Brexit

Brexit goes to the brink

Donald Tusk’s outburst imagining a “special place in hell” for the UK’s proponents of Brexit tells us that he has moved on to the next phase in the five stages of mourning. The president of the European Council is angry because he has finally realised that Brexit is actually going to happen — and that the UK could leave the EU without a deal. Mr Tusk is probably still confused, but at least he is now confused at a higher level.

Recognition of reality is an important step on the road to acceptance. And it is one thing to say that you expect something to happen. But quite another to actually believe it. And those who are now panicking the most tend to be the same as those who were the most complacent before. The German media, which I follow very closely, spent the last two and half years focusing on the campaign to hold a second referendum. The every utterance of Tony Blair or John Major, Britain’s two pro-EU former prime ministers, made front-page news. So did the big anti-Brexit demonstrations. Recently, the tone has changed. There is suddenly a lot of “Oh my God, this is really happening” commentary.

I am certain that Brexit will happen, but the relative probabilities of a Brexit with or without a deal are harder to gauge. Events intrude all the time to obscure the European view: Mr Tusk’s comments, the sudden downturn in the eurozone economy, or even the increasingly erratic behaviour of Emmanuel Macron.

Last week, the French president recalled his ambassador to Rome in response to a political spat with Italy’s Five Star Movement. At the December European Council meeting, he threatened to keep the UK trapped in the provisions of the Northern Ireland backstop forever — unless the British agree to keep their coastal waters open to French fisherman. If there ever existed a rational reason for the UK’s MPs to question the EU’s good faith in agreeing to the backstop in Theresa May’s withdrawal deal, Mr Macron provided it.

Despite these intrusions on to the scene, I remain moderately optimistic about a Brexit deal. There exists a narrow but clear path towards it — one that requires compromise in Brussels as well as in Westminister. At the EU end, Angela Merkel may yet emerge as an effective power broker. I yield to no one in my criticism of the German chancellor’s handling of the eurozone crises. But her detached, analytical approach is the mindset needed at the summit towards the end of March. She is right to say that the EU needs to explore creative solutions to the Irish backstop. We are once again approaching High Noon — a similar crunch point as the Maastricht summit in 1991 or the Greek crisis summit in 2015. In both cases, agreement seemed impossible. Until it happened.

History tells us we should not draw conclusions from the lack of agreement right now. The EU is not going to offer any concessions at this point. But once everybody enters the hall of smoke and mirrors at the European Council meeting on March 21, things will change.

It is also wrong to think about these negotiations as a staring contest. Both Mrs May and the EU have a powerful common interest in avoiding a hard Brexit; both are willing to compromise. And do not overstate the asymmetry in the costs of a hard Brexit. It is trivially true that a hard Brexit will affect the UK more than the EU, but this ignores that the UK voted for Brexit while the EU did not. There would be known losers such as the car industry, but many smaller ones as well. Dutch vegetable growers would stand to lose their biggest market and could end up dumping their tomatoes on German consumers, crowding out local producers. Can EU leaders really be confident that their voters will blame the British rather than them?

I also believe that agreement on the Irish backstop is possible. The EU will not agree to a formal end date. But it can give better legal assurances. Article 50, the basis for Brexit under EU law, allows the two sides to make arrangements for the transition. But permanent trade agreements fall outside its scope. Transitional arrangements cannot be indefinite: if Mr Macron decides to veto a trade deal over fishing rights, or if trade talks are abandoned, then surely the transition will be over.

The political declaration on the future relationship could also change — allowing for possibilities that could include a customs union. The final decision about the future would then be left to a vote in the UK parliament after Brexit.

The second crucial moment will come after the summit when MPs would meet to cast their final meaningful vote. It will be the last week before the Brexit deadline of March 29. It could, in theory, drag out all the way until that evening. There will be no options left to take off the table. And however it turns out, there will be angry people who did not see this coming.

munchau@eurointelligence.com

Source

neallesh@yahoo.co.uk

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