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Trading  | October 20, 2017

?The “British press” is wrong (although it wasn’t just the British press): Brexit negotiations are going well and the divorce settlement should be finalised by December. Really?

This is what the EU’s “real” boss had to say on the state of Brexit negotiations following the first day of the EU summit. “My position wasn’t changed by Theresa’s May’s presentation, because I’ve kept in continuous contact with her by phone. What I heard today was a confirmation of the fact that, in contrast to what you hear in the British press, the process is moving forward step-by-step…At this point, it’s not yet sufficient to begin the second phase, but it’s encouraging enough to continue working in order to reach the beginning of the second phase in December.”

According to Reuters, Merkel dismissed suggestions that the talks should be broken off as “absurd”, commenting “I have absolutely no doubts that if we are all focused … that we can get a good result. From my side there are no indications at all that we won’t succeed,’ she said.”

From Bloomberg, “Now both sides need to move,’ Merkel told reporters after hearing May speak at dinner, in a shift of rhetoric for the EU side, which has previously insisted that it’s up to the U.K. alone to make the next move.EU leaders are aware of the fragility of May’s position — she’s trying to hold onto her job after a failed election and keep a squabbling Cabinet together. That’s why they offered her words of encouragement on Thursday, according to an EU official speaking on condition of anonymity. The conclusions of the summit also point to possible progress before year-end, while demanding more concrete steps from the U.K.”

Three days ago, Germany and France were reportedly taking a tougher line on talks and members of Theresa May’s team were briefing journalists that negotiations could collapse after the summit if no ground was given by the EU (see “Theresa May’s Government Fears Imminent Collapse Of Brexit Negotiations”). However, UK Brexit Minister, David Davis, is slightly less confident and is still planning for a potential breakdown according to the lead story in today’s Times.

As we’ve said, “it boils down to money” and the EU is reluctant to move forward until both sides can agree on a number. This is where we suspect that some progress was made. If so, the more upbeat tone from Merkel makes sense and, according to an un-named UK official, this is what happened. The U.K. prime minister signalled she’s willing to offer more on the divorce bill, according to a U.K. official. May urged leaders at a European summit to help her find a deal she could sell to sceptics at home, and her counterparts responded with words of encouragement — though no concrete concessions.”

In terms of numbers, May’s initial offer made in Florence on 22 September 2017 was about 20 billion euros along with further unspecified commitments that might amount to another 20 billion euros. The EU is thought to be demanding in the region of 60 billion euros.  

Before the dinner began, some thought had gone into the choreography, as TV footage was dominated by May’s friendly chatting with both Merkel and Macron. The photo below shows what might have been the critical moment in the talks.

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