Wary Brussels faces Brexit conundrum after UK vote

Britain's European Union partners do not know what to make of an inconclusive election result that throws the future of prime minister Theresa May in doubt and may delay if not more seriously derail talks on Brexit.

With no official reaction yet from senior figures in Brussels or in national capitals, one EU official said it was too early to speculate on how the bloc would react to a change in Britain’s demands for its withdrawal in 2019 or whether plans for negotiations to open on June 19th would be put on hold.

“Let’s see if the next government changes its position on Brexit,” the official said as results confirmed that May could no longer command a majority in parliament.

Former Finnish prime minister Alexander Stubb was a rare senior commentator. He tweeted: “Looks like we might need a time-out in the Brexit negotiations. Time for everyone to regroup.”

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May, who had campaigned against Brexit last year but took over the Conservative party after David Cameron lost last June's Brexit referendum, delivered her terms for withdrawal in March.

These include a clean break from the EU’s single market and customs union. May then called a snap election hoping for a bigger majority to strengthen her hand in negotiations.

Compromise deals

That was also the broadly desired outcome in Brussels, where leaders believed that a stronger May would be better able to cut compromise deals with the EU and resist pressure from hardline pro-Brexit factions in her party which have called for Britain to reject EU terms and, possibly, walk out without a deal.

European leaders have largely given up considering the possibility that Britain might change its mind and ask to stay. Most now appear to prefer that the bloc’s second-biggest economy leave smoothly and quickly. To halt the Brexit process now would require the consent of the other member states.

The other 27 governments are particularly concerned that a breakdown in negotiations could lead to Britain ceasing to be a member on March 30th, 2019, as laid out in article 50 of the EU treaty, without negotiating the kind of divorce terms that would avoid a chaotic legal limbo for people and businesses.

That would also make it improbable that Britain could secure the rapid free-trade agreement it wants with the EU after it leaves.

In a note to clients, UBS wrote that the relative strength of hardline pro-Brexit groups in a weak Conservative government could make a breakdown in talks more likely and make it harder to reach a trade deal: “A tighter political balance could make it easier for Eurosceptics . . . to prevent the government from offering the compromises needed to secure a trade deal.

“The prospect of another election raises the risk of a delay, potentially leaving the UK without a negotiated exit settlement.”

Talk in Britain that a different ruling coalition could seek a “softer” Brexit than May has proposed, possibly seeking to remain in the single market, is also problematic for the EU.

While the 27 would quite possibly be willing to extend to Britain the same kind of access to EU markets that they offer to Norway or Switzerland, they have made clear that that would mean Britain continuing to pay into the EU budget and obey EU rules, including on free migration across the bloc, while no longer having any say in how the union’s policies are set.

EU leaders question how any British government could persuade voters to accept such an outcome and so would be wary of starting down the path of negotiating it for fear of ending up without a deal that both sides could ratify in 2019. – (Reuters)