European leaders applauded Theresa May for providing clarity by finally outlining her plan for a clean break with the EU, but said she needed to be realistic about the price Britain would pay for leaving.
May’s vision of a “global Britain” cutting itself off from European Union’s single market and launching negotiations on a deep and comprehensive free trade agreement with the bloc is a form of “hard Brexit” continental leaders were prepared for.
For months Europeans expressed frustration that British officials would not accept in public that their determination to curb immigration from the continent meant Britain must leave the common market. May’s speech on Monday put an end to that.
“Sad process, surrealistic times but at least more realistic announcement on Brexit,” tweeted Donald Tusk, the former Polish premier who will oversee the divorce negotiations between London and the other 27 member states in the European Council.
EU leaders are keeping their negotiating powder dry until May formally launches talks in the coming months. But officials who are preparing for the process noted that May had not spelled out many downsides for Britain’s economy.
“Where is the give for all the take?” asked the Czech Republic’s secretary of state for EU affairs, Tomas Prouza, on Twitter.
UK's plan seems a bit ambitious – trade as free as possible, full control on immigration…where is the give for all the take?
— Tomas Prouza (@CZSecStateEU) January 17, 2017
May accepted that there would have to be “give and take” and “compromises” if Britain is to keep “maximum” access for its goods and services while shedding its single market obligations, such as paying in to the Union budget, accepting rulings by EU courts and letting any EU citizen come to work in Britain.
Europeans, including German Economy Minister Sigmar Gabriel, renewed their insistence London would not be allowed to “cherry pick” EU benefits without paying for them.
Some countries, such as Canada, have negotiated extensive access to the single market, though less than Britain now enjoys. They are generally subject to arbitration by neutral tribunals and have typically taken seven years or more to negotiate.
Not “zero sum”
May stressed how free trade with Britain was in the economic interests of all – it was “not a zero sum game”, she said. Many in Europe accept that is the case, at least in the short term, and for that reason are willing to try and limit the damage.
But while May said an effort to “punish Britain and make a political point” would harm the economic interests of workers on the continent, EU leaders are worried that a sweetheart deal for London would encourage voters in other countries to try and emulate Britain’s referendum last June.
“We shall never accept a situation in which it is better to be outside the EU and the single market than to be a member,” said Guy Verhofstadt, the liberal former Belgian prime minister who is the point man on Brexit for the European Parliament.
British officials have suggested they could be forced to slash corporate tax rates to stay competitive if the EU imposes a deal that includes punitive tariffs.
‘Tax haven’ threat
“If we don’t (get a sensible Brexit deal) the people of this country are not simply going to lie down and accept that they will be poorer,” May’s finance minister, Philip Hammond said. “We will do whatever it takes to maintain our competitiveness and protect our standard of living.”
Verhofstadt said such remarks would not make it easier to reach a deal: “Saying … we are going to make a sort of free zone or tax haven of Great Britain, I don’t think this is useful,” he said.
“We need a fair agreement and certainly not under threats.”
Meanwhile, Ireland’s central bank has had over 100 inquiries from UK financial firms considering moving operations as a result of Britain’s vote to leave the European Union, Finance Minister Michael Noonan said on Tuesday.
“The Central Bank has had in excess of 100 inquiries from the City of London from people who are anxious to find out what the regulatory regime would be here if they were to move activity,” Noonan told parliament in Dublin.
“The Taoiseach (Prime Minister), myself, several cabinet ministers and senior civil servants across departments have all been in the City of London in the last six months and are in direct contact with several companies that have expressed an interest (in) setting up in Ireland.”