two sides a firm grip on the negotiation. First, each party should be well advised to better observe and listen to the internal debate inside the other’s camp. At the same time, they should avoid any boost of arrogance and accept to be less tactical and more honest to each other.

This means that the EU 27 should resist the temptation to penalize Britain, in one way or another, for its decision. On its side, UK should leave out some of its rhetoric on the promising deals it is about to strike with the outside world.

Additionally Britain and the EU 27 should not completely disregard the time factor. If Article 50 negotiations are highly unpredictable, one can guess at least that the two year deadline will not hold. An extension of the discussions therefore may be unavoidable. It is naturally far too early to publicly bring up this question. But time will quickly run out of these talks.

Political leaders would be well advised to anticipate and launch at least some inner thinking about the best way to handle in due course this highly political issue.

By Pierre Vimont, senior fellow at Carnegie Europe. You can watch Pierre Vimont speak at our annual conference here.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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