The Union flag, also known as the Union Jack, left, stands next to a European Union (EU) flag inside the Justus Lipsius building of the European Council in Brussels, Belgium,(Photographer: Jasper Juinen/Bloomberg)

Brexit Hard Talk Masks Compromise Signs as Negotiations Near

(Bloomberg) -- Brexit negotiations are set to start in less than a month with signs emerging that for all the hard rhetoric of recent weeks there are key areas on which both the European Union and Britain might be willing to compromise. 

That’s the view of some EU officials as the bloc’s remaining 27 governments make final preparations for the talks, which they seek to begin in the week starting June 19. While the terror attack in Manchester on Monday has shifted attention away from Brexit in recent days, focus will return when the U.K.’s political parties resume campaigning from Thursday. U.S President Donald Trump also expressed concerns about the U.K.’s withdrawal from the bloc when he met EU chiefs in Brussels on Thursday.

There are indications of flexibility from the EU over the bill it wants the U.K. to pay on departure. On the other side, the British also are implying a willingness to make concessions on the financial settlement as well as on immigration and the power of EU judges.

The question is whether common ground will really be found or the past weeks of tit-for-tat endure, scuppering chances of an amicable divorce let alone a future free-trade pact. In that event, it would be the U.K. which likely loses the most.

“Both sides will have to make some compromises -- but we shouldn’t fool ourselves into thinking that it won’t mainly have to be the U.K.,” said Agata Gostynska-Jakubowska, research fellow at the Centre for European Reform in London. “Brussels seems to be aware that we can interpret some of the tougher remarks in the U.K. as being directed to a domestic audience.”

Almost two months since U.K. Prime Minister Theresa May started the two-year countdown to Brexit, the leaking of dinner conversations by EU aides and election campaign broadsides against Brussels by the British have inflamed concerns that the talks will be combative. There is even disagreement over how to structure the negotiations.

A look behind the headlines nevertheless indicates some areas of potential compromise on both sides.

On the divorce bill, estimates put the amount the EU wants the U.K. to pay for past commitments and its share of ongoing projects at as much as a 100 billion euros ($112.5 billion) in gross terms.

But the EU’s chief Brexit negotiator, Michel Barnier, told European lawmakers last week that he has “never quoted these figures” himself, adding that the final amount will “depend on the methodology” to be agreed. Newspaper reports last week also suggested Barnier is pushing back at efforts by the governments in Paris and Berlin to inflict the maximum cost on the British.

‘Growing Flexibility’

“Barnier is delivering a much more compromising tone,” said Steffen Kampeter, Germany’s former deputy finance minister and the director general of Germany’s BDA federation of employers. “There seems to be a growing flexibility in the process.”

Some EU governments may exert pressure on EU negotiators to demand significantly less than 100 billion euros if it helps to strike an agreement in other areas and to move swiftly onto discussions about future trade arrangements, one diplomat said, without specifying an amount. The leaders of the Netherlands, Denmark and Ireland are among those to have said haggling over the bill shouldn’t delay trade talks too long. By contrast, some countries have signaled they may push for the maximum amount, the diplomat said.

Now EU negotiators are being heartened by lines in the Tory manifesto that point toward flexibility even as May and her team try to bash Brussels as a way to build domestic support before the June 8 vote. May’s Conservative Party election manifesto reads that although “the negotiations will undoubtedly be tough” there will need to be “give and take” from each camp.

In making a “fair settlement” of the country’s financial obligations, a Conservative government would act “in the spirit of the U.K.’s continuing partnership with the EU,” according to the manifesto. That strikes a less strident tone than weekend comments from Brexit Secretary David Davis, who spoke of 1 billion pounds ($1.3 billion) being “a lot of money.” Brussels-based diplomats say the EU side has taken note.

Wiggle Room

Similarly, there’s wiggle room on the area of citizens’ rights, with some governments believing it may be unworkable to demand EU citizens living in the U.K. before Brexit day -- and British ex-pats residing in the EU -- get a range of extra protection for themselves, current or future spouses and children for the rest of their lives.

As for the British, May already opened the door in April to the possibility that freedom of labor movement could be part of a transitional agreement with the EU.

In the manifesto May promised to double the levy on employers who hire non-EU migrants for skilled jobs and charge such foreigners more for public health care. This is “is a hint of the privileged access the EU-27 want,” which may make getting a deal easier, said Mujtaba Rahman, managing director at the Eurasia Group.

Explicit Mention

Also noticeable was the omission from the manifesto of any explicit mention of the European Court of Justice. May has said she wants to end its jurisdiction over the U.K., yet EU officials believe that to be impossible for matters such as protecting citizens’ rights.

Brexit Secretary Davis also signaled some willingness to compromise by saying on Monday that while the “ideological obsession in Brussels with one-sided jurisdiction by the European Court of Justice” was unacceptable, the deal will need “independent and impartial enforcement,” implying the British Supreme Court wouldn’t have ultimate authority and EU judges might still play a role.

May has already shown that she isn’t shy about changing direction on some policies, such as the climbdown in the past week on changes to elderly care and a tax rise reversal in March.

As they near their first proper engagement, both the U.K. and the EU know that hardliners on either side of the English Channel could dash attempts at compromise.

There’ll be plenty of “booming rhetoric,” but the U.K.’s approach to Brexit negotiations are similar to buying a car, Danish Foreign Minister Anders Samuelsen said in an interview.

“You always start out by telling the dealer the price he gives you is very high,” he said. “Before eventually realizing you won’t get the car for free.”