EU fears Brexit talks are being bugged
Senior Brussels official claimed spies were at work after Britain obtained sensitive files
THE European Union’s Brexit negotiators fear they are being bugged by the British secret service after the UK obtained sensitive documents “within hours” of them being presented to a meeting of EU officials last month, The Daily Telegraph understands.
A highly placed EU source disclosed the bloc’s security concerns as British negotiators returned to Brussels today to resume Brexit negotiations.
The two sides remain far apart on key issues of customs arrangements and Ireland, with Latvia’s foreign minister warning yesterday that the risk of a no-deal outcome was “50-50”.
The EU bugging fears were raised at a meeting of the European Council on July 13 by a senior member of Michel Barnier’s Brexit negotiating team, according to the source.
Sabine Weyand, the deputy chief negotiator, told EU officials attending the meeting of the European Council’s Article 50 working party that there was a possibility that British intelligence had penetrated their meetings, the source said.
The EU’S fears were spawned after British negotiators obtained the contents of a politically explosive slide presentation almost immediately after they were shared on July 5 – a day before Theresa May’s Chequers summit where the Cabinet agreed a plan for Brexit to put to Brussels.
The slides, the contents of which have been communicated to The Telegraph, contained highly negative European Commission economic assessments of British plans to remain in the EU’S “single market for goods”. Within hours, the source said, the UK had lobbied at “the top tier of government” to block EU Commission plans to publish the slides, which would have been widely regarded as a pre-emptive EU strike against the Chequers plan.
The source did not elaborate on what the “top tier” meant, but that day Mrs May was visiting Angela Merkel, the German chancellor, in a hastily arranged meeting at which both leaders agreed that Brexit talks were entering a “crucial phase”.
The UK’S efforts to suppress the slides were successful – they have not since been published – but their contents raise serious questions about the political viability of the Prime Minister’s Brexit plans. The slides warned that leaving the UK free to diverge on services while promising to remain closely aligned on goods regulations would give the country a damaging competitive advantage over time.
According to the source, the slides warned that 20 to 40 per cent of the value of a car was composed of services, and some 69 per cent of the value of chemicals was related to production and processing methods, where the UK would be free to set its own standards.
The commission warned that – on the basis of its assessments – the UK alignment in the single market for goods would lead to a “level of erosion in the single market” over a 15-year period roughly equal to the impact of a “no deal” exit for the UK – or 8 to 9 per cent of GDP.
If accepted by EU member states,
The European Commission briefing given to top EU Brexit officials on July 5 this year was political dynamite, driving a coach and horses through a fundamental part of Britain’s expected negotiating strategy. Delivered by Michel Barnier’s senior economic adviser on the eve of the Chequers summit, the Commission laid out what it saw as the hard economic arguments against allowing the UK to remain in the EU single market for goods only.
Citing detailed examples from cars to chemicals, sources briefed on the meeting say that Stephanie Riso explained why European Commission economists believed accepting the British plan would damage the single market.
The presentation, which preceded Chequers and the subsequent White Paper, went to the heart of the British pitch to align tightly with EU rules on goods, while remaining free to diverge on services. The slides warned that allowing this would leave the UK free to seek a competitive advantage that, over time, would cost the EU dearly.
On cars, she argued that 20-40 per cent of the value of a vehicle was in information technology, research and development, financial services and distribution – all areas where the UK could potentially undercut the EU.
On chemicals, she argued that 69 per cent of the value was linked to production and processing methods on which the UK would be free to diverge, to the incremental benefit of British industry.
The conclusion was that over 15 years UK alignment on goods alone would have an impact on the EU equal to the impact of a “no deal” exit for the UK – some 8-9 per cent of GDP.
Agreeing to such a deal would, the Commission warned, allow Britain essentially to achieve via Brexit what David Cameron had failed to in his renegotiation with Brussels – allowing the UK to have just “three and a half ” of the EU’S four freedoms of goods, services, capital and labour.
According to the source, Ms Riso concluded that the slides would be sent to EU member states and then published the next day – July 6, the day of the Chequers meeting. But the slides were never published after intervention from the British side at “the highest level”.
The question is why, and what it means for the Brexit negotiations as they enter their most critical phase, as both sides search for a deal this autumn that will conclude the Article 50 divorce pact, and open the door to full-blown trade negotiations. One clue is in the reaction of the Belgian, Dutch and Italian representatives at the meeting, who are understood to have warned the Commission of the political sensitivity of the situation, and urged a careful reaction to the coming UK White Paper.
In short, the member states prevailed on the Commission not to publish a document that could have torpedoed Mrs May’s grand Brexit gambit before it even left harbour.
The UK side will be hoping that Europe’s “understanding” in not publishing the damning commission assessments could herald a shift in the Brexit negotiations, in which more pragmatic member states take over the lead from the hyper-orthodox EU Commission. Following the publication of the White Paper there were reports – quickly denied – that some countries, including Germany, were “softening” towards some of the ideas put forward in the White Paper.
The UK’S implicit “offer” to Europe is that alignment in goods – where the EU runs a £95billion surplus with the UK – will avoid disruption to supply chains and be of obvious benefit to EU business, while leaving the UK flexibility on services and people.
It is this grand bargain that is at the heart of the Chequers deal, and on which the UK has mounted a huge diplomatic charm offensive this summer – and which Mr Barnier has been clear the EU cannot accept. Only hours after Mrs May had used a speech in Belfast to demand that the EU “evolve their position” in kind, Mr Barnier gave a press conference in which he openly questioned why the EU would engage in costly UK proposals.
“There’s not an awful lot of justification for the EU running the risk of weakening the single market,” he said. “That is our main asset.”
That was a view backed this month by Claus Grube, the former Danish ambassador to the UK and a known Anglophile, who warned that the UK was misjudging how flexible the EU could be.
He dismissed the White Paper as “a creative, but unbalanced combination” of single market rights with free-trade agreement obligations “to the benefit only of the UK” – arguing that the Brexiteers’ stated desire to diverge presented a clear risk of competitive distortion. Mujtaba Rahman, the lead EU analyst at the Eurasia Group, was equally sceptical of the UK’S sales pitch that a single market for goods was beneficial for both sides.
“This fundamentally misjudges the EU’S deeply held view – which is echoed in Berlin and Paris – that a single market for goods will not be in its political or commercial interest,” he said.
Mrs May is now trying to find a way past that commission orthodoxy, partly hoping that it will not be shared by all EU member states which may think commission fears about UK divergence on services are overblown.
But this is looking tough. After Ms Riso’s presentation, it is understood that France, Germany, Denmark and Austria all chimed in supporting the conclusions, with Austria adding that data from car companies like BMW had drawn similar conclusions.
‘A single market for goods will not be in its [the European Union’s] political or commercial interest’
Already in Whitehall there is talk of a ‘pivot to Canada-style deal’ if the EU rejects the Chequers hybrid deal’
John Springford, the economist at the Centre for European Reform think tank, believes that the UK could circumvent some of the Commission’s objections by agreeing to yet deeper alignment. At present the UK has agreed only not to dilute existing social and environmental regulations, for example, but has given no guarantees that it will implement new regulations in the future.
“If they did that, then a lot of these questions could be put to bed,” says Mr Springford. “But the EU will insist this is clearly ‘locked in’ if they are ever to accept Chequers, or something like it.”
Whether Mrs May can sell that level of ongoing alignment is far from clear, as clamour among the Conservative Party grassroots grows against the Chequers plan.
Chris Grayling, a Brexiteer who supports the Chequers plan, admitted yesterday it was difficult to convince voters it was the right way forward, but told the Today programme on BBC Radio 4 that he accepted having “alignment on technical specifications of manufactured goods” as the “price to pay” for a relationship with the EU.
Such grudging language will do little to inspire trust in Brussels or Paris and Berlin, which are expected to pass a verdict on the British gambit at the informal EU leaders’ summit in Salzburg on Sept 20.
Already in Whitehall there is talk of a “pivot to Canada-style deal” if the EU rejects the Chequers hybrid deal
– a move that would instantly beg the question of how to avoid the customs border in the Irish Sea, which Mrs May has so emphatically ruled out.
Of course, there is one answer to that question: namely joining a customs union with the EU – and that is one step that Mr Barnier and the European Commission have very clearly not ruled out.