EU Presses U.K. to Reveal State-Aid Plans to Save Brexit Talks

(Bloomberg) --

The European Union is pleading with the British government to reveal its plans for its post-Brexit state-aid policy or risk destroying the chances of a deal on the two sides’ future relationship.

With just weeks remaining to secure a wide-ranging trade accord, the U.K. has so far rebuffed EU demands to publicly set out its planned rules for granting subsidies to business after the end of this year. Talks ended last week with both sides accusing the other of causing deadlock.

A British official said the government would publish its plans in the next few weeks -- but at a timing of its choosing rather than to satisfy the EU. The bloc’s chief negotiator, Michel Barnier, has so far refused to allow progress on other issues until the U.K. engages on state aid.

One EU official described the U.K.’s approach as reckless, accusing the government of wasting many months when the two sides could have been making progress toward a deal. A second official said the absence of a clear plan on state aid was the biggest underlying problem in the negotiations and fueling a lack of trust between the two sides.

“We do not see how, by putting off the more difficult matters until later, we could come to a better agreement,” Barnier said last week. “Our British partners will have to be finally ready to present us with concrete and constructive proposals during the next round.”

There has been some informal contact between U.K. and EU teams over the past few days, and that is scheduled to continue next week. Officials said significant progress during the next negotiating round starting Sept. 7 in London is vital if the talks are to reach a successful conclusion in October.

There is still some optimism on both sides that a deal can be done once the U.K. reveals its plans. The EU has already softened its stance. Originally, it demanded Britain remain tied to the bloc’s state-aid regime with oversight by the European Court of Justice. EU officials said the bloc may accept the U.K. having an independent regime as long as it is broadly in line with the bloc’s framework and comes with a robust dispute mechanism system.

If the announcement satisfies the EU, a wider accord could very quickly slot into place, one U.K. official said.

But the details will be crucial. Another U.K. official warned the government won’t make pre-commitments about its state aid regime, nor will it tack to EU rules. An independent industrial policy has been at the heart of Prime Minister Boris Johnson’s vision for a post-Brexit Britain.

Both sides now accept they are working to a timetable that would see agreement of a text by the end of September for it to be signed off by leaders at their summit in Brussels on Oct. 15-16.

Officials say there are no plans for Brexit to be on the agenda of an extraordinary EU summit recently called for Sept. 24-25 -- but they don’t rule out convening an emergency meeting of leaders later in October or early November if there is a deal to be done.

Even if agreement on state aid can be reached, the two sides still have to settle their disagreement over what access EU boats will have to British fishing waters after Brexit. But a breakthrough on state aid would be significant and inject impetus into the negotiations, one of the EU officials said.

©2020 Bloomberg L.P.