EU fears Brexit delay, uncertainty after shock UK vote

European Union leaders fear Prime Minister Theresa May's shock loss of her majority in the snap British election will delay Brexit talks due to start this month and raise the risk of negotiations failing.

Guenther Oettinger, the German member of the European Commission, said it was unclear if negotiations could be launched on Monday, June 19, as planned. The talks, which the EU wants to ensure a legally smooth British departure in March 2019, would be more uncertain without a strong negotiatng partner, he said.

"We need a government that can act," Oettinger told German broadcaster Deutschlandfunk. "With a weak negotiating partner, there's the danger than the negotiations will turn out badly for both sides...I expect more more uncertainty now."

His French colleague Pierre Moscovici said the result would affect the negotiations but declined to be drawn on whether the EU executive hoped Britain might ask to stay. He told Europe 1 radio that Brexit was supported by most of the last parliament following the referendum a year ago and that the timetable for leaving in 2019 was not "optional" but fixed in treaty law.

Former Finnish premier Alexander Stubb was a rare senior commentator. He tweeted: "Looks like we might need a time-out in the Brexit negotiations. Time for everyone to regroup."

May, who had campaigned against Brexit last year but took over the Conservative party after David Cameron lost last June's Brexit referendum, delivered her terms for withdrawal in March.

These include a clean break from the EU's single market and customs union. May then called a snap election hoping for a bigger majority to strengthen her hand in negotiations.

That was also the broadly desired outcome in Brussels, where leaders believed that a stronger May would be better able to cut compromise deals with the EU and resist pressure from hardline pro-Brexit factions in her party which have called for Britain to reject EU terms and, possibly, walk out without a deal.

Elmar Brok, a prominent German conservative member of the EU parliament, said Europeans would be disappointed May had failed to gain the majority that could have helped her override her party hardliners: "Now no prime minister will have that room for maneuver," he said. "Which is what makes things so difficult."

European leaders have largely given up considering the possibility that Britain might change its mind and ask to stay. Most now appear to prefer that the bloc's second-biggest economy leave smoothly and quickly. To halt the Brexit process now would require the consent of the other member states.

FEAR OF COLLAPSE

The other 27 governments are particularly concerned that a breakdown in negotiations could lead to Britain ceasing to be a member on March 30, 2019, as laid out in Article 50 of the EU treaty, without negotiating the kind of divorce terms that would avoid a chaotic legal limbo for people and businesses. That would also make it improbable that Britain could secure the rapid free trade agreement it wants with the EU after it leaves.

In a note to clients, UBS wrote that the relative strength of hardline pro-Brexit groups in a weak Conservative government could make a breakdown in talks more likely and make it harder to reach a trade deal: "A tighter political balance could make it easier for Eurosceptics ... to prevent the government from offering the compromises needed to secure a trade deal."

Talk in Britain that a different ruling coalition could seek a "softer" Brexit than May has proposed, possibly seeking to remain in the single market, is also problematic for the EU.

While the 27 would quite possibly be willing to extend to Britain the same kind of access to EU markets that they offer to Norway or Switzerland, they have made clear that that would mean Britain continuing to pay into the EU budget and obey EU rules, including on free migration across the bloc, while no longer having any say in how the Union's policies are set.

EU leaders question how any British government could persuade voters to accept such an outcome and so would be wary of starting down the path of negotiating it for fear of ending up without a deal that both sides could ratify in 2019.

Siegfried Muresan, spokesman for the European center-right party whose dominant leader is German Chancellor Angela Merkel, was scathing, saying on Twitter that May had followed Cameron in risking the "future of the country for personal political gain."

She had, he said, "played with fire" in binding Britain to the two-year deadline for Brexit talks and had now "got burned."

(Editing by Simon Cameron-Moore and Angus MacSwan)