Germany’s Priority is the EU27 – Brexit Britain Should Expect No Favours

Quentin Peel | 13 November 2017

German Flag, fdecomite, CC-BY-2.0

The burning subject of Brexit is such an obsession in Britain, both north and south of the border, that it is hard to conceive that it is getting much less attention on the continent. But that is the sorry truth.

In Germany, the Brexit decision is a matter of genuine regret, but the top priority in Berlin is to limit the damage to the remaining 27 members of the European Union. No one talks of punishing the UK, but there is very little sympathy for its plight. Long memories linger about the British refusal to support the euro during the eurozone crisis in 2010. ‘When sterling gets into trouble, don’t turn to us for help,’ a senior official said then. He is still a key player.

The result is that Berlin, usually regarded in London as likely to be ‘helpful’ to a ‘soft’ Brexit, is actually proving to be one of the toughest negotiators behind the scenes. The finance ministry has taken a very hard line on the need for London to settle its outstanding budget commitments. And the latest signal to emerge is that Berlin is also hostile to agreeing any bespoke transition arrangement allowing the Brits to be half-in and half-out of the EU for two years or more, as proposed by Theresa May.

The politicians are distracted. Angela Merkel is in the throes of attempting to negotiate a complex four-party coalition government – something never tried before in post-war Germany. Even in the September general election, Brexit barely figured in public debate. Top of the agenda was the fraught question of refugees and immigration, followed by the economy and the environment. As far as foreign policy was concerned, Russia and Ukraine got a lot more attention than any possible disruption caused by British determination to quit the EU.

The ongoing coalition talks between Merkel’s Christian Democrats, her Bavarian partners in the Christian Social Union (CSU), the liberal Free Democrats (FDP) and the Greens, face a first deadline of 16 November to agree on a broad outline of agreed policies. If they are approved by each of the parties, they expect to take another six weeks to craft a detailed government platform. But they have yet to get seriously stuck into EU policies, let alone Brexit. They are far more focused on the domestic front, where divisions on refugees and asylum policy, and phasing out the internal combustion engine, are most difficult.

All four parties in the talks are fundamentally in favour of EU integration, although they disagree on the detail of reforms in the eurozone. On that subject, the liberals are the most cautious. But all agree the top priority is the future of Franco-German cooperation, and Emmanuel Macron’s agenda for EU and eurozone reform. ‘They don’t care about Brexit,’ says one observer.

While the politicians try to forge the coalition, the Brexit negotiations are in the hands of the bureaucrats. They are not inclined to be helpful mediators, as Downing Street seemed to expect.

For a start, they are adamant that Michel Barnier is in charge. ‘We are fully behind the line of Michel Barnier. It is checked with Berlin line by line,’ is the way they put it. Indeed, the whole process of the negotiations, and the determination of the EU27 to keep a united front, has strengthened the position of the European Commission.

The German finance ministry has taken a particularly hard line on the UK budget contribution, because negotiations are just beginning in Brussels on a new seven-year EU financial framework: the larger the hole left by the British, the more Germany – as the biggest net contributor – will have to pay.

Money was always going to be a zero-sum game. But now German lawyers are starting to look at the UK desire for a transitional period, and they don’t like what they see. Their view is that the British either stay in the EU single market and customs union with all their current obligations and commitments – including free movement and obedience to the European Court of Justice – or they go. A halfway house with the UK legally out but still somehow getting all the benefits of the single market and customs union would create huge problems, including with third countries’ trade relations.

The other suspicion is that any concessions made to Theresa May might still not be accepted by her Brexiters and the Daily Mail – just as the concessions made to David Cameron failed to persuade them. They are also adamant that the EU Withdrawal Bill should not water down any EU regulations, and thus distort the level playing field of competition.

It may still be possible to stop the clock. It may still be possible for the British to reverse the Brexit process, as Wolfgang Schäuble said when he was still finance minister. But even on that score, there will be huge political pressure to renegotiate the precious UK budget rebate. Mrs May’s room for manoeuvre has all but disappeared, in London and in Brussels – and in Berlin too.

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Chatham House

Quentin Peel is Associate Fellow in the Europe Programme at Chatham House. He had an extensive career at the Financial Times, including as European Community correspondent, Brussels bureau chief, Berlin chief correspondent and foreign editor and international affairs editor.