This week it became apparent that a “no deal” Brexit is now possible, if not probable.
As Theresa May failed to rally her party and government behind a single Brexit roadmap, market analysts see the odds of a disorderly (“no deal”) Brexit rising. A Reuters poll confirms that 25% of analysts expect a disorderly Brexit in March 2019. No deal also means no transition period.
There is no danger of the negotiations “breaking down,” that is, to leave the table.
For the UK the economic pain is immense. For the EU, the UK has the combined GDP weight of 19 member states. No one is leaving the table. But, we are moving further away from the prospect of a resolution whole parties are already locked in a blame-game.
London is locked in negotiations with itself
In an article with the Daily Telegraph published on Monday, the former Foreign Secretary Boris Johnson argued that May’s so-called Chequers plan is a “disaster for Britain.” That is the tip of the iceberg; the Sunday Times warned that May is facing a threat to her leadership by hardline Brexiteers planning to destroy her Brexit plan and install Boris Johnson in Downing Street.
The revolt has the support of the Tory election guru, Sir Lynton Crosby who is reportedly coordinating the front with the European Research Group (ERG) led by Jacob Rees-Mogg.
May insists that without coextensive customs union territory, there is no pragmatic resolution to the Irish question. But, as a negotiating position, May’s proposal for a “combined” Customs territory is a “non-starter” for her backbenchers.
For conservative backbenchers paying the divorce bill without a clear commitment to Single Market access would be unacceptable. Alignment to the European Court of Justice case law is unacceptable. Even “voluntary compliance” with a common rulebook is barely tolerable.
May’s critics suggest the plan limits the UK’s ability to deviate from EU norms, create competitive advantages, leading to better trade deals for the UK. In sum, the UK will become a rule-taker, throwing away most of the “advantages of Brexit.”
Mr Johnson insists that the border issue in Northern Ireland can be resolved by technical means, referring to the old “maximum-facilitation” plan. The plan has repeatedly been dismissed as unworkable in Brussels and London alike. But, Brexiteers want to put on a brave poker face and challenge Brussels and Dublin to erect a border on their side, if they would.
Meanwhile, public opinion is now shifting, but not impressively. Across all polls, Remain appears to have a small margin of preference, but without an actual vote in sight, that means nothing. Besides, the overwhelming majority of Conservative voters remain Leave supporters. A motivated core of party activists is, in fact, pushing for a clean break in a “fight them on the beaches” spirit. In fact, hardline Brexiteers are confident that the other side of the Atlantic will support them, given President Trump’s vocal support for Boris Johnson.
No lifeline from Brussels
Brexit Secretary Dominic Raab suggests the UK’s future relationship with the EU is becoming “clearer and clearer” by the day but admits a political framework agreement may not be ready for October.
What Barnier made clear last weekend is his inclination to force the UK to pick an “off-the-shelf” deal (Norway). For Barnier, Single Market access comes at a cost. That cost includes freedom of movement, regular contributions, and European Court of Justice jurisdiction.
The alternative for the UK is an ambitious “Canada-dry” deal.
“… If we let the British pick the raisins out of our rules, that would have serious consequences,” Barnier said, warning that “third parties” will seek the bespoke benefits the UK demands.
In sum, there is no scope for “plus, plus, plus.”
The Commission’s primary concern is the Single Market. The Italian government has preannounced a block (non-ratification) of the CETA deal this autumn, on which the Brexiteers model their agreement (CETA plus).
There will be no lifeline from Berlin
The pound began to regain a bit of lost ground against the euro and the US dollar on Wednesday, upon news that Germany and London have reached a key compromising deal over Brexit.
The anonymous source report was founded on the hope for “constructive ambiguity.”
Bloomberg reported that both Germany and the UK were ready to accept a “less detailed agreement” on the U.K.’s future economic and trade ties with the EU, to avoid a disorderly Brexit in March 2019. That “key compromise” amounted to kicking the can down the road.
Brexit is supposed to take place in two successive waves: first comes the separation agreement, then comes the future trade accord. Bloomberg’s report suggested that negotiators were willing to sign a political framework agreement that did not include a detailed trade agreement. In some, it was suggested that a few things could be agreed before everything was agreed.
That report appears to be little more than wishful thinking.
In a speech delivered in Frankfurt on Tuesday, German Chancellor Angela Merkel confirmed that a “no deal” Brexit is a distinct possibility.
“We don’t want the discussions to break down,” the German Chancellor said, specifying that such an eventuality can’t fully be ruled out. Nonetheless, Ms Merkel vowed to commit “all our force and creativity to make sure a deal happens.”
But, Ms Merkel expects the UK to become a third country. “Exit means exit,” the Chancellor said. In mirroring Theresa May’s “Brexit means Brexit” statement, the German Chancellor was also reiterating the German position that a “third party” relationship cannot be the same as EU membership.
Transition period in danger
The UK’s Brexit Secretary Dominic Raab insisted that the final destination/outlook of the agreement to be concluded this autumn will not be altogether “nebulous and unclear.”
London signals that there will be agreement on fundamentals, which presents the challenge of ratification in both the European and the UK parliament. And that is a tall order because both parliaments will not tolerate “constructive ambiguity.”
Berlin is anything but vague.
“No deal” means no transition period. “If we do not get to an agreement – a scenario we don’t want – there will not be a transition phase,” the Chancellor’s spokeswoman Ulrike Demmer is quoted by Reuters as saying on Wednesday.
The Austrian foreign minister Karin Kneissl told BBC’s Newsnight that Brexit is perhaps “the only topic” in which the EU 27 are cohesive in their response is Brexit.
The ranks remain closed. Only Poland’s foreign minister, Jacek Czaputowizc, is keen to be the advocate for openness to the UK’s positions. Poland is said to be reflecting the broader views of the Visegrad Four (Poland, Hungary, Czech Republic, Slovakia); however, that is an assumption.
The clock is ticking
Meanwhile, the political clock is ticking.
The European Parliament (EP) expects a vote on the framework agreement to take place no sooner than two weeks before March 29, 2019 Reuters reports.
The head of the EP constitutional affairs committee Danuta Hubner says the objective is now the plenary session of March 11-14, 2019. The framework agreement should not be delayed beyond November 2018, as lawmakers will need time to absorb and debate the agreement across the 27-member states.
Moreover, it is clear that EP will not debate a framework agreement that has not been ratified by the UK Parliament. That is a big issue since the UK parliament is deeply divided within and across party lines.