Theresa May, U.K. prime minister, delivers a speech at Complesso Santa Maria Novella in Florence, Italy, on Friday, Sept. 22, 2017. May will on Friday propose a period of transition after Brexit takes effect in March 2019, aiming to give certainty and clarity to companies worried about the looming split. Photographer: Chris Ratcliffe/Bloomberg
Prime Minister Theresa May had set out her plans for a two-year post-Brexit transition period in a speech in Florence last month © Bloomberg

Germany and France have dashed British hopes of fast-tracking talks on a two-year post-Brexit transition deal, insisting that the UK’s EU divorce bill be resolved first.

British officials had hoped that EU leaders would jump-start negotiations at a high-profile Brussels summit in two weeks by approving the opening of talks on a transition period after Britain’s exit in 2019, which Prime Minister Theresa May proposed in her Florence address last month.

But according to European diplomats, a Germany-led group of EU countries has demanded more clarity on the long-term financial commitments Britain will honour. The UK insists it will only do this once the shape of its future relationship with the EU is clear, including a transition period.

Berlin’s tough stance will be of particular concern to London, coming just a week after Angela Merkel, the German chancellor, met Mrs May to discuss Brexit and her Florence speech, which offered to use transition payments to cover an EU budget shortfall of at least €20bn.

The setback comes amid further signs that post-Florence hopes of smoother Brexit sailing are beginning to fade.

The UK’s two main negotiators are battling each other for staff and resources days before the fifth round of Brexit talks begin next week. According to an internal email seen by the Financial Times, Olly Robbins, who left his job as head of the Department for Exiting the EU last month to set up a rival “Europe Unit” in Downing Street, is openly trying to poach his former colleagues from David Davis, the Brexit secretary.

The Berlin roadblock and renewed cabinet infighting comes after the disarray at this week’s Conservative party conference, sapping Mrs May of much of the momentum she enjoyed after her well-received address in Italy.

The uncompromising positions in Berlin and Paris emerged on Friday as ambassadors from the remaining 27 EU members held their first debate on the union’s approach to transition talks, including the option of approving exploratory negotiations at an October summit.

Michel Barnier, the EU’s chief negotiator, outlined the potential benefits of opening talks on a transition deal at the meeting. He argued that they could create space to resolve the big outstanding issues on a Brexit bill, as well as recognise Britain’s recent more accommodative stance.

But this option was firmly rejected by a group of countries led by Germany and France, which took a stricter view on the sequence of negotiations, according to several diplomats briefed on the meeting.

Germany’s resistance suggests that the EU27 will not let up pressure on divorce issues in the coming months, despite the Florence overture from Mrs May.

One EU ambassador told his colleagues: “We are not here to save the Tory party.”

As a gesture to recognise progress, the EU is considering starting an internal “scoping” exercise on a transition deal, where the EU27 would prepare for talks with the UK at a later stage. While an advance of sorts, this falls well short of London’s hopes that talks would begin after the summit in October.

Some diplomats involved in the discussions speculated that Berlin’s tough line may be tactical to raise pressure and lower expectations ahead of a summit where EU leaders would take a more accommodating approach.

Mr Barnier argued that the Berlin-backed approach should make the summit of EU leaders in October a “stepping stone” to a potential deal in December, where “sufficient progress” on a Brexit bill is acknowledged and transition talks can begin.

If a delayed timetable were adopted at the summit in October it would be a serious blow to British business, which is warning ministers that an end-of-year deal on a transition period is essential to avoid a wave of companies decamping operations to the continent because of uncertainty.

The stalemate comes as Germany’s biggest business lobby has warned members to prepare for a “very hard Brexit” because Britain lacks a clear strategy.

Mr Barnier’s team, meanwhile, has started meeting national customs authorities handling UK trade to make sure that they are preparing for all scenarios, including no deal.

The British negotiating team hopes to make progress on the question of citizen’s rights in next week’s talks but there is not expected to be a new offer on the question of the Brexit bill.

“It will be a fairly quiet negotiating round,” one British official predicted.

Letter in response to this article:

Any proposal by the UK can only be provisional / From D R Myddelton, London, UK

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