BERLIN — Angela Merkel rebuffed a request by Theresa May for assurances that Britons living in the European Union and EU citizens living in the U.K. would keep their rights to residence, work and healthcare after Brexit.

The German chancellor's polite but firm "Nein" when the two leaders met in Berlin on November 18 dashed the British prime minister's hopes of a quick, informal deal to reassure expatriates on both sides of the Channel that they will not lose out when Britain leaves the EU, three people familiar with the matter said.

British officials had hoped to create some goodwill ahead of exit negotiations, expected to start next year once May triggers the EU's Article 50 divorce clause, by taking the issue of citizens already living in each other's countries off the table. The issue affects some 1.2 million Britons and their families resident in the other 27 EU countries, and as many as 3.3 million EU citizens resident in the U.K., including almost one million Poles.

A senior European Commission official had quietly encouraged the initiative in a private capacity, both to improve mutual understanding with London and to avoid any suggestion that European citizens were being taken hostages in the negotiations. If the EU were to say it was ready to safeguard the position of Britons living in Europe, it would gain the moral high ground in the talks, the argument went.

The pro-Brexit Daily Telegraph reported last week that British ministers had told business leaders all but a few EU countries were ready to accept the outline of a reciprocity deal possibly as early as at the next EU summit on December 15-16.

But Merkel had already put paid to the British bid by then, sticking to her mantra that there can be no pre-negotiations before Britain tenders its formal notice of intention to leave the Union, setting in motion a two-year countdown to its withdrawal.

May's push for such a declaration was a rare instance in which, behind closed doors with an EU peer, she has gone beyond bland generalities about her intentions, summed up in stock phrases such as "Brexit means Brexit" and wanting to secure the best deal for Britain that convey no sense of a clear strategy.

A German government spokesman declined to discuss specifics of the Merkel-May meeting, which took place while U.S. President Barack Obama was making a farewell visit to Germany, but said Berlin had made clear its full support for the EU's "no negotiations without notification" stance. A spokesperson for May's office said: "I don't think we'd get into details of private meetings," noting that the prime minister had made clear publicly what she wants to achieve in terms of "reciprocal rights."

Mutual mistrust

The tactical thinking behind the German rejection speaks volumes about the depth of mistrust between Berlin and London, and about Merkel's determination to put preserving the unity of the other 27 EU members ahead of the future relationship with a departing Britain.

Officials were concerned that London would try to salami-slice the negotiations, seeking to retain most of the advantages of EU membership while rejecting obligations such as allowing continued free movement of people, accepting the jurisdiction of the European Court of Justice, implementing all EU rules and continuing to pay into the EU budget.

Berlin insists those conditions for market access also apply in full to any interim or transitional arrangements after Britain leaves the bloc and before it has completed negotiating a new trade relationship.

In German eyes, any early, partial deal on citizens' rights might encourage May to play for time and delay triggering Article 50. It might also embolden those in the U.K. government and the Conservative Party who believe Brussels can be bounced into accepting continued British access to the single market without too many concessions.

May signaled to business leaders last week that she understood their need to avoid economic ties falling off a "cliff edge" when the two-year exit talks end in 2019, in a comment widely interpreted as indicating she was leaning toward seeking a phasing out of single market access after several years rather than a sudden stop. But German policymakers are not convinced it is politically feasible for her to accept the conditions, given her party conference commitments to control immigration and regain full legislative and judicial sovereignty when Britain leaves.

The Germans argue it makes more sense for the EU to keep the trade-off on British expatriates' rights up its sleeve as a sweetener during the most painful phase of the negotiations, likely to occur in 2018.

A prior deal on citizens might even have raised the temptation for London to walk away after two years without an exit agreement and renege on the bill for its residual liabilities to the Union, which the European Commission Brexit team has provisionally estimated at around €60 billion. Besides, committing to continue giving reciprocal free healthcare cover to more than 300,000 mostly elderly British citizens is a heavy burden for a convalescent economy like Spain's.

Waiting for the pain

The Germans argue it makes more sense for the EU to keep the trade-off on British expatriates' rights up its sleeve as a sweetener during the most painful phase of the negotiations, likely to occur in 2018. It was naïve for the British to expect the issue could be taken out of the overall context. By then, Britain could be gripped by a Brexit-induced slowdown, with foreign financial firms moving jobs from the City to the eurozone and inflation due to the pound's slide eating into living standards.

They are convinced that Britain will only negotiate realistically once the weakness of its hand has sunk in with the Conservative leadership and pro-Brexit voters, many of whom maintain that Europe needs the U.K. as much as the U.K. needs the EU, and seem to believe that Britain can continue to enjoy the key benefits of the single market without the constraints.

Seen through that prism, cutting a quick deal on citizens' rights might have perpetuated illusions in London that this is a negotiation among equals, rather than a lopsided situation in which Britain, having voted to leave the club, is dependent on the goodwill of all 27 former EU partners.

"It is the British who decided to leave the EU, not the EU that is leaving Britain. So they can't now say they want to keep just the bits they like and discard the rest," said a person familiar with Merkel's thinking.

Paul Taylor writes POLITICO's Europe At Large column. Charlie Cooper in London contributed additional reporting.