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by Mish

France and Poland want to include agricultural subsidies and Germany proposes the UK should get nothing for assets such as buildings.

This is such a nonstarter that even the most diehard deal proponents ought to be shaking their heads.

Some of this is tit-for-tat gamesmanship involves Brexit leaks in which EC president Jean-Claude Juncker informed Angela Merkel that “Theresa May Lives in a Different Galaxy”.

That phone call came following a meeting last Wednesday when Theresa May told Juncker the UK has no legal obligation to pay the EU a Brexit divorce bill. Juncker also stated he is “ten times more skeptical than before.”

These statements were leaked to the press, most likely by Juncker or his staff.

Regardless, I fail to see how widening differences is remotely conducive to serious negotiations.

Optimism Reigns

Yesterday, Eurointelligellence commented:

Despite the extraordinary events following Jean-Claude Juncker’s dinner in Downing Street last week, we remain optimistic that a Brexit deal is still possible. The road to an agreement is unlikely to be straight, however, and it may be very noisy. Clearly there is the potential for a grand failure.

Today, following the €100 Billion bluff, Eurointillegence wrote:

We thought the leak of the Juncker-May dinner conversation was amateurish, very likely to strengthen Theresa May in the UK and reduce the role of the European Commission in the upcoming Brexit talks. We do not think that any of this will alter the Brexit negotiation outcome. A deal is possible if both sides want it – and impossible if one does not.

That’s a bit of a change but not much. The key line is “We do not think that any of this will alter the Brexit negotiation outcome.”

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Thus, Eurointelligence is still optimistic, despite its carefully laid out math.

Deal Math

  1. If the UK does not want a deal it won’t happen.
  2. If the EU does not want a deal it won’t happen.
  3. A deal is “possible” if both sides want one.

It’s pretty clear that Juncker and Merkel do not want any deal that does not involve huge punishment to the UK.

The EU may claim it wants a deal, but hardening positions show it doesn’t. This could be silly “art of the deal” gamesmanship but it increases the likelihood the UK says to hell with it all and just walks away.

Even if both sides want a deal and attempt to stick it out, a deal is impossible if both sides stick to stated principles.

Yanis Varoufakis, the former finance minister of Greece, gave this pertinent advice to the UK: Yanis Varoufakis: ‘My Brexit advice to Theresa May is to avoid negotiating at all costs’

Prof Varoufakis, a specialist on economic “Game Theory”, says Britain must not let itself be captured by the EU’s negotiating net.
“My advice to Theresa May is to avoid negotiation at all costs. If she doesn’t do that she will fall into the trap of Alexis Tsipras, and it will end in capitulation,” he told The Telegraph.
He was speaking on the publication of his memoir, Adults in the Room, a riveting account of his brush with a back-stabbing and treacherous EU system.
“The parallel with Brexit is the tactic of stalling negotiations. They will get you on the sequencing. First, there is the price of divorce to sort out before they will talk about free trade in the future,” he said.
“When you make a moderate proposal they will react with blank stares and look at you as if you were reciting the Swedish National Anthem. It is their way of stonewalling,” he said.
Prof Varoufakis, steeped in Hellenic mythology, says they will resort to the “Penelope Ruse”, the delaying tactic of weaving each day before unraveling it again secretly at night.

Just Leave

Varoufakis’ advice is similar to what I have been offering for months.

On April 28, I wrote Brexit Negotiations: Why Bother?

Only by walking away – showing a willingness to let time expire – does the UK have a chance at reasonable negotiations. Even then, I am not sure what the chance is because the “EU’s desire to punish the UK and set rules in the name of solidarity” likely exceeds the desire to walk away with a win-win situation.

Mike “Mish” Shedlock