With a Month to Go, Here’s How EU Rates Brexit Deal Chances

(Bloomberg) -- It’s endgame time (again) on Brexit. A month before the U.K.’s scheduled departure, it seems to be anyone’s guess whether Prime Minister Boris Johnson will get a revised divorce deal with the European Union, ask for another postponement or defy Parliament and leave without an agreement.

With Britain’s Conservatives holding a party conference this week, there’s bound to be a lot of noise. Here’s a reality check on how the EU sees events unfolding, based on multiple conversations with officials directly involved in the process. All of them spoke on condition they not be identified because the discussions aren’t public.

The Talks

• On balance, the EU view is that Johnson wants a deal. While his aggressive tone when he took office in July led some to suspect the opposite, his discussions with other leaders have been serious enough to convince the EU he doesn’t really favor a disorderly departure.

• U.K. and EU teams have made little progress in limited talks in Brussels and one European official said it would be a joke to describe them as “negotiations.” The British government has published four so-called non-papers -- essentially discussion documents -- on arrangements for the Irish border. The EU says they aren’t realistic, don’t set out concrete solutions and look like they’re designed to stall for time.
• The EU always accepted that the U.K. government would submit more serious proposals only after the Tories’ annual conference, which ends Wednesday. If that happens quickly, there would be enough time to reach a deal before an EU summit in Brussels on Oct. 17-18. “It’s the U.K.’s responsibility to come forward with legally operational solutions that are compatible with the withdrawal agreement,” European Commission spokeswoman Mina Andreeva told reporters Monday in Brussels. “Then the commission is, and remains, open to examine whether such proposals meet the objectives of the backstop.”

The Compromises

• The EU desperately wants a deal. With Brexit dragging on and the threat of economic pain caused by a no-deal crash-out, the bloc is in the mood to compromise. While it won’t do anything to risk the principles of the single market, it would make more concessions on the contentious Irish border backstop if Johnson were likely to get approval for a deal in the House of Commons. The catch? The EU doubts he can pull it off.
• Giving the Northern Ireland assembly a say on the backstop is something the EU would consider to help increase democratic legitimacy. The U.K. would need to propose solutions. So far, it hasn’t.
• Any revised deal would require a completely rewritten political declaration on future ties to reflect the different priorities of Johnson’s government compared to Theresa May’s. The EU is alarmed that Johnson wants to ditch May’s commitments on the level playing field -- common standards in areas such as social protection, taxation and state aid subsidies. These would underpin any future trade deal. They would become even more significant if the backstop reverts to covering only Northern Ireland rather than the whole U.K., something the EU would accept. France in particular is keen to uphold the level playing field.
• The EU’s mood for compromise faded over the past week with increasing concern over the febrile atmosphere in the U.K., Johnson’s heightened rhetoric and the court verdict declaring his suspension of Parliament unlawful. Meetings between Johnson and other world leaders at the UN General Assembly didn’t produce much.
• That same sense of shock has some governments increasingly toying with the idea of accepting some U.K. demands just to end the agony. Yet there’s no serious pressure on the Irish government, which would have to accept concessions on the border backstop.

The Summit(s)

• Leaders of the other 27 EU countries always insist they won’t negotiate at a summit, meaning a deal would have to be done in the next 2 1/2 weeks or less. Some officials in the EU are bracing for a car-crash summit with Johnson walking out if he doesn’t get his way.
• Given the small window, the EU expects another summit at some point during the two weeks between the scheduled one and Oct 31. This would also almost certainly be the case if leaders needed to agree another extension.

The Extension

• EU officials don’t seriously expect government leaders to block a further Brexit delay if the U.K. asks for it. They might even try to get ahead of Johnson and proactively offer an extension.
• There’s no guarantee the U.K. would get the three months that Parliament’s legislation tells the prime minister to request. The extension could be shorter -- or longer, especially if a U.K. election is in the cards.
• With Johnson determined not to request an extension but Parliament forcing him to, EU officials have discussed whom they should listen to. It seems certain that the bloc will only recognize an extension request from the prime minister himself or, like the last two times, the U.K. ambassador to the EU in Brussels.

The Technicalities

• The EU is pretty sure the only way out of the logjam on the Irish border issue is make the backstop apply to Northern Ireland only, rather than the whole U.K. The backstop -- which Johnson says he wants scrapped -- could be repackaged, renamed or given a new look with an all-Ireland agri-food zone and a chapter on the readiness to use alternative arrangements, such as trusted-trader programs and technology.
• The U.K. hasn’t indicated backing and hasn’t offered much beyond the willingness to accept an all-Ireland agri-food zone. Even this, the so-called sanitary and phytosanitary zone, or SPS, wouldn’t negate the need for Northern Ireland to remain in the EU’s customs union. That brings the whole issue back to a customs border between Northern Ireland and the rest of the U.K.
• The EU would accept an all-Ireland SPS zone but this would only solve about 30% of the border activities. Even then, the EU is confused about what the U.K. is proposing. Would it be a new Ireland-only zone or would Northern Ireland simply be part of the EU’s rules? Would Northern Ireland accept future changes in EU rules and would the U.K. accept European Court of Justice jurisdiction over part of its territory?
• One problem for the EU is that SPS goods still require customs declarations. Even Northern Ireland animal products that could pass freely over the border because of common agri-food rules would have to undergo customs checks.
• While the EU is willing to look at alternative customs arrangements, its view is that they aren’t ready yet. Nor does the U.K., according to discussions in Brussels. Britain’s government wants to work on them during the transition period that begins after Brexit day -- which the EU won’t accept. It wants the backstop to be “legally operable” immediately.

To contact the reporter on this story: Ian Wishart in Brussels at iwishart@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Tony Czuczka

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