EU's Barnier Warns U.K. Against Front-Loading Brexit Talks

(Bloomberg) -- The European Union's chief Brexit negotiator said the U.K. must settle the details of its divorce from the EU before discussing any future free-trade deal or risk crashing out without an accord, in a rebuff to Prime Minister Theresa May.

“The U.K. government will push for parallel negotiations on the withdrawal and the future relationship,” Michel Barnier told the European Parliament in Strasbourg, France. “This is a very risky approach. To succeed, we need on the contrary to devote the first phase of negotiations exclusively to reaching an agreement on the principles of the exit.”

With a consultative role in the negotiations that are due to get underway next month and veto power over any final agreement, the EU Parliament outlined its priorities on Wednesday for the two-year process that May triggered last week. The stance is the assembly's input into negotiating guidelines that the leaders of Britain's 27 EU partners are due to fix on April 29.

Barnier said that the first phase of negotiations on exiting the bloc “is our best chance to build trust” before moving on to the future relations. “We are not proposing this to be tactical or to create difficulties for the U.K.,” he said. “On the contrary, it is an essential condition to maximize our chances to reach an agreement within two years.”

Honoring Obligations

In its resolution, the 751-seat Parliament warned the U.K. against starting free-trade negotiations with countries outside the EU before Brexit, saying such a step would violate the bloc's law, and called on Britain to “honor all its legal, financial and budgetary obligations.” Officials in the EU have put the divorce bill for Britain at as much as 60 billion euros ($64 billion).

“If you leave the house, you have to pay the bills,” said Gianni Pittella, Italian leader of the Socialists in the EU Parliament. “It's simply doing your duty.”

Any separate accord on the U.K.'s future relationship with the EU should exclude “piecemeal or sectoral provisions, including with respect to financial services,” that would give Britain-based businesses preferential access to the EU internal market, the assembly said in its resolution.

Meanwhile, any “transitional arrangements” needed to ensure “legal certainty and continuity” between the moment of Brexit and a deal on the future EU-U.K. relationship should be limited to no more than three years and must “preserve the integrity of the European Union's legal order, with the Court of Justice of the European Union responsible for settling any legal challenges,” according to the resolution. It was approved by a vote of 516 to 133, with 50 abstentions.

Tensions Ahead

In signs this week of the Brexit tensions that may surface, U.K. Chancellor of the Exchequer Philip Hammond said some within the ruling Conservative party oppose reaching an accord with the EU and Manfred Weber, a German who is one of the bloc's leading lawmakers, said London's financial-markets business tied to the euro must be pared back after Britain leaves. Over the weekend, former Conservative Party leader Michael Howard suggested Britain would be willing to go to war with Spain over the rock of Gibraltar.

Barnier and Jean-Claude Juncker, president of the European Commission, the EU's executive arm, warned about the consequences of failing to reach a Brexit accord.

“No deal means no winners,” Juncker said. “Everybody will lose.”

Britain's EU partners are seeking initial agreements in the Brexit talks on a U.K. divorce payout and on the rights of citizens from across the bloc who live in Britain. Also on the priority list is a deal on the land border between Ireland and Northern Ireland, which stayed in the U.K. after Irish independence in 1922 and which suffered decades of deadly violence before the arrival of the European single market and a peace accord.

Unresolved Dispute

European officials have signaled that progress over these three matters in the coming nine to 12 months could pave the way for parallel talks with Britain over a free-trade accord that would take effect after the country leaves.

Nigel Farage, an EU Parliament member whose U.K. Independence Party helped persuade 52 percent of British voters to endorse Brexit in last June's referendum, earned a rebuke from the assembly's Italian president, Antonio Tajani, by accusing the rest of the bloc of “behaving like the Mafia” in the run-up to the negotiations.

Farage said the divorce sum being floated by the EU is so high that “it's just impossible for us to see any accommodation.” While he said the U.K. could walk away and the EU side would bear the brunt of the fallout, he called for “give and take on both sides.”

Guy Verhofstadt, the EU Parliament's point person for Brexit, said the U.K.'s decision to leave the bloc after more than 40 years of membership is the “sad” result of an unresolved dispute among Conservatives over ties to the rest of Europe and signaled the possibility of Britain one day seeking to rejoin the club.

“There will be one day or another a young man or a young woman who will try again, who will lead Britain into the European family once again,” Verhofstadt said. “And a young generation that will see Brexit for what it really is -- a catfight in the Conservative Party that got out of hand; a loss of time; a waste of energy; and I think a stupidity.”

--With assistance from Jones Hayden

To contact the reporter on this story: Jonathan Stearns in Strasbourg, France at jstearns2@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Richard Bravo