Brexit: Crunch time for the German Presidency
The 1 July deadline for the UK to apply for an extension of the Brexit transition period coincides with the start of Germany’s six-month rotating EU Presidency. Germany takes the helm at a time of unprecedented political and economic challenges, ranging from the COVID-19 response to the already tense negotiations on the EU’s next multiannual financial framework (MFF). However, with just six months of negotiations time left, Brexit is also set to be high on the Presidency’s agenda.
Against better knowledge, no extension
Pandemic or not, the UK wants to stick to the original deadline. On the last day before the deadline, it is very clear that the UK has no intention to buy itself more time to conclude a trade agreement. UK Prime Minister Boris Johnson has consistently ruled out applying for an extension, a legal possibility which would have allowed for up to two years of extra negotiation time beyond December 2020.
Amid the COVID-19 pandemic and its economic fall-out, there would have been ample reason to extend the transition period. Both the EU and the UK are grappling with the economic disruption caused by the COVID-19 crisis. Brexit, in whatever form, will only amplify the economic hardship and hamper the recovery process for both sides. While governments across Europe are scrambling to get their economies back to business, there is little appetite for additional headaches.
Intensified talks coming up in July
There is still a lot of work to be done, as the fourth negotiation round in the beginning of June ended in deadlock. EU and UK leaders recognised this during a “high-level” video call on 15 June. Following this call, European Council President Charles Michel announced that both sides agreed to “intensify the negotiations”. Starting on 29 June, negotiators will meet in person on a weekly basis to try to unlock the EU/UK trade deal.
Although the expectations of the fifth negotiation round are positive, few observers believe that the negotiators can resolve the main sticking points between the two sides, such as fishing and competition regulations and state aid rules. The positions on these issues are still too far apart and with the current mandates and red lines it is difficult to imagine the two sides reaching an agreement by the end of the year.
German Presidency taking charge of the political process
By focussing on the process and not on the substance, the EU and UK leadership kicked the can into autumn. With a looming deadline and increasing pressure to find an agreement, the remaining issues on the table by then will require high-level political involvement from the EU Council, under leadership of the Germany Presidency.
Michael Clauss, Germany’s Permanent Representative to the EU, has already indicated that Brexit will dominate the EU leaders’ agenda in autumn. At an event hosted by the European Policy Centre in Brussels, Clauss said “the Brexit issue is going to absorb a lot of political – or most of the political attention – we expect in September and October”.
Politically, the German Presidency is expected to take a harder line on Brexit. In a recent interview with major European newspapers, Chancellor Angela Merkel stated that the UK will have to live with the consequences of weaker ties with the EU. She added that it is not up to the EU to consider what is best for the UK: “That is for Britain to define – and we, the EU27, will respond appropriately.”
That raises the question: what would an appropriate political response look like?
Prepare for the worst
To begin, the EU and its Member States should ramp up preparations for a no-deal Brexit. This would not only protect Europe’s economy in the unlikely event of a cliff-edge scenario, but it would also increase the leverage of the EU’s negotiators to exert pressure on their UK counterparts. If the possible consequences of Brexit can be mitigated, the threat of a no-deal scenario cannot be exploited at the negotiation table anymore.
Time to play the long game
Furthermore, the EU27 political leaders should focus on discussing the long-term consequences of Brexit for the EU, instead of short-term fixes. This will involve a careful balancing of the different external and internal interests of the EU.
Externally, the EU has no interest in a weakened UK. In the current geopolitical environment, the EU needs strong and reliable partners to promote its interests. The UK’s foreign policy interests are closely aligned with those of the EU27, as shown by its approach to the Iran nuclear deal, the Paris climate agreement and sanctions against Russia. The UK is a key ally in upholding the rules-based international order and if its influence declines that will have a direct impact on the position of the EU.
Internally however, EU27 leaders should be wary of signing a deal that lets the UK benefit from the Single Market or other EU arrangements. If the difference between membership and non-membership is not clear, the UK case might be used as leverage by other Member States to push for a more differentiated treatment for themselves. This could lead to more fragmentation and less unity of the EU27.
Flexible on the form, not the substance
Lastly, EU27 leaders should be flexible on the form of the deal, not on the substance. Given the limited timespan, it is extremely unlikely that a comprehensive agreement will be concluded by the end of the year. Instead, we can expect a last-minute extension or a “fig leaf deal” that leaves most of the issues to be worked out at a later stage. Both arrangements would be favourable for the EU, as it would permit EU leaders to prioritise other issues first.
As discussions will flare up again in autumn, the German Presidency would do wise to take on board the advice of former UK Permanent Representative Sir Ivan Rogers, who advised his own government that “Brexit is a process not an event”. It is unlikely that this process will be concluded by the end of the year in any form or shape. But with or without extension, both the European Commission and EU member states should use this time wisely.