Juncker Makes Clear To May That Brexit Negotiations Will Not Be Easy

Theresa May might have just gotten her first real wake-up call on the real difficulties in separating from the European Union. Leaks of May's meeting with Jean-Claude Juncker, President of the European Commission, quoted Juncker as saying that May was not only in "a state of denial" and but also was in a "different galaxy" when it came to the Brexit negotiations.

May insists on trying to work out a new trade deal with Europe at the same time as the withdrawal terms are being negotiated. Juncker dismissed that idea out of hand and he was subsequently supported by Angela Merkel who said, "I must say this clearly here because I get the feeling that some people in Britain still have illusions — that would be wasted time...We can only do an agreement on the future relationship with Britain when all questions about its exit have been cleared up satisfactorily".

In addition, May also seems under the illusion that the UK will not have pay a "severance" fee to the EU for leaving simply because there is no mention of such a fee in the EU treaties. Juncker made it clear that there would be no subsequent trade deal without such a payment.

Admittedly, this is just the opening act in a long negotiation and positions on both sides will evolve over the next two years. But it should now be clear to May that the EU holds most of the cards and is not only united but in no mood to make things easy for Britain's exit. While she will not say so, May's best hope for an easier path for Brexit would be to have an anti-EU candidate win the election in Netherlands or France, perhaps breaking up the unity of the bloc. But Wilders was soundly defeated in the Dutch election and Le Pen is trailing badly in the current polls in the run up to this weekend's election.

The open question is whether May's "hard" Brexit stance is being influenced by other pro-Brexit ministers and members of the government who are pushing the idea that leaving the EU without a trade deal and falling back under WTO trading rules would be an acceptable outcome. Apparently there are number of ministers who are increasingly comfortable with this idea. But a Treasury report prepared before Brexit estimated that falling under WTO rules would cut UK GDP by between 5% and 10% over 15 years and blow a more than 40 billion pound hole in government finances.

In any case, Juncker has made it clear to May that it will be a difficult road ahead in order for the UK to leave the EU. This guarantees that there will be no quick solution and more years of uncertainty for the UK economy. In addition, the pressure from Scotland and Northern Ireland to leave the Union and become part of the EU will continue to build. May and the Conservatives are expected make gains in the upcoming election, mainly by making further inroads in formerly Labour areas. But while England may become more unified under Tory rule, in many ways it will also become more isolated. That does not actually make for a stronger negotiating position.