FT News: Stakes raised in Brexit talks

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From the Financial Times in London, I'm Malcolm Moore. And this is FT News. It has been a tumultuous week for Theresa May. First, a full and damaging account of a disastrous dinner with Jean-Claude Juncker, the European Commission President, was leaked to the Frankfurter Allgemeine Sonntagszeitung. Then, Alex Barker, our Brussels Bureau Chief, revealed that France and Germany have pushed up the gross divorce bill that the UK must pay to around 100 billion euros.

What next? Joining me to discuss the fallout and its impact on the Brexit negotiations are Alex as well as Peter Spiegel, a former Brussels Bureau Chief who now heads the FT's news operation, and Henry Mance from our team in Westminster. Alex, can you quickly sketch out the substance of the leak?

This slowly emerged over a few days and then came to this crescendo in the German press with a piece that basically was a fly-on-the-wall account of one side of a dinner between Jean-Claude Juncker and Theresa May with a level of detail that you wouldn't even see in a diplomatic note-- a lot of dialogue, a lot of the exchanges between Theresa May and David Davis, her negotiator, that were particularly disparaging. And the substance itself was less surprising to those who follow this carefully and see the gap in positions.

But what really marked this out was the breach of trust it represented. The commission team-- the people leading this negotiation for the EU27-- had been invited round for tea. And this was the first real engagement between the two sides. And you saw most of it then-- or their impression of that-- emerge in a newspaper.

So Theresa May values respect, confidentiality. She's very cautious in these kind of engagements. And for someone who is thinking, I'm going to have to share some of the most sensitive political judgments of my entire premiership with this team, it's not a great start.

Peter, do we know who leaked it?

Everyone has their suspicions. But as someone who was Alex's predecessor and relied on similar leaks myself, I don't like to get in the game of trying to guess who's the leaker. But the fact of the matter is, as Alex points out, this is an institution that not only has three co-equal branches of government-- between the European Commission, the European Council, and European Parliament-- but there are 27 member states. It's, as I frequently say, a target-rich environment in which people in member states, in institutions, various political parties leak.

It is not a unitary state, like Britain is, where you can control information very tightly. There are people who have interests, who want stories out to advance their interests or to send messages. And that the British side ever thought this was going to be a conversation that was going be secret for two years and tightly held by both sides shows, frankly, a bit of naivety, I think, on their part. This was always going to be done with transparency of the kind they may have liked or not. And they should have gamed for that at the outset,

OK. So great for us journalists, but perhaps a bit painful for Theresa May. Henry, what has been the reaction from Downing Street?

It's been strident. I think it's been pretty angry. Downing Street obviously think that the other side is to blame and that to some extent their confidence has been betrayed. They could also make the point that in recent weeks their language-- or at least Theresa May's language-- around Brexit has been softening to some extent.

She's accepted what she likes to call an implementation phase, but many people talk about as a transition arrangement where the European Court of Justice continues to have a role, where Britain continues to make some payments. And that had moved away from her threat to withdraw security cooperation if she couldn't reach a deal with the other EU member states. And so it came at a time when they thought perhaps they were doing their bit in terms of making negotiations go a bit more smoothly.

I would like to come in on that point. I think one of the things that did surprise them, in terms of the substance of this dinner, was exactly that Theresa May they'd seen tacking towards compromise before the Article 50 letter, in the tone of the Article 50 letter, in some of the substance, some of the demands that weren't made. And I think they were very surprised to see the prime minister take a hard line in the dinner on the expectations of a trade deal before the period, on what they see as her overoptimism about the potential to do a deal on citizen rights very, very quickly. They see a huge gap in the positions.

And she started taking a very hard line on the money and talking about a more pick and mix attitude to the deal in general. And this rattled them. So the issue was one of tactics, which we're all gripped by because of what this means for the trust in the negotiation. But behind that is also some quite worrying signs about the gap there is in the positions.

I guess this depends on whether we can trust the account. But Henry, do you have any sense of why Theresa May was diverging a little bit from the account she set out in the Article 50 letter that was handed to Donald Tusk?

I'm not clear on that. It would seem to me perfectly plausible that Theresa May, being the type of person she is-- that's not a particularly clubbable character, as she likes to put it, or I guess not many people's idea of jovial lunch or dinner date-- probably didn't see the need to smooth the edges of her words in private. So if you expected that she might relax around the dinner and create bonhomie, I think that's not the type of person she is. And that's partly what Ken Clarke, the former Chancellor, was alluding to last year when he referred to her as a bloody difficult woman.

And she's actually using that description and using her image of someone who doesn't play the old boys club game-- she's using that to her advantage. It's not just establishing herself as prime minister but now seeking reelection and really seeking it almost as a presidential figure, saying, elect me as your leader, to Britain. She's not going around saying how great the conservatives are, she's going around saying what a strong leader she'll be and how tough she'll be in negotiations. So that would explain to me why going into a dinner like this, she wouldn't necessarily see it as a charm offensive moment.

It strikes me repeatedly that this is what the Brits do wrong with a regular basis in Brussels. You could call it clubbability. You could call it socialising. In many circles, this is called diplomacy. And Brits haven't done this in Brussels, at least since David Cameron's been prime minister. The example of Cameron was-- literally for six years, he'd come to every summit with something he was going to pick a fight with Brussels about. Some of them were made up.

I remember there was a summit where he accused-- Jose Manuel Barroso at the time was the commission president of trying to build an army of drones. And he was going to fight the drone army. And he came and then after the summit, he said, I have defeated the drone army. It's not going to exist. And everyone else at the summit was like, what are you talking about? This is not real.

And then at the end, he said, oh by the way, I have referendum coming up. Can you please help me out with a special deal? For six years you kicked the teeth of the European Union colleagues, and then you expect a deal. And I think for some reason the Brits who actually are so good at diplomacy in NATO, at the IMF, at these other international institutions just don't see a need to play that in Brussels. And I think it is to their detriment.

Everyone else plays the game. And we've seen what happened with the Greeks. When the Greeks didn't want to be diplomats, they almost got kicked out of the eurozone. And so I think May's people have to wake up to very quickly that diplomacy is part of this negotiation. And unless they play the quote unquote "game" or become more clubabble, they're going lose at this.

Alex, I guess this is quite a stinging lesson. But looking at the Brussels point of view, this seems to be quite a bold tactic to leak such a full account straight up. And then of course, we've seen your scoop today to up the Brexit bill, as well. This is strong stuff, isn't it? Is this usual?

Look, we're approaching a divorce. And the psychology of Brussels is changing, and the boundaries have moved a bit. But I think in terms of the leak, there is unease in Brussels as well about how about that emerged. I don't think anyone would see it as a great way to build that sense of trust that you need for a negotiation like that. And at the same time, it wasn't necessarily the fullest account of that meeting.

I think Michel Barnier was playing a much bigger role in the discussion than was necessarily represented in that one account. And I think for Theresa May, it may be that she looks at the field in front of her and the negotiating partners she has, and it may be that Michel Barnier becomes a bigger player in this process for them. He isn't the clubbable guy that some are in Brussels.

He's got a bit more of a May persona. He gets down to business. He's very upright and straight forward. And they may find that he is the prime interlocutor in a lot of this.

On your question about whether this is normal practise, I think the assumption made on the British end is that this is an economic discussion. It is in the interest of both the EU and the UK to have a smooth transition for economic reasons. UK'S an important market for German cars. And the UK needs access via the financial services [INAUDIBLE] to the European market.

And I think what the British side is not realising-- and again, just to hearken back to the Greek crisis-- is politics always trumps economics when it comes to these negotiations in Brussels. And we can make all the economic arguments we can about why the ECB should have backed Greek bonds from the beginning, or why they should be offering Theresa May an easy deal on trade. But the fact of the matter is it is in no one's political interest-- in Europe-- for this to go smoothly. Certainly Emmanuel Macron, running for president in France against someone who is advocating France leave the EU, can't show that France leaving the EU is going to go well.

And so what I think we're seeing here in the ratcheting up of the leaking, of the bill they're going to request is they want to show their domestic audiences they are playing hardball with the Brits. And this is what happens if you want to elect Front National or AFD or Geert Wilders. This is a really existential crisis for them domestically. They can't make it go well for political reasons with the Brits.

OK. And Henry, given Theresa May has to manage this situation that Peter is sketching out for a public here who is clearly euro-skeptic and a media that is clearly euro-skeptic, this is going to be pretty challenging going forward. If we keep seeing bombshells being dropped into the process from the European end, what does Theresa May do in terms of not reacting and hardening the British position in response?

She's is pitching herself as a missile defence system for the UK against these Brussels bombs, as it were. So I think it doesn't do her any harm domestically at the moment. It is difficult for her to be diplomatic about it, however.

At the moment, her Conservative Party is accusing the Labour Party of having unfunded spending commitments in its plan for government that would total 45 billion a year, according to the Conservatives-- 45 billion pounds a year. So if we're talking about a Brexit bill which is potentially around twice that, then you can see why it's very difficult to say, on the one hand, we think that Labour going to spend too much money. On the other hand, as a conservative government negotiating Brexit, we'll be prepared to cede twice that amount going out the door. So she has to balance it. But I think as the most credible political leader and most credible prime minister in the UK at the moment, this threat actually strengthens her to some extent.

OK. We will leave it there and wait for the next bombshell. Thank you very much, Alex, Peter, and to Henry.

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