UK and EU agree to Brexit divorce bill, Irish hurdle remains

London - UK and the European Union negotiators reached an outline deal on the divorce bill that Britain will pay when it leaves the bloc, clearing a hurdle in talks and leaving the thorny issue of the Irish border as the last major obstacle.

Negotiators reached a preliminary agreement that still needs to go to national governments for approval, according to a person familiar with the situation. The UK government said, “intensive talks” are ongoing to “build on recent momentum.”

For months, talks have been all but deadlocked over separation issues, meaning negotiations haven’t even started on the crucial terms of trade that will apply when Britain leaves in just 16 months’ time.

Once the divorce bill has been settled, one more major hurdle - and a more complex one - remains before talks can move on. The UK has until Monday to come forward with a proposal for how a hard frontier can be avoided on the island of Ireland when it becomes home to the UK’s new land border with the EU.

Prime Minister Theresa May and European Commission President Jean-Claude Juncker are scheduled to meet Monday for a lunch where she’s expected to present the formal offer.

If EU governments accept, it would help clear the way for leaders at a summit in mid-December to declare that “sufficient progress” on separation terms has been made for talks to start on the future relationship between Britain and its biggest trading partner. Businesses are keen for talks to start on the transition period that Britain wants to put in place after the split.

The pound strengthened, trading at $1.3384 early on Wednesday and bond futures fell.

Avoiding a number

The divorce bill is a result of budget payments the UK signed up to while a EU member as well as other liabilities such as pensions that stretch into the future. 

The EU was asking for at least €60bn and EU officials have long said that any final number would be camouflaged to help the UK government sell the unpopular settlement to skeptical voters. The Financial Times reports that Britain accepted total liabilities of as much as €100bn, but aims to pay half of that and spread it over many years.

While settling the bill is unpopular with voters and rejected by some members of May’s own party, the Irish border issue is even more sensitive and will require political will and trust on all sides.

Ireland wants to avoid any kind of border on the island after Brexit and the European Commission is backing its stance. A policed frontier and customs controls will be needed somewhere, as the UK is leaving the single European market that allows the border now to be almost invisible. A return to checkpoints would stir memories of decades of violence and also harm the island’s economy.

Irish Foreign Minister Simon Coveney said UK and EU teams are discussing possible wording of a commitment on the border issue that would allow talks to move forward to trade.

Dublin has an effective veto at this stage of negotiations and could stop talks moving on from the divorce issues to trade at the December summit if it’s not satisfied with Britain’s proposal.

May has to come up with a solution that’s acceptable to Dublin but also to the Northern Irish DUP party whose votes she needs in Parliament to govern.

Ireland would like the north to keep the same rules as the Republic after Brexit, but that would inevitably mean setting up a border between Northern Ireland and mainland Britain. The DUP’s raison d’etre is keeping Northern Ireland integrated in the UK, and it rejects any kind of arrangement that would separate it from the mainland.

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