U.K. Pushes Citizens' Rights to Advance Brexit Talks -- 5th Update

European leaders rebuffed British Prime Minister Theresa May's pitch to revive stalled Brexit talks on Thursday, but German Chancellor Angela Merkel said she was confident negotiations would advance by December.

The Brexit talks are running in circles: Officials from the other 27 European countries say they need more specifics on which past spending pledges the U.K. will commit to before talks can progress to Britain's future trade relationship with the EU. London, however, doesn't want to yield on money until it has assurances on the shape of Britain's future trading relationship with the EU.

Over dinner with the other EU leaders, Mrs. May didn't budge on the issue of money. Dutch Prime Minister Mark Rutte said "there were no new proposals."

Slow progress at what was supposed to be a key moment underlines how Mrs. May's political weakness is complicating talks, sowing uncertainty for businesses in the U.K. With less than a year-and-a-half until the U.K. is expected to leave the bloc, any failure to reach a deal is likely to cause enormous disruptions for businesses that rely on unrestricted trade between the U.K. and the EU. Such a scenario could pose big risks to the U.K. and European economies.

Delays in negotiations could lead to further headaches for businesses operating in the U.K. Goldman Sachs Group Chief Executive Lloyd Blankfein tweeted Thursday that he will "be spending a lot more time" in Frankfurt after enjoying "great meetings, great weather" there. He added the hashtag #Brexit.

Goldman Sachs and other international banks in London are preparing contingency plans for Brexit and lenders are looking at building up teams in Frankfurt, among other European cities.

Ms. Merkel struck an upbeat note, saying she was confident that divorce discussions would make enough progress by December for negotiations to move to a second stage where the two sides discuss the future trade relationship. But she warned that phase would be even more complex.

"The good spirit, the good atmosphere of the negotiations will be maintained," Ms. Merkel said. She said that talks taking longer than anticipated "doesn't mean we won't continue to work hard to reach the second stage, which is undeniably going to be more complicated than the first stage."

However, speaking on her way into the summit on Thursday afternoon, Ms. Merkel struck an upbeat note, saying she believed that divorce discussions would make enough progress by December for negotiations to move to a second stage where the two sides discuss the future trade relationship.

"I'm confident that we'll be able to advance to phase two in December," Ms. Merkel said.

Four months into talks, negotiations have been limited to terms of Britain's departure from the EU: How much money it owes the bloc, the treatment of three million EU citizens living in the U.K and the one million Britons living in the EU, and how Brexit will affect the border between Northern Ireland, which is part of the U.K., and Ireland.

Mrs. May had hoped to move beyond divorce issues to start negotiating the future trade relationship this month.

On Thursday, she told the leaders of the other 27 European Union countries that she recognized discussions had been difficult over the summer but believed her commitment in September to honor the U.K.'s financial obligations should have been enough to break the impasse. She appealed to them to help craft a deal that could win backing at home.

"There is increasingly a sense that we must work together to get to an outcome we can stand behind and defend to our people," she told the leaders.

Once Mrs. May leaves the summit Friday, the other EU leaders are set to agree that they will begin preliminary discussions on the future trade relationship among themselves so the bloc is prepared for negotiations with Britain by year-end.

Mrs. May sought to inject new energy into negotiations by saying Thursday that she wants to make it as easy as possible for EU citizens in Britain to stay after Brexit. She said Brussels and London are within "touching distance" of reaching an agreement on the issue.

But EU diplomats said a number of issues remained outstanding, including what role the European Court of Justice would play in protecting the rights of EU citizens living in the U.K. Irish leader Leo Varadkar also said Britain needs to get more specific on its ideas for working out smooth border arrangements between Northern Ireland and Ireland after Brexit.

After poor election results in June, in which Mrs. May's Conservatives lost their majority in Parliament, Mrs. May has faced additional pressure from euroskeptics within her cabinet and party who want her to take a more hard-line approach.

"We understand the domestic difficulties, but that's not our problem," said one EU official.

Finnish Prime Minister Juha Sipila said Thursday that EU leaders were frustrated by the slow progress in negotiations. When asked if officials were preparing for the possibility of not reaching a deal, he said: "Not yet."

--Emre Peker contributed to this article.

Write to Jenny Gross at jenny.gross@wsj.com, Valentina Pop at valentina.pop@wsj.com and Laurence Norman at laurence.norman@wsj.com

(END) Dow Jones Newswires

October 19, 2017 19:57 ET (23:57 GMT)