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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.

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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