Brexit Bulletin: Backstop Forever

(Bloomberg) -- Today in Brexit: The thing about the Irish border is it might never be fixed.

A year ago, Theresa May agreed to a compromise on the Irish border that’s come back to bite her: She’s being held to her impossible promises. The Irish backstop now being hashed out looks like another version of the same thing.

The prime minister is trying to persuade her Cabinet to accept the so-called backstop arrangement to get a deal over the line — much like in December, when a preliminary accord was signed so that talks could move on. (As it turns out, they didn’t move on a whole lot.)

But the main thing to remember about the Irish backstop is what the European Union side has thought along: No future trade deal between the two sides is ever going to be good enough to make some kind of border unnecessary. That’s because the only way to avoid a border is to stay in the customs union and big bits of the single market — which the U.K. has long ruled out.

Brexit Bulletin: Backstop Forever

So pro-Brexit Tories have a point when they say the backstop risks binding the U.K. to EU rules forever, with no say in them.

As May tries to corral her Cabinet into an agreement — with reports she’s aiming for an agreement next week — there are some big glitches to overcome:

  1. May’s most euroskeptic ministers are demanding to see the government’s full legal advice supporting a plan for the backstop. It hasn’t even been written yet, Tim Ross reports.
  2. There’s a backlash after May told her Cabinet that the U.K. will agree to the EU’s “level playing field” rules as part of the backstop. That means not being able to slash EU regulations on competition rules, state aid and environmental regulations.
  3. May has told the Northern Irish Democratic Unionist Party that the EU’s backstop proposal — the one that would carve off Northern Ireland — will be in the divorce deal as an ultimate, last-resort guarantee, the Times says. DUP leader Arlene Foster said the letter raises “alarm bells.”
  4. The Telegraph reports that EU fishing fleets must be given access to British coastal waters as the price of accepting the U.K.’s backstop.

Today’s Must-Reads

  • You Do the Math: Can May get her Brexit deal through Parliament? Rob Hutton looks at the problem we’re all trying to answer.
Brexit Bulletin: Backstop Forever
  • May is about to sign a Brexit deal that looks very much like the “bad deal” she always vowed she wouldn’t accept, argues the Spectator’s James Forsyth. No deal or a second referendum brings risks, but the backstop raises more questions of democratic accountability than EU membership, he argues.

Brexit in Brief

Sunday Ringaround | May is planning a Sunday ringaround of Cabinet ministers in the hope of getting them on board for a Cabinet meeting on Monday or Tuesday, the Financial Times reports. Dates for a special deal summit are still up in the air. Nov. 25 was doing the rounds again yesterday.

Another Move | Euronext NV, the owner of Ireland’s stock exchange, is making plans to move the settlement of Irish shares to Brussels after Brexit, Dara Doyle reports. Ireland — the only EU member without its own central securities depository — has relied on U.K.-based Crest to settle trades since the dawn of electronic financial markets. But once the U.K. leaves, Crest probably won’t be able to continue providing that service.

Preparing for the Worst | The EU’s markets cop is helping traders move derivatives contracts out of London to get ready for a no-deal Brexit. Rule changes proposed by the European Securities and Markets Authority would make it cheaper and easier for EU banks, funds and other traders to replace U.K. counterparties with new ones in the EU.

Hoping for the Worst | A $15 billion credit hedge fund that hunts for distressed debt is waiting for Brexit to take its toll. Marathon Asset Management’s Bruce Richards says his firm is in standby mode, waiting to invest in any U.K. companies roiled in the Brexit fallout. “Come a year after Brexit, we believe there’s a recession waiting,” Richards told Bloomberg TV.

How Much? | Bank of America Corp. has spent $300 million to $400 million getting ready for a potential hard Brexit, Chief Executive Officer Brian Moynihan said. Preparations include a new hub in Dublin and a broker-dealer in Paris, moving staff, creating legal entities and redoing contracts so that it’s ready to operate in March.

On the Markets | Even fund managers who once shunned the pound are now betting on a rally, report Charlotte Ryan and John Ainger. The pound was little changed in early trade this morning at $1.3046.

300 Pages and Counting | The withdrawal agreement that ministers have been invited in to read — but not to take home — is 300 pages long, Tim Ross reports. And it’s not finished yet: It doesn’t yet include the most difficult section, the bit on the Irish backstop.

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