U.K. Prime Minister Theresa May. (Photographer: Simon Dawson/Bloomberg)

U.K. and EU Agree Brexit Deal in a Draft That Hands Wins to May

(Bloomberg) -- The U.K. and the European Union have agreed to the final bit of their Brexit deal, setting out a vision for close economic ties in a draft that hands Prime Minister Theresa May some key political wins.

EU Council President Donald Tusk said the draft, which was obtained by Bloomberg, had been agreed in principle, pending leaders’ sign off on Sunday. May briefed her Cabinet and announced the deal outside of her Downing Street residence.

“The British people want this to be settled. They want a good deal that sets us on course for a brighter future. That deal is within our grasp and I am determined to deliver it,” she said.

The pound surged as investors saw the final stage of negotiations falling into place. May’s challenge now is to convince a skeptical Parliament to back it in a vote that will probably take place next month. She’s already hitting on her best argument to win over politicians: Voters want it done and they care little for the dramatic party politics that has dogged the Brexit debate since the historic referendum in 2016.

The deal offers May some points to help her sell it at home. First, it gives industry what it wanted as it points the way to easy trade for goods, calling for "a free trade area, combining deep regulatory and customs cooperation." For Brexiteers -- her most vocal opponents -- it hints vaguely that the U.K. will be able to pursue its own trade policy and also stop free movement of people.

It also offers a way out of the most toxic part of the divorce deal -- the Irish backstop that opponents of all political colors oppose as it risks keeping the U.K. shackled to the EU’s orbit indefinitely. And for Brexiteers there’s also a line about how technology will come into its own in the future, solving problems that hardliners have long said hi-tech could fix.

Now it depends whether May’s opponents want to be convinced or not. The text isn’t legally binding, unlike the treaty that governs the divorce, which is where the most unpalatable bits of the agreement are nestled.

EU Commission Margaritis Schinas told reporters that the issue of Gibraltar -- a sticking point because of Spanish claims -- and fishing access still needed to be agreed and the ball is now in the court of EU member states. Spain says talks are still under way.

German Chancellor Angela Merkel also appeared to cast doubt on the idea that the deal was done, saying the Irish issue was still a stumbling block.

U.K. and EU Agree Brexit Deal in a Draft That Hands Wins to May

May is due back in Brussels on Saturday for a meeting with EU Commission President Jean-Claude Juncker before a key summit with other leaders on Sunday. That’s when the leaders are expected to sign off.

These are the key points in the deal:

  • The Parties envisage comprehensive arrangements that will create a free trade area, combining deep regulatory and customs cooperation, underpinned by provisions ensuring a level playing field for open and fair competition.
  • It should "build and improve on the single customs territory provided for in the Withdrawal Agreement which obviates the need for checks on rules of origin.
  • Cross-border financial services will be based on equivalence. Work will start as soon as possible to avoid disruption
  • Parties to explore possibility of cooperation between U.K. and regulatory agencies such as EMA, EASA -- this was a key demand from May which the EU had rejected
  • On the Irish backstop: The Parties recall their determination to replace the backstop solution on Northern Ireland by a subsequent agreement that establishes alternative arrangements for ensuring the absence of a hard border on the island of Ireland on a permanent footing. (That’s an upgrade to the previous language.)
  • In another boost for Brexiteers, the draft refers to "all available facilitative arrangements and technologies," to ease customs procedures.

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