And now for the hard part
The European Council will declare that sufficient progress has been made, but both sides are returning to old form in preparation for phase two. We discount the loose talk by David Davis over the weekend, and the furious reaction to it. The British strategy is now very clear to see: do everything to get past the March 29, 2019 point of Brexit. Donald Tusk was talking yesterday about a furious race against time. And, while these negotiations could still turn sour and end up failing, we don't think there is a lot to negotiate once you realise that the serious trade negotiations are not going to start until after Brexit. Davis' idea that the UK and the EU could sign a trade deal a second after Brexit is ludicrous.
The main issue to be decided in the next few months is the transition. Alberto Nardelli (@AlbertoNardelli) reports that the EU has tightened the draft guidelines, by making specific references that the ECJ remains in charge, saying that the UK have to continue to comply with EU trade policy, and spelling out that the talks about the future relation will only start in March 2018.
And no, there will be no trade deal before March 2019.
Manfred Weber has an article in which he effectively threatens to withhold a transitional deal. We think this tone is extremely unhelpful at this stage, as the transitional deal is in both sides' interest. He is right, of course, when he points out that both sides will need to have an understanding about their future relationship before they sign a transitional deal. But this is what the British side has been arguing all along: that the EU's sequencing does not make a lot of sense beyond a certain point, because many of the issues - including the future of Northern Ireland - will require some concrete agreement on the future trading relationship. Weber said his preferred deal would be a broad association agreement with a Canada-style trade agreement inside. That will, of course, only affect the flow of goods. We were interested to read that the EU is willing draw up a separate agreement on services and capital.
Peter Foster notes that the EU has showed an impressive degree of unity in the first phase of the negotiations, but suggests this unity may break down in the second phase as the interests of the member states are no longer aligned. He says the Netherlands and Belgium will be pushing for a more relaxed approach on customs and on the Common Transit Convention. On financial services there are differences between those countries that rely heavily on the City of London and those that want to attract business away from it. He quotes a senior official, who had previously complained about the chaos on the British sides, saying that everybody involved knows that divisions among EU member states will become a factor in the next round of negotiations.
Last week's agreement calmed the nerves of Britain's hyperventilating commentators a little bit. As Sebastian Payne pointed out, the probabilities of a no-deal Brexit as well as of a Brexit revocation have both receded as a result of last week's agreement. He referred to a recent analysis by Ipsos Mori the divisions between Brexiteers and Remainers in the UK are hard and are not moving. Brexit has become a form of identity politics. There are signs of growing doubts among Leavers, but this has not reached a point where they are ready to shift sides.