There is a similarity between the United Kingdom’s attitude towards Brexit and the European Union’s stance in terms of creating “an ever closer Union”: their respective public opinions as well as their politicians seem to achieve rapidly a consensus on what they do not want but are equally incapable of agreeing on what they seek. On the one hand the UK does not wish a “no deal” exit from the EU but is unable to outline the terms of an acceptable agreement while, on the other, continental citizens are in their great majority favorable to the EU (see latest barometer) while their representatives are unable to agree on the measures necessary for its survival: federalism, completing EMU, common defense, immigration, fiscal harmonization, etc.

It is urgent to remove both these stalematess and, as far as the EU is concerned, to recognize that the second transcends by far the first for the simple reason that the demise of the EU would render any Brexit agreement pointless!

When analyzing the balance of power between the negotiators, it is clear that the EU holds most trump cards. Nevertheless, a “no deal” exit would be harmful to both parties, despite the precautionary measures put in place; it follows that it is incumbent on the EU Authorities to limit the effects of Brexit, whatever its impact on the UK. That is why it is not admissible to stick doggedly to positions fixed once and for all, however rational they may be: for instance maintaining that the EU will only respond to proposals of the UK that command support of a Parliamentary majority or that it is not conceivable to concede in the negotiation, anything that is liable to establish a precedent.

As it is in the objective interests of the Union to conclude an agreement, it behooves its leaders to take an initiative: indeed, initiating the process will confer a huge advantage to the “pen holder” by incorporating in the document the fundamental interests of the EU rather than reacting to the opponent’s requests. “Voluntary” concessions are likely to encourage the UK to accept compromises that they are unable to put forward (because well below their expectations) and therefor achieve a compromise with the EU that keeps the appearances intact, giving the British the satisfaction of having obtained amendments of the initial draft in their favor.

Such an approach relies on the recognition that during its 45 years of membership, the UK has made important contributions to the EU in number of fields. To name but a few: the UK’s military capacity and excellence in intelligence gathering has given geopolitical credibility to the EU; similarly its extensive diplomatic network and its seat on the UN Security Council; the expertise of the City which has endowed the EU with a world class financial center; the sheer size of its internal market with its considerable deficit vis à vis the continent; the quality of its civil service whose members detached to various European institutions have brought a series of often irreplaceable competencies, etc. The loss of these benefits will weaken the Union, at least in the short term, even if the damage done will be far less than that inflicted on the UK.

Based on this analysis, one is forced to accept that the departure of the UK from the Union is not comparable to that of another Member: indeed either the departing country is a key Member (for instance a member of EMU) whose exit would risk the collapse of the € and of the EU in its aftermath or else, it would concern a weaker Member whose negotiating power in the withdrawal negotiations would be minimal.

As a result, the EU should abandon its dogmatic stance that it is impossible to negotiate a “bespoke deal” with the UK.

From a pragmatic point of view, I would suggest offering a deal inspired by the Norwegian model with a series of specific adaptations:

1. Within its participation in a “customs union”, the UK would be offered participation in trade negotiations with third party countries or organizations. The UK would also be invited to attend meetings of the Council debating the negotiating mandate (or its modifications), conferred on the Commission, retaining the same voting power that it currently enjoys. It would not have a veto power which would give it more rights than those of Members, but would retain a real influence in the debate.

1. Services, and in particular financial services, would be included in the Custom’s Union treaty, restoring passporting privileges to the UK.
2. An agreement concerning the supervision of City firms whose activities are deemed systemic for the Eurozone would give EMU authorities the necessary rights to exercise their “sovereignty” (clearing…).
3. The UK would be granted the right to participate in the activities of all relevant EU Agencies assuming both rights and obligations but would not be entitled to house their operations. Participation in EU programs for research education, etc., would also be allowed.
4. The UK should be integrated as appropriate, into present and future regulations governing the protection of the external borders of the Union so as to avoid restoring a hard border between the two Irelands.
As in the Norwegian model, the UK would make an appropriate contribution to the EU budget.

In exchange for these concessions, current arrangements in terms of cooperation in matters of defense, foreign affairs and the judiciary would be maintained or reinforced. Concluding before the end of the transition period an agreement based on the “off the shelf” Norwegian format is probably achievable while negotiating an ad hoc Free Trade Agreement would appear out of reach.

Furthermore, it might prove appropriate in an ulterior stage to negotiate a full blown treaty with the UK. One of its aims might be to suggest that France and the UK share one of their two seats on the Security Council, attributing the second to the EU under the responsibility of the Council and the High Representative for Foreign Affairs. This seemingly outlandish proposal makes eminent sense because, having left the EU, the UK will come under intense pressure to abandon its privileged status and this will undoubtedly have a knock on effect on France’s position.

If the current stalemate persists, a “no deal” Brexit will become the default outcome and will bring serious hardship to both parties. It is therefore incumbent on the EU Authorities to take the necessary steps and make proposals that can get both the EU and the UK out of the rut towards which they are heading together.

Brussels, 20th January 2019

Paul N. Goldschmidt