British Secretary of State for Exiting the European Union (Brexit Minister) David Davis (L) and European Union Chief Negotiator in charge of Brexit negotiations with Britain Michel Barnier (R) leave after addressing media representatives at the European Union Commission in Brussels on September, 28, 2017. The EU and the UK concluded a forth round of Brexit talks. / AFP PHOTO / EMMANUEL DUNANDEMMANUEL DUNAND/AFP/Getty Images
UK Brexit minister David Davis, left, and EU chief negotiator Michel Barnier in Brussels in September © AFP

Brussels is giving Britain two to three weeks to set out how much it is prepared to pay in the Brexit divorce settlement, warning that the EU will otherwise struggle to prepare this year for a transition deal the UK badly wants.

According to the informal deadline, unless London makes a big financial offer this month, the bloc may be unable to adopt guidelines for the transition talks at a crucial summit in December.

“We need to know soon,” said one senior EU negotiator. “There isn’t much time, there are no shortcuts.”

The deadline, which seeks to increase pressure on London, will be one of the main points of dispute on Thursday as British and EU negotiators meet for the sixth round of Brexit talks in Brussels.

The UK wants talks on transition to start as soon as possible so that businesses’ fears about a cliff-edge Brexit can be allayed at least a year before the departure date of March 29 2019.

Theresa May’s government is privately indicating it will offer more clarity on outstanding budget commitments it intends to honour, which the EU puts at roughly €60bn in net terms. But British officials first want more certainty that the EU will reciprocate and simultaneously agree the outlines of a transition deal in December.

One EU diplomat described it a “chicken and egg” dilemma, in which the EU will only start work on drafting transition guidelines if Britain shows it will make “sufficient progress” on financial issues before the end of November.

The guidelines would lay out the detailed conditions for a transition arrangement beyond March 2019. Although a final agreement could take several months to negotiate, the guidelines would outline the basic terms of a deal, offering a degree of reassurance to businesses as they near crucial decisions on contingency plans.

An internal EU27 planning document notes that the EU will “take stock” of negotiations in the week of November 20, with the aim of starting the formal meetings on the “elaboration of draft guidelines” by November 29. The UK side, by contrast, expects to make a move no earlier than the Budget on November 23, and possibly as late as December. If negotiations on money are still stuck and the EU timetable slips, EU negotiators are warning London that the EU27 may decide to adopt guidelines in 2018, seriously delaying a final transition deal.

A blunt warning from the European Parliament on Wednesday over citizen rights further complicates the situation, casting doubt over an area where negotiators had made significant progress.

The parliament’s Brexit steering group made a detailed list of “firm” demands, including a cost-free and near-unconditional “settled status” application process for 3m EU nationals in Britain, which would only begin once a transition period ends. Such demands go far beyond what the UK has offered, but the parliament holds a veto over the final divorce deal.

Mrs May’s team concedes that the impression of this week’s talks in Brussels will be one of deadlock on money, but that work is continuing on choreographing a breakthrough at the December European Council. “The next step has to be a big single jump,” says one ally of the prime minister.

A big concern on the UK side is ensuring that any movement on the financial settlement is translated into action by member states.

Downing Street is anxious to avoid a repeat of the October summit, when Mrs May’s Florence speech received a warm welcome from Michel Barnier, the EU’s chief negotiator, but he was unable to persuade France and Germany to allow transition talks to begin in parallel to divorce talks.

France and Germany are still urging the EU27 to stand firm and not race ahead in preparing texts until the UK has moved first.

“They don’t want to send the wrong signal to London. We’re talking about transition and the future — but that’s it. It’s a start and only that,” said one EU diplomat involved in talks.

With Mrs May beset by domestic scandals and struggling to find cabinet consensus over Brexit, one senior EU official said it would be “madness” to make concessions or offers that try to second-guess the febrile politics of Westminster.

The utility of the December deal for business will partly depend on the level of detail in the guidelines and the size of the gap that must be closed in negotiations. While there will be no direct talks on transition before December, the EU is planning “to bear in mind the UK position” on transition in its own deliberations.

British officials note they are not expected by the EU to put a number on a financial offer at this stage but will have to give an indication of their methodology, notably in relation to paying for previous unpaid commitments known as “reste à liquider”.

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