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EU leaders are preparing a tough opening stance for Brexit talks, according to the draft of the bloc’s first formal response to Britain’s request to begin Article 50 exit talks.

The first version of the European Council’s negotiating guidelines, seen by the Financial Times, lays down exacting conditions on the UK, making clear that a smooth transition out of the single market will require accepting the bloc’s laws, supervisors, courts and budget contributions.

Before EU leaders are willing to open talks about future UK-EU trade relations, the draft states that “sufficient progress” must be made in talks on withdrawal terms, covering the rights of EU migrants in Britain and outstanding UK financial liabilities to the EU. Paris and Berlin are supportive of this “phased approach” to negotiations.

The nine-page guidelines are the document the EU’s 27 leaders will use to maintain control of the negotiation process. The draft will be debated in coming weeks, with the aim of adopting it at an EU-27 summit on April 29.

From the political priorities set out in the text, the European Commission will recommend a more detailed legal mandate for its chief negotiator Michel Barnier, which ministers aim to adopt by the end of May.

The draft guidelines offer an unvarnished view of the consequences of Brexit. They bluntly state that Britain’s departure from the single market and customs union will involve disruption for the economy and citizens as new legal barriers are enforced. Six core principles are set for the negotiations, covering both the withdrawal and transition phases.

It calls for a “balance” of rights and obligations; the “autonomy” of the EU’s rule-making and “legal order”; the indivisibility of the EU’s four freedoms, including the free movement of labour; and the integrity of the single market.

“A non-member of the union, that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member,” it states.

“In this context, the European Council welcomes the recognition by the British government that the four freedoms of the Single Market are indivisible and that there can be no “cherry picking”.

In another move that will raise concern in Westminster, it calls for a level playing field in future economic relations with the UK, mentioning competition, subsidy controls and provisions against fiscal dumping — a demand in direct response to British threats on tax.

A substantial section of the document is devoted to ways to minimise uncertainty for citizens and businesses at the point of withdrawal. The draft suggests EU citizen rights would only end at the point of Brexit — not at the date of notification, as some Brexiters have suggested.

A short section also calls on the UK to honour its share of the EU’s financial commitments. It calls on Britain to “respect the obligations undertaken before the date of withdrawal”.

“The settlement should cover all legal and budgetary commitments as well as liabilities, including contingent liabilities,” it states.

The Commission estimates this to be around €60bn. Finally the EU statement makes clear that it wants an agreement, because a no-deal scenario would be damaging to all sides.

It says the EU27 will nevertheless prepare for an unmanaged exit with no agreement. “Any free-trade agreement should be balanced, ambitious and wide-ranging.

It cannot, however, amount to participation in the Single Market or parts thereof, as this would undermine its integrity and proper functioning,” the guidelines state.

“It must ensure a level playing field in terms of competition and state aid, and must encompass safeguards against unfair competitive advantages through, inter alia, fiscal social and environmental dumping.”

The guidelines are the main political vehicle for the EU’s 27 national leaders to control the Brexit negotiation process. Mr Barnier’s mandate is expected to cover only withdrawal issues; both the EU guidelines and his mandate will be updated through the Brexit process.

Image via AFP

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