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The EU has given the green light to talks with the UK on reducing trading frictions, but a growing dispute over money threatens to poison them before they begin.
Ambassadors from the 27 EU member states agreed the negotiating mandate on Wednesday for key parts of the post-Brexit “reset” sought by the UK government after defeating a German-led rebellion about making London pay into the EU budget.
They backed French-led demands that the UK must contribute to EU “cohesion funds” as the price of a deal to re-link EU and UK energy markets.
But three EU diplomats said the EU statement launching the talks had been softened to say that it “will reflect” on the appropriate levels of financial contribution — rather than a more definitive “will establish”.
The weakening of the text came after Germany, backed by the Netherlands and others, pushed back against French-led demands for the UK to make cohesion payments for areas agreed in May at the Windsor summit on the “reset” of UK-EU relations.
Germany wants to charge the UK only for future agreements, since that document did not reference EU budget payments, just contributing to issues such as a deal to remove border checks on plant and animals.
An EU diplomat warned the compromise had left a “Sword of Damocles” hanging over the EU-UK negotiations before they have even started.
The UK has asked for a 50 per cent discount on its contributions to the Erasmus+ student exchange programme, which it promised at the May summit to “work towards” rejoining — a key request of many EU member states.
Former prime minister Boris Johnson pulled the UK out of the Erasmus scheme because it was expensive, but it remains hugely popular in the EU and is widely seen in Brussels as a test of UK “good faith” in the coming negotiations.
Brussels has argued that the UK’s discount should be only 30 per cent and apply only to 2027.
An EU diplomat familiar with the discussions warned that UK “penny-pinching” over rejoining Erasmus+, alongside its efforts to limit the scope of a proposed Youth Experience Scheme for young people, risked poisoning the coming negotiations.
“The UK constantly harping on about ‘value for money’ is a real trigger for a lot of member states. Everyone has tough fiscal situations and this is just making the negotiation dangerously transactional,” they added.
“The British should not be surprised. All third countries pay for access to the EU market,” said one of the three EU diplomats. “If we made an exception for them, Norway and Switzerland would want the same.”
Lord Peter Ricketts, chair of the Lords European affairs committee that published a report this week on the EU-UK “reset”, said that realising the aspirations set out in the May summit was proving to be “a long and winding road”.
He noted that Nick Thomas-Symonds, the UK minister in charge of the reset, had ruled out any contributions to the general EU budget — as opposed to limited contributions to facilitate the cost of a deal on agrifoods or energy market alignment — in his evidence to the committee.
“The demands that London pay into EU cohesion funds go beyond the terms of the 19 May Common Understanding. In my personal view, they are a maximalist opening pitch as negotiations finally get under way. I see no case for the government agreeing to this,” Ricketts added.
UK officials said they were “pleased” with the progress on mandates that now opened the way to negotiations, including the apparent softening of the EU approach to financial demands.
A UK government spokesperson said: “We are working together to implement the package agreed at the UK-EU summit and are committed to a broad and constructive relationship with the EU. We will not give a running commentary on ongoing talks.”
A second fight over money has erupted after the UK rejected an EU demand to pay up to €6.7bn to benefit from a €140bn rearmament programme.
Brussels wants the UK’s powerful defence industry to participate in the Security Action for Europe, or Safe, programme that would help European countries to jointly procure new weapons.
But France has corralled the other members into charging a high entry fee. Two diplomats told the Financial Times that the price could drop a little to get a deal.
The UK faces a deadline to join by November 30 or miss out on submitting project bids.
“Negotiations between the EU and the UK are always extremely difficult,” said a senior EU diplomat. “I think we’ll get there. I think there is a willingness on both sides to find solutions, but it’s hard work.”