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Germany has hardened its stance on Brexit as Theresa May, Britain’s prime minister, prepares to launch the historic exit negotiations on Wednesday.

Chancellor Angela Merkel, who made accommodating noises after last summer’s referendum, has adopted a tough position on issues such as the UK’s exit bill and the sequencing of negotiations, partly in response to increasing expectations that Britain is seeking a hard Brexit.

“We have no interest in punishing the UK, but we also have no interest in putting European integration in danger over the UK,” Wolfgang Schäuble, the finance minister and Ms Merkel’s close ally, said in a recent FT interview.

“That’s why our priority must be, with a heavy heart, to keep the rest of Europe — without the UK — as close together as possible.”

The hardening mood in the EU’s most powerful state runs counter to hopes in London that Berlin would take a softer line because of pressure from the powerful car lobby, which is concerned about its sales and investments in the UK.

Instead, Germany’s political debate has become more fiercely pro-EU after the election as US president of Donald Trump, an enthusiastic supporter of Brexit, and the emergence of Martin Schulz, the Europhile former president of the European Parliament, as Ms Merkel’s main challenger in federal elections in September.

While the chancellor previously insisted she wished to keep Britain “as close as possible” to the EU, Berlin has now given priority to maintaining the EU’s fragile unity in the face of challenges including migration, eurozone economic tensions and populist attacks on the bloc from French and Polish nationalists.

Berlin backs the European Commission’s insistence that Britain’s exit terms must be negotiated before talks begin on any new relationship with the EU. Ms Merkel’s view is that agreement on exit must be struck in principle, probably in outline, before future arrangements are discussed.

This applies particularly to the UK’s exit bill, which the commission says may total €60bn. The German finance ministry says: “Any Article 50 agreement will have to include the UK’s assurances that it will honour the financial commitments it undertook as an EU member state.”

Heribert Hirte, a legal expert for Ms Merkel’s Christian Democrats and member of the Bundestag EU affairs committee, adds that a breakdown over finances would “rule out any chance” of negotiating the future UK-EU relations agreement.

Other German officials and politicians also highlight the obstacles to a mutually satisfactory deal. Detlef Seif, the CDU’s parliamentary Brexit spokesman, says: “We all see it’s going to be difficult. It would be a miracle if we got a good result.”

Norbert Spinrath, Brexit spokesman for Mr Schulz’s Social Democrats, says: “We expect the British to do the honourable thing. If they don’t, the EU can take them to the international courts.”

The only party to welcome Brexit, the rightwing Alternative for Germany, has recently lost ground in polls.

However, government and Bundestag representatives argue friendly relations with the UK must be maintained if possible, and so, as one quips, “this unpleasant duty must be done well”.

Ms Merkel’s habitually-cautious rhetoric allows her to appear more conciliatory to the UK than either French president François Hollande or European Commission president Jean Claude Juncker, who have both been more critical of London.

One EU-27 diplomat says Germany could be positioning itself between a hardline France, and Poland, which, with its own sceptical view of the EU and big interest in 800,000 British-resident citizens, may be more sympathetic to Britain. Such an approach would put Ms Merkel in her favourite consensus-making role.

However, many in Berlin are still angry over what they see as a foolhardy British decision.

“They think the future of Britain outside the EU will be glorious,” says one German political aide. “Many European leaders don’t think it is going to be glorious.”

Mr Schäuble said: “I don’t think this decision is in Britain’s interests, but it’s not up to me.”

UK attempts to force open messaging app in wake of attacks follows failed efforts in US

British politicians have demanded that WhatsApp and other messaging applications provide access to police and security forces to monitor terrorist communications in the wake of last week’s attack on the Houses of Parliament. However, tech experts argue that opening backdoors in popular messaging services using end-to-end encryption throws up a number of problems.

How does WhatsApp work and what is end-to-end encryption?

WhatsApp is the world’s most popular messaging app with more than 1bn users. A year ago, it rolled out end-to-end encryption for users across all devices including iPhones, Android, Windows and BlackBerry phones.

This means that only the sender and recipient of a WhatsApp message or call can access the text, photos, videos or recordings — and, crucially, not even WhatsApp itself.

Eavesdroppers, including cybercriminals, hackers, telecoms companies, internet providers or government spies cannot access and read the content of the messages either.

What does the UK government want?

Amber Rudd, the UK home secretary, has asked that police and intelligence agencies are given access to WhatsApp messages to solve and foil crimes and acts of terrorism.

She plans to meet technology company executives later this week to pressure them into allowing this. She has not ruled out legislative changes that would compel companies to comply.

In essence, she is asking for a “backdoor”, a hole in WhatsApp’s encryption methods that would allow a select group of people under certain circumstances, such as the authorities during a police investigation, to read communications between suspected criminals.

She said it was “completely unacceptable” that government could not read messages on WhatsApp. “We need to make sure that organisations like WhatsApp, and there are plenty of others like that, don’t provide a secret place for terrorists to communicate with each other.”

Is WhatsApp pushing back against this?

WhatsApp cannot at present provide access to such messages. It has said in a statement that it was “horrified” by the London attack and that it was “co-operating with law enforcement”.

To give the UK government what it wants, the company would need to create a way to de-encrypt the service, meaning its end-to-end privacy guarantee would no longer be absolute.

But security experts agree there is no such thing as a “one-off backdoor”. If a workaround exists, it puts all its users at risk of being hacked.

Several technology executives, including Apple’s Tim Cook and WhatsApp chief executive Jan Koum, have warned that it is impossible to give some people access to encrypted devices or messages, without opening up an entry point for “bad guys” such as hackers or spies from other countries.

Mr Koum has said previously that backdoors put “our freedom and liberty . . . at stake”.

Security experts agree this sets a dangerous precedent.

“Compelling companies to put backdoors into encrypted services would make millions of ordinary people less secure online. We all rely on encryption to protect our ability to communicate, shop and bank safely,” said Jim Killock, executive director of the Open Rights Group.

How is this similar to what happened with Apple and the FBI?

Apple’s iOS software is fully encrypted, just like WhatsApp, which means no one can access any data on your iPhone, including text messages, photos, calls and contacts, unless they have your phone’s passcode — not even Apple.

Technologically, the two platforms are similarly secured against hacking or eavesdropping.

In late 2015, a US judge ordered Apple to help the FBI in its investigation into a shooting in California, in which 14 people were killed.

The court said Apple must provide “reasonable technical assistance” to break into the suspected criminal’s iPhone 5c, or in other words, to break its own encryption.

The two cases are similar in that governments have asked both companies to lower safeguards and put in a backdoor that does not currently exist.

Apple refused to comply with the FBI’s request, since it did not have the technical ability to break into a locked iPhone and would have to create one. Mr Cook said: “The US government has asked us for something we simply do not have, and something we consider too dangerous to create.”

So far, WhatsApp has not publicly pushed back on Ms Rudd’s plans, but its position on backdoors has been clear in the past.

Following Mr Cook’s letter on the issue last February, Mr Koum with Google’s chief executive Sundar Pichai and ex-NSA whistleblower Edward Snowden came out in support of the iPhone maker.

“I have always admired Tim Cook for his stance on privacy and Apple’s efforts to protect user data and couldn’t agree more with everything said in their Customer Letter today. We must not allow this dangerous precedent to be set,” he wrote in a Facebook post.

Although the iPhone 8 (and iPhone 7s counterparts) are not expected until the fall, Apple suppliers have to ramp production months in advance to secure the millions of parts necessary for the launch. Economic Daily News is today reporting that TSMC will begin mass production of the Apple A11 SoC, which will power the 2017 iPhones, in April.

The chip inside the iPhone 7 is the Apple A10 Fusion, which includes two high-power cores and two lower-power cores. The design of the A11 chip is unknown but the report says it is fabricated using a 10 nanometer process ..

The A10 chip is fabricated at 16nm so a reduction to 10nm for the A11 already signposts that a major upgrade is in the wings. Bear in mind that the A10’s speed in the iPhone 7 already outstrips the rest of the smartphone industry in single-core performance. As well as density, Apple chip designers will have likely redesigned the components and circuitry to optimize performance and power efficiency further.

The report says the A11 chip is built using a FinFET process, packaged with a ‘wafer-level integrated fan-out’ technology … it sounds advanced that’s for sure. It isn’t yet clear if the A11 will be another ‘Fusion’ design where the chip incorporates higher-power and lower-power cores.

The A11 is destined to be included in the radical new OLED iPhone 8, as well as the rumored iterative iPhone 7s and iPhone 7s Plus updates, expected to debut in the fall. There is also the possibility that the A11 is included in the upcoming iPad Pro refresh, although rumors to date have suggested they will use an ‘A10X’ SoC.

The newspaper report says that TSMC will have made 50 million A11 chips before the end of July with the plan to make 100 million chips this year. The majority of these will be sold to consumers inside the new iPhones, as Apple’s massive holiday quarter sees in excess of 70 million iPhone sold.

All signs point to the iPhone 8 being a major upgrade over the iPhone 7 with a bezel-less glass and stainless steel chassis design, larger OLED display with fingerprint sensor integrated into the display, 3D front camera, wireless charging and more.

Saudi Arabia has announced a lower tax rate for its state energy giant Saudi Aramco on Monday as the company prepares for a 5 per cent listing late next year.

A royal order was issued to cut the tax rate for Saudi Aramco, the kingdom’s main revenue earner, from 85 per cent to 50 per cent.

The tax rate is a key component in determining the valuation and dividend policy for state owned Saudi Aramco, which officials have said is worth $2tn.

Even if it is valued at half this level it would still be the largest ever flotation.

Amin Nasser, Saudi Aramco’s chief executive, said in a statement: “The new tax rate will bring Saudi Aramco in line with international benchmarks.”

Investors and energy sector analysts have said Saudi Aramco’s high tax and royalty payments to the state are one factor that could reduce its valuation.

But with a 5 per cent listing, the kingdom will remain Saudi Aramco’s largest shareholder and in turn would get paid a dividend.

“Any tax revenue reductions applicable to hydrocarbon producers operating in the Kingdom are replaced by stable dividend payments by Government-owned companies, and other sources of revenue including profits resulting from investments,” said Mohammed Al-Jadaan, minister of finance, in a statement.

The IPO forms the centrepiece of a plan to overhaul Saudi Arabia’s economy and diversify away from oil, the precious resource it has been reliant on for decades.

Saudi Aramco earlier this year had recommended the government approve a tax rate of 50 per cent.

Aramco is not just an oil and gas producer, it also works as an effective arm of the state building schools, hospitals and sports stadiums.

Since announcing plans for a listing in early 2016 Saudi Aramco has engaged in a vast untangling of its finances, portioning off those revenues it earns from its core business versus those projects it conducts for the government.

- Sells €3.299B vs. €3.3B indicated in 3-month Bills; Avg Yield: -0.616% v -0.642% prior; Bid-to-cover: 1.76x v 1.30x prior 

- Sells €1.497B vs. €1.5B indicated in 6-month Bills; Avg Yield: -0.598% v -0.618% prior; Bid-to-cover: 2.14x v 1.74x prior