Both sides of the Brexit negotiations – but, let’s face it, mainly the British – celebrated getting past the European Union’s March summit milestone broadly on schedule. Most of the separation issues are sorted out, there’s a 21-month transition period agreed to in principle and the EU has issued its guidelines for the post-transition relationship. Sighs of relief all around.
Yet one look at the to-do list for between now and the EU’s October deadline to conclude the talks reveals little room for complacency. As Peter Ptassek, Germany’s Brexit coordinator, said on Twitter recently, there’s been a “strange silence” from the U.K. since the summit breakthrough. “Not the right moment to talk?” he wondered. “EU awaiting U.K. response…” No date has yet been set for the next round of negotiations. Despite a huge gulf in the visions for the post-2020 relationship between the two sides, there has been little in the way of serious conversation between London and Brussels on how to bridge that divide.
While negotiators are at least in touch over how to solve the tricky issue of keeping the Irish border invisible after Brexit (the fourth in a series of U.K.-EU meetings on the topic takes place in Brussels today, with a session focusing on the rights of individuals), that’s only one of a number of topics left over from the first phase of the negotiations. The draft 120-page Brexit treaty shows that, in addition to the Irish border, there’s no agreement between the U.K. and EU yet on topics including:
- governance of the Brexit deal, and what to do if there are disputes;
- the power of the European Court of Justice over the U.K. before the end of the transition period, including the right to start new proceedings against Britain;
- the ownership of nuclear material;
- intellectual property registration;
- ongoing police cooperation and sharing of law-enforcement information;
- cooperation in civil law and commercial matters.
That treaty, which must be approved by the British and European parliaments and a weighted majority of 72 percent of the remaining EU member states before Brexit day next March, will sit alongside what the EU calls a “political declaration” about the future. Any agreement about future trade will be in that declaration and referred to in the treaty. But it won’t be legally binding and probably will fall a long way short of the fully fledged trade deal that the U.K. hopes to have ready for the end of the transition period. How detailed the declaration will be depends on the amount of work that can be done over the next six months and the willingness – or otherwise – of both sides to make concrete commitments now about the future.
Risks Overplayed | The most accurate pound forecasters see the currency climbing more than 8 percent this year. Sterling’s bumpy ride since the end of January has done little to alter the view of John Goldie at London-based broker Argentex LLP, which holds the top position for the pound against the dollar in Bloomberg’s latest survey ranking. He sees the currency ending the year at $1.46, compared to a median poll of $1.42. Investec, which topped rankings for major currencies, said the underlying fundamentals support a bullish sterling view. “Brexit risks are overplayed, my view is that agreements will be made,” said Goldie.
English Debt | Euro-area banks have about €100 billion ($122 billion) of outstanding liabilities under English law, which after Brexit may no longer count toward EU requirements for loss-absorbing debt, according to the Single Resolution Board, the EU’s authority for bank restructuring. Banks in several euro countries face this problem, the SRB said yesterday. Elke Koenig, the board’s chairwoman, said that while a Brexit transition period could resolve the issue, banks must be prepared for any outcome of Brexit negotiations.
Finnish Lines | EU chief Brexit negotiator Michel Barnier is in Finland. He met lawmakers and Prime Minister Juha Sipila on Thursday and consults at Helsinki airport today, with the aviation industry one of Finland’s priorities in the Brexit negotiations. During a press conference with Sipila, Barnier reiterated that the EU’s position on the type of future relationship it will have with the U.K. could change if the British government removes some of its red lines.
Data Sharing | The U.K. Treasury is confident the country will continue to share indirect tax data with the EU after Brexit and boost global efforts to fight tax evasion among online marketplaces, Bloomberg BNA reports. The issue is “in the mix of negotiations,” Mel Stride, the Treasury’s financial secretary, told Bloomberg Tax. “But I would expect us to make progress on that.”
Choppy Waters | Shipping companies are strengthening freight services between Ireland and continental Europe amid plans to bypass British ports after Brexit, the Financial Times reports (paywall). Companies are worried about the prospect of long lines and cumbersome customs checks when passing through U.K. ports, the newspaper says, despite the British government’s pledge to ensure “frictionless trade.” The paper says that CLdN, a Luxembourg-based shipping company, has introduced two “mega vessels” on new direct freight routes linking Dublin with the ports of Zeebrugge and Rotterdam, in Belgium and the Netherlands.
The Daily Telegraph reports that the opening of the U.K.’s first overseas naval base in 50 years is a sign that the country’s “ability to maintain a global military presence post-Brexit has been greatly enhanced.”
The Navy’s new Juffair base at the Bahraini port of Mina Salman, built at a cost of about £40 million, will enable Britain “to play its part in keeping the region’s vital sea-lanes open,” the Brexit-backing newspaper says.
The paper says the opening is an historic moment, reversing the policy of former Prime Minister Harold Wilson, who withdrew all British forces based east of Suez, a strategy that was completed in 1971 – two years before the U.K. joined the EU.
“The reopening of the Navy’s base in Gulf is therefore seen as a major commitment by Britain to reviving its military presence overseas in the run-up to Brexit,” the newspaper says.
©2018 Bloomberg L.P.