BREXIT Begins

With the clock ticking on the United Kingdom’s exit from the European Union, negotiators from both sides officially started Brexit talks almost three months after the British government formally gave notice of its intention to leave the European bloc. The March 29 date of that announcement officially started the two-year period of negotiations over the terms of the divorce.

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David Davis, the British Cabinet secretary in charge of the United Kingdom’s exit, and EU chief negotiator Michel Barnier met for a working lunch on Monday. Other working groups and top negotiators were to hold meetings during the day, and a news conference was scheduled for the evening. The first days of negotiations are not expected to be particularly dramatic and could mostly focus on setting the agenda and agreeing to the logistical and practical elements of the talks.

This will be the first time that a country has ever left the union, and many parts of the process are uncertain. Despite resistance from the United Kingdom, the European Union has been clear that negotiations need to make “good progress” before talks on future bilateral national relations can begin. The union is expected to assess the state of progress by the end of the year, and only then will it decide whether the parties can start negotiating on future relations. The United Kingdom has said it wants to sign a free trade agreement with the European bloc.

In the coming months, negotiations will revolve around three main issues: the rights of European citizens living in the United Kingdom and British citizens living in EU countries; the “final bill” of financial obligations that the United Kingdom will have to pay to the union; and an EU border between Northern Ireland and the Irish Republic. The union and the United Kingdom agree that Northern Ireland and citizen rights are priorities, but a solution may not come easily. The size of the Brexit bill, which may run into tens of billions of euros, will be particularly difficult because London will try to keep it as small as possible.

British Prime Minister Theresa May will be in Brussels with the EU heads of state and government for the European Council on Thursday, and she is expected to make an offer on the issue of citizen rights. The union considers these rights to be the most important priority of the Brexit negotiations.

But the domestic situation in the United Kingdom will complicate the talks. May failed to win a majority of votes during snap parliamentary elections on June 8. The government’s stability will remain fragile as she works to form a coalition between her Conservative Party and Northern Ireland’s Democratic Unionist Party. Parliament is scheduled to vote June 28 or 29 on the Queen’s Speech, the monarch’s traditional address at the opening of a new session, set to take place Wednesday. The results of that vote could indicate the level of support for May.

The Conservative Party has been divided between supporters of a hard Brexit, a complete break in ties with the European bloc’s structures, and a soft Brexit, which would preserve some of the connections between the two. But even some soft Brexiteers like Chancellor of the Exchequer Philip Hammond have signaled that the United Kingdom will leave both the EU single market and the customs union. That stand emphasizes that come the end of March 2019, the United Kingdom will no longer be part of the European Union.
Stratfor