Brexit Bulletin: Preparing for Failure
European Union officials are increasingly pessimistic about the chances of a December deal, and are already looking at their diaries to see when a follow-up summit could be hastily arranged to give the U.K. a second chance.
The view in Brussels is that it’s up to the U.K. to make concessions – particularly on the contentious divorce bill – before the EU will agree to move talks on to trade, Bloomberg’s Ian Wishart reports. If it hasn’t done that by December, the EU would wait rather than force the issue or move to a Plan B, according to three people familiar with the negotiations.
A summit in February, which at the moment is down as an extraordinary gathering to discuss internal business, could provide another opportunity. There’s also the possibility – as long as the U.K. doesn’t stage a walkout in protest – that an additional summit could be called in January, the people said. In public, leaders have signaled that March would be the next chance for the bloc to agree that enough has been done on the divorce settlement for talks to move on to the next stage.
Negotiations are deadlocked, with the British government refusing to meet the bloc’s demand that it commit to meeting financial liabilities of about €60 billion ($71 billion). The U.K. says it has made plenty of concessions already and now it’s up to the EU side to show some flexibility.
The U.K. government is trying to strike the best deal possible while back home fighting rebels on both sides of the Brexit debate. The distractions were underlined late Tuesday as pro-EU Tory lawmakers threatened a rebellion on the government’s landmark Brexit legislation. There are dissenters on the other side too, and divisions in Cabinet constrain Theresa May’s room for maneuver.
Delaying a decision beyond December would make the negotiations – and the situation at home – even trickier. Businesses are already threatening to enact their worst-case scenario plans if no transition deal is set in stone in January. Transition arrangements haven’t even been discussed, although Brexit Secretary David Davis says he hopes for an agreement early in 2018.
Britain is due to leave in March 2019, with or without a deal. And October 2018 is a soft deadline to get a deal done so that the veto-wielding European Parliament, and U.K. lawmakers, have time to approve the agreement.
“We have no clear readiness from the London side to commit to further compromises and that’s why for the moment we are in a blocked situation,” Manfred Weber, the leader of Angela Merkel’s Christian Democrats in the European Parliament, told reporters Tuesday. Weber, who is due to meet May on Wednesday, said it’s increasingly unlikely EU leaders will give the green light in December.
After the latest round of talks ended in failure last Friday, chief EU negotiator Michel Barnier raised the prospect that the December summit could also be a flop. There’s a sense of deja vu: October was meant to be the month that divorce talks would be wrapped up and negotiations on the future would start. Then, as now, expectations for a breakthrough were slowly wound down.
Mad Plan | May survived a night of Brexit voting in Parliament but mainly because the most contentious debates are still to be held. Tory rebels pledged to stand their ground, with Dominic Grieve, a former Conservative attorney general now leading the charge to soften Brexit, describing as “mad” a government plan to enshrine the date of the U.K.’s departure in law. “I will vote against it – absolutely no ifs, no buts, no maybes,” Grieve said, cheered by colleagues. He called Brexit an “extraordinarily painful process of national self-mutilation.” The Brexit-backing Telegraph hit back with a front-page photo splash of the lawmakers it called the Brexit mutineers.
Irish Veto | Irish Prime Minister Leo Varadkar gave his strongest signal yet that he’s not prepared to use his veto over Brexit talks in the face of opposition from other European countries. Isolating the government in negotiations would be “a really big mistake strategically,” he said.
Davis to the City | David Davis is on a determined mission to show global bankers some love, promising he’ll work to protect the City of London from any trouble caused by Brexit, Bloomberg’s Tim Ross writes. He has made two speeches in the space of a week setting out his plan to ensure the U.K. capital keeps its status as a world-leading financial center. It’s a far cry from the prime minister’s attack last year on the international elites as the “citizens of nowhere.”
Banks Going | Bank of America Corp. will initially move about 200 sales and trading staff to Paris and Frankfurt as part of its Brexit plan, Chief Operating Officer Tom Montag said. Deutsche Bank says it needs to know by the beginning of next year “what is going to happen and what is not going to happen.”
Aston Martin at Risk | Carmakers in the U.K. could endure “semi-catastrophic” production interruptions if the EU stops automatically accepting the nation’s vehicle certification program once Brexit comes into effect, Bloomberg’s Tom Seal reports. Terms for Britain’s departure from the EU will need to include agreements on so-called type approvals for U.K.-made autos so they can still be sold in the bloc’s remaining countries, executives told a parliamentary committee on Tuesday.
Russian Meddling | Russian Twitter accounts sent about 45,000 posts about Brexit in 48 hours during the referendum, the Times reported. May delivered a stern warning to Russia on Monday about meddling in democracy, though she didn’t mention the Brexit vote.
ECJ Ruling | Britain can’t deny a Spanish woman who obtained a British passport the right to live with her Algerian husband in the U.K., the EU’s top court said in a case that could weigh on the citizens’ rights debate.
Lloyd Blankfein made headlines last month when he tweeted that he’d be spending “a lot more time” in Frankfurt. But on Tuesday he seemed equally taken with the city that is Frankfurt’s main rival in winning the spoils of Brexit.
©2017 Bloomberg L.P.