By Guy Faulconbridge
LONDON (Reuters) - In the month since Prime Minister Theresa May submitted formal divorce papers, Brexit has been overshadowed by a public display of brinkmanship as Britain and the rest of the European Union set out their stalls for the tortuous exit negotiations.
After an encounter with May dubbed the "disastrous dinner", European Commission President Jean-Claude Juncker apparently left her Downing Street office last Wednesday shocked and deeply worried that a disorderly Brexit could be looming.
May, campaigning ahead of a snap June 8 election she called, dismissed the German newspaper report as Brussels gossip but refused to give her own account of the meeting and repeated her promise to be a "bloody difficult woman" in talks with Juncker.
Brexit spice was added by cautions from German Chancellor Angela Merkel about the "illusions" of the British and public bickering over the exact numbers on a yet-to-be-calculated divorce bill that Britain must one day pay to the EU.
EU diplomats have long held that British politicians are living in a 'bubble' with little grasp of the complexity of Brexit, a charge denied by British ministers who say some in the EU are maneuvering for an opening advantage in the talks.
"Nothing that has happened in the last two or three days has changed my view of the odds of this thing breaking down," said Anand Menon, professor of European politics and foreign affairs at King's College London.
Menon's view is that the Brexit talks have a 30 to 40 percent chance of ending in failure.
"This sort of shadow boxing and posturing doesn't change that in the least because that is what happens when negotiations start: people lay out positions, often exaggerated positions, and that is just the way it goes," he said.
A disorderly Brexit with no deal would spook financial markets, tarnish London's reputation as one of the world's top two financial centers and sow chaos through the economies of Britain and the EU by dislocating trading relationships.
Besides money, the cohesion of the West and the fate of an estimated 3 million EU nationals living in Britain and some 1.2 million Britons residing in other EU countries is at stake.
"BLOODY DIFFICULT WOMAN"
May, an initial opponent of Brexit who became prime minister in the turmoil that followed the June 23 referendum vote, has two years to negotiate the terms of the divorce before Britain exits the EU in late March 2019.
EU leaders endorsed stiff divorce terms on Saturday and Juncker said Britain's decision to withhold consent to some 6 billion euros ($6.5 billion) in EU spending on approved programs, notably to handle the Mediterranean migrant crisis, could affect the start of Brexit talks.
"During the Conservative Party leadership campaign I was described by one of my colleagues as a 'bloody difficult woman'. And I said at the time the next person to find that out will be Jean-Claude Juncker," May said.
Juncker said his best real-time description of May was that she was a "tough lady", adding he respected May and liked her as a person.
EU diplomats have expressed concern both over May's ambition to personally dominate detailed Brexit talks and her attempts to strike deals with EU leaders before outlining the detail. Britain says it will decide how to conduct its side of the talks.
British finance minister Philip Hammond said the leak to a German newspaper of the Downing Street dinner and reports of large divorce bills indicated how tough Brexit talks would be.
"We are on the brink of a very tough, complex, lengthy negotiation and I am not remotely surprised that people are maneuvering for opening advantage in that negotiation," he said.
MONEY AND MIGRANTS
As Britain and the EU embark on one of the most complex negotiations in recent European history, many EU diplomats fear British leaders have failed to appreciate the enormity and stakes of the divorce.
Besides rhetoric, the public Brexit dialogue between the EU and Britain has focused largely on money and migrants.
EU negotiators have hiked possible payment demands for Brexit over recent weeks, officials say, widening the divide between Brussels and London, which questions whether it owes anything at all before talks start next month.
Hours before EU chief negotiator Michel Barnier was due to give details on the EU's standpoint, a Financial Times headline saying the EU might seek an upfront payment in 2019 of up to 100 billion euros ($110 billion) drew an immediate rejection from Britain's Brexit Secretary David Davis.
"We'll not be paying 100 billion," Davis said.
The European Commission has previously given a ballpark estimate of the bill of about 60 billion euros. The FT said the calculations it referred to would result in a net payment from Britain of roughly that level, after subsequent reimbursements.
Barnier, who said he found the dinner with May very cordial, told reporters the EU hoped to make sufficient progress by November on citizens' rights and a financial settlement to be able to start discussions on a future relationship with London.
Davis said he wanted a generous settlement that would mean EU migrants enjoy "pretty much exactly what they enjoy now".
But the EU insists that such broad assurances are worthless without deep legal discussion and wants to agree a cut-off date until which EU citizens arriving in Britain would enjoy the same rights as now.
"Will Brexit talks fail or succeed? I don't know and no-one does," said a diplomat from an EU country. "The guess is a deal of some kind can be reached but the risk remains that it falls apart."
(Reporting by Guy Faulconbridge; Editing by Janet Lawrence)