Brexit Bulletin: Clipping Johnson’s Wings

(Bloomberg) -- Today in Brexit: Parliament has weakened Boris Johnson before he’s even got the job.

What’s Happening?

The best weapon in Boris Johnson’s arsenal has been left firing blanks.

From the beginning of his campaign to be Britain’s next prime minister, Johnson has argued that the difference between his approach to negotiations and Theresa May’s is that he would be willing to walk away without a deal. Parliament has now moved to take that option away from him.

Johnson’s threat made the EU side nervous and his unpredictability was probably his best asset going into talks ahead of the Oct. 31 Brexit deadline. The EU has repeatedly insisted that it will not reopen the Withdrawal Agreement and could cope with a no-deal divorce. Still, if Brussels — or Dublin — was ever going to budge at all, it would probably have been out of fear that Johnson might do the unthinkable and fulfil his pledge to walk away.

While it’s not impossible to rip Britain out of the EU without a deal now, it’s pretty difficult to find a route to it — at least this year. (One way is to restore the devolved executive in Northern Ireland — as ITV’s Robert Peston says, watch for signs that becomes a priority.)

So the pressure eases on the EU, which as Ian Wishart has reported has been looking at what mild sweeteners it can offer without appearing to be giving in to a populist.

Conceivably, Thursday’s vote makes it easier for the next prime minister to get a tweaked deal through Parliament, as euroskeptic hardliners will be faced with the choice of that deal or no Brexit at all. The trouble with that argument is that we’ve been here before — it’s exactly the dilemma May presented them with, and they still said no.

The EU is already talking about the prospect of another extension, both in public and in private. And an early general election probably just got more likely too.

Today’s Must-Reads

• Jeremy Hunt is hoping for a late surge to beat Boris Johnson. But it’s a big ask. “It’s like a team making a four-goal, second-half comeback after going 6-0 down in the first half,” says politics professor Tim Bale. “They might win back a bit of self respect but they still won’t win the game.”
• The EU will issue a new warning to the U.K. on banking, saying there’s no such thing as free access for financial firms after Brexit.
• Civil servants fear a Brexit backlash from a Johnson government, according to the Financial Times.

Brexit in Brief

Open to Extension | Incoming European Commission President Ursula von der Leyen said Europe and the U.K. must do “everything” to achieve an orderly Brexit, as a failure would entail massively negative consequences for both sides. She reiterated that she’d be willing to consider another extension if requested by “our British friends.”

Number Two | Senior Conservative euroskeptics are pushing Johnson to make hardliner Iain Duncan-Smith his deputy, The Sun reports. They want to make sure the next prime minister sticks to his pledge to leave the bloc on Oct. 31.

Last Prime Minister | Boris Johnson could be the last premier of the United Kingdom, said former Prime Minister Gordon Brown. Brown warned of a head-on conflict between the front-runner’s hardline Brexit views and the Scottish National Party’s “extreme nationalism,” the Guardian reports.

Cost of No-Deal | A no-deal Brexit could plunge the British economy into a yearlong recession, hammer the pound and house prices and add tens of billions of pounds to government borrowing, according to the U.K fiscal watchdog. And that’s based on the “less disruptive” scenario of a no-deal departure.

Mixed Message? | Irish Prime Minister Leo Varadkar sounded a conciliatory note on Thursday, saying he’ll meet the new U.K. premier, and is open to considering whether Britain has any workable solutions for the border. A few hours later he reiterated the EU’s line that the Irish border backstop can’t be renegotiated, although the political declaration on future ties can be tweaked.

Barnier’s Message | Markets got excited on Thursday about Michel Barnier’s messaging too. The top EU Brexit negotiator said in a BBC documentary that the bloc was open to discussing alternative arrangements for the border. That prompted a surge in the pound. An EU spokesman said there was nothing new, and Barnier then told reporters in Riga that the divorce deal can’t be changed — only the non-binding political declaration about future trade.

On the Markets | The pound rose 0.9% on Thursday, extending gains after the vote in Parliament. It edged lower to $1.2543 early on Friday.

Fishy Claims | Johnson’s claim — as part of a campaign stunt — that EU rules required smoked kippers to be accompanied by an “ice pillow” when sent to customers through the post was rebuffed by Brussels. U.K. rules, not European ones, are responsible, the Telegraph reported. Johnson made his name as a reporter in Brussels writing about EU rules that appeared absurd — stretching the truth at times as he did so.

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To contact the editor responsible for this story: Adam Blenford at ablenford@bloomberg.net, Iain Rogers

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