Chancellor Angela Merkel is seeking to stiffen German resolve on Brexit, singling out the car industry as vulnerable to any British attempt to strike market-access deals ahead of the U.K.’s exit from the European Union.

In a closed-door meeting with German lawmakers, Merkel said some industries might press for such accords with the U.K. government and that political leaders should oppose them, according to two people who attended. In particular, allowing U.K. banks to do business in the EU in return for Britain granting market access to European carmakers is a non-starter, Merkel was quoted as saying by the people, who asked not to be identified because the meeting was private.

The comments are the most specific signal yet of German concern that Prime Minister Theresa May’s government might try to sidestep the other 27 EU governments and seek sector-by-sector advantages before Brexit talks have even begun. As Merkel seeks to enforce the EU’s insistence on a package deal, some ministries in Berlin earlier instructed officials to avoid back-door contacts with U.K. counterparts for the same reason.

“Merkel is rightly warning against special deals for individual industries,” Heribert Hirte, a lawmaker in the chancellor’s Christian Democratic Union, said in an interview. “We can’t enable cherry picking.”

A German government spokesman declined to comment on what Merkel told lawmakers in the meeting last week, saying her position on Brexit -- that the U.K. must accept the EU’s free movement of people, capital, goods and services to have full market access -- is unchanged.

The U.K. government has underscored the auto industry’s importance by giving assurances that persuaded Nissan Motor Co. to keep investing in Britain while May tries to balance taking the country out of the EU with safeguarding investment and jobs. For Germany’s auto industry, the stakes may be even bigger.

David Fuller's view

This may be no more than yet another somewhat mischievous volley from the EU, so I would not take it too seriously.  We have often seen that Angela Merkel will change the EU’s “inviolate” rules when it suits her to do so.  Since EU policies are always a work in progress, I regard that as practical rather than merely cynical.  

Since the EU is mired in problems, a safe rallying point is its collective dislike of the UK.  After all, the British public had the audacity to defy David Cameron and vote for Brexit, without even needing any help from Vladimir Putin. 

The British public was voting for self-governance because the EU’s agenda had changed.  This shocked EU officials who took it personally.  Some have repeatedly said that the UK should be “punished”, so that other nations in the EU would not follow our lead.  In other words, the EU had become a club which European nations could join, but never leave of their own choice.  This does not strike me as a compelling enticement. 

EU officials are also angry because with the UK leaving, they will lose their second largest contributor to this expensive club.  That means bureaucratic perks in Brussels will have to be downsized.  Against this background, I maintain that it would be unwise for the UK Government to contemplate mutually sensible negotiations over a lengthy period.

The psychology is all wrong. The EU, already smarting, would be preoccupied with avoiding any further losses, while being determined to punish the UK, judging from recent statements.  Therefore the UK should get out of the EU quickly, in my opinion, with no deal.  Once out, sensible negotiations could commence, and the EU would be focussing on what it had to gain rather than to lose.  Given that the UK currently imports far more from the EU than it exports back to it, not least from Germany’s automobile sector, Mrs Merkel would have every incentive to negotiate a mutually beneficial trade agreement with the UK.