UK sees Brexit breakdown if EU won’t compromise

Bloomberg ­­­­­­­­­­­­­­­

Brexit negotiations are heading for a catastrophic breakdown unless the European Union signals this week that it will allow talks to move on to trade, according to a person familiar with the UK government’s position.
Without a clear sign that negotiations will progress to trade and transition arrangements by December at this week’s summit of European leaders, the entire Brexit process will be in danger of collapse—and senior British ministers are losing faith in the EU’s willingness to strike a deal, the person said. Speaking on condition of anonymity, the person said Theresa May took a political risk by promising to pay into the EU budget and settle the divorce bill in a speech in Florence, Italy, last month and now needs something in return before she can make further concessions.
The assessment comes as the prime minister heads to Brussels for dinner with EU chiefs ahead of a critical summit starting on Thursday, and is calling EU leaders individually in last-minute diplomatic efforts. May is expected
to spend 90 minutes talking with European Commission President Jean-Claude Juncker and the bloc’s chief negotiator Michel Barnier on Monday in an attempt to break the deadlock in the negotiations.
The pound weakened as much as 0.3 percent, and traded 0.1 percent lower at 1:45 pm.
Germany and France made clear they want to toughen the tone of a declaration that’s being prepared for the summit, according to an official familiar with the discussions. The latest draft already offered the UK little beyond encouraging words and a call for Barnier to start preparatory discussions on trade talks—but only within the European side.
Talks have stalled because Britain won’t detail how much it’s ready to pay as it leaves the bloc until the EU starts discussing the future trading agreement and the transition that Britain wants to smooth the split. Europe says it won’t do that until May’s government takes steps toward an agreement on the bill. With or without a deal, the UK will leave in March 2019. The Brexit department had no immediate comment.
German Chancellor Angela Merkel and French President Emmanuel Macron are the two key obstacles to allowing talks to move on to trade, according to the first official. Germany has a vested interest in delaying progress in the Brexit talks because Frankfurt is trying to tempt companies away from London, the person said.
May spoke to Merkel and tried last month to convince the German chancellor that a two-year bridging period after Brexit day would help both sides. So far EU leaders have refused to widen Barnier’s negotiating mandate to include trade or transition, and Merkel has been skeptical about a transition deal. The chancellor is also more preoccupied with forming a new coalition government at home.
Business leaders and the Bank of England say a transition plan must be outlined by the end of the year or it will start to lose its value as companies give up waiting and begin to move operations out of the UK to cities such as Frankfurt, Paris or Dublin.
On top of the UK’s fraught interaction with the EU, May is facing pressure from lawmakers in London. A cross-party group is planning an attempt to veto any result in which Britain would quit the bloc without a deal. Euroskeptics in May’s Conservative Party want her to “call time” on the negotiations and walk away without a deal. She needs the EU now to create the atmosphere and the space for her to make any further concessions, because her political position at home is so precarious.