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A flurry of deal-making, with all sorts of rumors about an agreement being close, or even having already been sealed in secret, dominated UK reporting last week. It was all for naught. As the Financial Times reported in considerable detail, Brexit Secretary Dominic Raab met for only an hour with Michel Barnier to reject the current draft of the Withdrawal Agreement. No further sessions are scheduled.
This is fatal to the negotiations. Recall the EU had set down a firm timetable at Salzburg: May had to come back with something to be presented at the EU summit set to start this Wednesday, or else a special November session to complete the agreement would be off. The order of battle was that the text had to be presented to the sherpas by Tuesday at the latest so they could review it and brief their bosses. So there is no way for their to be panicked 11th hour regrets and a revival of the negotiations before the October meetings. That time has passed.
Given how disruptive a UK crash out would be to the EU, the Guardian and others speculate the EU will hold an emergency summit in November for planning purposes. That would also give the UK one last chance, were it to try, to make a last-ditch effort at cinching an exit agreement. As the Guardian put it:
The plan is likely to pile further pressure on the British prime minister by illustrating the EU’s seriousness about allowing the UK to crash out if the alternative were a deal that would undermine the integrity of the single market or prove unacceptable to the Republic of Ireland.
But between Salzburg and now this breakdown, the human dynamics are also a big impediment. Despite Barnier being the personification of a calm and professional negotiator, EU leaders have had it with the UK’s arrogance and attempts to bully the EU despite having no leverage. That was what the outbursts at May in Salzburg were about.
The disconcerting thing about the collapse of the talks was that the EU was blindsided. The EU thought the Raab meeting was to sign off on an agreement, not to nix it. This means at best the UK team got way ahead of its principals and was unable to bring them along. At worst, it means bad faith dealing, where the UK team had agreed to things that it had run by No. 10, only to renege. Did the threat by the DUP’s Arlene Foster to blow up the Government carry the day? From Politico:
Indications that a tentative deal at negotiator level was close, began to emerge mid-afternoon Sunday, when the U.K.’s Department for Exiting the EU released a statement that Brexit Secretary Dominic Raab would make an unscheduled trip to Brussels…
Subsequently, EU diplomats said a meeting of EU ambassadors had been scheduled for 6.30 p.m. Sunday evening. Three EU diplomats said the meeting was intended to allow ambassadors early sight of the divorce deal, but after the meeting between Barnier and Raab, an EU official said the EU negotiator would update them on the U.K.’s remaining objections.
Banier tweeted later:
We met today @DominicRaab and UK negotiating team. Despite intense efforts, some key issues are still open, including the backstop for IE/NI to avoid a hard border. I will debrief the EU27 and @Europarl_EN on the #Brexit negotiations.
— Michel Barnier (@MichelBarnier) October 14, 2018
Brexit talks reached a dramatic stand-off in Brussels on Sunday night, after Theresa May warned that a draft treaty to take Britain out of the EU was a “non-starter” and risked tearing her government apart.
Mrs May despatched Dominic Raab, her Brexit secretary, to Brussels to make clear that she could not sign up to the current terms for Britain’s exit at a European Council meeting on Wednesday…
The biggest sticking point remains the so-called Irish backstop, the guarantee by both sides that there will be no hard border in Ireland pending the agreement and ratification of a lasting “frictionless” UK-EU trade deal.
Some Eurosceptic Tory cabinet ministers have threatened to resign unless Brussels agrees to put a firm end date on the “temporary” customs union between the EU and UK which forms part of the backstop.
Separately Northern Ireland’s Democratic Unionist party, which props up Mrs May’s government, has threatened to bring down the prime minister unless she drops a linked proposal to keep the region in the EU’s single market during the backstop period, putting a regulatory border in the Irish Sea…
EU ambassadors were told that Mr Raab’s meeting with Mr Barnier went badly, throwing into doubt several elements of the deal that was expected to take shape.
Aside from Ireland continuing to be the circle that cannot be squared, it is dismaying to see the UK still trying to have its precious cake, um, “frictionless” trade deal. What about leaving the Single Market don’t you understand?
The Times reports that the UK is (finally) about to get serious about crash-out preparation:
The Times has learnt that senior civil servants have warned ministers that whatever happens this week, the government’s contingency plans for Britain crashing out of the EU without a deal agreed must start being put into effect by the end of the month. Rather than wait for the conclusion of talks in Brussels, or the ratification of any deal by MPs, the work of stockpiling medicines and telling businesses to begin registering for new customs processes must begin shortly, ministers have concluded.Those involved in the discussions said that if the government delayed taking action to prepare for a no-deal Brexit beyond this month, it faced being under-prepared by March 29 next year, when Britain officially leaves the EU.
“Underprepared” is the understatement of the month.
Finally, from Richard North:
This looks terminal, not least because a meeting of Sherpas scheduled for today has been cancelled. This means that there is to be no further negotiator interface before Tuesday’s general affairs council – an essential prerequisite to a deal being presented to the European Council.
On that basis, it does not look as if there can be a successful outcome to the October Council – if by success we mean a negotiated deal. For others, this brings us to an outcome which has been the target all along….
Given the behaviour of the “Ultras” this weekend, this comes as no surprise. But we will not be able to judge the full impact of this latest development until we know what the European leaders plan to do.
If, as surmised by Spiegel Online, they decide to allocate the special November meeting to agreeing contingency plans, then we can assume the negotiations are as good as over. But if further face-to-face meetings are planned, we may still be in with a chance…
Officials, however, have moved to dampen speculation that the break-up in negotiations was in fact choreographed. “There’s trouble”, one of those anonymous sources told The Times. “This was not the plan”. A senior EU diplomat added: “This is not good and the backstop remains the problem”.
North also warned:
A “no deal” presents serious challenges for EU Member States, and for the EU institutions. A considerable amount of physical preparation will be needed, together with a substantial number of legislative adaptations before even a minimal cross-border operation can be resumed with the UK. The same applies to the UK, and Ministers have been warned to step up contingency plans here – even if there are severe limitations as to what can be achieved.
Despite the enormous costs that a disorderly Brexit would wreck on the UK and the EU, it is hard to see how it can be stopped. The EU put a huge amount of pressure on May and her coalition to get real. Despite the week-plus of intense talks, it appears the two sides are no closer together on the two main points of contention, the Irish border and what the future relationship should be (and how specifically that should be set forth in the Withdrawal Agreement. It appears to still be true that there is not a deal that May could get through Parliament, with the DUP and the Ultras set to vote anything that smacks of compromise down.
I would really rather be wrong about this situation. A crash out will precipitate a new financial crisis, not overnight, but it will send boulders downhill that will create an avalanche. The world is already so binged-out on private debt that, as the IMF and the World Bank and the BIS have recently warned, the risk of a meltdown is already high. A “no deal” Brexit will produce the scenario that former UK central banker Willem Buiter warned about in 2008 in his post, Reykjavik on the Thames. He explained how the UK had the same profile that Iceland had, a small open economy with an outsized banking sector. He saw the UK as vulnerable to a triple crisis: a currency crisis which would then kick off a banking and a sovereign debt crisis.
The EU is also vulnerable to a banking crisis, both via contagion from a UK financial train wreck and on its own. It is already having a slow-motion Italian banking crisis. A disorderly Brexit is sure to damage the EU economy. How will its wobbly banks make out in the year after Brexit if the EU economy shrinks by 2% or 3%? And remember, the EU has mechanisms in place that look designed to create bank runs, like nation-state deposit guarantees than in many cases are very much underfunded, to bail-in schemes that would make any sane depositor move their money to another bank if things got ugly.
When Margarite Yourcenar wrote her classic Memoirs of Hadrian, the one sentence she kept from a discarded first draft was “I begin to discern the profile of my death.” Brexit will be a death, not just of an ordered way of living in the UK, but of entire geopolitical structures. We can’t yet know how far the breakage will extend, but this had the potential to be the beginning of the end of much larger systems, just the way the Great War was the closing chapter of the era of monarchies and rule by landed aristocrats and the beginning of the end of the gold standard.
Perhaps the key actors will steer away from the abyss. Maybe the October shock will force a referendum, and maybe the EU will relent and extend the Brexit deadline. But that would require a lot of parties to make radical departures from their current stances. Happy endings are a lot more prevalent in movies than in real life.