The Brexit Grandstanding Works in the EU's Favor

(Bloomberg View) -- Leaked details of a dinner conversation between U.K. Prime Minister Theresa May and European Commission President Jean-Claude Juncker suggest that the Brexit talks won't just be contentious -- they'll be brutal. At this point, the perception helps May as much as it does the EU leaders. After the June election in the U.K., however, May will be at a disadvantage.

A stark description of what transpired during the April 26 dinner in London appeared in the Sunday edition of the German daily Frankfurter Allgemeine Zeitung. In a two-hour-long conversation with Juncker, May rejected the idea of her nation paying any kind of exit bill. She also reportedly said she hoped to clarify the status of EU citizens in the U.K. and Brits in the EU by the next meeting of the Council of Europe in June, based on the idea that these people should be treated as third-country nationals. According to FAZ, May also insisted on negotiating a future trade deal at the same time as the exit arrangements and suggested that the parties together should try to make Brexit a success; in response, Juncker explained that, in his view, a third-party status and success are polar opposites.

Juncker's reaction to what he heard was apparently incredulity and disappointment. As he left the dinner, he declared that he was "10 times more skeptical" than before about the outcome of the talks and that the probability of failure was "more than 50 percent." In distress, Juncker called German Chancellor Angela Merkel to say that, in his opinion, May lived in a different galaxy filled with illusions.

That's the German version of events. The British one can be found in London tabloids. According to the Daily Express, May "chastised the unelected official" during the dinner and demanded that he should be "patient." The Sun, in their tabloid way, accused Juncker of attacking May "behind her back" for refusing to pay a divorce bill.

Neither of the versions is probably quite correct. At the outset of an intense two-year negotiating process, the parties are working to establish their starting positions so that the slightest step back could be viewed as a meaningful compromise. The dinner conversation itself probably wasn't as openly acrimonious as it is described, but the perception that it was helps May. The tougher and more independent-minded she appears, the more support she's likely to get from voters who would hate to weaken her hand even if they're anti-Brexit. 

Merkel, for her part, has an election coming up in September, and she has no reason to look soft at the outset of the Brexit talks, especially as her strongest opponent, Martin Schulz, is fiercely pro-European and would hammer her on that. Merkel -- apparently after Juncker called in frustration -- made it clear in a speech to the German parliament on April 29 that, like Juncker, she considered the British side deluded. She also ran through the entire Juncker agenda: No simultaneous talks about exit terms and a future trade deal; strong protections for EU citizens in the U.K., including 100,000 Germans; as little financial damage as possible to the EU. Unity appears to be ensured on the initial position: Merkel's bullet points are the basis for the negotiating guidelines on which the 27 EU leaders signed off on Saturday. As is usual with the EU, the guidelines don't include some of the tough demands from a draft that had been leaked earlier, for example, the specific demand that all EU immigrants already in the U.K. and their entire families, including future spouses, keep their current rights. But that doesn't mean the matter won't be raised during the talks: The EU is in no hurry to conclude them since every extra week of British agony is a deterrent to other potential "exiters."

While both May and Merkel benefit domestically from taking a tough stance, the EU negotiators, too, love the escalation because they know that May can only be bluffing. There is, for example, no reason for her to know about the European Medicines Agency's 500 million euro ($545 million) unbreakable, 25-year lease in Canary Wharf. Since the EU didn't initiate Brexit, it doesn't want to pay to break it off and move the EMA elsewhere -- even if the lease wasn't a smart idea in the first place. Nor does May necessarily know exactly what rights and social protections Brits enjoy in other EU countries, which makes it difficult for her to negotiate a reciprocal deal for British emigres and immigrants. Juncker and his team, free of responsibility for running any single country, deal with these cross-border housekeeping matters on a daily basis. They also know how detailed trade talks can get: They've hammered out quite a number of them, something the U.K. hasn't had to do since it's been a EU member.

May, of course, could find the expertise among U.K. officials with EU experience -- but, well before Brexit, the British presence in EU institutions was gradually waning. As far back as 2013, the U.K. parliament's Foreign Affairs Committee was complaining that not enough Brits were taking EU employment tests to compensate for retiring staffers. The U.K. has long treated the EU as a nuisance and worked harder on opt-outs than on trying to learn its ropes. Now, it doesn't quite understand what the EU wants and why its wants it.

In other words, stepped-up, prolonged theatrics are in Juncker's interest because he knows that when the parties get down to business, there will be less time left and his team will have a better grip on the issues, down to the minutest detail. That's how one gets the best deal -- or gets the other party to walk away in a huff, something that would suit the EU negotiators fine: Time is on their side.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.

To contact the author of this story: Leonid Bershidsky at lbershidsky@bloomberg.net.

To contact the editor responsible for this story: Mike Nizza at mnizza3@bloomberg.net.

For more columns from Bloomberg View, visit http://www.bloomberg.com/view.