The Commission may seem to be running the Brexit negotiations, but it will be Angela Merkel’s view that counts. She will be the EU’s “bloody difficult woman”, facing what’s left of ours. Germany has become dominant in the EU. Member states know that where Germany holds strong views they won’t back down. France, once able to adopt a similar approach, has become the junior partner. They still work closely together, but France does not get its way if they clash. Despite all the hype, Macron started to learn this on his first visit to Berlin. Anything likely to cost Germany money was firmly slapped down. Germany has two key interests, both much more important than trade. They are the strength of the EU and its institutions, and who pays for it. These are very different from Britain’s free trade priorities. They could lead to an early crunch on the “exit fee”, before we even talk about trade. To negotiate successfully, you must be ready to walk away. We may not now have a Parliamentary majority for doing so. Merkel’s greatest fear is that other members will follow a successful British exit and the EU might then break up, leaving Germany without a power base and a role in the world. She has good reason for her fear. Her two major policy concerns – immigration and the Euro – both have the potential to break up the EU. Brexit is an irritating distraction which could spark or exacerbate a crisis. She doesn’t need us, or a successful Brexit. Germany is determined not to make economic sacrifices for the EU. They made huge economic sacrifices to reunite with East Germany. But East Germany was “us”. Both countries saw themselves as one people. The sense of kinship with fellow Germans, and a shared cultural inheritance, was what eventually brought them together as a nation, after centuries as a patchwork of small states at the mercy of the great European powers. Europe cannot be “us” in the same way. Germany thinks member states should help themselves by becoming more German; they should obey the agreed rules for their own good. Germany tends to equate helping other Europeans with giving them money. To be fair, most of their fellow member states tend to see it in the same way. This gives Merkel strong views on Britain’s “exit bill”. Commissioner Barnier is said to have counselled a less confrontational approach, but was overruled by “the member states”. We can be pretty sure which member state did most of the overruling. If Britain does not pay, most of the money will have to come from Germany. The only alternative would be to cut back severely on what the EU does and how much it spends. But that is anathema to Germany. It would diminish the EU’s role in the world, and thus Germany’s also. That is not how they are thinking at all. The new draft EU budget also includes big spending increases. Plans are also now under discussion for an EU Defence Fund – a big increase in EU military spending, now that “we have to rely on ourselves”, as Merkel put it. They clearly haven’t even started to think about how to manage without the British contribution. But that is characteristic of the EU – a problem shelved is a problem solved, even if the temporary solution makes the problem worse. Meanwhile the British must pay to keep the show going. Britain has long been seen by Germany as a semi-detached member. We are in neither the Euro nor Schengen, and thus not involved in the two major crises which now dominate EU thinking. British membership and support was not worth much to Germany. Merkel was prepared to humiliate David Cameron on both Juncker’s appointment as Commission President and Cameron’s “renegotiation”. The UK is worth even less to them now. Moreover, Merkel has a track record of not looking very far into the future, and not always recognising potential threats to German interests. She gave Cameron nothing, failing to see the danger of losing a major EU contributor. She can act impulsively – as with her encouragement of large scale immigration without any consultation, even with her own cabinet; and her abandonment of Germany’s nuclear power following the impact of the tsunami on Japan, despite the limited incidence of tsunamis in the North Sea. She cannot see that Germany’s huge trade surpluses are seriously unbalancing the whole Eurozone, with no end in sight. We cannot therefore rely on her to give great weight to potential damage to German exports without a free trade agreement. Nor can we expect her to see that the weak banking systems of some large Eurozone members are in poor shape to withstand trade shocks. So, who is important to Merkel? Merkel has been much more accommodating towards political pressures from within Germany than from anywhere else. Having won her last election, she moved left and made big policy concessions to agree a coalition with the losing SDP. Her support for Juncker’s appointment resulted from pressure from the SDP and senior members of her own party. In the process, she gave away to the European Parliament her effective control over the appointment of the Commission President. Germany’s federal system gives substantial political influence to the regions. All German Chancellors before Merkel headed a regional government first and built up their power base there. Being from East Germany, she was not part of this power system. None of the regional barons are in her cabinet, as they were accustomed to be. Car manufacturing is important for states like Bavaria and Baden-Wurttemberg. Their governments, and others, will be concerned about job losses from British tariffs on their exports, particularly in an election year. If the talks seem to be failing, they will pressure her. The “exit fee” matters more to Merkel than trade. The EU wants €100bn. Our legal advice, and also theirs, is that we owe nothing. They need us to pay to fill a €10bn hole in their annual budget and avoid an EU fight about who else might fill it. They will push very hard. We can compromise to some extent, but backing down would show more weakness. We have already conceded the EU’s sequencing of talks. The Remainers’ current aim is a “transition period” – staying in the customs union for 2-3 more years, unable to make trade deals and with potential partners starting to lose interest. It would give Merkel the whip hand. We don’t need their permission to leave the customs union or single market, but we do need their agreement to stay. Merkel could impose what conditions she likes. This would be the bad deal that is worse than no deal. We need the ability to walk away, and it appears the Government continues to recognise this, despite the election setback. The threat of a British walkout would concentrate minds in the run-up to the German elections in September. But can we do it? The Conservative-DUP agreement should hold, but Tory Remainers now include the Chancellor and a strong group of Scots. They and others will oppose a walkout. If the crunch comes, we must call their bluff, and see if they feel strongly enough to bring down the Government on a manifesto commitment, risking an election and a Corbyn government. We won’t get another chance to get Brexit right.