Theresa May’s European mission impossible

Theresa May, speaking at the Girl Summit

BERLIN

To the German political establishment the idea of any country leaving the EU is unthinkable. Berlin’s first response was to hope Brexit was a bad dream, according to Fabian Zuleeg, the German chief executive of the Brussels-based European Policy Centre. “What Germany wanted most was a reversal of the whole thing: that we could have some form of exit from Brexit.”

Merkel is now having to wake up to reality. She wants to keep the strongest possible trade relationship with the UK, preferably with it inside the single market. The UK is the third-biggest destination for German exports, taking 7.5%, behind France (9.5%) and the US (14.3%). Exports to the UK account for 3.5% of German GDP. But the key question for Berlin now is how to keep the UK close without offering it such a favourable deal that others might head for the exit door.

Brexit, as viewed in Berlin, will be deeply painful for the EU, but must not be painless for the UK. “The danger, as Germany sees it, is of contagion. Berlin is very aware of that,” says Zuleeg. Berlin will do its utmost to help the UK. But if May plays hard ball and the UK is excluded from the single market, it will not be the end of the world. “There will be opportunities, too,” says a German diplomat. “Frankfurt could take a large part of the City of London’s financial services market, for a start.”

MADRID

Spain will be crucial in the Brexit process and has some strong cards to play. Gibraltar will be the biggest. Madrid will use it as a bargaining tool. “At first, after the Brexit vote, the Spanish government issued a calm response,” says journalist Enrique López of Tele Madrid, the public service broadcaster. “But you can be sure it will demand joint sovereignty over Gibraltar as a condition for any deal.” Spain also has strong leverage because it is host to 320,000 expatriate Britons. If they are to be allowed to stay, with property rights, the right to work and access to free health care, Madrid will want similar generosity for those Spaniards already in the UK, as well as those wanting to travel to work for its big companies in Britain, such as Santander bank, or study. The Spanish government will also watching Scotland as the SNP try to engineer independence while staying in the EU. A Spanish eurocrat in Brussels said: “We have our own separatist problems and we say to Catalans if you separate you will be out of the EU and at the back of the queue. We don’t want to see an independent Scotland go against that.”

WARSAW

Under its right-wing Law and Justice government, Poland has seen the UK as an ally against deeper political integration. Britain is also welcome because it is a net contributor to the EU budget, while Poland is a net recipient. Warsaw fears the budgetary balance could tip against Poland and other central and eastern European nations, which will be asked to pay more.

Agata Gostyńska-Jakubowska, a native Pole and research fellow at the Centre for European Reform in London, says Poland will want the UK to pay to remain a member of the EU trade club. “In return for access to the single market, the Polish government would probably expect Britain to keep paying into the EU budget, though perhaps at lower levels,” she says.

Poland will also fight any UK attempts to extricate itself from the free-movement rules while retaining access to the single market. More than 800,000 Poles currently live and work in the UK. Warsaw will insist on them having a right to stay, and on others following, in return for single market access. Ryszard Petru, an economist who founded the liberal Modern party in Poland, said: “You cannot get rid of something you don’t like (free movement) and at the same time keep the part you like (access to the single market). That is having your cake and eating it.”

THE HAGUE

The Netherlands has strong trading links with the UK and is keen to keep it is as a partner in the single market if at all possible. But there are other similarities that make it wary of doing too much to help the British. The Netherlands has its own anti-EU political movement headed by Geert Wilders, leader of the Party for Freedom. The last thing the pro-EU parties want is to allow Wilders to say that exiting could be pain-free. Hans van Baalen, a Dutch MEP, says “there are a lot of friends of the UK here” and a lot of willingness to help.

The Dutch fear, says Rem Korteweg, a Dutch national working for the CER in London, is that an easy Brexit will encourage Wilders to preach a message that a country can leave the EU, keep the benefits and avoid the costs.

PARIS

President Hollande told Theresa May that France would not agree to the UK having access to the single market if it did not also accept freedom of movement. “It will be a choice facing the UK: remain in the single market and then assume the free movement that goes with it or have another status,” he said. Hollande believes the UK has long been an obstacle to further integration – and is not willing to see it cherry-pick as it leaves. “That would be the ultimate insult to the French and their view of Europe,” said a senior French official in Brussels, “after all the obstacles the UK has put in the way”. Hollande also faces a threat at next year’s presidential elections from Marine Le Pen’s Front National, which is in favour of leaving the EU. He has to drive the hardest bargain, to show French voters what “Frexit” would mean.

ROME

The Italians will see plenty of opportunities for their struggling economy if the UK leaves the single market. For one, it will be more difficult for companies such as the UK-based Japanese firm Nissan to sell cars into the European market at prices that compete with Italian carmakers such as Fiat. British MEP Richard Corbett, who advised the former president of the European Council, Herman van Rompuy, said the Italians will relish the prospect of getting a greater slice of the financial services market if companies based in the City lose their current “passporting rights” to trade in the EU market.

Powered by Guardian.co.ukThis article was written by Toby Helm, for The Observer on Sunday 24th July 2016 00.05 Europe/London

MAY’S MISSION IMPOSSIBLE

guardian.co.uk © Guardian News and Media Limited 2010