Brexit Central reports After a brutal rebuff at Salzburg, Theresa May must shift Brexit policy and reunite her party.
President Tusk’s verdict after meeting with the assembled leaders of the EU27 at Salzburg was brutal. Perhaps it wasn’t anything that EU figures hadn’t already said before. But it left little room for doubt. The economic aspects of the Prime Minister’s Chequers plan, he said, “will not work”. This was a major setback. Number 10’s entire Brexit strategy is now teetering on the edge.
What now? Theresa May needs to face the assembled membership of her party in less than a fortnight.
She faces a difficult audience, bruised by Downing Street’s botched handling of Chequers. Her authority will be further challenged by former Cabinet ministers openly campaigning against her.
Salzburg puts us well and truly in the brinksmanship phase of Brexit where the EU seems willing to play ‘chicken’ with the economic and geo-strategic interests of the continent. European leaders have thrown the Prime Minister’s hard-won and painful compromise proposal back in her face, but offer no solutions of their own.
At this point the biggest risk of a no-deal Brexit comes from the EU’s stubborn inability to compromise. And the ultimate irony is that a failure to reach agreement on a backstop designed to prevent a hardening of the Irish border, is now the most likely cause of a no-deal exit and a possible hardening of that same border.
EU Leaders Run Out of Patience with May
From Eurointelligence …
If there is one EU partner the UK can normally rely on for solidarity or at least for sympathy, it’s the Netherlands. Not this time. The most scathing words about lying Brexiteers at yesterday’s EU summit in Salzburg may have been Emmanuel Macron’s, but for a French leader to be rude about the British has been normal diplomatic practice for centuries. By far the most stunning dismissal of British Brexit negotiating tactics came from Mark Rutte: “We all want the best for both sides, but it’s difficult with all the red lines that are part of the British debate.”
Red Lines Everywhere
Curiously, the EU has far more red lines than the UK. I believe a no-deal setup that ends in the hands of the WTO would be far more damaging to the EU than the UK.
Others say the opposite. But the UK being a single nation would immediately be relieved of tons of EU BS on tax policy, fishing rights, etc. And the UK would no longer have to contribute a dime to the EU slush fund pot.
No-Deal Brexit has Come a Step Closer
Eurointelligence has stated many times that its base assumption is that there would be a deal. Just two days ago, it thought that Chequers would fly. Things changed today.
The EU has killed off the Chequers plan for good. May needed Chequers to ensure that the Irish backstop in the withdrawal treaty would never be triggered. Her plan‘s formal rejection means that the Brexit choices have become starker. In our view no-deal may now be the single most likely outcome, alongside with what some UK commentators are calling the blind Brexit – one with an Irish backstop in the withdrawal agreement and a fudged political declaration.
The DUP [Northern Ireland MEPs backing May] has no reason to support a deal that could leave Northern Ireland permanently decoupled from the mainland. The opposition parties will also reject it – for different reasons. Could the Tory party unite behind this? It is possible, but such an outcome cannot be taken for granted.
The EU‘s formal rejection of Chequers is a serious setback for a prime minister who just seemed to have found some political traction back home. The speculation about her future will now intensify. The Times writes this morning that David Davis, the former Brexit secretary, will present his own plan for a free-trade deal during this month‘s Tory party conference. If this has more traction with the grass roots than whatever May will suggest, Davis could emerge as the next Tory leader. But would Davis’ plan include an Irish backstop? We don‘t know. Ireland is one of the issues that divides the eurosceptics. Some could not care less about Northern Ireland and are willing to accept an intra-UK customs border. But we find it hard to believe that this could command a majority position in the UK parliament as a whole.
The complications of UK politics – not well understood on the continent – and the technical complications of Brexit, are what drives us to the conclusion that the risk of a no-deal Brexit has risen in Salzburg.
What will May do? For starters, the British government will now visibly increase preparations for a no-deal Brexit. May herself will stick to Chequers, as one of her cabinet ministers indicated this morning. She will accept a few technical compromises here and there, and let the negotiations drag out to the very end. Unless the conservatives replace her this autumn, she will confront the EU with a choice of Chequers versus no-deal. The UK sides believes, rightly in our view, that the EU is underestimating the probability of a no-deal Brexit.
Stroke of Good Fortune
This bit of political gamesmanship is a stroke of good fortune for the UK.
Short-term there will be a bit of pain. Long-term, getting the hell out of a miserable marriage to 27 Nannycrats who all have to agree with everything (or nothing gets done) has to be a good thing.
Mike “Mish” Shedlock
The EU is an exit sandwich. First by the UK. Second by an eastern European country like Poland or Hungary. Poland has reiterated its desire to pay the US $2B to establish a military base in Poland as defense against Russia. It seems odd that Poland would not ask the EU for help, unless Poland fears Germany or is planning to Polxit.
A long comment was just eaten by the Maven comment system…
Please fix this…
EU leaders are tone deaf and INCOMPETENT.
They have completely misjudged the Brexit situation just like they completely misjudged the rush of migrants in 2015.
This humiliation of UK and Brits just increased the odds of NO deal Brexit where trade would be on WTO tariffs and which would hurt German economy and French Economy hugely since they export much more to UK than they import from UK.
UK should have a NO deal Brexit and refuse to pay the about 50 billion Euros EU claims they need to pay and instead UK needs to tell German taxpayers and French taxpayers to pay that 50 billion and Merkel and Macron will become even more unpopular than they already are.
UK can pay ALL WTO tariffs of UK businesses that export to EU and still have billions in profits from WTO tariffs on products imported to UK.
UK can smooth the customs by giving factories and large companies their own custom officials and having local custom officials for middle-sized companies that go through all customs issues for middle-sized companies in certain city.
Small companies can quickly do their customs at the border since no ques with the above optimized customs plan.
There can be open border between Ireland and Northern Ireland with large companies and factories also doing customs through their dedicated customs officials and middle-sized companies doing customs with the customs officials in their city.
500 UK Pounds worth of goods can be brought customs free to avoid any bother for normal people and some spot checks for small companies crossing the border to make sure they go to the customs station to declare the products.
There will be some customs evasion but so what it will be small potatoes and will also work the other way around with Northern Ireland taking products to Ireland customs free so in the end NO reason to agree EU’s insane dictats to keep the border free and open because it can be kept open and free even in a NO deal scenario.
Macron saying that “liars” caused Brits to vote for Brexit is the most IDIOTIC statement ever because France and Hollande to whom Macron worked for as a minister were part of the reason Brexit happened because France ALLOWED the Jungle full of illegal immigrants in Calais trying to get to UK and attacking lorries and France ALLOWED Afghans, Iraqis, Nigerians, Eritreans etc. to try to cross from Calais to UK to get the premium welfare UK provides.
Those migrants were ILLEGALLY in France and according to EU rules France should have arrested them and either sent them back home or made them apply for asylum in France, instead France pushed them to UK through Calais by allowing them to go there and wait there until they got across.
The migrants themselves did NOT want to ask for asylum in France because France REJECTS most asylum claims and has a strict process while UK has a soft touch asylum process and even FAILED asylum seekers can stay in UK while France sends them back home if they apply and are rejected.
UK also has much more generous welfare than France.
France’s actions and the situation at Calais which has been an ongoing nightmare for about 10 years now is one of the major reasons Brexit was voted for by the Brits.
Another reason Brits voted for Brexit was Merkel’s 2015 insane and incompetent welcome of millions of migrants to Germany and Europe and the massive crime wave that followed.
After getting a residence permit from Germany or some other EU country those millions are entitled to move to UK under current EU freedom of movement rules.
Third reason was Romanian and Bulgarian gypsies moving in masses to UK to get the generous welfare.
Romanian gypsies selling homeless magazine Big Issue in UK are considered to be working in UK and get access to UK welfare…
Fourth reason was massive low wage immigration to UK from Poland and many other eastern European countries and this migration had the effect of lowering UK wages and keeping wages low in UK so the working man was robbed through EU policies to the benefit of the owning class and businesses while the millions of eastern Europeans swamped UK healthcare, UK daycares, UK schools etc. to the point of overcrowding while prices of real estate shot through the roof even for working class areas due to the additional demand.
Some designs just don’t work well. There’s a reason 28 cylinder engines with arbitrary misfire and bearing seizure don’t exist. The EU is such a political engine.
Probably a good time for Margaret Thatcher’s Bruges speech from 9/20/88.
“Over the centuries we have fought to prevent Europe from falling under the dominance of a single power.
We have fought and we have died for her freedom.
Only miles from here, in Belgium, lie the bodies of 120,000 British soldiers who died in the First World War.
Had it not been for that willingness to fight and to die, Europe would have been united long before now—but not in liberty, not in justice.
…
Indeed, it is ironic that just when those countries such as the Soviet Union, which have tried to run everything from the centre, are learning that success depends on dispersing power and decisions away from the centre, there are some in the Community who seem to want to move in the opposite direction.
We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.”
If only “the frontiers of the state in Britain” had ever been “successfully rolled back”, Britains fate post EU would be an awful lot more comfortable and secure….
Like her pal Reagan, I’m sure Thatcher’s heart was in the right place. But, also along with Reagan, she serves as exhibit 1 illustrating what can go wrong when running a country from a position of economic illiteracy.
In Bastiatian parlance, both Thatcher and Reagan saw the “seen” of lower nominal tax rates. And went home patting themselves on the back. Not bothering to recognize the “unseen,” of increases in debt and central bank printing, more than making up for the reduced nominal taxes. With the end result being, just as has been the case with every other administration, leaving government not reduced, but rather enlarged, compared to when they took office.
Interesting that all those super-bright Oxbridge graduates in the UK Political Class who were pushing Brexit missed the whole issue of the Northern Ireland border ahead of the referendum. Makes one wonder what else they are missing … even now?
There may be a good case for separation from the EU. Long-term, there is the opportunity for improvements — provided there are changes in the structure of the London Political Class. (Never forget that it was the London Political Class who dragged a reluctant UK electorate into the EU in the first place).
But it is clear there will be short-term pain in many different ways — some manufacturing will move to the continental EU; London’s vital financial role will come under increasing pressure from Frankfurt (and the move to points further east such as Singapore & Dubai will be accelerated); upper class English seeking to retire to Spain & France will face new obstacles; ordinary tourists going both directions will face some hassles.
With the voters of the UK so narrowly divided on the issue of separation, the consequences of the inevitable short-term pain are difficult to predict. As the spectacle of Princess Di’s funeral showed, we are long past the days of English stiff upper lip and doughty working class Londoners enduring the German blitz.
The Ireland- Northern Ireland border needing to be open due to the peace agreement on Northern Ireland is NOT a problem unless one makes it a problem.
Just keep the border open.
Ireland is out of Schengen like UK so both Ireland and UK check people coming to their countries before letting them in to the country so the Ireland- Northern Ireland border can be kept totally open since there is NO chance of hordes of migrants coming through it.
The companies and factories can be required to run customs at the company locations or at the factory if the companies and factories are large enough and middle-sized companies can also run customs themselves through a customs official in the city and small companies can self report.
Individuals can be given customs free allowance of 500 pounds or 500 euros so no ordinary person has to bother with customs.
Put some spot checks on the border from time to time to make sure most are compliant.
There will be some customs evasion but it will be from UK to Ireland for some products and From Ireland to UK for some products so most likely balances itself out and small customs avoidance is NO reason to tie EU regulations and Brussels bureaucracy round your neck and stifle your economy.
Ordinary tourists are already checked at the border since UK (and Ireland) are outside of Schengen free movement area so there will be NO extra hassle.
France and Spain would have to be BRAINDEAD to cause any hassle for UK people on holidays since they would lose lots of tourism Euros/Pounds and France and Spain would have to be BRAINDEAD to cause any hassle to UK people owning apartments or houses in France and Spain because they would destroy their local economies kept up by tourists and long term expats in many areas and they would also destroy their real estate market in areas favored by Brits if they did that.
When it comes to London as Financial centre there is NO reason other non-EU financial centres like Dubai or Singapore would take business from London after Brexit.
It is more likely it will be other way around with London taking business from Dubai and Singapore after London is outside of EU.
Also top German bankers and top French bankers have told Merkel and Macron that access to London markets needs to be kept open for German banks and French banks also after Brexit so Merkel and Macron would have to be special kind of stupid to hurt their own banks by stopping them accessing London markets and all kinds of products available in London but not available in France or Germany.
Frankfurt might win some business that is now done through UK but this will not be more than a small blip and will be more than made up by non-EU countries using UK more and more as a financial base.
NO more EU bureaucracy overkill from Brussels from haughty German and French EU bureaucrats…
It is more likely that some manufacturing for UK market will move to UK from EU.
UK imports much more products from EU than UK exports products to the EU.
All decent arguments. Time will tell. The big point is that there will be short term pain following separation simply due to confusion — and when 48% of the population is already against separation, that pain may lead to unexpected events. The Law of Unintended Consequences reigns supreme in the political arena.
The secondary point is that so much depends on the performance of the denizens of Westminster Palace following separation. Given how badly they screwed up by dragging the UK into the EU and now screwed up again by mishandling the separation process, is there any reason to have high confidence that those UK politicians will turn in a superb performance?
Good luck!
“This bit of political gamesmanship is a stroke of good fortune for the UK.”
True. But then with politicians you can never be sure. They will sign with the devil if it suits them. Merkel earlier this year would be an example.
IMO, EU is coming down hard on Britain for only one reason – if it is soft on Britain, then they would have a stream of Exiters… just prefix the first 2 characters of most countries in the EU to the Exiters!
So it may not be political brinkmanship but pure survival that is in play.
+1
And even if you give the EUers every benefit of every doubt, it becomes completely untenable for them, to negotiate and maintain a different agreement with every country who want to see if they can get a “better deal” on the outside.
Either in or out makes sense. It’s not as if the EU is that hostile to trade with outsiders to begin with. Nor as if there are no examples available of how other non-EU countries interact with EU ones.
So, just leave. Then see what happens, and adjust over time once you have real world experience of life outside.
EU playbook was to make things so difficult for UK that they would lose their nerve and cancel Brexit and remain in EU.
Giving UK a good deal would have caused 2-4 other EU countries to start considering EU exits quickly.
UK doing a NO deal Brexit and just leaving will cause those 2-4 countries to start considering EU exits in a few years when UK thrives and EU stagnates.
Maybe the EU leaders treating UK and Brits like crap have started to believe their own hype how great EU is despite EU being a failure in everything it touches from Immigration to Euro to Banking to manufacturing etc..