May Calls for Two-Year Brexit Transition Period -- Update

By Jason Douglas in Florence, Italy, Valentina Pop in Brussels and Stephen Fidler in London Features Dow Jones Newswires

British Prime Minister Theresa May said the U.K. would honor its financial commitments to the European Union's current budget and seek to keep trading with the bloc on current terms for a two-year period after its planned exit in 2019, in a speech aimed at revitalizing stalled divorce talks with the EU.

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In a grand hall overlooking Florence's famed Church of Santa Maria Novella, Mrs. May appealed for creativity and ambition from negotiators working to untangle the U.K.'s four-decade ties to the EU and craft a new partnership built on economic and security cooperation.

Britain's exit from the EU, scheduled for March 2019, "does not mean we are turning our back on Europe, or worse that we do not wish the EU to succeed," Mrs. May said, in an address that comes ahead of the resumption of exit talks between London and Brussels on Monday.

Those talks have made only limited progress since they began in the summer and remain focused on three key issues: EU citizens' rights after Brexit, managing the Irish border with Britain, and reaching a deal on the U.K.'s financial commitments to the EU that haven't yet been paid.

Mrs. May touched on each of those issues, saying London doesn't want to see the return of border between Ireland and Northern Ireland and that British courts will uphold EU citizens' rights after Brexit.

She also pledged that the U.K. would honor financial commitments to the bloc made during its membership.

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"I do not want our partners to fear that they will need to pay more or receive less over the remainder of the current budget plan as a result of our decision to leave," Mrs. May said. The current EU budget plan runs from 2014 to 2020.

Her official spokesman later told reporters this pledge covers budgetary commitments through 2020 -- but that other potential liabilities, such as contributions to paying the pensions of EU staff, remain subject to negotiation.

A senior EU official said that if the budget offer were to be put on paper, it might advance talks next week. "But it's not enough for sufficient progress, that's still a long way to go," the official said.

Mrs. May also suggested a two-year "implementation period" would be needed after the U.K.'s planned withdrawal in 2019 for both sides to prepare for new trading relations. She said that during this time, "access to one another's markets should continue on current terms," though she added the U.K. wants to be free during the transition to seek new trade deals.

Mrs. May's speech was also aimed at presenting the EU with a coherent British position on Brexit after months of public disagreements between senior government officials. Present at the speech were Treasury chief Philip Hammond and Foreign Secretary Boris Johnson, who fought on opposite sides of the campaign to pull the U.K. out of the EU and have recently put forward differing views on Brexit strategy.

But she didn't provide many new clues about her long-term vision. She repeated that the U.K. would leave the EU's single market and its customs union. But she said neither an arrangement such as membership of the European Economic Association, like Norway, or a more remote Canada-type free trade arrangement would suit the U.K.

A Canada-style agreement would "represent such a restriction on our mutual market access that it would benefit neither of our economies," she said.

One of the EU officials described her view of the future relationship as "have our cake and eat it."

German EU lawmaker Manfred Weber, who chairs the largest group in the European Parliament, tweeted that "in substance, PM May is bringing no more clarity to London's positions. I am even more concerned now." He reiterated EU's position that citizens living in the U.K. "need legal certainty" and warned London that "time is running faster than the government believes."

Michel Barnier, the EU's chief Brexit negotiator, noted the "constructive spirit" of Mrs. May's speech. But he also said Mrs. May hadn't clarified proposals on Ireland.

Write to Jason Douglas at jason.douglas@wsj.com, Valentina Pop at valentina.pop@wsj.com and Stephen Fidler at stephen.fidler@wsj.com

(END) Dow Jones Newswires

September 22, 2017 12:36 ET (16:36 GMT)