Brexit Bulletin: The Choices Get Harder

(Bloomberg) -- Today in Brexit: With Theresa May poised to admit that she can’t avoid European elections, some unpleasant choices now need to be taken. 

What’s Happening?

The prime minister might soon have to decide which is more damaging to her Conservative Party—a soft Brexit that would split it or a general election that could kill it.

Theresa May is preparing to admit that she can’t get her Brexit deal through Parliament in time to avoid taking part in European elections, in which the Conservatives are bracing for a damaging campaign and a trouncing by Nigel Farage. The Tories are resigned to losing the European elections; the prospect of a general election with the same dynamic is more worrying.

Farage’s new Brexit Party is a threat that can probably only be contained if the U.K. actually leaves the European Union. That’s the implication of a warning on Thursday by Foreign Secretary Jeremy Hunt. “It would be a big mistake to have an election until we’ve left the EU,” Hunt said.  Leaving “is what we promised people we would do last time, they are expecting us to do that and frankly I think they’re very perplexed that we haven’t done it yet.” Another minister told Bloomberg’s Rob Hutton the Brexit Party poses an existential threat to the Tories if the U.K. doesn’t leave the EU.

Brexit Bulletin: The Choices Get Harder

But how to deliver Brexit? The only way that’s still available to May is to give the Labour opposition pretty much everything it wants. That means a customs union with the EU and a softer divorce than the one May had in mind. May and her deputy David Lidington have already dropped big hints that a customs deal is where they think a compromise can be found. Still, that isn’t necessarily enough to win over all the Labour votes May needs. Labour is also pushing for another referendum on whatever deal is finally struck.

That leaves May having to contemplate the even trickier question of what’s worse for the Tory party—a second referendum that will be branded a betrayal or a general election pitting her party directly against Farage’s populists?

Today’s Must-Reads

Brexit in Brief

RBS Warning | Royal Bank of Scotland cautioned that Brexit uncertainty would make income growth “more challenging” in the near term. Businesses are delaying borrowing decisions because of the uncertainty, the bank said.

Buffett Undeterred | Billionaire investor Warren Buffett told the Financial Times he’s unfazed by Brexit and would still consider investing in the U.K. “I’m ready to buy something in the U.K. tomorrow,” he said, regardless of whether the U.K. is in or out of the union. “We welcome the chance to put money out any place where we think we understand and sort of trust the system.” (The buried good news there is the implication he still trusts the system in the U.K.)

Boris’s War Chest | Boris Johnson made more than £160,000 ($206,000) in donations and speaking fees in March and April, bolstering the former foreign secretary’s war chest for a Conservative Party leadership contest. Johnson was already well ahead of potential rivals—including Environment Secretary Michael Gove and former Brexit Secretary Dominic Raab—at the beginning of April, when the register was last updated. 

Hunt’s Choice | More from Jeremy Hunt, who said if there were a binary choice between no-deal and no Brexit, he would choose no-deal. Of course, it’s not a binary choice as Parliament has made clear it won’t accept no-deal. It looks like he’s burnishing his leadership credentials as a born-again Brexiteer.

Macron vs Merkel | President Emmanuel Macron said France and Germany may have different views on issues such as Brexit, climate policies or trade talks with the United States, but he defended what he called “fruitful confrontations.” Brace for more theatrics at the next Brexit summit.

On the Markets | The pound was barely changed at $1.2903 early on Friday. Volatility has also dropped as the political drama turns to deadlock.

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