EU Draft Throws Down Gauntlet to May to Soften Brexit Plan

(Bloomberg) -- The European Union's draft guidelines for its negotiations with the U.K. on their future relationship signals hope that Prime Minister Theresa May will soften her stance and keep Britain more closely aligned to the bloc.

Many diplomats in Brussels and across the EU still think they can persuade the U.K. to at least stay in the bloc's customs union and single market, if not remain a full member of the 28-nation club.

That's why the guidelines drawn up by EU President Donald Tusk say:

• May's red lines mean it can't offer the U.K. as ambitious a trading deal as she is seeking,
• but point out that the EU could be more generous if the U.K. changes its position.

The EU is calling this its “evolution clause” and leaders may look at whether the U.K. government's position has shifted when they meet for a summit in June.

With opposition Labour and rebel lawmakers in May's Conservative party opposing the prime minister's stance, the EU's position dangles an incentive to pro-EU lawmakers to try to shift May's negotiating stance. Many EU officials believe that the U.K.'s continued membership of the customs union, something May has ruled out, would be beneficial to both sides and may be the only way to solve the problem of keeping the Irish border invisible.

The draft is explicit that “being outside the customs union and the single market will inevitably lead to frictions” with “negative economic consequences.” That's a retort to May's line that she wants “as frictionless trade as possible.”

The document makes clear the reward. While the EU's position “reflects the level of rights and obligations compatible with the positions stated by the U.K.,” if Britain's positions shift, the EU “will be prepared to reconsider its offer.”

There are some signs the EU's strategy of being inflexible about what it can offer is working, at least in some spheres. Anti-Brexit lawmakers in the U.K. are looking into whether Britain could postpone its exit from the EU to give Parliament and voters more time to weigh up whether they really want to leave.

Pro-EU lawmakers in all three main parties have raised privately the possibility of extending the Article 50 negotiation deadline beyond March 2019, so that if the public does change its mind, it won't be too late to stay.

--With assistance from Robert Hutton and Kitty Donaldson

To contact the reporter on this story: Ian Wishart in Brussels at iwishart@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Emma Ross-Thomas

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