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February 08, 2018

Could the Irish question still trigger a hard Brexit?

The euphoria about December's preliminary Article 50 agreement has given way to depression, as the UK is confronting the issue of the future relationship and is finding that it cannot get the kind of deal it wants - cherry-picking as the EU calls it. We are also becoming more pessimistic about the final deal and, on balance, believe that the probability of a hard Brexit remains formidable.

Peter Foster has a good news story this morning that the Irish are now putting on additional pressure by insisting that they want a legal text to cement what was agreed in December - frictionless trade across the Irish border. The article says that Simon Coveney, Ireland’s foreign minister, has made this clear in recent talks with his UK counterparts, and that this issue is now moving to the top of the agenda of what Foster calls Theresa May's inner war cabinet. We agree with Foster's observation that the British strategy to put this issue on the backburner and integrate it in the final trade discussions is not going to work. He notes that this would also delay beyond March an early agreement on the transition.

There is also a lot of outrage in the UK about the Commission's proposal to penalise the UK unilaterally in the case of an unresolved conflict during the transition period. We think this could be a genuine deal breaker. And, as we and many others have noted before, while the Irish question can be fudged, it cannot be squared with the UK's decision not to have a customs union with the EU. The only customs union arrangement we think is sensible would be the Norway option, but it is in theory possible to have a customs union but no single market membership. We just don't understand why the UK would want this. If a customs union is excluded, there can be no open border within Ireland. And if Ireland insists on a legally binding guarantee, either the UK will have to shift its Brexit strategy towards the customs union, or we are heading towards a hard Brexit. 

We always said that the first part of the negotiations were the easy bit. The final agreement will be hard. It will only happen if either the Irish back down on this demand for a legal guarantee, or if the UK backs down on leaving the customs union. 

Ambrose Evans-Pritchard may not be representative of public opinion, but he is someone who at one point favoured Remain, before turning into a sceptical Leave supporter. His latest headline screams: "Parliament is sleep-walking into a British Versailles over Europe". This is now becoming the eurosceptic narrative in the UK.

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