Brexit Bulletin: Take Your Time

(Bloomberg) -- Today in Brexit: The likely next head of the European Commission wants to avoid a messy Brexit.

What’s Happening?

The woman designated to be the most powerful official in the European Union said she hopes the U.K. stays in the bloc after all. And if Britain has to leave, it should be done in an orderly way – with more time if needed.

Ursula von der Leyen, the nominee for next European Commission president, gave a clear sign that she will try to prevent a no-deal exit and would be open to another extension. She takes over on what’s meant to be the day after Britain leaves. 

“We want you to remain,” she told European lawmakers on Wednesday. “When the United Kingdom needs more time, then I believe it’s right.” Leaving without a deal would be “catastrophic,” both economically and for international relations, she said.

Her reluctance to countenance a no-deal exit is potentially good news for the U.K. side. Both candidates to replace Theresa May are making it their strategy to scare the EU into believing Britain will walk away without a deal, which they see as the best tactic to secure changes to the unpopular divorce agreement. Front-runner Boris Johnson is even keeping open the option of suspending Parliament to push through no-deal, in what looks like a negotiating ploy.

In bleaker news for the candidates, she made clear the divorce agreement wouldn’t be renegotiated.

So how to get the deal done?

According to Mujtaba Rahman of Eurasia, a political risk consultancy, there’s a new idea being floated to solve the impasse, and it involves taking longer to leave. Britain could extend the transition period – currently slated to end in December 2020 – beyond 2022. It would then use that time to settle the issue of the Irish border. It’s not ideal – it would smack of the very can-kicking Johnson has vowed to avoid. But if it helped him get the deal done, at least he could argue he’d delivered Brexit.  

Today’s Must-Reads

• Johnson is winning the media war in the race to be Britain’s next prime minister, making bigger digital waves than rival Jeremy Hunt and getting better coverage in the country’s right-wing newspapers, Joe Mayes reports.
• But the prospective prime minister is engaged in perhaps the most dangerous game of bluff ever seen in British politics, writes the Financial Times.
• In the Darroch affair, Trump treated Britain shamefully, writes Bloomberg’s editorial board.

Brexit in Brief

See you in Court | Former Prime Minister John Major threatened to seek a judicial review if the next premier suspends Parliament to force through a no-deal Brexit. Boris Johnson described the threat as “very odd.”

What’s on Offer | EU leaders may be prepared to make concessions on the Brexit deal, according to David Lidington, May’s de facto deputy. But they would first want to know that a revised deal could pass the House of Commons, he said. Lidington told Parliament’s Brexit Select Committee “it is conceivable that the EU would be prepared to discuss some kind of further protocol to the Withdrawal Agreement.’’

Hunt and the Pound | A surprise win for underdog Jeremy Hunt in the contest to become U.K. prime minister would cause the pound to rally from near a two-year low – but not for long. Investors would soon focus on the fact that Hunt would face the same challenges as May: an intransigent EU and a divided Parliament.

New Buyers | The U.K. housing market saw an increase in new buyers last month for the first time since November 2016, and there are signs the market is starting to stabilize, the Royal Institution of Chartered Surveyors said. A gauge of prices indicated stagnation after four months of declines.

Not Automatic | Bank of England policy maker Silvana Tenreyro said the response to a no-deal exit isn’t automatic, and depending on how the pound reacts, the central bank may need to raise rates. Still, the most likely policy response is a cut, she said.

On the Markets | The pound rose 0.3% to trade at $1.2535 this morning. But Bloomberg’s Mark Cudmore says sterling is staring into the threat of a currency crisis: The Bloomberg Pound Index has fallen on 38 of the past 48 trading days. And while currency weakness is usually a good release valve for economic pressure, all signs show it needs to fall much further, he says. 

Want to keep up with Brexit?

You can follow us @Brexit on Twitter and join our Facebook group, Brexit Decoded. 

To contact the editor responsible for this story: Anne Pollak at apollak@bloomberg.net, Leila Taha

©2019 Bloomberg L.P.