Path to Brexit Deal Filled With Thorns Ahead of Summer Pause

(Bloomberg) -- The arrival of summer is set to slow the already glacial Brexit talks to a halt.

Four months since U.K. Prime Minister Theresa May officially triggered the negotiations and 20 months before Britain leaves the European Union, there is precious little to show from two rounds of discussions. All of the contentious issues that must be resolved before the EU agrees to debate its future trade relationship with Britain are still open and there’s no formal meeting to tackle them until the last week of August.

In his last official engagement before the summer recess, the EU’s chief Brexit negotiator Michel Barnier met the bloc’s ambassadors in Brussels on Wednesday. He expressed frustration about the slow pace of progress in the negotiations, a person present in the meeting said. Barnier described a situation of inertia in everything apart from the issue of citizens’ rights, where he said there is some movement, the person said, asking not to be named as the meeting was private. 

The so-called Permanent Representatives of the bloc’s 27 governments responded by expressing their backing to the negotiator and their willingness to stay united against any potential attempts by the British government to approach them bilaterally. A spokesman for Barnier declined to comment.

As summer sets in, here’s a round-up of where we stand with the countdown clock to Brexit ticking:

Has there been any progress?

The short answer is yes, although most of it relates to matters of process, rather than substance.

The U.K. has accepted the EU’s position on the sequencing of the talks -- first separation terms, then future trade ties and a transitional arrangement.

May’s team has also tacitly acknowledged that progress must be made toward a deal guaranteeing the rights of EU citizens in the U.K. and vice versa. It’s also said for the first time in writing that it needs to settle its financial obligations.

Why the gridlock?

The problem is the same as it’s always been: Two of the main demands of Brexit advocates in last year’s referendum were that the U.K. would reclaim its sovereignty from EU institutions and laws, and that it would stop paying vast sums of money into the EU budget.

But the bloc says that striking a deal on citizens will require the U.K. to accept a role for the European Court of Justice in enforcing their rights after March 2019. Britain is so far refusing to allow this, proposing instead the establishing of a new independent arbitrator.

The EU also wants a substantial payment to the bloc’s budget not just for past commitments, but also for future liabilities. The U.K. continues to push back against the idea of a princely sum, with Foreign Secretary Boris Johnson advising the EU to “go whistle.” It has also frustrated the EU by failing to provide any estimate of its own of what it will have to pay.

Are there any other obstacles?

Barnier has complained the U.K.’s plan for citizens falls short in ways other than the issue of courts.

By aligning their rights with those of U.K. nationals, he says the proposal would rob EU nationals of some of the rights they currently enjoy such as the ability to bring non-EU partners to Britain. He’s also said the plan lacks clarity and a promise of life-long protection against future changes in U.K. laws.

Such a split over what was meant to be the easy part of the talks lays bare just how little each side is willing to concede.

On the upside, people familiar with the matter said this month that the EU and U.K. will seek broad principles on how to maintain the current border between Northern Ireland and the Republic of Ireland to prevent the search for a solution holding up the wider Brexit talks.

What’s next?

The next round of talks is scheduled for the week starting Aug. 28 in Brussels.

Two more rounds -- beginning Sept. 18 and Oct. 9 -- are scheduled before the next meeting of EU leaders on Oct. 18.

That’s the earliest possible date when all members of the bloc may conclude that “sufficient progress” has been made toward an agreement on the separation terms, allowing trade talks to start.

Given the complexity of the task at hand, and bearing in mind that it may take weeks to form a government in Germany after elections on September 24, it’s becoming increasingly likely trade talks may not get the green light before an EU summit on Dec. 19. That would leave about a year for wrangling.

What’s the bottom line?

So far, Brexit has been more of a dictation of the EU’s terms, rather than a negotiation. That isn’t much of a surprise given its side is composed of 27 countries, has less to lose than the British and knows the clock is ticking.

The negotiating directives leave limited room for maneuver and diplomacy, turning Brexit into a matter for the continent’s divorce lawyers to deal with, rather than politicians who could possibly be cajoled by the British into a more gentlemanly agreement.

After May’s failure to win a parliamentary majority in last month’s election, her government is increasingly open to a transitional deal in which it will maintain the status quo for an adjustment period. That will likely require it to accept the EU’s rules and fees for longer.

Of course, the EU would lose, too, if talks collapsed without a deal.

“The reason that the EU-27 are willing to accept this negative outcome is that greater goods are at stake: the unity of the EU-27, the integrity of the single market and the future of European integration,” said Fabian Zuleeg, chief economist at the Brussels-based European Policy Centre.

“A deal, including a transition arrangement, will only be possible if the U.K. accepts the EU’s red lines while, at least temporarily, breaking the promises made to the U.K. electorate, as well as accepting a safeguard mechanism to prevent the U.K. reneging on its commitments, given the lack of constitutional provisions to bind Westminster to any deal,” Zuleeg wrote in a report.

In an interesting touch, his report was tweeted by Sabine Weyand, Barnier’s deputy.

To contact the reporter on this story: Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net.

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Richard Bravo, Jones Hayden