EU says landmark budget deal adds pressure on UK in Brexit talks

After another week of Brexit logjam, the EU is convinced its position is stronger than ever.

European Council President Charles Michel and the EU’s chief negotiator, Michel Barnier, met on Friday to compare notes, a day after the latest round of talks ended with Brussels and London still far apart.

Michel, and EU27 national leaders, have focused far more attention in recent weeks on negotiating a historic €1.82 trillion budget and coronavirus recovery package. Now that a budget deal is struck, EU leaders are convinced it strengthens their hand in Brexit talks too, according to EU officials.

After conferring with Barnier on Friday, the Council president sent a clear message that the bloc feels well-prepared for a no-deal scenario. Michel, posting on Twitter, noted that the landmark budget deal reached Tuesday also created a €5 billion off-budget fund, called the Brexit Adjustment Reserve, designed to prop up governments, businesses and industries hardest hit if no deal is struck with the U.K. by when the Brexit transition period ends on December 31.

He also tweaked London about how long the process has dragged on. “More than four years after the U.K. voted to leave, talks on a future relationship are still ongoing,” he wrote.

EU officials said success in reaching a budget deal with its contingency provisions, and the positive reaction in the financial markets, had already bolstered EU27 economies and raised confidence among leaders and the negotiating team. In particular, they are resolved to stick to the EU’s core demands, particularly regarding the so-called “level playing field” and on fisheries.

Stuck in the mud

A senior EU official said the British side had not demonstrated any new flexibility despite what they see as London’s weakening position.

“They have been very, very slow in reacting and not shown a lot of willingness to move forward,” the senior EU official said. “Ireland, Belgium, Holland will be impacted by Brexit. A part of this Brexit Adjustment Reserve could very well be used to compensate our fishermen. So you know the Brits might not have expected that, that we would have come up with that, and this budget. For us, it is very important that we prepare for every possible outcome.”

The senior official added, “We would definitely prefer a deal and we are ready to conclude a deal — it’s better for both of us  — but we are preparing for every scenario. We’re not going to sell Europe just like that. Our values will remain untouched.”

A senior U.K. government official involved in the talks was similarly adamant Thursday that Britain wasn’t about to yield significantly either. “A deal is unlikely if the fundamentals don’t change. They need to adapt their position to realize they are negotiating with an independent nation state,” the official said.

Asked whether talks were at breakdown or breakthrough, the official said: “We are potentially equally close to both, to be honest. It’s hard to quantify. I can quite see how we could make a breakthrough relatively quickly if they do adjust their position in the most important areas and if they don’t, we won’t. It really is in their hands to a large extent.”

A second U.K. official said it was sensible for both sides to prepare for no deal because there is no guarantee an agreement will be reached. “There is clearly enough agreement to keep the process being useful. But of course we have to face the possibility an agreement won’t be reached and prepare for all scenarios,” the official said.

Time running out

EU leaders also seem emboldened by having German Chancellor Angela Merkel at the helm of the Council of the EU for the sixth months leading up to the end of the U.K.’s transition period. Merkel has been firm on the EU’s demands for the trade deal and future political relationship.

Barnier on Friday shared a timeline with the European Parliament’s U.K. Coordination Group — obtained by POLITICO — which suggests that negotiations on a “final text” of the agreement must be finalized by early October. That’s necessary to provide sufficient time for translating the agreement into all 24 official EU languages and to provide ratification by EU countries, the European Parliament and the British side.

Earlier in the day, Germany’s major business lobby issued a stark warning that failure of the negotiations was the most likely scenario, and urged the EU to prepare emergency measures.

Hans von der Burchard and Emilio Casalicchio contributed reporting. 

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