The chancellor, Philip Hammond, has attempted to pave the way for a smooth Brexit by assuring Germany that the UK has no desire to disrupt the EU during its divorce from Brussels.
Germany has stressed that a precondition for a successful split will be an understanding that Britain wants the European economy and the euro to thrive.
Hammond told a German business conference in Berlin on Wednesday: “The UK government is clear that a strong and successful EU, and a strong and successful euro, are very much in the UK’s interests … [these are] key objective[s] for us in the forthcoming negotiations. We will not do anything that would undermine the EU or risk its unravelling.”
But in private talks with the German finance minister, Wolfgang Schäuble, on Tuesday night, Hammond made it clear that if there were to be a choice between UK access to the single market and the country’s ability to control its borders, the latter would be the preference.
Germany’s chancellor, Angela Merkel, who will seek a fourth term in office in an election later this year, has insisted that Brexit talks must not lead to a weakening of the EU. This week, she defended her willingness to admit as many as 800,000 Syrian refugees to Germany at a cost of €20bn (£17bn), saying it was vital to protect the integrity of Europe.
German sources emphasised that she would put the unity of Europe first in Brexit talks, even if it meant a short-term financial cost for Germany.
On Wednesday, Malta’s prime minister, Joseph Muscat, said the UK’s deal must be worse than the terms of its membership, repeating a position he expressed in October.
“We can see no situation where whatever is negotiated ends up being better than the current situation that the United Kingdom has,” he told a press conference in Valletta. Malta took on the six-month presidency of the council of the EU on 1 January.
Muscat rejected suggestions that Britain may be able to play on divisions among the other 27 EU member states to extract concessions, saying they were unusually unified.
“I have rarely been at a discussion on any other subject where the 27 member states have basically the same position,” he said.
Berlin is thought to regard Hammond as one of the most sympathetic Conservative politicians, but the German government said it would not necessarily support his call for a lengthy transitional period until more was known about the UK’s fundamental negotiating objectives.
The German view is that Britain has not internally settled its negotiating position, but the more controls on free movement the UK seeks, the less access to the single market it will get.
In his remarks in Berlin, Hammond sought to disabuse any notion that the UK may pull back from Brexit.
“The referendum decision is irreversible,” he said. “People like me who believed that it was better to remain inside the EU, and to campaign for reform from within, have moved on. The debate is now about what kind of Brexit. I understand Germany will approach the challenge with the priority of protecting the integrity and unity of the EU. But this does not have to be a negative-sum game.”
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He pointed out that the UK and Germany combined had accounted for more than half the economic growth in the EU since 2010, and three-quarters of employment growth. “That is no coincidence,” he said. “It is due to the philosophies that guide the economic management of our two countries. We need to find a solution that recognises the constraints on both sides, but delivers an outcome that supports continued economic growth.”
Germany does not quite share Hammond’s perspective. It has noted that the UK deficit is still relatively high and some British reporting of the state of the European economy underplays the extent to which European growth, if not employment, has reached levels compatible with controlling inflation.
Berlin has also said it will not break from the unified support that the EU will show to the lead commission negotiators. It does not expect the German elections to impinge on Brexit negotiations.
The German government expects euro clearing activity to transfer to the eurozone, and some financial services to transfer from the City of London to New York. A simplified UK free trade agreement with the US is feasible, in Berlin’s view, but the true value of such a deal would need to be scrutinised.
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