Theresa May under pressure from opposition Labour and EU as Brexit talks resume

Britain's Prime Minister Theresa May is under pressure from opposition Labour Party and EU as Brexit talks resume on Aug 28, 2017. PHOTO: AFP

LONDON (BLOOMBERG) - Brexit talks resume on Monday (Aug 28) with Prime Minister Theresa May under pressure on two fronts: European negotiators are pushing her to reveal her hand, while the opposition Labour Party has made a bid to lure her critics to their side.

Labour's announcement on Sunday that it wants Britain to stay in the European Union's single market and customs union for up to four years after it leaves the bloc - a proposal that will delight business - means it's now worthwhile for Conservative lawmakers who want to maintain ties with Europe to rebel and seek cross-party deals.

May, who wants to leave the single market in 2019, lacks a parliamentary majority.

The move comes just as May's deeply divided cabinet had started to reach a consensus about what Brexit - and the first years after the split - should look like. As the next round of divorce talks gets underway on Monday, shifting domestic politics will once again hang over the negotiations.

"There is now a real chance that the U.K. could stay in a customs union forever," Charles Grant, director of the Centre for European Reform, said on Twitter. "But a few Tory rebels are needed."

While it's not clear whether European officials would welcome the Labour proposal, the party will soon have the chance to test support at home for its idea. Legislation that seeks to prepare Britain for leaving the EU returns next month to Parliament, and lawmakers are expected to battle over amendments.

"Labour has created an opportunity for Britain to avoid inflicting on itself the economic costs inherent in the government's chosen path," former Labour Business Secretary Peter Mandelson, usually a critic of his party's current leadership, wrote in the Financial Times.

"But achieving this depends on what others in Parliament do, including those on the Tory benches who know the risks of turning a crisis into an economic calamity. Labour has done Parliament and the public a big favor in starting what will be a complicated debate," he said.

Brexit Reversal?

May's government wants to leave the single market and customs union in March 2019, but then have a transition period of up to three years to allow both sides to adapt.

Labour argues there isn't time to negotiate a transition deal as well as a final Brexit deal.

Many who oppose Brexit like the idea because it would also give voters more time to change their minds as the consequences of the split become clearer.

Pro-Brexit Conservatives have tended to oppose a long transition not only because it could be a first step towards reversing the referendum result, it would also mean several more years with Britain open to EU migration and paying into the common budget.

The Tories would face fighting the next election - due by 2022 - open to the criticism that Britain hadn't really left the EU at all.

"May would have a huge dilemma if a majority of MPs were to back Labour's policy," said Mujtaba Rahman, an analyst at Eurasia Group. "If she accepted a Commons vote in favour of it, she would face a backlash from hardline Brexiteer Tory MPs, who might well try to oust her by forcing a Tory leadership contest."

The next round of talks will begin about 5 pm Brussels time on Monday, as the EU tells Britain it needs more details of its position. EU officials have signalled they expect little movement, despite a series of British position papers published during the last two weeks.

Still, Brexit Secretary David Davis will ask his EU counterpart Michel Barnier to use "flexibility and imagination" to allow talks to move forward.

"The week ahead is about driving forward the technical discussions across all the issues," Davis will say on Monday, according to his office. "We want to lock in the points where we agree, unpick the areas where we disagree, and make further progress on a range of issues."

His goal is to make enough progress by October, when EU leaders meet for a summit, to get approval for the talks to move on to trade - something EU officials currently say privately is unlikely.

The European Commission insists that some kind of progress the divorce bill, the issue of EU citizens' rights and a workable solution for the Northern Irish border has to be made before discussions move on to trade.

A senior EU official on Friday downplayed the chance of any major advances this week in key areas such as the exit bill. German Chancellor Angela Merkel reminded Britain on Saturday that it had to settle its dues.

The Telegraph newspaper, citing British officials, said there were signs of splits between EU countries, with France potentially willing to back the negotiations moving to trade in October. France proposed that Britain continue paying into the EU budget during the transition period, the paper said.

Davis and Barnier will meet to formally open talks, and officials will then hold working groups to discuss technical details behind each side's proposals. Davis and Barnier will then close the round of negotiations on Thursday.

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