Brexit Bulletin: What Happened to the Row?

  • Negotiators for both sides were convivial on the first day of talks
  • May's political weakness may turn out to be an unexpected asset

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So much for the “row of the summer.”

A month after British Brexit Secretary David Davis predicted an early blowup over how to structure the Brexit negotiations, the U.K. side marked the first day of talks by agreeing to the European Union’s timetable.

As the EU’s chief negotiator Michel Barnier warned the costs of leaving the bloc would prove “substantial,” Prime Minister Theresa May’s government gave into EU demands to discuss the terms of its divorce — including the exit fee — before any consideration can begin on the future trade deal Britain wants.

David Davis and Michel Barnier on June 19.
Photographer: Jasper Juinen/Bloomberg

Barnier bluntly warned that such an accord would not be fleshed out until after the U.K. leaves in less than two years. It was a clear rebuff to May’s stated ambition of wrapping up a new free trade agreement quickly.

“I’m not in a frame of mind to make concessions,” Barnier said after a day of discussions in Brussels.

Davis said Britain hadn’t backed down. When the EU “decides we have made enough progress — their words — both sets of dialogs will continue, including free trade,” he said.

Both sides were keen to emphasize their desire to work positively and to reach a fair deal that will foster friendly relations once Britain leaves. Davis pushed back against speculation that May’s recent electoral defeat meant the U.K. would seek to soften Brexit by trying to stay in the EU’s single market or customs union.

“We need to bring back to Britain control of our laws and control of our borders,” he said.

May will make her case for a quick agreement on residency for EU nationals and employment rights at a summit of European leaders in the Belgian capital later this week. She will then publish a detailed outline of her offer on Monday, Davis said.

London Falling?

London, expanding confidently for decades as one of globalization’s great successes, appears unsettled and under siege.

In less than a month, the British metropolis has suffered a terrorist attack claimed by Islamic State, an election upset that undermined the government and the worst residential fire of modern times, which has left at least 79 dead. Then, on Sunday night, a white man in his 40s drove a van into worshipers outside a north London mosque, fulfilling long-held fears of a terrorist assault against Muslims.

All this as May’s government begins the toughest peacetime negotiation ever undertaken by a British government, which could end up driving workers from the city.

Bloomberg’s Marc Champion and Charlotte Ryan cast their eyes over the outlook for the capital city.

Police guard a street in the Finsbury Park area of north London on June 19.
Photographer: Daniel Leal-Olivias/AFP via Getty Images

So Weak, She’s Strong?

One idea doing the rounds is that May has been so weakened by the loss of her parliamentary majority that she may be in a better position to get a good Brexit deal for Britain.

The theory goes that the Europeans will worry that Brexit would be even more complicated to arrange if May were toppled, inflicting pain on their political system and economy as well as Britain’s.

Anand Menon, who teaches politics at King’s College London, likes to cite research published in the mid-1980s by American economist Robert Putnam.

Putnam argued that domestic weakness can provide bargaining strength by allowing a politician to say if they can’t win a deal abroad they will be dumped at home.

“In other words, being able to say ‘I can’t compromise or the bastards will kick me out’ is, paradoxically, a way of increasing one’s leverage,” Menon wrote recently. “‘I’m so strong I can do what I like’ really is not.”

Brexit in Brief

  • Silvana Tenreyro, who lectures at the London School of Economics, is named to replace Kristin Forbes on the Bank of England’s Monetary Policy Committee. She previously warned the Brexit process would slow the British economy
  • Forbes says in an interview that colleagues shouldn’t leave it until too late to rein in consumer prices, given the bank has been “underestimating the inflationary pressures”
  • U.S. Trade Representative Robert Lighthizer and U.K. International Trade Secretary Liam Fox met to discuss the possibility of new trade agreement “soon after Brexit,” according to a statement
  • Confederation of British Industry predicts “steady but subdued economic growth” over the next couple of years
  • The European Central Bank needs euro clearing to be inside the EU after Brexit for the sake of monetary policy, Governing Council member Jan Smets says
  • The ECB is making sure that euro-area lenders are preparing for the possibility of a so-called hard Brexit, says Daniele Nouy, who heads the ECB Supervisory Board
  • The EU shouldn’t try to punish the U.K. to create a precedent but rather should remember it will remain a neighbor, Austrian foreign minister Sebastian Kurz says
  • Brexit ranks 12th out of 15 in a list of threats to the EU, although two-thirds of Europeans want the bloc to take a hard line on Britain, according to a survey by Chatham House
  • Currency investors bet £146 billion on the night of the Brexit vote last June, according to CLS Analytics

And Finally…

It was so convivial on the first day of divorce talks that Barnier and Davis exchanged gifts.

Reflecting their shared interest in climbing, Davis bought his opposite number a signed first edition of a book detailing a French expedition to the Himalayas in 1950.

Barnier gave his counterpart a walking stick from Savoie in the French Alps where he hails from.

They lunched on Belgian asparagus, red mullet and meringue cake with wild strawberries.

Both quoted political heavyweights when talking to reporters, Barnier choosing the words of Jean Monnet and Davis citing Winston Churchill — although the Guardian suggested it might not have been Churchill.

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