From ‘Sufficient Progress’ to a Future Relationship – Germany’s Priorities in the Brexit Negotiations

Nicolai von Ondarza | 7 December 2017

© 2017 European Union

For Germany, its priorities in terms of Brexit could be called paradoxical. The UK is, after all, Germany’s third biggest export market. There is a large German surplus, and the UK will remain an important international partner for Berlin outside the EU. But Germany’s top priority is not to protect its economic interests in trading with the UK. The top German priority, in the context of Brexit, is to preserve the integrity of the single market and the unity of the EU27. This priority is shared across the political and economic elite.

Limited fallout for Brexit from Germany’s challenges in forming a new government

This consensus on Germany’s priorities regarding Brexit is also shown by the so far very limited effect of the current difficulties in forming a government, following the recent general elections. First, coalition negotiations between the so called ‘Jamaica’ parties (CDU, CSU, FDP, Greens) broke down and now negotiations for a renewed, though much smaller, ‘grand coalition’ of CDU/CSU and SPD are set to drag well into the new year. A new coalition agreement, a minority government or new elections are all on the table. This severely hampers the room for manoeuvre of the now caretaker government of Chancellor Angela Merkel in contested policy areas. In the EU, this particularly concerns the German response to the proposals for reforming the eurozone.

But for Brexit, there is no particular impact of the current constraints on Merkel. Neither in the election campaign nor in the preliminary ‘Jamaica’ talks were there any disputes between the major parties on how to deal with the Brexit negotiations. In practice, the conduct of these negotiations have largely been delegated to the administrative level, where almost all German ministries have built up dedicated Brexit units to coordinate the negotiations in all affected policy areas. Crucially, both economic actors such as the Federation of German Industries and all the mainstream political parties back the approach of the government, giving the caretaker government both authority and room for manoeuvre in the Brexit negotiations.

Main priorities

This broad agreement consists of three main principles.

The first is the aim to achieve an orderly exit, based firmly in the Article 50 procedure. This is why early on German Chancellor Merkel championed the ‘no negotiation before notification’ line in order to clearly signal that the negotiations should only take place in the formal EU-UK setting. In particular, Germany resisted any attempts to create bilateral side negotiations between Berlin and London, which would have greatly endangered European unity. In the same vein, Germany is fully behind the phased approach to the Brexit negotiations, insisting that the ‘divorce’ issues need to be settled first before the EU should enter into negotiations on transition and trade with the UK.

The second principle is that the main aim for Germany in the Brexit negotiations is to preserve the unity of the 27 and to protect the integrity of the single market. From the view of the German government, Brexit is first and foremost an exercise in damage control. The biggest possible danger in this would be a dismantling of the single market by giving the UK preferential access to parts of the single market without all the obligations. From this principle therefore derives a rejection of any kind of cherry picking with respect to the single market, strong support for Ireland in the negotiations concerning the Northern Ireland-Ireland border, and a clear principle that any kind of transition would require the UK to fully comply with all of the EU rules during that time.

The third and final principle is that in the long-term, Germany has of course an interest in a future relationship with the UK based on an extensive partnership covering trade, justice and home affairs as well as foreign, security and defence matters. This partnership with the UK, as a third country, will however, from a German point of view, have to be noticeably below the level of an EU member.

Expectations for the European Council

In consequence, Germany’s position on the upcoming European Council in mid-December is quite clear. First and foremost, the German government backs the approach by the Commission of achieving sufficient progress in all three area before either negotiations on transition or future relationship can start. In all three areas Germany had strong conditions for achieving sufficient progress.

On the rights of EU citizens, preserving the role of the ECJ in ensuring their rights is regarded as paramount. Regarding the financial settlement, this is seen in Germany most importantly as an issue of trust and of reconfirming the principle of pacta sunt servanda. From this point of view, the reported willingness of the UK to follow up on the commitments made by Prime Minister May in her Florence speech that the UK would honour all its commitments made as a member state are seen as sufficient. Finally, the German government has voiced clear and unambiguous support for the Republic of Ireland in order to signal European unity.

The long-term agenda

If sufficient progress on all three issues is achieved either in the December Council or, if necessary and possible, early in 2018, given its economic and political interests, the German government will clearly support negotiating a transition period with the UK. Following the interest of preserving the integrity of the single market, Germany will insist, however, that the UK must commit to fully retaining the legal order of the EU during transition – including direct effect and primacy of EU law as well as jurisdiction of the ECJ – while leaving the institutions of the EU. Despite the general agreement on the need for a transition, these will therefore also be very hard negotiations.

Looking further ahead, the general consensus in Berlin is that negotiating and agreeing all elements of the future relationship with the UK within the time frame of Article 50 is a political fiction. The aim is therefore to agree upon the general framework for future relations within the withdrawal agreement, and thus use the transition to negotiate the details of that – if necessary, in a longer time frame than two years.

But this general framework matters. Rejecting the idea of a bespoke agreement, the German government sees only two general possibilities for future relationship. The preferred, but less likely, option is that of the UK remaining within the single market. But given the announced intention of the UK to leave both single market and customs union, the direction of travel is more towards the second option – a trade deal similar to and based on a deep free trade agreement such as the EU-Canada one. This would include new restrictions on trade, in particular in (financial) services.

Overall, Germany’s priorities on Brexit will continue to be very consistent: protect the single market and organise an orderly withdrawal. To get an agreement on sufficient progress, the ball, as they say in Berlin, is in the UK’s court.

Nicolai von OndarzaNicolai von Ondarza | Twitter

Stiftung Wissenschaft und Politik

Dr Nicolai von Ondarza is Deputy Head of the EU/Europe Research Unit at the Stiftung Wissenschaft und Politik (SWP). He is also currently a lecturer in the European Studies Postgraduate Programme jointly organised by the three Berlin universities.