Brexit Bulletin: Creative Thinking Needed

(Bloomberg) -- Today in Brexit: Some calmer words on both sides after the weekend’s bust-up.

U.K. Prime Minister Theresa May struck a conciliatory tone in Parliament on Monday – avoiding the combative flourishes of late – and on the other side of the Channel the tone was more constructive too. On the eve of a decisive summit, French President Emmanuel Macron said he thought “collective intelligence” would prevail.

Intelligence will certainly be needed, and some creative thinking too, as the riddle of the Irish border continues to stump Brexit negotiators. They’ve been fighting about this since February – how to avoid a hard border on the island of Ireland without erecting one in the Irish Sea – yet fundamental differences remain. Britain and the European Union don’t even agree on how to define the so-called “backstop” (an insurance policy written into the Brexit deal to make sure that whatever happens in the future there is no policed border on the island).

But both sides sound like they still want a deal. May said on Monday that the two sides were not “far apart,” and said the outline was becoming clear. She’ll discuss Brexit at a full Cabinet meeting today. EU President Donald Tusk said there’s goodwill on each side, even as he warned that no-deal was more likely than ever. 

Teneo Intelligence reckons an agreement is still the most likely outcome, and the drama is a necessary part of the diplomacy. “What has been playing out is a choreography designed for domestic consumption in the U.K.,” the research group said. “More British grandstanding is required over the coming weeks for Prime Minister Theresa May to receive backing in Westminster.”

Leaders will have a chance to move things along when they meet for dinner Wednesday night. May will address them beforehand, and is then expected to leave the other 27 to talk Brexit without her. (The invitation to May has finally now gone out, and she’s formally accepted.)

We might get a better sense of how the negotiations are going later today, when chief EU negotiator Michel Barnier briefs the European affairs ministers of the 27 in Luxembourg. Tusk and Barnier meet today to prepare for the leaders’ Brexit discussion over dinner. Tusk, who took at least some of the blame for the disastrous Salzburg summit last month, called for both sides to keep working to overcome the obstacles.

“As someone rightly said: ‘It always seems impossible until it’s done.’ Let us not give up.”

Today’s Must-Reads

  • Brexit used to mean Brexit, John Authers writes for Bloomberg Opinion. What does it mean now?
  • EU Transport Commissioner Violeta Bulc tells the Financial Times that airlines have had plenty of time to prepare for a no-deal Brexit and the bloc won’t bend the rules to help IAG – owner of British Airways and Iberia.

Brexit in Brief

Pizza Plot | Eight euroskeptic ministers, including Brexit Secretary Dominic Raab and Foreign Secretary Jeremy Hunt, met over a takeaway last night and while they remain concerned, the prospect of resignations has receded as negotiations are still up in the air, Bloomberg’s Tim Ross reports. Their main worry is the Irish backstop and that the only alternative to May’s plan might be no-deal, according to a person familiar with the situation. 

Vote Counting | Four Tories raised the idea of a second referendum in Parliament on Monday. That’s a shift for a group that has previously focused on getting as soft a Brexit as possible. Sarah Wollaston, Anna Soubry, Dominic Grieve, and Heidi Allen all put the idea to May, who was clear in her response: “We had a people’s vote. It was called a referendum and the people voted to leave.” Meanwhile, Treasury Select Committee chair Nicky Morgan warned May that Parliament wouldn’t allow a no-deal Brexit.

All About the Backstop | May laid out in more detail than ever before on Monday what exactly the backstop fight is about. She said the EU accepted her plan for a temporary arrangement in which the whole U.K. stays in the bloc’s customs regime, but says there’s not enough time to work it out. There’s also a fight over whether it should be time-limited or open-ended. The EU also wants its own original backstop plan – one that May has ruled unacceptable – to be in the Brexit treaty as an ultimate fallback position in case all else fails.

Wage Delays | Nissan Motor Co., which operates Britain’s largest car plant, has delayed the start of wage talks with its U.K. workers until the terms of Brexit have been settled and it has a fuller understanding of the impact on its business. The Japanese automaker will start negotiations in 2019 “when we have better clarity on the future business outlook,” the company said on Monday. Talks were originally scheduled to start during the fall.

Another Dublin Win | Coinbase Inc., one of the biggest U.S. cryptocurrency exchange operators, is expanding its European presence with a Dublin office as Brexit uncertainty continues to push companies to create contingency plans.

Ending Austerity? | Britain needs an extra £19 billion ($25 billion) a year by 2023 if May is to fulfill her pledge to end austerity, according to the Institute for Fiscal Studies. That’s the amount required to deliver on promises to increase spending on health, defense and aid without inflicting real-terms cuts on other departments, the think tank said.

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