EU hopes for clarity on Brexit payments

"Everyone is eager to see [the speech]," an EU official conceded when talking to EUobserver on the condition on anonymity.

"The key element is the financial settlement, to see that they will contribute at least until the end of the multi-annual financial framework," the official said, referring to the EU's seven-year budget, which ends in 2020.

"The question is how far she will go," he added.

This will be May's first detailed speech on Brexit since January, when she also announced the UK would be leaving the single market and the customs union.

It is not clear if May is going to the mention specific sums she intends to pay to the EU, although the Financial Times reported on Tuesday that the prime minister would say the bill is at least €20 billion.

"The expectation is that she is going to be making an offer on the financial settlement for a transitional period," Tim Bale, a professor of politics at Queen Mary University of London, told EUobserver.

Bale added May seems to have struck a compromise with eurosceptics in her party - that there would be no payments beyond a transitional period - and that could buy her some time with the fierce anti-EU forces in her party.

"It [the speech] seems be a chance for her perhaps to accelerate the negations, that are seem to be running into the sand," he said.

In Brussels, there is a need for clarity from the UK side.

"I see a problem in the politics of Westminster - lots of illusions out there," another EU official said, adding that: "We hope reason will prevail, which would be good for everyone."

"But this is primarily a challenge for May and her party," the official warned.

Just how limited her authority is in London was highlighted over the weekend, when her Brexit policy was openly challenged by foreign minister Boris Johnson in an opinion article he published in the Telegraph, without any retribution.

"May's position is very weak domestically. [The Johnson episode] laid bare the reality that she is a prisoner of eurosceptics within her party, and her own failure at the election," Bale said.

But no matter the substance of the speech, EU officials think it is highly unlikely that the EU's chief negotiator, Michel Barnier, can report "sufficient progress" to the leaders of member states at the EU summit in October.

"Sufficient progress" on the financial settlement, citizens' rights and the Irish border issue are preconditions for moving the talks to their next phase, on future relations with the EU.

Officials point out, however, that October was a self-appointed deadline to make sure talks were on track, but it is not laid down in any of the negotiating guidelines or papers.

Nevertheless, October could be a turning point.

"Then [if no sufficient progress is achieved], the blame game can start on who is responsible for the failure," the first EU official said.

"At a certain point, we need a crisis to increase pressure and move on with the talks in substance," the official added.

"Show me the money"

Large differences remained between the UK and the EU approach to the financial settlement after the last round of talks.

And frustrations with the lack of a clear UK political position on payments were clear at the press conference in August.

"In July, the UK recognised that it has obligations beyond the Brexit date," EU negotiator Barnier said.

"But this week the UK explained that these obligations will be limited to their last payment to the EU budget before departure. [...] After this week, it is clear that the UK does not feel legally obliged to honour these obligations after departure," he said last month.

"A proper approach is to go through, line-by-line, and see whether or not legal obligations are correctly clarified," retorted UK Brexit secretary David Davis at the time, telling reporters.

The EU treats all of the UK's obligations between the 2014-2020 EU budget cycle as a starting point, whereas the UK wants to go through each part of the budget to establish if they have to pay.

Another EU official explained that EU countries see the financial settlement as a sort of "down-payment that is bound to secure goodwill" on the part of the EU-27, once the two sides shift onto talks about the future arrangement.

Several EU officials told the EUobserver that the UK argued the EU budget - the multi-annual financial framework (MFF) that spans over a period of seven years - is merely a "planning instrument", and not a "legal instrument".

The EU side seemed baffled by this notion, as the Treaty of Lisbon outlines the MFF as a legally binding act.

"The EU wants the UK to prove why it does not owe money and the UK wants Brussels to prove why it does," an EU official said.

Moreover, the UK's legal argument is that it does not need to pay for items in the budget that have not yet been contracted.

So far, the UK has only committed to pay whilst the country is still an EU member, but refrained from accepting any liabilities beyond the Brexit date in March 2019.

Officials have pointed out that any extra payments are seen by UK negotiators as a way to pay for the benefits of the future relationship.

While EU officials say they understand that the money issue is very politically sensitive in the UK, they emphasise that this is where the EU-27 are probably the most united.

No net contributor wants to pay a single euro cent more into the already-agreed EU budget, and no recipient wants to give up what has already been promised through the laborious MFF negotiations in 2013.

"It is a priority for everyone," said an EU official.