EU, U.K. Warn Obstacles Remain as Brexit Compromise Nears
(Bloomberg) -- Brexit negotiators are edging toward a compromise on the thorniest issue in talks, even as officials on both sides warned that obstacles still stand in the way of a deal.
EU chief Brexit negotiator Michel Barnier said Wednesday that a deal is within reach, and officials in Brussels and London said some progress was being made in intense negotiations. While the Telegraph reported late Wednesday that an agreement had been clinched, EU and U.K. officials warned in public and in private against predictions that a deal is in the bag.
“It’s too early to be putting champagne on ice,” Prime Minister Theresa May’s de-facto deputy, David Lidington, said Wednesday in an ITV interview. “We’ve got a fair way to go still. There are still differences between our position and that of the European Commission, but we’re working very hard to overcome them.”
The main sticking point is how to keep the Irish border open after Brexit. It’s known as the backstop, because it’s meant to be a guarantee that whatever future trade deal the two sides eventually sign, the border between Northern Ireland and the Republic remains all but invisible. The trouble is that both sides suspect that whatever is agreed as a backstop will end up coming into effect -- potentially shaping future ties between the U.K. and the bloc indefinitely.
The U.K. currency has gained almost 4 percent since mid-August as optimism over a Brexit divorce deal grows, paring its decline for the year to 2.3 percent. Yet it’s still well below pre-referendum levels, with one hedge fund manager predicting it could recover to $1.55 in the longer-term on a positive Brexit outcome.
The Telegraph reported that U.K. and EU officials have agreed a backstop that would keep the whole U.K. in a customs union with the EU until a permanent trade deal is brokered, and that May will put it to her Brexit war cabinet on Thursday.
One U.K. official pushed back against the report, saying nothing has been agreed yet. Another said there is movement in talks toward a temporary customs fix that would keep the U.K. aligned to EU customs rules as part of the so-called backstop. That’s in line with what the U.K. proposed back in June -- but the EU has reservations.
May is demanding a guarantee that the arrangement will be temporary, the person said. The EU has been reluctant to do that -- saying that the backstop can only work as a guarantee if it’s open-ended. One option is to have a review of the backstop proposals before the end of a post-Brexit transition period is due to expire, according to the person familiar with the situation.
Staying inside the EU’s customs regime is controversial at home, as a large part of May’s Conservative Party reject it. The proposal also risks angering the Northern Irish party that keeps May in power -- as it could involve checks on goods between Northern Ireland and mainland Britain.
In a possible signal to the government not to take them for granted, the Democratic Unionist Party’s 10 lawmakers didn’t vote with the Conservatives on an agriculture bill on Wednesday, instead abstaining on a Labour amendment.
“Now is not the time to try and sell even more compromise to satisfy the appetite of the EU to humiliate our country,” the DUP’s Brexit spokesman, Sammy Wilson, wrote in the Telegraph on Thursday. “The road which the leaks and briefings is outlining is the road to parliamentary defeat for any deal which the prime minister brings forward.”
Whatever deal she eventually brings home, May will face a battle to get it approved by Parliament. Brexiteers in her own party’s European Research Group -- which numbers 60 or more -- have signaled they’d vote against a deal along the lines she’s seeking.
Former Foreign Secretary Boris Johnson, who quit May’s cabinet over her Brexit plans, railed against backstop proposals in a series of tweets, saying the strategy would make Britain a “permanent colony” of the EU. And former Brexit Secretary David Davis, who also quit in protest, said the deal is shaping up to be one that won’t pass Parliament because of a lack of guarantees on the U.K.’s future economic relationship with the bloc.
EU and U.K. negotiators hope to make progress on the thorny issue of the Irish border in time for the October summit of EU leaders next week, and then seal the agreement a month later. The talks “are intensively continuing day and night,” Barnier said.
German Chancellor Angela Merkel and Dutch Prime Minister Mark Rutte urged greater speed so that leaders can see progress next week.
“We’re going on the principle that the faster we’re done, the better,” Merkel said. “It’s important that we can really log a result next week,” the Dutch leader said, adding that “a few big questions remain.”
But Merkel, a veteran of EU negotiations, warned that the "devil is in the detail."
©2018 Bloomberg L.P.