Brexit: The Ball Kicked to Brussels

Published on January 30, 2019

The fluid and highly uncertain back and forth between UK Prime Minister Teresa May and Members of Parliament over the past few weeks culminated in a round robin of multiple amendments on Brexit, only two of which cleared Parliament last night.

With those votes now in the rear-view mirror, the initial reaction from Brussels is that May has thrown, whether deliberately or inadvertently, the fate of negotiations right back into the EU’s lap, and on the face of it that may not bode so well for May.

** In highly simplified English, British MPs voted last night in effect for May to go back to Brussels and re-negotiate the Irish backstop to find “alternative arrangements.” The good news is that this issue has been isolated as the single remaining stumbling block in negotiations with the EU, giving May a mandate to go to Brussels with the highly fractured Parliament, at least for now, behind her.

** “Alternative Arrangements” for the Irish backstop are, however, a very tall order for Brussels, and Ireland’s Foreign Minister Simon Coveney was quick to point out, with the echoes of the yeas and nays still ringing in Westminster, that Brexit negotiators have already spent two years trying to find even one alternative arrangement to the Irish backstop issue, with no success.

** EU officials have also been quick to remind the UK the Irish backstop is part of the Withdrawal Agreement which has been agreed, closed, and will not be re-opened for negotiation (full stop). This has led much of the street, in the light of morning, to tweak their generally, in our view, too low odds of a hard Brexit just a tad bit higher.

** But for all the tough talk from the EU, most significantly from European Commission President Jean-Claude Juncker, there have been some small hints of potential softening from Brussels. And perhaps more to the point, the sudden lurch downwards in Eurozone growth, most notably and remarkably in Germany, and concerns in the Elysee that the political and economic fall-out from the yellow vest demonstrations would only be exacerbated by a new host of uncertainties, starting with fishery issues, from a hard Brexit, may inject a new sense of urgency for the EU to show at least some (limited) flexibility on Backstop “alternative arrangements.”

** It is clear, however, that the Brexit saga has entered yet again into a new phase of brinkmanship and drama between London and Brussels. The early feedback from Brussels to the latest political events in London is that May’s strategy at this point appears to be to push negotiations right to the edge and force some MPs who have not supported the current deal to date, perhaps on the Labour side, to vote for it at the eleventh hour and avoid a crash out of Brexit.

** But this view takes at face value the intransigence publicly expressed by Brussels over re-opening the WA Treaty itself, and with it giving an additional “hard,” legally binding, assurances on the Irish question. And while it may be early to speculate at this point, we believe one, and perhaps the only realistic, concession to bridge the Ireland question would be around setting a sunset clause, or agreed end date, to the Irish backstop.

On that, we would note of special interest EU Chief Brexit negotiator Michel Barnier’s comments indicating a willingness to work with the UK on a “more ambitious” political declaration, even as senior officials in Brussels have come out in full force warning of the need for all sides more than ever to fully prepare for a hard Brexit.

Back to list