Hope for Brexit breakthrough diminishes

Spain and France underline how the distinctive interests of EU states are adding to the complexity of the exit negotiations

Angela Merkel, the German Chancellor, met new Spanish Prime Minister Pedro Sanchez over the last two days, starting Saturday. The talks had a broad-ranging bilateral and European agenda, including migration, with Brexit on the menu, too, given growing speculation about a ‘no-deal’ United Kingdom exit outcome.

As Sanchez and Merkel know, the window of opportunity is rapidly closing in on the original October deadline for the EU and UK to agree to a withdraw agreement. Spain and Germany have so far been advocates of the tough position emanating from Brussels, and UK Prime Minister Theresa May is therefore pushing hard to get Sanchez and Merkel — alongside other key leaders such as French President Emmanuel Macron — to soften the stance of the EU’s chief Brexit negotiator, Michel Barnier.

Spain, the Eurozone’s fourth-largest economy, benefits, economically, from around 300,000 UK citizens residing in the country and has a significant trade deficit with the UK, which — other things being equal — favours softer negotiating positions on Brexit. Yet, this picture is complicated by other factors, including Gibraltar’s future.

Under the new Spanish government of Sanchez, it is not yet clear if Madrid will seek to veto a final Brexit deal over Gibraltar, but the previous administration did invite the British government to negotiations on the UK overseas territory on the southern Spanish coast, including proposals for joint sovereignty. Madrid’s negotiating position towards Brexit is also shaped by the secessionist challenge from the Catalonia and Basque regions. Spain was strongly opposed to Scotland’s potential independence in the 2014 referendum, and will seek to scotch any attempt by that country, and also Northern Ireland, to receive any special status in the EU post-Brexit, which may complicate attempts to secure a breakthrough over the Irish border issue that remains one of the biggest areas of UK-EU disagreement.

What Spain’s position on Brexit underlines is how each EU state has distinctive political, economic and social interests that inform its stance on the UK’s exit. The divergent and complex positions of EU states thus range from the UK’s fellow non-Eurozone member Sweden, whose political and economic interests are broadly aligned with UK positions, to countries that have more complicated postures. Macron’s Brexit positioning, including his robust stance on future UK access to the single market, is reinforced by broader French plans to pitch Paris as a competing financial centre to London, which had begun in earnest under the presidency of Francois Hollande. This saw former finance minister Michel Sapin and Hollande’s Brexit special envoy Christian Noyer, a former Bank of France governor, begin openly promoting Paris with key financial firms after the June 2016 referendum.

This has continued under Macron and last year he hailed the decision to relocate the European Banking Agency (EBA) to Paris from London as “recognition of France’s attractiveness and European commitment”. Last week, May met Macron, but this session predictably did little to break the substantive impasse between the two in the UK’s EU exit negotiations. This outcome likely reflected the domestic-driven motives for Paris to push for a tough settlement with London. The French president had previously dismissed UK attempts to try to “divide and rule” the EU-27 by picking individual states and weakening Barnier.

Taken overall, Spain and France underline how the distinctive interests of EU states are adding to the complexity of Brexit negotiations. While Brussels will continue to seek unified EU stances under Barnier’s leadership, London will simultaneously try to shape the positions of nations that could be key allies or foes, even though this is likely to have limited success.