Like Greece, Brexit negotiations leave the UK a rule taker from the EU

Since the beginning of the referendum campaign on EU membership, a section of British politics has been immersed in a grand illusion: that the UK would be in a position to leave the EU without making painful concessions.

Some hard Brexiteers have even fantasised that they can blackmail Europe into accepting their terms. This type of illusionary thinking, which persists despite being rebutted repeatedly by what has actually happened, is not surprising. We learned a lot about it during the Greek economic crisis and the negotiations between Greece and its European counterparts.

At first, there appears to be little in the way of comparison between Greece and Britain. The UK is a big economy and a hegemonic European power with superior negotiating capabilities and a rich record of securing numerous opt outs from the process of European integration. Greece by contrast, is a regional player and a small eurozone economy on the verge of going bankrupt. In addition, the UK has decided to leave the EU, while Greece has been struggling to stay a member of the eurozone.

But despite these fundamental differences, the UK has ended up in a similar negotiating position to Greece in 2015: a deal where it must concede the most, or a no deal where it is the biggest loser. The UK, like Greece, is now a rule taker, not a rule maker. And the UK’s position is more similar to Greece’s than one might imagine.

The UK and Greece are the weakest players in their negotiations with the EU, though for different reasons. Greece because of its bankrupt economy and the need for liquidity. The UK because it decided to leave the EU. While a member of the union, the UK enjoyed the strong bargaining power of being within its institutions. Once it began the withdrawal process, the bargaining power became asymmetrical, working in the EU’s favour.

A hard bargain

Both Greece and the UK adopted hard negotiating strategies against the EU. In both countries, this was mainly due to domestic constraints, particularly negative public opinion and a hostile media, significant opposition from both within and outside the ruling party, and the dynamics of coalition politics.

After years of wrangling with the EU over the terms of its bailout programmes, in February 2015, the newly-elected Greek prime minister Alexis Tsipras, declared an immediate end to austerity and tough negotiations to renegotiate the “onerous” terms of Greece’s bailout. In the months that followed, Greek officials went to China and Russia in search of financial assistance. In June, the government broke off negotiations with the EU and then held a referendum on the terms of the programme, which voters rejected.

The problem with such uncompromising posturing, however, is the tit-for-tat dynamic that ensues. Research on the Greek crisis showed that hard bargaining from the weaker side led to harder bargaining from the stronger side. Eventually, Tsipras was forced to accept a third bailout programme with even harsher terms in August 2015.

The UK has also maintained a hard negotiating position on Brexit. Once Theresa May, the British prime minister, triggered the article 50 process that started the UK’s withdrawal from the EU in March 2017, she set a series of hard “red lines”, especially in respect to ending the free movement of people. This culminated in May declaring in mid-2018 that a hard Brexit “wouldn’t be the end of the world” and warned European leaders not to treat the UK unfairly. Despite the diplomatic niceties, May was told first by the EU’s chief Brexit negotiator, Michel Barnier, that she needed to soften her red lines to reach agreement. Once agreement was reached the European Council told her there would be no renegotiation.

High stakes

In both Greece and the UK, hard bargaining raised the so-called “reservation price”. This is the minimum the governments of both countries are willing to accept in Brussels before walking out of the negotiations in fear of losing face at home. The EU also has a reservation price: the preservation of the existing rules and the integrity of the single market.

As happened in Greece, the UK government and many prominent Brexiteers think that by raising the stakes of the negotiation they are raising the cost of disruption for the EU in case of a no deal. The problem with this logic is that the alternative of a no deal in both Greece and the UK’s case is less disruptive for the EU than for the negotiating counterpart. It means that any deal will be weighted towards the EU to reflect this.

The UK is faced with a choice between the deal on the table and a no deal, which is the worst possible negotiating outcome.

The rational expectation is that it would opt for the lesser of two evils and accept the deal on offer, like Greece did when it accepted the bailout programmes. Unlike Greece, though, the UK seems unable at this stage to reach a similar level of pragmatism about the extremely disruptive outcomes of a no deal. The problem is in parliament, where politics is trapped between two illusions: while some politicians believe the country they serve is a great world power that can afford to crash out of the EU, others believe they can renegotiate a better deal.

The deadlock is here to stay, unless more drastic measures are taken. As the Greek case showed, domestic opposition to the outcome of negotiations with the EU can be overcome by resorting to the people. The deadlock from the July 2015 referendum in Greece was finally overcome by a general election in September 2015, which gave a clear mandate to Tspiras and his Syriza coalition to press ahead with the bailout deal. The hard opponents to the third bailout programme walked out of the party and subsequently were annihilated electorally.

This is exactly what hard Brexiteers fear. They do not want to risk a vote that could send them to obscurity given that public opinion in the UK favours a compromise to a no deal, if does not outwardly favour to remain in the EU. It is high time that the prime minister took a calculated political risk. British democracy is deadlocked and only a vote – either a general election or a referendum – can take the country out of the impasse.