May 19, 2017
The EU is shocked, shocked by the UK’s stance on Brexit
We have argued for some time that the main risk to the entire Brexit process is a source of cognitive dissonance on the part of the EU, which has a long history of misjudging UK politics. The Guardian has a wonderful story about a memo detailing a Commission meeting that includes an exchange between Michel Barnier and Jean-Claude Juncker. Barnier said he detected a growing readiness by the UK to pull out without a deal - something they both seem to have discounted before. And Barnier makes another important point: the reason why the Brexit bill has become such a serious issue is related to internal EU politics: Germany and France are steadfastly refusing to put any new money into the EU’s budget, while the net recipient member states will not accept lower disbursements. This is why the Brexit bill has been ratcheted up.
We presume, but don't know for sure, that this conversation took place after Juncker’s infamous No.10 dinner. Juncker told Barnier that May was softening up the British public for a Brexit without agreement. The minutes of the meeting also show that Barnier has given up on the timetable. There will be no deal by the end of the year, as he previously envisaged.
The most important issue for Juncker and Barnier is the sequencing. The EU insists on an Art. 50 exit deal first, while the UK wants this commingled with trade negotiations.
“He [Juncker] noted that on the UK side, the government was trying to gain credence for the idea that if agreement were not reached on all the negotiating points, including those in the second phase, there would be no overall agreement on its orderly withdrawal,”
The problem for the EU is not so much a point of principle, but the sheer workload of the Art 50 process itself. They don’t believe that it is possible to spend much time on a detailed trade negotiation. The meeting then discussed
“the need to integrate in the parameters for the future negotiations the growing support in British public opinion for the idea of a disorderly exit of the UK from the union”.
We find this story very revealing. We recall that people laughed at Theresa May’s Brexit-means-Brexit pledge, only to find out later that it was an accurate, albeit incomplete, pledge. We feel the same goes for the "better-no-deal-than-a-bad-deal" pledge. They really mean it, and the EU is right to factor this into their own negotiating stance. There is a history of misjudgement: the EU did not see the Brexit referendum coming. It did not factor in any probability of a Leave vote. After the referendum, many bought into the "Bregret" hopes, only to find out that British politics is not going to make that happen. And now they are surprised that the UK is willing to pull the plug on an Article 50 agreement. It is not hard to see a pattern here.
The EU is now finding out that the Brexit negotiations are going to be different from the talks with Greece in 2015. The European Council then took the view, correctly as it turned out, that Alexis Tsipras would not have the stamina to pull the plug. The UK government is better prepared for Brexit partly because it is not doing much else these days, while the EU has a few other issues to deal with, and because it has concluded that a credible no-deal threat is the only tool it has to equalise the negotiating position.