Pro-European Union and anti-Brexit demonstrators wave European Union (EU). Photographer: Luke MacGregor/Bloomberg

May Gambles on Go-Slow Brexit to Help Revive Flagging Talks

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The U.K. and the European Union are inching towards a plan that could help unblock Brexit negotiations and clear the path to a deal, raising hopes of progress after months of stalemate.

While the EU summit in Brussels fell far short of the breakthrough it was long touted to be, a glimmer of hope emerged from the gloom that has descended on the process in recent weeks.

May Gambles on Go-Slow Brexit to Help Revive Flagging Talks

The idea that’s breathing new life into the negotiations is an old one: take more time to do the deal. Foreign Secretary Jeremy Hunt said that as a result a deal was now “emerging.” But it’s a risky move for May -- members of her Conservative Party have angrily criticized her and even Hunt said cabinet ministers have “lots of concerns.”

Jacob Rees-Mogg, chairman of the pro-Brexit European Research Group of Conservatives, was scathing, saying that May was “kicking the can down the road” and had given into the EU again and again.

The pound was little changed at $1.3024 at 9 a.m. in London.

Both the EU and Britain now think there’s merit in keeping the U.K. inside the bloc’s full membership rules for longer after it formally leaves, with an option to extend the 21-month transition period that’s due to end in December 2020.

That would give negotiators more time to resolve the biggest obstacle that’s blocking the road to a deal: how to avoid customs checks at the border between the U.K. and Ireland.

“There will be more difficult moments as we enter the final stages of the talks,” Prime Minister Theresa May told reporters in Brussels. “But I am convinced that we will secure a good deal that is in the interests of the U.K. and of the European Union.”

The move is a gamble for May, who doesn’t have a parliamentary majority and has fought off threats to her leadership for more than a year. However, pro-Brexit rebels acknowledge that they do not have the numbers to oust her.

It’s been a bad month for Brexit talks. In September, May was humiliated when leaders rejected her plans at a summit in Salzburg, Austria, which she’d hoped would be a chance to persuade them to engage constructively.

And on Oct. 14, talks hit a roadblock when May’s Brexit Secretary Dominic Raab traveled to meet EU chief negotiator Michel Barnier to tell him he could not accept the Irish border solutions proposed by Brussels. That impasse dealt a fatal blow to the long-term goal of using this week’s leaders’ summit to seal the terms of the divorce.

May Gambles on Go-Slow Brexit to Help Revive Flagging Talks

When the leaders gathered in the Belgian capital on Wednesday, they were determined to avoid another diplomatic catastrophe like Salzburg. May’s 15-minute address to her fellow leaders before dinner didn’t impress, and left some of them confused and frustrated. But she showed a willingness to move her position, and the EU has too, according to officials on both sides.

May signaled that she was open to extending the transition period to help solve the problem of the Irish border. In return, the EU has agreed to engage with May’s proposal for a so called backstop guarantee to avoid customs checks on the U.K.-Ireland border -- which would involve keeping the whole U.K. inside the EU’s customs regime.

According to an EU official, the bloc decided that time is running out and they can’t afford any more breakdowns. German Chancellor Angela Merkel said the leaders pledged on Wednesday to do "everything to find a solution."

May Gambles on Go-Slow Brexit to Help Revive Flagging Talks

May said her proposal was an attempt to solve the issue of the Irish border, which has stumped negotiators for more than a year.

“What has now emerged is the idea that an option to extend the implementation period could be a further solution to this issue of the backstop in Northern Ireland,” May said. “We are not standing here proposing an extension to the implementation period. What we are doing is working to ensure we have a solution to the backstop issue in Northern Ireland, which is currently a blockage to completing the deal.”

There were other signs of progress, too. If the summit had gone badly, EU officials were weighing up the idea of calling a special summit in November to prepare themselves for a chaotic divorce without a Brexit deal. To the relief of May’s team, that didn’t happen.

Speaking to reporters at the end of the summit, other leaders voiced their optimism about the prospects for progress, echoing May’s confidence. “I think that where there’s a will, there should be a way,” Merkel said. “I think there is a way.”

On Wednesday night, Barnier briefed the leaders on progress. He said that he thought May’s idea for a U.K.-wide temporary customs arrangement was worthy of consideration and that negotiators would spend the next weeks looking at that and the possibility of a longer transition, according to EU officials. The leaders said they were happy for Barnier to work on finding a solution on that basis.

There were signs that May could also be willing to water down one of her key objections to the EU’s proposals for an Irish border backstop: that it must be open ended. The premier publicly insists that any backstop must be strictly time-limited, to avoid delaying Brexit and to ensure the U.K. is free from EU customs rules to strike its own trade deals around the world.

May Gambles on Go-Slow Brexit to Help Revive Flagging Talks

But Irish Europe Minister Helen McEntee said May was "very clear" in saying that the backstop is an insurance mechanism and so can’t be time-limited. “You need to have it there and it can’t run out after a year or two and she very much agreed with that,” she told RTE.

When May was asked to confirm that this is her position, she dodged the question, saying only that nobody wants the backstop to be necessary at all, and that if it were, it would only last a few months.

Despite the progress in Brussels, May still faces major hurdles in London, where she will eventually need any deal she strikes with the EU to be ratified by the U.K. Parliament.

Veteran Brexit campaigner John Redwood, who’s a member of May’s Conservative party, said extending the transition period would be “completely nuts.” He added: “She won’t get it through. We’re against it. It’s not Brexit.”

©2018 Bloomberg L.P.