Brexit Bulletin: Ireland Battens Down the Hatches

Brexit is 23 days away.

(Bloomberg) --

Today in Brexit: The Irish government is set to lay out its plans to shelter the economy from a no-deal divorce.

What’s happening? As both sides continue in their attempts to a secure a Brexit deal, some governments in the European Union are already bracing for the worst.

In Dublin today, Irish Finance Minister Paschal Donohoe will base his 2020 budget on the assumption that the U.K. will tumble out of the EU without a divorce settlement — and the hit to growth that will entail. That means no big tax cuts, caps on spending and squirreling away cash to cushion exporters and farmers against the worst effects of a no-deal Brexit, whenever that may be. The urgency to come up with contingency measures has become more acute since the U.K.’s new proposals failed to break a deadlock over what will happen to the Irish border after Brexit.

Brexit advocates in the U.K. have long hoped that economic self-interest will eventually force Ireland to blink on the issue that’s holding up the U.K. exiting the EU: How to avoid border infrastructure returning to the island of Ireland. So far, there's little sign of Prime Minister Leo Varadkar caving. Instead, he's sought to turn up the pressure on his U.K. counterpart, setting Friday as an informal deadline to come up with an improved offer on Brexit.

Back in the U.K., a Scottish judge refused to put further obligations on Johnson’s negotiating tactics yesterday, ruling in the prime minister’s favor in a case that could have forced him to obey a law that requires him to delay Brexit if he can’t reach a deal.  But the boost may be short-lived — the judge ignored the prime minister’s frequent assertions that he won’t seek an extension and relied on assurances from government lawyers that he would obey the law, which may make it harder for Johnson to leave without an agreement on Oct. 31. 

Meanwhile, the U.K. is set to continue talks with EU negotiators today. Johnson spoke to his counterparts in Denmark, Sweden and Poland on Monday, in what Brexit minister James Duddridge told Parliament was an attempt to “whip up enthusiasm for the deal and avoid no-deal.” In a sign of the government’s confidence that the U.K will be leaving on Oct. 31, the Treasury will make three million Brexit 50p coins — imprinted with that exit date — available to spend by the end of the month, according to the Telegraph.

Today’s Must-Reads

• Bloomberg’s Vassilis Karamanis takes a deep dive into the currency markets to show that pound traders are turning increasingly optimistic as the U.K. heads for the crunch EU summit later this month.
• The Spectator’s James Forsyth reports the contents of a lengthy text message that he says shows how Downing Street views the state of the negotiations — including what to do if the talks collapse.
• The Institute for Fiscal Studies has warned Johnson against pressing ahead with his plans for big tax cuts, amid warnings that a no-deal Brexit could blow a 100 billion-pound hole in the public finances.

Brexit in Brief

Blame Game | The British public will blame Parliament, pro-remain lawmakers and the EU more than Johnson if Brexit is delayed, according to a ComRes survey for the Telegraph.

Another Defection | Former Conservative MP Heidi Allen last night became the latest lawmaker to join the Liberal Democrats, bring the pro-remain party’s total in the House of Commons to 19.

Publishing Delay | Bloomberg’s Robert Hutton reports that Johnson’s government has delayed publishing its post-Brexit rules for when it would be able to intervene to help businesses after a disagreement over what those rules should be.

Stark Warning | The chairman of Societe Generale has warned that a no-deal Brexit could plunge the world into recession and would be a disaster for the financial system. “Consumption would stop, investment would stop and we could have also a recession,” Lorenzo Bini Smaghi said at the Bloomberg Invest London conference on Monday, adding “it is a systemic event.”

New Opportunities | Brexit represents a great opportunity to reboot the U.K. economy, Gerard Lyons, chief economic strategist at Netwealth Investments, told Bloomberg TV yesterday.

Energy Sapping | Brexit may add to the pain faced by Britain’s consumer energy suppliers, which are already being squeezed by regulators and tight margins in the electricity market, Bloomberg’s Olivia Konotey-Ahulu and Mathew Carr report.

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To contact the editor responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Leila Taha

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