Brexit Bulletin: Bitterness Breaks Out

  • Report of dinner at Downing Street puts U.K. at odds with EU
  • French election that could shape Europe’s future looms large

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Brexit is turning bitter again.

Germany’s Frankfurter Allgemeine Sonntagszeitung newspaper sent shockwaves through political circles at the weekend by reporting that European Commission President Jean-Claude Juncker left talks with Prime Minister Theresa May last week “10 times more skeptical” about reaching a mutually acceptable deal.

The two sides disagreed about the complexity involved in any agreement and the sequencing of talks as well as trade and budget contributions. Juncker put the chances of negotiations failing at over 50 percent, the newspaper said.

Jean-Claude Juncker, president of the European Commission, right, and Theresa May, U.K. prime minister, pose for photographers outside number 10 Downing Street in London, U.K., on Wednesday, April 26, 2017. Maywill host the EU's chief Brexit negotiator,Michel Barnier, andJunckerfor talks in London on Wednesday for the first time since she triggered the legal process of withdrawing from the bloc. Photographer: Simon Dawson/Bloomberg

Theresa May hosted Jean-Claude Juncker and other EU officials at Downing Street last week.

Photographer: Simon Dawson/Bloomberg

Playing down the report as “Brussels gossip,” May sought to use it to remind voters in next month’s U.K. general election that the Brexit talks will be tough and she alone is up to the task.

“As we have seen in recent days, it will not be easy,” she wrote in the Western Morning News, a regional daily newspaper. “Across the table from us sit 27 European member states who are united in their determination to do a deal that works for them.”

Tittle-tattle or not, the report underscores how quickly the negotiations risk getting bogged down by briefing wars, threatening the ability to find common ground. It also suggests that the two sides will spend the early part of their discussions resolving just what to talk about, eroding the time left for substantive matters. Britain leaves the European Union in March 2019 regardless of whether it has struck a deal.

Fresh newspaper reports on Tuesday further highlighted the challenge. The Financial Times reported the European Commission is to rush out proposals for imposing more control on London’s euro-clearing market. The Daily Telegraph said the EU has been thwarting British efforts to address the issue of citizens’ rights.

What Happens Next? 

The fallout from the Downing Street dinner “brings home just how vast the gap is between May’s and the EU’s understanding of the Brexit rollout,” said Henrik Enderlein, a professor of political economy at Germany’s Hertie School of Governance. “May wants her cake and to eat it too. It just won’t work.”

Mujtaba Rahman of the Eurasia Group said that while a “substantial gap in expectations remains between the two sides” there is room for compromise on money and the role of European courts. The risk of no deal remains a significant 20 percent, he said.

Holger Schmieding of Berenberg Bank said “noisy talks” won’t ultimately prevent a divorce settlement being arranged for March 2019 after which there will be a three-year transition to hammer out a final deal.

For Bloomberg View, Leonid Bershidsky writes that May’s tough talk may help her in June’s election, but not beyond it.

Catching Up

Much of Europe was on holiday yesterday so to catch up on what happened over the weekend, see here for an overview of Saturday’s EU Brexit summit and here for the lessons learned from it, as well as the latest on the state of play between the two sides.

The Future of Europe

Ultimately what may matter more for Europe is what happens in France’s presidential election on Sunday.

Bloomberg’s John Follain traveled across the country to discover how the messages of two candidates, Marine Le Pen and Emmanuel Macron, are playing out. The rivals have two distinct visions for addressing the challenges of globalization.

Separately, these five charts show how the euro-area is recovering just as Britain prepares to pull out of the EU.

Business Demands

The British Chambers of Commerce laid out its demands to the next government, saying a good Brexit deal is important, but only if the domestic policies to back it up are in place.

The priorities in its manifesto for the June 8 election are “frictionless future trade arrangements” with the EU and no new business taxes. As part of a Brexit deal, it also wants protection for EU nationals in the U.K. and an immigration system that doesn’t cut companies off from vital skilled labor.

“While businesses all across the U.K. want a good Brexit deal, they are very clear that decisions taken here at home matter as much – if not more,” said BCC Director General Adam Marshall.

Separately, a group of cross-party lawmakers said the U.K.’s decision to leave the EU’s atomic regulator after Brexit will put the country’s nuclear industry at risk and may threaten power supplies. 

The editors of Bloomberg View say May’s Brexit platform should be light on promises.

And Finally…

The result of last year’s Brexit referendum was evident months beforehand, to those able to keep track of 18,000 tweets. Now academics at the Univeristy of Surrey have done just that – retrospectively – by reviewing the Twitter accounts of the three main campaign groups.

They concluded that the two groups lobbying to leave were marginally more negative than their “Remain” opponents and more successful at setting the agenda. By referendum day, Leave.EU had almost 50,000 more followers on Twitter than Stronger In.

“The outcome of the Brexit vote on June 22, 2016 would not have been as shocking had more attention been paid to what was happening on Twitter,” said researcher Simon Usherwood.

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