by Mish

Today, the Financial Times reported Germany and Italy back European Commission on Brexit.

Berlin and Rome are backing the European Commission’s plan to rule out starting trade talks with Britain until the UK gives assurances on a multibillion-euro Brexit bill and citizens’ rights.
German and Italian officials say they support Michel Barnier, the chief EU negotiator, in seeking progress on divorce terms as an opening step. France is uncompromising on the estimated €60bn bill, while Spain is more wary of attempts to “punish” Britain.
Such stances are preliminary since EU member states have still to take a formal position.
Christian Kern, the Austrian chancellor, confirmed the commission’s €60bn estimate. “The cheque should be around €60 billion; that’s what the European Commission has calculated and this will be part of the negotiations,” he told Bloomberg.
“We agree with the commission,” said one German official, referring to the so-called divorce clause of the EU treaty. “Any Article 50 agreement will have to include the UK’s assurances that it will honor the financial commitments it undertook as an EU member state.”

Negotiation Tactic or a Real Stance?

The article labeled the stance “preliminary”. And a recent Eurointelligence report commented: “It is a mistake to think, as some commentators do, that the EU is strong and united in its approach to Brexit. That is only apparently so because the negotiations have not yet started, so we are still in the sound-bite stage with lots of reference to “cherry-picking” and the like. We noted a recent comment from Sigmar Gabriel that the EU should not penalize the UK, which we know is also the position of Angela Merkel. Germany will be a force of moderation. Once both sides are confronted with the actual costs of Brexit, they might conclude that they want to minimize those costs. That process has not started yet.”

For a change, I mostly disagree with the Eurointelligence assessment.

For sure, there is not a united front. But France, Germany, and Italy pretty much hold the EU’s cards. Let’s also not forget that Brexit has become a religious battle.

Merkel Contradictions

Merkel’s statements about not wanting to punish the UK, do not align with her hardening stance that undoubtedly does punish the UK.

If the UK refuses to go along, and it won’t, what the heck will the EU do?

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The answer is: it depends. On what? Elections.

Election Wildcards

  1. Will Marine le Pen win the French national election on May 7?
  2. Will Italy hold an election this year? Will Beppe Grillo’s Five Star Movement win?
  3. Will chancellor Merkel be around after the German national elections on September 17?

Whether or not the EU’s stance is some sort of negotiation bluff, the political makeup may be far different in December than it is today.

Until we see the results of those elections, it’s difficult to predict what is likely in the negotiation process.

Source: Opinion Polling for the German 2017 Federal Election

Merkel is behind in the latest poll and three out of the last seven polls. Eurointelligence notes “Of all the polls in Germany, the ARD/DeutschlandTrend (Infratest Dimap) is probably the most noted because it is the one that is broadcast each month on Germany’s main TV channel, and because it has a fairly decent track record. And it shows that, for the first time in over ten years, the SPD is ahead of the CDU.

French National Elections

In France, eurosceptic Marine Le Pen is the leader in round one and is moving up against possible matchups in round two. I believe she will win if her opponent is Francois Fillon, and she may win against Macron.

Taking all of the above into consideration, it is difficult to predict how much Brexit negotiations will change in December from stances we see today.

Mike “Mish” Shedlock