BRUSSELS, May 2 (Reuters) - Britain is in uproar over a German newspaper account of last week's Brexit talks between Prime Minister Theresa May and EU chief executive Jean-Claude Juncker. Here are reading notes for the saga:
Headlined "The Disastrous Brexit Dinner", Monday's article in the Frankfurter Allgemeine quotes an unidentified source or sources saying European Commission President Jean-Claude Juncker was "shocked" at May's position at a Downing Street dinner last Wednesday. He fears the two sides are so far apart that the chances are even that Britain will leave the EU in March 2019 with no agreement - creating a chaotic legal limbo across Europe.
While confirming nothing, Juncker aides do not deny that he said: "I'm leaving Downing Street 10 times more sceptical than I was before." The account, by a German correspondent respected for his access to Juncker's entourage, includes detail from a pre-dinner meeting involving only four people: May, Juncker and their advisers Oliver Robbins and German lawyer Martin Selmayr. Few in Brussels doubt the FAZ's source was close to the talks and EU officials have confirmed many of the details to Reuters.
May dismissed the story as "Brussels gossip". In public, Juncker says the talks were "constructive", "excellent" and "friendly". But he also said British officials "underestimate" the complexity of the issues that must be resolved. EU officials say the concerns expressed in the article reflect EU thinking.
A sour mood is certainly a worry. EU officials say London started it by vetoing a budget measure last week due to "purdah" - a hold on decisions before a June 8 election. Selmayr tweeted there would "FULL PURDAH RECIPROCITY", scrapping plans for informal discussions on the logistics of Brexit talks.
EU officials say that making public their concerns about the British position may help change it. For example, after a call from Juncker early on Thursday, German Chancellor Angela Merkel urged Britons to abandon their "illusions" about Brexit. Juncker told Merkel that May was "living in another galaxy" - which May denied - and Merkel repeated her appeal on Saturday.
May has been frustrated at the EU refusal to sign off on a quick deal to say the 4 million expats on either side of a new UK-EU border shouldn't worry about staying. The FAZ said she proposed fixing that at a June 22 EU summit and said 3 million EU citizens in Britain would be treated like other foreigners. The EU insists that airy assurances are worthless without deep legal discussion and wants the extensive rights of EU citizens protected by enforceable treaty terms. Juncker showed May huge piles of EU treaty paperwork to make his point, officials said.
She admits talks will be "tough". She insists that Brexit can be "a success" and mutually beneficial, while Juncker and others say all they can do is manage a "lose-lose" outcome. When Juncker told her flatly that Brexit could not be a success, the FAZ says, she recounted a deal she cut as interior minister, giving Britain opt-outs on EU security policies. "That set off the alarm bells for Juncker's people," the paper wrote, saying her comparison of a minor, technical negotiation and the vast complexities of Britain leaving the EU worried Juncker.
Also a worry in Brussels, was May saying she would lead the negotiations herself. The FAZ said she proposed monthly talks lasting four days each. EU officials expect more like permanent negotiations in Brussels, requiring May to name a team leader.
Timing is part of it. May wants talks now on how Britain can keep free trade with the EU after leaving. The EU stance agreed by the 27 other leaders on Saturday is that Britain must first get an outline deal on its divorce, notably expats' rights, settling the EU budget and border control, especially in Ireland. That could be done by the end of the year, they say.
So far, so confrontational. Juncker says Britain may owe the EU something like 60 billion euros in 2019. Chief negotiator Michel Barnier, who was also at the dinner, says the sum cannot be calculated until the end but the methodology must be agreed. What worried Juncker most in Downing Street, according to the FAZ, was that May insisted that nothing was owed. And Brexit Secretary David Davis said the EU could not force payment. In that case, Juncker said, EU states would not offer a trade deal.
Well ... There is clearly a good deal of mutual irritation and suspicion. The leak will not help. The FAZ actually recounts May repeating her insistence on secrecy. The EU, bound to keep 27 leaky European governments informed, is resigned to that being impossible and plans to make a virtue of "transparency".
But if both sides repeated their readiness over the weekend to deal with the collapse of negotiations, both sides know that could mean deep economic and human disruption. Article 50 of the EU treaty says that Britain will be out of the Union on March 30, 2019, with or without a treaty settling legal uncertainty. The EU says that would be worse for Britain, which sells nearly half its exports to the bloc, but there would be pain all round.
It won't help British confidence in keeping secrets, but few in Brussels saw much chance of that anyway. London might now see the Commission, especially Juncker and Selmayr, as especially hostile. In fact, however, diplomats say they have been trying to rein back some tougher demands from member states. More important are practical steps than can build, or break, trust.
"What's happening now is mainly just a media storm," said a senior EU official dealing with Brexit preparations. "But," if, after the British election, there are further attempts to strong-arm Brussels by, say, holding up EU budgets or business, "then that will create a major problem for the negotiations."
Reporting by Alastair Macdonald; @macdonaldrtr, editing by Larry King