EU-UK talks stumbling on banks and benefits

A week before the summit in which EU leaders expect to close a deal with the UK on EU reforms, the process remains "very fragile", European Council president Donald Tusk i said on Wednesday (10 February), with benefits and the banks being the main difficulties.

As central European countries continue to express concerns about the plan to limit in-work and child benefits for EU workers in the UK and other countries, France pointed out on Wednesday that it opposed proposals on financial issues.

French finance minister Michel Sapin said some proposals in the draft agreement "could suggest there would be a difference of treatment" between London and other EU financial centres.

"That is not possible. The treatment must be as identical as possible," he told French MPs at a parliamentary hearing.

Sapin echoed concerns expressed by the French Banking Federation in a letter to French president Francois Hollande i.

The proposed arrangements about relations between the eurozone and non-eurozone countries "raises major problems of principles concerning the integrity of the internal market, the financial stability of the European Union and fair competition between financial players", the head of the federation, Frederic Oudea, wrote in the letter, according to Reuters.

Oudea, who is also the head of the Societe Generale bank and of the European Banking Federation, pointed at the proposal to exempt non-euro and non-banking union countries from paying for the rescue of eurozone countries or institutions.

"If that provision was to be maintained, the banking sector suggests to demand reciprocity for the eurozone," he wrote in his letter to Hollande.

He also said that banking union rules applying only to credit institutions located in the eurozone would be a violation of the internal market for the financial sector.

Sapin told MPs that the "unity of the market, particularly financial markets" was a "red line" for France in the discussions ahead of next week summit.

In a debate at the national assembly also on Wednesday, French prime minister Manuel Valls warned Britain that it could not "dictate" the terms of the agreement.

"It is up to Britain to recall that is is fully a country in the EU. We don't dictate our conditions, we are in a partnership and we go forward together," he said.

He added that France would be "particularly vigilant" on guarantees that the eurozone would still be able to integrate further.

"When you are not a member of the eurozone, you cannot dictate conditions to the eurozone," he said.

To alleviate French concerns before the summit, Tusk will go to Paris to meet Hollande. The meeting will be part of a series of talks with leaders, announced by Tusk on Wednesday, in order "to secure a broad political support for [his] proposal" for an agreement.

He said that in addition to Hollande, he would meet German chancellor Angela Merkel i, Romanian president Klaus Iohannis and the Belgian, Greek and Czech PMs, Charles Michel i, Alexis Tsipras i and Bohuslav Sobotka i, respectively.

Sobotka currently chairs the Visegrad group i that gathers his country together with Slovakia, Hungary and Poland. The group has been the main critic of the plans to limit benefits for EU workers.

In an opinion article published by EUobserver on Wednesday, Czech state secretary for European affairs Tomas Prouza said that "the situation of EU citizens working in another member state cannot be more disadvantageous than that of citizens of third countries".

"We still have a week left before the European Council to find the final compromise that everybody can agree with," Prouza wrote. "If we want to find an agreement, we cannot open Pandora’s Box and include issues of other member states in the discussion."

EU ambassadors and national EU advisers will meet this Thursday for a second round of talks to prepare the final draft for the summit.

Ahead of this meeting and of his tour of Europe, Tusk sent an updated proposal to the 28 capitals on Wednesday.

According to the Wall Street Journal, the draft limits the use of the so-called immigration emergency brake, the mechanism to limit benefits to countries that opened their labour markets to new EU member states in 2004.

The updated proposal also specifies that the plan to reduce child-benefit payments to EU workers in Britain would not be extended to other “exportable” benefits, like old-age benefits.