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First date: UK's May to meet Germany's Merkel to talk Brexit

The U.K.'s new Prime Minister Theresa May is heading to Berlin on Wednesday afternoon for a working dinner with German Chancellor Angela Merkel with the unpalatable issue of Brexit expected to be the dish of the day.

It will be May's first overseas trip since becoming prime minister last week after a tumultuous chain of events following the U.K. decision in June to leave the European Union (EU). She is also due to travel to Paris on Thursday for talks with French President Francois Hollande.

May's election was applauded as she is widely seen as a "safe pair of hands" and, like Merkel, she is known for her cool demeanor and pragmatic approach to government. She has certainly wasted no time in putting her mark on the U.K's government, strategically appointing a number of "remain" and "leave" politicians to prominent positions in the cabinet.


UK Prime Minister Theresa May
Carl Court/Getty Images
UK Prime Minister Theresa May

With similar personal qualities, analysts saw no reason why the meeting of two of Europe's most powerful women should go badly.

"There's no reason to assume that there will be a hostile atmosphere," Carsten Nickel, deputy director of research at Teneo Intelligence, told CNBC on Wednesday. "They've never met before but they should get along on at least a personal level," he added.

Tricky relations

The circumstances surrounding their first meeting on Wednesday evening are tricky, however, and building good relations damaged by the Brexit vote will be crucial. Awkwardly, the U.K. has yet to even start departure proceedings, leaving the relationship in limbo.

May has said that she wants to firm up the U.K.'s negotiating position over its possible future role with the EU before triggering the official procedure for leaving the bloc, known as Article 50.

But European leaders have urged the U.K. to get on with the process, saying that delay prolongs the economic and political uncertainty surrounding the Brexit, for all parties. Publicly too, EU leaders have vetoed any discussions over a post-EU relationship until Article 50 is triggered.

The U.K. has started distancing itself from the EU, however. May has told European Council president Donald Tusk that Britain is to relinquish its upcoming six-month presidency of the council in 2017, the Press Association reported Wednesday.

There have been differing attitudes towards the U.K. following the vote; some European leaders want "an example" to be made of the country, giving the U.K. no easy ride when it comes to negotiating a post-membership relationship to deter other countries from following suit.

Others, like Merkel, are more measured, calling for a more cooperative approach and saying there should be no EU "revenge" on Britain. After all, the U.K. has been a key trading partner in the EU and the bloc is mindful of its need to maintain its links to the U.K.'s robust consumer market.

With official break-up negotiations yet to even begin, Nickel noted that there was the "potential for tensions further down the line" despite the cordial atmosphere expected between May and Merkel tonight.

"Merkel is aware that she needs to step into the 'strong leader of Europe' position again and that she needs to incorporate a more hawkish position like France to ensure that the single market survives. Yes, the trade relationship with the U.K. is important to Germany but its relationship with the rest of the EU and the need to keep the bloc together outweighs that," Nickel said.

EU project 'in danger'

Anti-EU sentiment is stirring throughout Europe in varying degrees, making the need to keep the bloc unified more important than ever. From the prominence of France's National Front party to Italy's anti-establishment 5-Star Movement and Germany's anti-immigrant Alternative for Germany party, the region's mainstream leaders are dealing with "upstart" political parties on the left and right that are challenging the status quo.

Such sentiment has only been strengthened by the region's refugee crisis and terrorist attacks by largely "home grown" terrorists, highlighting the region's failings in terms of integration and enfranchisement.

Rabobank's team of research analysts warned that the EU – and Merkel in particular - had to tread a fine line in its negotiations with the U.K. and keeping the rest of the EU on side.

"The fact that the EU has a great incentive to ensure that an 'easy' or smooth deal is not won by the U.K. is clear," analysts Richard McGuire, Lyn Graham-Taylor and Matt Cairns said in a note Wednesday.

"Should the EU simply bow to the U.K.'s desires (or at least the desires of a slim margin of those that voted to leave) is unlikely in our view. To do so would be to tempt fate, given other members of the EU that may themselves be 'unhappy' with certain elements of their membership may well seek to test the waters themselves," they said.

"This, we would argue, brings to bear the very real risk that the EU project itself is in danger and is, we also believe, a risk that the remaining members of the EU, particularly those most committed to the project in Germany and France will work hard to squash."

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