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Brexit talks finally underway, with pressure on for a 'soft' option

19 June 2017 9:01 AM
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Almost a year since Britons voted to leave the European Union, Brexit talks finally opened on Monday amid confusion over just what the UK government wants from the divorce.

What UK Brexit Secretary David Davis describes as the "most complicated negotiation of all time" began at 11am (7pm AEST) in Brussels with Prime Minister Theresa May's government already on the back foot. An attempt to strengthen her hand by calling an election backfired and she's run into further domestic strife since, while the 27 other EU members started out with more leverage anyway.

May has yet to change tack formally and doing so would risk infuriating eurosceptics in her Tory party who might still prove strong enough to scupper a deal or to topple her as leader if they believe she's backsliding.

"The election result increased the probability of extreme outcomes," said Phillip Souta, head of UK public policy at Clifford Chance. "If there is going to be a deal, it makes it more likely to be softer than before the election, but on the other hand the probability of no deal at all has increased."

In Brussels, Davis and the EU's chief negotiator, Michel Barnier, met with the UK keen to win back sovereignty without hurting its economy, while the EU's aim is to maintain regional stability and stop inadvertently rewarding Britain's decision to leave for fear of encouraging others to break away. Barnier plans to hold face-to-face meetings every four weeks.

How the negotiations progress will be monitored closely by investors and business leaders. Banks including Goldman Sachs Group say they will shift jobs from London to the EU if they fear their access to the bloc is jeopardised, while manufacturers in the UK such as carmaker Nissan Motor warn against trade being hurt. The pound has fallen about 14 per cent against the dollar since the June 23 referendum, pushing up inflation even as the economy shows signs of slowing.

Davis struck a conciliatory tone in a statement released overnight, emphasising Britain and the EU's "shared European values".


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