Brexit Bulletin: ‘Treacherous’

(Bloomberg) -- Today in Brexit: Spain isn’t happy, and that could lead to fireworks at Sunday’s special EU summit.

Spain accused the European Union of treachery over Gibraltar, and threatened to blow up the last stage of Brexit talks ahead of the signing-off summit this weekend.

The Brexit text was changed in a “nocturnal and treacherous” way without Spain’s knowledge, according to Luis Marco Aguiriano, Spain’s Secretary of State for the European Union. Prime Minister Pedro Sanchez, who’s struggling domestically and faces regional elections in December, threatened to “veto Brexit” if the country doesn’t get its way over Gibraltar, which is a disputed territory.

No one country has a veto over the process at any stage, but there’s still a risk of a bit of drama on Sunday. Gibraltar unites Spaniards more than it does Brits and it makes sense for Sanchez to stand firm.

However, Spain isn’t the only country that’s a bit miffed with how the process was handled, Ian Wishart reports. Member states were taken aback by how fast things moved on Thursday. The European Commission — the EU’s executive arm, for which Michel Barnier and team have been handling the negotiations — was suddenly in a rush to get things done. That left EU capitals sidelined and puzzled, according to people familiar with the situation. With member states starting to raise concerns on issues from fish to fair play, the Brussels machinery staged an intervention.

EU President Donald Tusk and Commission President Jean-Claude Juncker declared that a deal had been “agreed in principle at political level,” just as Commission negotiators circulated a text, which quickly leaked (to Bloomberg). National ambassadors thought the document was still an open draft as they met behind closed doors in Brussels.

Some members are also cross about Prime Minister Theresa May’s visit to Juncker on Saturday. That’s because leaders including German Chancellor Angela Merkel have made clear they aren’t going on Sunday to negotiate — Merkel won’t go unless she can go in and out for the signing, according to her officials. The last pre-summit meeting of member-state officials is Friday morning — and they don’t want any surprises after that. So there is concern that May will arrive in Brussels after that bearing new requests.

May’s spokesman tried to allay any concerns. He acknowledged that the deal isn’t finalized until all 27 member states sign off, and said the U.K. won’t be asking for anything else.

That might keep EU leaders onside, but it’s hardly likely to appease the many back home who still want the text amended.

Today’s Must-Reads

• It’s pretty clear May doesn’t have the votes to get the deal through Parliament. So what comes next? Rob Hutton, Kitty Donaldson and Thomas Penny take a look.
• There’s optimism in the air: Bankers in the EU and in Britain think financial-market chaos will be avoided. Find out how the financiers avoided a new Lehman moment.
• Did you miss the fun yesterday? Our live blog covered every development, and we broke down the 26-page document, too.

Brexit in Brief

Not Good | The CBI business lobby group said the Brexit deal was “not perfect” and there was “hard work ahead” but that “right now it’s the best option.” Its comments came following the publication by ITV News of internal CBI emails that showed its Brexit chief Nicole Sykes saying “no need to give credit to the negotiators ... because it’s not a good deal.”

Unclear | Ireland is the only EU member without its own central securities depository and has relied on a U.K. Based operation called Crest to settle trades since the 1990s. That's now at risk because of Brexit. The company is now pushing authorities to allow it to continue settling Irish shares in the UK in the event of a no-deal scenario.

Breaking the Rules | Another unforeseen consequence of Brexit: The U.K. might end up in breach of commitments on emergency fuel stockpiles, Rachel Graham reports. Europe manages its fuel inventories as a bloc, so part of the U.K.’s emergency stocks can be held in other member states. Because of uncertainty over Brexit, some other nations are reluctant to renew the storage arrangements, according to the U.K. Petroleum Industry Association.

On the Markets | Nomura currency strategist Jordan Rochester now sees a 25 percent chance that a second referendum is called. Markets are also starting to price in the possibility that May’s deal will be voted down. The pound was little changed on Friday at $1.2875.

Gove’s Philosophy | Euroskeptic Environment Secretary Michael Gove dropped a hint of his Brexit philosophy after a speech last night, Rob Hutton reports. Citing Italian philosopher and Marxist Antonio Gramsci, he said one needs “pessimism of the intellect, optimism of the will.” Gove explained: “The situation is not great, but we can get through. That principle is one I apply not just to the environment but to other things as well.”

Stockpiling Wine | Majestic Wine Plc is working to make sure Britons don’t run out of European wine after Brexit day next March.
The retailer is planning to bring inventory worth £5-8 million ($6.4-10 million) into the U.K. to mitigate any potential supply-chain disruption from Brexit, the company said on Thursday. 

“If we end up having an almighty fight and suddenly it costs an extra £5 to get a bottle of wine from Europe, the consumer’s going to vote with their feet in terms of the pricing of things.”

Coming Up | Theresa May is doing a BBC phone-in at 12:30 p.m. It looks like part of her campaign to appeal to voters directly and over the heads of squabbling politicians.

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To contact the editor responsible for this story: Adam Blenford at ablenford@bloomberg.net, Jones Hayden

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