(Bloomberg Opinion) -- One word — “pathway” — is all it took to send the British pound rocketing against the U.S. dollar. It had been a dire week in Brexit-land, with Boris Johnson’s do-or-die tactics failing to persuade the European Union to accept his new proposal on the Irish border.
But suddenly on Thursday afternoon came the surprising news that a meeting between the British prime minister and his Irish counterpart Leo Varadkar had gone quite well. “Very positive, very promising,” Varadkar said. “I do see a pathway towards an agreement in the coming weeks.” The sterling rally continued on Friday as there was talk about the EU’s negotiating team possibly starting to discuss legal drafts of a deal in secret, a process known as entering “the tunnel.”
What might this pathway look like, though? The EU’s negotiators and Johnson’s merry crew had been miles apart on how to solve the two problems facing Ireland after Brexit: how to avoid a hard border in the name of peace, and how to uphold the integrity of the EU single market in the name of trade.
There were no details on any new Irish solutions to go with Thursday’s warm words, nor with Friday’s talk about intensifying negotiations. But we’d probably need to see Johnson moving somewhere toward an EU-Northern Ireland customs union, while Brussels might have to swallow a limited form of consent from Northern Ireland’s lawmakers or citizens for such an arrangement.
It looks like Johnson will have to do most of the yielding, which is why this won’t be easy, despite the excitement of pound traders.
First, a recap of Johnson’s initial proposal, which he and his Brexiter comrades saw as a good-faith offer on avoiding a hard border. Under that plan, Northern Ireland would have left the EU customs union along with the rest of the U.K. but stuck to EU regulations on goods. Britain would have thus preserved its own customs territory but avoided a regulatory border on the island of Ireland.
The Johnson arrangement, at least as it stood before Thursday’s Varadkar talks, would have needed to secure consent from the Northern Ireland assembly at Stormont every four years. Former U.K. Foreign Secretary Jeremy Hunt, not a rabid Brexiter, called it: “A serious compromise.”
Yet the list of EU objections had only been getting longer before the Varadkar meeting. The bloc’s chief negotiator Michel Barnier disagreed with Hunt, saying the initial Downing Street proposal was un-serious and unacceptable. The plan would have still required customs checks on goods traveling between Ireland and Northern Ireland, but with some kind of magic technological fix to avoid hard checks on the border.
This technology is, putting it kindly, untested. Meanwhile, there were no legal fall-backs for the EU if this all went wrong, and Northern Ireland’s periodic vote could have meant the plan was never applied.
Even when looking beyond Ireland there were huge problems with Johnson’s first proposal, which deleted the pledges of his predecessor Theresa May to uphold a “level playing field” between the U.K. and EU on areas like tax, state aid, social rights, and the environment. Europe certainly won’t want an unshackled Singapore-on-Thames sitting alongside it.
For all the hope of a “pathway,” and whatever concrete concessions that may emerge, these differences are more deeply-rooted than the technical talk suggests.
As the EU historian Piers Ludlow puts it, the Brexiters see leaving the EU as transactional: They don’t have a good enough deal inside the bloc, and they want a better deal outside it. But the EU sees Brexit as existential; not just because agitators like Nigel Farage want the bloc to disappear, but also because London’s constant pleading for a favorable deal threatens to undermine the EU’s raison d’etre: the single market.
Hence the Irish impasse. The Brits can’t fathom why there’s so much fuss over a 500-kilometer-long border. Who needs checks anyway? Why is the EU “weaponizing” an island of 7 million people? But the answer from the existential Europeans is thuddingly obvious. Ireland is staying, the U.K. is going. The EU will have to uphold laws, treaties and regulations for 27 members and the 70 non-members with which it has signed free trade deals. Why would it help out a non-member by breaking its own rules?
This doesn’t mean a deal is impossible, as evidenced by the signs of progress on Friday. But Johnson will have to give ground, while keeping his coalition of Brexit ultras and Democratic Unionists on board — and while keeping one eye on a future election battle with Farage’s no-deal supporting Brexit Party. If next week’s EU summit is going to end in smiles and handshakes, there will be tears for somebody along the way.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.
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