Why Irish Reckon May Still Boxed In on the Brexit Backstop

(Bloomberg) -- After a week of missteps, Irish nerves are steadying again, unmoved by Theresa May’s promise to go back to Brussels to re-negotiate the Brexit deal.

Why Irish Reckon May Still Boxed In on the Brexit Backstop

The Irish government rejected any softening of the so-called backstop, immediately after Westminster on Tuesday backed May’s proposal to strip it from the divorce accord with the bloc. The backstop is designed to keep the border with Northern Ireland invisible after Britain leaves the European Union.

Hints last week the EU might give ground to rescue the talks were wobbles rather than cracks in its united front, one Dublin official said.

The gamble for Ireland, that sticking by the backstop risks derailing the entire negotiation, is underpinned by a number of forces.

First, officials say, no one in Dublin is feeling the heat from the EU so far -- the bloc instantly rejected May’s renegotiation plan. Second, Prime Minister Leo Varadkar could potentially end his political career if he gave in. Third, though the risks of a no-deal might be edging upwards, there’s no sign of a majority in the U.K. Parliament for that outcome.

“Continued Tory Brexiteer dreams of the EU withdrawing its support from its member state Ireland still lack any foundation, especially if Dublin sticks to its pointed but pragmatic stance in the talks,” said Carsten Nickel, deputy director of research at Teneo Intelligence. “Instead, the eventual Westminster decision against no-deal remains likely to mean the acceptance of a version of May’s deal.”

Officials from across Europe, speaking on condition of anonymity, said their backing for Ireland remains resolute, despite the fact that everybody loses if the U.K. crashes out of the bloc without a deal. Officials maintain it will be extraordinarily difficult for May to gain significant concessions on the backstop unless she offers other solutions for the border -- and that would involve dropping her opposition to closer ties with the EU.

Solidarity from the EU has been “total,” Irish Senator Neale Richmond said in an interview with Bloomberg Television on Wednesday, adding that without a backstop Ireland risks “losing control” of the border question

Vulnerable at Home

All this has to be set against a domestic situation which means Varadkar’s own fate is bound tight to the backstop.

His minority government is propped up by the biggest opposition party and so far, it has backed the prime minister’s strategy. Giving ground on the backstop could trigger an election. If he were to cave in completely, it’s probably game over, said one observer.

Yet the Irish are aware that pressure could emerge as the cliff edge nears.

“As the economic and political carnage of a no-deal looms closer, Ireland may come under pressure to relax its position in favor of an option that avoids such an outcome,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin. Brexit is “now a dangerous game of chicken.”

The prospect of a no-deal Brexit creates pressure of its own, according to one European official. It would almost certainly mean the return of a hard frontier, and the European Commission’s comments last week on the need for border infrastructure in that case spooked some people in Ireland.

Some interpreted the comments as a sign the EU was pushing for concessions, prompting Commission President Jean-Claude Juncker to call Varadkar and express his regret, two people familiar with the conversation said.

Berlin Backing

While Germany has been probing for areas of potential compromise, Berlin also remains supportive, the Irish say.

There’s been support from elsewhere too. U.S. Congressman Brendan Boyle took to Twitter to ask “why anyone would negotiate” with May after she rowed back from the backstop, underscoring the difficulties the U.K. might face winning new trade deals if the border issue is unresolved.

For now, the Irish strategy is to keep the focus on London, betting that parliamentary maneuvers will steer the U.K. away from a no-deal Brexit. The House of Commons indicated a majority of lawmakers opposed a no-deal Brexit in January, and did so again on Tuesday.

The British could still pivot to a Norway-type deal, hold a second referendum or even a general election, which might neutralize the leverage of the Democratic Unionist Party, a group from Northern Ireland opposed to any differentiation with the rest of the U.K.

There’s even still hope that the current deal will be passed, as it becomes apparent that no obvious alternatives are available. The deal was on life support, but it’s not dead yet, according to one official before Tuesday’s votes in London.

©2019 Bloomberg L.P.