German Finance Minister Wolfgang Schauble. Picture: AFP PHOTO/THIERRY CHARLIER
German Finance Minister Wolfgang Schauble. Picture: AFP PHOTO/THIERRY CHARLIER

Berlin — Germany’s finance minister has set a tough line on EU divorce talks with Britain on issues from tax breaks to exit costs, dashing London’s hopes that Berlin would soften Europe’s stance on the UK’s departure from the bloc.

Theresa May’s government has been looking to Germany — a net exporter to the UK — to temper French demands that Britain "pay a price" for its exit vote.

But Wolfgang Schäuble told the Financial Times that, even after Brexit, the UK would be bound by tax rules that would restrict it from granting incentives to keep investors in the country — and would also face EU budget bills for more than a decade.

"Until the UK’s exit is complete, Britain will certainly have to fulfil its commitments," he said. "Possibly there will be some commitments that last beyond the exit. .. even, in part, to 2030.. .. Also we cannot grant any generous rebates."

Berlin had been one of the most UK-friendly EU governments in the immediate aftermath of the vote to leave the EU, with Chancellor Angela Merkel signalling Europe risked damaging ties to Britain if it drove a hard Brexit bargain.

But following intense lobbying by French President François Hollande, who is concerned an easy exit could encourage anti-EU political forces within his own country, Germany has begun to harden its line.

In addition to demands for long-term payments, Schäuble insisted Britain must stick to international rules on investment incentives, a clear signal Berlin would closely watch commitments such as those May has made to car maker Nissan, which recently won government assurances before it agreed to build new models in the UK.

"These rules apply to all whether EU members or not," he said.

Brussels is already examining the Nissan deal to see if it violates EU rules against state aid.

Schäuble pointed out that Group of 20 agreements commit members to limit tax avoidance — an initiative that would reduce Britain’s ability to grant tax breaks, even after leaving the EU.

"The UK is still a member of the EU and it is a country which has always upheld the valid regulations, valid laws and valid treaties," said Schäuble.

He said "very many requests" were coming from London-based companies interested in relocating parts of their business to Frankfurt.

© 2016 The Financial Times Limited

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