European leaders will formally reject British demands to hold trade talks at the same time as negotiating the terms of the UK’s ‘divorce’ from the EU, leaving both sides heading for an early stand-off in the Brexit talks.
The hardline EU response will be outlined in draft negotiating guidelines that will be distributed by the European Council to the remaining 27 member states at a closed-door meeting in Brussels.
Theresa May’s request that the terms of the future UK-EU partnership be negotiated “alongside” the terms of the divorce – rejected by the German chancellor Angela Merkel on Wednesday - was shot down again on Thursday, this time by the outgoing French president, Francois Hollande.
“First we must begin discussions on the modalities of the withdrawal, especially on the rights of citizens and the obligations arising from the commitments that the United Kingdom has made,” Mr Hollande told Mrs May in a telephone conversation.
Mrs Merkel said she hoped that a future trade deal could be discussed “soon” but only after the thorny issue around Britain’s financial liabilities and the rights of EU citizens in Britain had been resolved first.
Mr Hollande echoed that position, saying he was happy to open discussions on the framework of future relations but only “on the basis of what progress is made” on those two dossiers.
The draft guidelines, which have been drawn up by Donald Tusk, the European Council president, will be circulated to member state capitals for a month of discussions ahead of an EU summit on April 29 to finalise the language.
Once agreed, they will be converted into a detailed, legally binding negotiating “mandate” for Michel Barnier, the chief EU Brexit negotiator.
With Europe’s two major powers apparently united in agreement on the issue, senior EU officials said that it was “highly unlikely” that the 27 EU members states would substantially shift their positions on the sequence of the talks.
However Whitehall officials involved in preparations for the talks have told The Telegraph that they still believe the EU will demonstrate some flexibility when the time comes, and that Mrs May’s letter was broadly well received in EU capitals.
“We detect some ‘give’, in the sense that if we can reach agreement on the basic principles covering the budget and the citizens’ rights, that would open the way to wider talks,” the source said.
But senior EU sources painted a much more uncompromising picture, telling The Telegraph that they would demand substantial levels of detailed agreement on money and citizens before agreeing to open further negotiating chapters.
High-level political agreement that EU and UK citizens must not be used as “bargaining chips” – a position David Davis, the Brexit Secretary said was a “moral responsibility” – would not be enough, EU sources said.
“It is not just a question of everyone agreeing ‘we’ll fix it’ then move on,” the senior EU source said.
“Political agreement is not enough. The details will have to be sorted before the EU side can move on.”
Chief among EU concerns is the question of the long-term “enforceability” of highly complex agreements that will cover pensions, the rights of spouses from third countries and other liabilities that could stretch 40 or 50 years into the future.
That will also bring up the question of the jurisdiction of the European Court of Justice, and whether Britain will consent to be bound by future ECJ rulings on disputes over the acquired rights of EU citizens that might arise in the future.
EU member states have also been united on the question of money and that an agreement must be reached on how to calculate Britain’s liabilities before engaging in a discussions of the future trade relationship.
A second Whitehall source with knowledge of the UK’s calculations, said that any deal on money would “ultimately have to be tied to an FTA [Free Trade Agreement]”.
That position is accepted as realistic in many EU capitals, but only if the UK agrees a figure deemed reasonable by the 27, which might well be less than the 60bn Euros currently being touted by Mr Barnier, but still a substantial figure.
Timing is also critical. Official accounts of meetings with Michel Barnier seen by The Telegraph show German and French officials demanding that British commitments on money and citizens need to be “set in stone” to avoid back-sliding or horse-trading in the closing phases of the negotiations.
With the two-year Brexit talks now officially under way, European leaders gathered for a conference of centre-right European Peoples Party (EPP) grouping in Malta warned that the EU faced a critical moment in its future.
To the music of the 1970s hit "We Are Family" leaders, including Mrs Merkel, pledged not to allow Britain to exploit divisions between member states during the talks.
"We are living a very difficult moment,” said Antonio Tajani, the president of the European Parliament, citing the challenges posed by "economic crisis, immigration, terrorism [and] Brexit.”
MrTusk vowed that Brexit would make the remaining 27 EU countries "more determined and more united", while Jean Claude Juncker, the president of the European Commission, said Brexit should be seen as a "new beginning" for the bloc.