Brexit Hopes Rise as U.K. and EU Take a Step Closer to a Deal

(Bloomberg) --

British and European officials will seek to capitalize on the brighter mood surrounding Brexit talks after the leaders of the U.K. and Ireland said they could see a pathway to a potential deal.

The pound jumped by the most in seven months following Thursday’s positive meeting between U.K. Prime Minister Boris Johnson and Irish Premier Leo Varadkar, who has a huge influence over the rest of the European Union on Brexit.

After two and a half hours of “constructive” discussions at a country house in northwest England, Varadkar said he believed an agreement is possible by the Oct. 31 deadline, and urged negotiators to resume talks in Brussels.

The EU’s chief negotiator, Michel Barnier, will meet U.K. Brexit Secretary Steve Barclay to take stock of progress and start to map a potential route forward in Brussels on Friday morning.

‘Pathway’ Forward

With just three weeks left until the U.K. is due to leave the EU, negotiations had soured and stalled. The more favorable tone from the two leaders on Thursday indicated that a breakthrough is still possible, although difficulties remain.

“I had a very good meeting with the prime minister and our teams together -- very positive, very promising,” Varadkar said after the talks. “I do see a pathway towards an agreement in the coming weeks.” He said he hoped the progress would be enough for formal negotiations to re-start in Brussels.

U.K. and EU officials played down how close the two sides are to a deal and said it would be difficult to reach an agreement before next Thursday’s summit of European leaders in Brussels. While the EU welcomed the positive tone of the Johnson-Varadkar meeting, officials said much will now hinge on whether Barnier thinks there’s enough common ground to resume negotiations over the weekend.

The two leaders issued a joint statement following their “detailed and constructive discussions” -- during which the pair took a walk together around grounds of the property near Liverpool -- saying they had identified the potential for a route to an agreement.

Both leaders “continue to believe that a deal is in everybody’s interest,” they said in the statement. “They agreed that they could see a pathway to a possible deal.”

The Border Puzzle

Johnson is determined to take the U.K. out of the EU by the deadline of Oct. 31 -- even if that means leaving with no agreement to cushion the impact on the economy. EU leaders, meanwhile, are preparing to give Britain an extension to the deadline, even though that’s something Johnson says he will never accept.

Despite more than two years of talks, the key disagreement between the U.K. and the EU is over how to ensure there is no need for checkpoints to inspect goods crossing Ireland’s land border with the U.K.

Johnson has proposed limited customs checks away from the frontier, but Varadkar insists any such inspections will threaten peace in the region.

The possible breakthrough may center on a so-called customs partnership, the Irish Times said, without citing anyone. This would involve Northern Ireland exiting the EU customs union with the rest of the U.K., but applying EU customs rules and tariffs on goods entering the region, ensuring the right duties are paid on those destined for the EU single market, the newspaper said.

The EU has also criticized the U.K.’s plan to give the Northern Ireland Assembly a veto over the deal. Johnson’s team say it’s vital to allow the region’s community to give “consent” for the future arrangements on the border.

But for the EU, allowing a veto for Northern Irish politicians would undermine the point of a long-term guarantee against a hard border going up at the frontier. The U.K.’s Northern Ireland Secretary, Julian Smith, told the BBC on Thursday that under Johnson’s plan no one side would have a veto, suggesting a potential concession from Britain.

It’s not clear what compromises were set out during the private talks Thursday. Johnson in particular runs a risk of alienating his supporters in Britain’s Parliament, which must ratify any deal he reaches with the EU.

Johnson’s predecessor, Theresa May, found getting a deal in Brussels was the easy part. She failed three times to persuade members of Parliament to approve her withdrawal agreement. Eventually, that cost May her job.

--With assistance from Ian Wishart.

To contact the reporters on this story: Tim Ross in London at tross54@bloomberg.net;Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Robert Jameson

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