Brexit Bulletin: The Mood Darkens

(Bloomberg) -- Today in Brexit: Talks are turning hostile, and some on the EU side reckon it’s a foretaste of what’s to come.

What’s Happening?

Brexit talks are getting nastier, according to the European Union side, as Brussels braces for Boris Johnson to become prime minister.

A meeting last week between chief Brexit negotiators was one of the most difficult encounters of the last three years, according to EU officials. Two of them said the U.K. appeared to be trying to bully the bloc into concessions, Ian Wishart reports.

EU officials are weighing possible concessions to help the prime minister who emerges from the Conservative leadership race next week get an agreement ratified in Parliament — and avoid the chaos of a no-deal split. But the encounter last week between Brexit Secretary Stephen Barclay and chief EU negotiator Michel Barnier risks hardening the EU’s stance.

Brexit Bulletin: The Mood Darkens

A spokesman for the U.K.’s Brexit department said the meeting had been constructive.

Johnson’s Brexit strategy, as set out so far, seems to be to scare the EU into thinking the U.K. will walk away without an agreement if the bloc doesn’t renegotiate the most controversial part of May’s deal: The so-called Irish border backstop. At the same time, he talks of the U.K.’s “friends” in Europe, and says he doesn’t want a no-deal departure but must prepare for one as a negotiating tool. 

Officials in Brussels say privately they see Johnson as an untrustworthy populist, and the individual who bears most responsibility for Brexit happening at all — first by stoking anti-EU sentiment as a journalist and then as a politician in the referendum campaign.

So there’s some  reluctance to reward him with better terms than those offered to May. But initial discussions about concessions have begun. None of it goes as far as Johnson or rival Jeremy Hunt want. Both reiterated in a debate last night that tweaking the Irish backstop isn’t enough. Measures being considered include looking at technological solutions for the Irish border and making a formal link between the divorce bill the U.K. has agreed to pay and a future trade agreement. 

And if all that fails, how about another extension? The EU side is all but expecting it, and even Johnson has hinted his deadline might slip.

Brexit Bulletin: The Mood Darkens

Today’s Must-Reads

  • Britain is unlikely to rediscover the Blitz spirit of World War II in the event of a no-deal Brexit, writes Gideon Rachman in the Financial Times. Johnson would instead face angry demonstrations calling for his resignation. 
  • Contradictions and inconsistencies in Johnson’s economic policy would open up deep divisions in Cabinet, writes Rachel Sylvester in the Times. The tension between populism and free-market liberalism will define his premiership.
  • Savvy investors are putting their money where Brexit matters least, steering clear of U.K. companies or picking ones that can flourish in the chaos, writes Bloomberg’s Matthew Winkler.

Brexit in Brief

The Next President | The European Parliament votes on Tuesday on the nomination of Ursula von der Leyen as the next European Commission president. It looks set to be a tight ballot. On Brexit, she has said she's open to an extension, that a no-deal exit would be catastrophic and that she hopes Britain doesn't leave.

Safe Distance | Both Tory candidates for prime minister condemned President Donald Trump’s tweets on four U.S. lawmakers in the leadership debate, but wouldn’t say if they thought they were racist. Johnson also said he wouldn’t support military action against Iran.

Control vs Caps | Johnson said he wants “control” of immigration, but refused to commit to a specific cap on numbers. “We will have control, that’s what the people voted for and they’ll get it,” he said during the debate. Johnson has long been seen as liberal on immigration, even though putting an end to free movement of people from the EU was a major issue in the 2016 referendum campaign. 

Not So Fast | Chancellor of the Exchequer Philip Hammond said the next prime minister won’t be able to secure a quick trade deal with the U.S. after Brexit, after the Times reported that Johnson wants to strike a quick deal in time for Britain’s scheduled Oct. 31 departure from the bloc. “We should be ambitious, but I think we’ve got to be realistic that we’re not going to do it in five minutes,” Hammond said in an interview with CNBC on Monday. Trade Secretary Liam Fox, who is backing Hunt, also said a U.S. trade deal would take time.

On the Markets | The pound is at its weakest ever for this time of year and it could get even worse next month. Seasonal patterns show it has fallen against the greenback for the past five years in August and against the euro for four of those, as the month tends to bring risk-averse trading conditions. Sterling traded at $1.2514 early this morning.

Brexit Bulletin: The Mood Darkens

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