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Brexit to last indefinitely

Having succeeded in uniting the UK parliament in the only way possible, Theresa May has resorted to running down the clock in the vain hope that when MPs stare into the economic abyss of a no-deal Brexit they will recoil in horror and reluctantly vote through her deal.  The trouble is that nobody is buying it.  MPs know that May – and more importantly the financial interests behind her – is going to blink.  That is, as the clock approaches 11.00pm on 29 March 2019 everyone knows that May is going to beg the EU negotiators for an extension to Article 50; and if she doesn’t, she risks a MPs shoving her aside and making the request on behalf of parliament as a whole.

There is however a fundamental flaw in both May’s and the UK parliament’s reasoning.  It is a flaw that has been present on the British side from the very beginning.  It is the assumption that the European Union has no position of its own and that it will ultimately dance to the British tune because of the damage a no-deal Brexit will do to the EU economy.

It is this line of thought that has taken Theresa May and her various Brexit Secretaries on tours around the capitals of Europe to impress upon (and attempt to divide and conquer) assorted national leaders the potential risk to their indigenous businesses.  Seeing the EU as nothing more than the national representatives of an amalgamation of French cheesemakers, German car manufacturers, Spanish tomato farmers and Italian wine makers has proved to be Britain’s undoing.  As the UK’s former Ambassador to the EU – and one of the very few people in Britain who understands how the EU works – Sir Ivan Rogers recently pointed out:

“Capitals obviously matter, but I think having lived through this with a number of prime ministers, a number of different negotiations … that reflex in the British system always to think that we can deal direct with the organ grinders and not the monkeys: it never works like that.

“It didn’t work like that in the Cameron renegotiation either. That stuff is not done in the way British politics works, leader to leader. It’s done via the bureaucrats, and the sherpas, and the people at the top of the institutions.”

Anyone who has followed the imperturbable Michel Barnier over the past two years will not have failed to understand the collegiate nature of the EU.  Every word contained in the agreement that Barnier essentially wore May down into accepting was first agreed to by the 27 EU governments and then with the EU institutions so that – unlike the hapless Brits – the EU27 spoke with one voice.  And the message – for anyone with the wit to listen for a moment – is that the EU is going to defend the single market at all costs.  If that means taking a short-term economic hit from a no-deal Brexit, so be it.  After all, the European Central Bank was able to bail out eastern European industries after the collapse of the Soviet Union, and to bail out the economies of southern Europe in the wake of the 2008 crash.  Printing a few billion more Euros to cushion the impact of a no-deal Brexit will be little more than small change.

What this means in practice is that when May picks up the phone at the last minute in the hope of getting an extension to Article 50, the EU leaders may allow the call to go straight to the answer machine.  As Rogers observes:

“The UK and EU know there is no chance of no-deal Brexit being the long-term end state, as the UK would quickly come back to the negotiating table. There is not a world where we are going to end up with no deal.” (My emphasis)

In other words, there is an EU interest in allowing the Brits to commit ritual economic suicide by crashing out without a deal.  This is that once this has occurred and the potentially catastrophic consequences of, in effect, severing the UK’s just-in-time supply chain life support systems been realised, the UK will quickly come back to the negotiating table.  When they do so, they will either seek access to the single market via membership of the customs union; or (in the event of a change of government or second referendum) a return to membership of the EU.  Crucially, however, all of the beneficial opt-outs and rebates that the UK currently enjoys will have been removed.  Indeed, were the UK to seek to re-join, it would do so on the same terms as Turkey or Ukraine; having to sign up to the euro and the Schengen free movement zone.

Worryingly, there is a growing political incentive for the EU to assist UK government incompetence in producing an accidental no-deal Brexit too.  This is the recent news that the EU economy is faltering.  Crowded out of the headlines by Brexit in the UK, the Italian economy has slipped into recession.  Far more troubling, however, was the news that Germany barely avoided a recession in the last quarter.  Economically, this news would imply that the EU would want to engineer the softest Brexit possible.  But politically the EU institutions could use a no-deal Brexit to blame “Perfidious Albion” for their looming economic woes.

Even if a no-deal Brexit is delayed, it will be on EU rather than UK terms.  May’s idea that she can get another couple of months to forlornly traipse around the capitals of Europe hawking a deal that was dead in the water last December simply will not work.  As Rogers points out:

“The only talks extension on offer to the UK from the EU may be as long as nine to 12 months, since the EU will not wish to grant an extension simply because the UK is in a state of political chaos.”

In that event, the UK would have to contribute to the EU budget and run elections to the European Parliament (since it would be illegal for the current UK MEPs to remain in place).  In effect, the European election would become a de facto second referendum that would split the main UK parties between their Leave and Remain constituencies; further dividing the people of Britain, but with no resolution to Brexit in sight.

As you made it to the end…

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