Frankfurt

‘This is not about punishing Great Britain,’ declared Sigmar Gabriel, Germany’s interim foreign secretary, on his recent visit to London. I fell about laughing, because this is precisely what’s going on. It is as obvious to us Germans as it is to the Brits: the EU cannot tolerate the thought of a successful United Kingdom outside the Brussels sphere of influence because, if that were allowed to happen, others might dare to start thinking about leaving the club too.

Everything we hear from Brussels flows from this. The EU presents itself as a champion of free trade, especially when its leaders are attacking Donald Trump, yet it does all it can to slow down, complicate and generally frustrate a free trade deal with the UK, the world’s fifth-largest economy. It talks as if keeping open borders with Britain is a great gift from the EU, rather than, of course, an arrangement of mutual benefit to consumers of all countries. Would the EU dare to enter trade negotiations in Washington, Tokyo or Beijing and demand payments for allowing access to EU markets? Why does it take this approach with Britain?

In Britain, it might seem that the EU embodies the mood of Europe — miffed at Brexit and determined to take a tough line. Don’t be fooled. The EU is unpopular in so much of Europe precisely because it does not speak for the people it purports to represent. The idea of a €100 billion ‘leaving bill’ seems as extortionate in Berlin as it does in Birmingham: why would Britain want to carry on making huge financial transfers to Brussels when these were one of the main reasons for wanting to leave? Quite apart from anything else, a British government which agreed to such an outrageous bill would surely be neglecting its fiduciary duties to its people.

‘The four freedoms of the common market are indivisible,’ the EU grandly declares — but this is self-evident nonsense. Do we seriously believe there can be no free trade in goods without also accepting the right of migrants, of varying levels of skills, to settle in one’s country and gain access to welfare? No free trade deal that the EU has negotiated with other countries makes any such demand — and for good reason: no country would entertain it. The assertion is preposterous, as the British voters calmly declared on 23 June last year.

Michel Barnier and his team try so hard to present the argument that the UK needs the EU more than vice versa. It is an arrogance which flies in the face of the evidence: that the rest of the EU runs a €120 billion-a-year trade surplus with Britain and that three times as many EU workers are resident in Britain than British workers are resident in the EU. Why would the EU want to put this at risk? Because being seen to punish Britain is a bigger priority than maintaining the health of your export industries.

Then comes the warning that making a Brexit deal with Britain will be difficult because it will involve the renegotiation of 30,000 regulations — working out at an impossible rate of 40 per day for the two-year duration of the Brexit talks. Barnier’s team seems not to appreciate that in trying to put across this point it is making an involuntary confession that the EU has flooded the continent with so many regulations, laws, executive orders and decrees that it has become impossible to comply with the law. As Winston Churchill said: ‘If you have 10,000 regulations, you destroy all respect for the law.’ Jean-Claude Juncker’s minions have exceeded this total by a factor of three.

This is one of the reasons that the EU has made itself so unpopular and why some want to leave. But the EU in its arrogance can’t see it. There is an efficient shortcut to the Brexit negotiations: do not negotiate every single paragraph of each and every regulation, but abolish them in large numbers, on both sides of the Channel.

The EU’s negotiators are approaching the Brexit talks like a game of chicken. As far as they are concerned, the one who first blinks will lose. The enemies in this game are not just the insubordinate secessionist rebels in London, but all countries and political forces toying with the thought of following their example — or even just those who dare to remind the EU of the principle of subsidiarity: the idea that nation states are, where possible, supposed to govern themselves.

Theresa May insists that she wants friendship, cooperation and alignment with Europe to the advantage of both sides. She comes across as genuine when she says, ‘We want to continue being Europe’s best friends.’ And this, of course, is dangerous: if European nations can be friends and trade freely without the need to accept edicts from Brussels, then what’s the power of Brussels? Why put up with Juncker, Barnier and friends? When Boris Johnson warned the EU against seeking to administer ‘punishment beatings’ to Britain as if in ‘some world war two movie’ the EU reacted with fury — because there was so much truth in the Foreign Secretary’s analysis.

The EU is taking a risk, here. It is treating the Brexit talks as an opportunity to show other EU member states what happens to those who dare to leave. Might it frighten countries into staying, or heighten concerns about what it is becoming? The negotiators on the EU side of the table interpret the Prime Minister’s friendliness as weakness and start to express ever more impossible demands while using every opportunity to speak of ‘Britain’s historic mistake’.

To a great many of Britain’s friends, looking in from abroad, Brexit doesn’t look like a mistake. Instead, Britain looks like a country that has dared not to accept the unacceptable, and in doing so it poses a question to its European neighbours. What do we want to be? A prison of peoples keeping its inmates inside by threat of sanctions? Or a community of free peoples binding its members through an attractive proposition and renewing this promise every day with democratic governance, transparency, performance and fairness? On the continent, we behave as if option two is not possible. But if we continue to act like this, then there might be no one left in the club.

Might the EU frighten countries into staying - or heighten concerns about what it is becoming?

Dr Markus Krall is a managing director in Goetzpartners’ Frankfurt office and heads the Financial Institutions Industry Group.