The EU will drive a very hard bargain

THE scale of the challenge facing Theresa May and the UK Government’s Brexit negotiating team grows clearer by the day.

The European Council’s draft guidelines show that for all the prereferendum rhetoric about the UK being able to (a) have and (b) eat cake, the EU is determined to drive a hard bargain.

Gone is any suggestion that specific sectors will be able to continue to enjoy single-market benefits. Gone, too, is the idea that a free trade agreement will be in place by the time the UK reaches Brexit Day in March 2019. There is now the prospect of us having to accept a transitional deal under which we would abide by today’s EU rules while officially outside the union.

And also gone is any suggestion that the EU is willing to let us walk away from this divorce without paying alimony. In fact, our budget obligations will need to be sorted out before we can start real trade negotiations.

Even if a free trade agreement can be secured – and this is a challenge, as demonstrated by just how close the recent deal with Canada came to collapse – it is clear the EU will want us to abide by strict rules on the support that we can give UK companies. We are looking at a future in which “state aid” rules will continue to limit the scope of government intervention.

The tone of the European Council document is one of firm resolve and also confidence. Its authors know that if the 27 EU states act as one they are in a very strong negotiating position.

As if to remind us of how many cards the EU holds, there is a mention of Gibraltar and the pledge that Spain will have a decisive say on whether any future deal will also apply to the rock.

However, the negotiations could follow a very different course if there is a breakdown of unity among the EU’s member states. Figures from the Council, the Commission and the Parliament may be in the spotlight right now, but the stance taken by elected leaders of the member states will prove crucial to the final deal.

Germany’s Angela Merkel will be lobbied intensely by powerful exporters who will not want to see obstacles to trading with the UK. The outcome of the French presidential election could shipwreck any possibility that the EU will speak with one voice.

Eastern European leaders will want assurances about the rights of their citizens who work in the UK. The Republic of Ireland will not want to see an outcome that could plunge the peace process into even deeper crisis and erect new barriers with its closest trading partner.

The UK may not hold formal negotiations with individual states but staff at British embassies and consulates across the EU will be engaged over the next 24 months in high-energy diplomacy.

The top figures in the EU are in no doubt about the threat the union faces as eurosceptics in other countries look at Britain’s Brexit movement with admiration. They are in a fight for the soul of Europe and we should not expect any deal they offer to suggest a better life awaits outside the EU. The Western Mail newspaper is published by Media Wales a subsidiary company of Trinity Mirror PLC, which is a member of IPSO, the Independent Press Standards Organisation. The entire contents of The Western Mail are the copyright of Media Wales Ltd. It is an offence to copy any of its contents in any way without the company’s permission. If you require a licence to copy parts of it in any way or form, write to the Head of Finance at Six Park Street. The recycled paper content of UK newspapers in 2014 was 78.5%