The Guardian view on EU attitudes to Brexit the UK is running a goodwill deficit

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(ABC TODAY) Shared economic interest is a big motive for countries to form alliances, but not the only one. The chancellor of the exchequer, Philip Hammond, on Wednesday set out good commercial reasons why the EU should include financial services in a post-Brexit trade deal with the UK. The problem is that his target audience sees the value of European integration in terms that go well beyond commerce. Mr Hammond’s pitch for a uniquely fluid cross-border financial regime had been rejected hours before his speech. Draft guidelines for the next stage of Brexit talks, published by the European council, envisage a steep downgrade of access to EU markets for financial services.

A clear implication from the document is that the prime minister’s Brexit red lines, taking Britain out of the single market and customs union, have so narrowed the available options that the best the City of London can hope for is trade in services on a template set by the EU’s deal with Canada. The chancellor rejects this model, arguing that the UK and the rest of Europe begin their negotiations from a point of maximum convergence; so for Brussels to invent barriers where none now exists is perverse. The EU riposte is that the perversity originates with the UK’s decision to leave the single market.

Mr Hammond is right when he says that the lack of a precedent for a big services deal is no proof that such a deal cannot be done. Nothing about Brexit is precedented. If the government had begun fleshing out its ambitions earlier, the likelihood of a generous hearing would have been much higher.

The purely technical obstacles would always have been formidable. The UK side has systematically failed to grasp how unbreakable the legal seal is on the single market: that inside/outside is a binary choice. Theresa May has also struggled to comprehend how central that legal integrity is to the cause of political solidarity in the EU. Even if there were some fast-track regulatory superhighway to be built from London into the EU, it would take a vast diplomatic effort to persuade other governments that building it wouldn’t undermine the rest of the structure. Such an effort would need to have begun well before now, and been conducted by people more skilled than Mrs May, David Davis and Boris Johnson.

EU member states have divergent appetites for accommodating British exceptionalism. French resistance to favours for the City is not unrelated to hopes of luring banks to set up shop in Paris. But the UK also has friends in the EU whose capacity to influence the negotiations has been poorly harnessed. Needlessly confrontational Tory rhetoric has hardened the 27-against-one dynamic that now makes the prime minister’s job so hard.

Mrs May and her chancellor rightly emphasise the common economic interests that should compel the EU towards generosity. But they wrongly imagine that economics trumps other considerations. British ministers argue that EU stubbornness is self-defeating. There is irony in Brexiters complaining about ideology obscuring economic rationality, when their project was conceived in that spirit.

Other governments are capable of calculating their own interests. They do not need Mrs May to advise them on that score. The missing element in her strategy is investment in the diplomacy that would have persuaded them that Britain is sincere in seeing its interests and those of the EU as truly aligned. There is no shortage of financial reasons to do a deal that suits Britain. The deficit is in goodwill. That debt is harder to repay.