May has reasonable chances of success
To us Theresa May acts like a chess player carefully positioning her pieces in ways that appear puzzling to outsiders. The latter's confusion is the source of an overwhelming share of Brexit commentary in the UK. She has one valuable advantage in this game: she knows the strategy and constraints of her opponent - the EU - much better than anyone else in the UK political scene.
Most of the UK Brexit commentary falls foul of mistaken assumptions about EU politics, procedures and law. In this context we noted a comment by Anatole Kaletsky, who calls on the EU to extend the Brexit deadline unilaterally. He means the European Council should vote to offer an extension, irrespective of whether or not this is requested by Theresa May, betting on the House of Commons to then pass the necessary legislation.
He is also wrong to portray the upcoming talks as a blinking contest. The 29 March deadline is useful both to May and to the EU. May needs to get a majority behind her plan, which will never happen without a deadline. And the EU knows it will need Ireland to support a compromise solution, which will also never happen without a deadline. They both need to take this to the brink. As we have said before, the contours of the eventual agreement are not the main point. It is the need to generate the needed unity on both sides.
May revealed some of her strategic intent yesterday during a speech in Belfast, where she effectively killed the Malthouse compromise - which called for an extension of the transition period and the ditching of the backstop. May said the Irish backstop will remain in place. Her talks with the EU, starting tomorrow when she meets Jean-Claude Juncker in Brussels, will be about assurances on the finality of the backstop. This is to a large extent a technical discussion. Never bet against the EU finding a technical solution.
But even though the Malthouse compromise was never going to fly as a negotiating tool, it did the job of re-uniting Tory MPs behind their prime minister, at least for a while. It allowed her to persist with her strategy of running down the clock. We are already in February. Various Commons amendments were designed to stop her from doing this. The closer we get to the deadline, the stronger her position is vis-a-vis the parliament. Even Kaletsky's solution would not fly since parliament needs to do a lot more than pass an amendment in order to force an extension to the deadline. It needs to pass legislation, and one should not underestimate the UK government's ability to frustrate such a process.
The deadline is crucial. She recently told her cabinet that the March 29 deadline still holds. This is not true, of course. We know that she will have to extend it because every option now requires an extension. But her game is to get a deal first, and then to extend, not the other way around. And we think this is the EU's game as well.
As a final thought for today, we believe that second-referendum advocacy may be the biggest risk factor for a no-deal Brexit. We have heard the view expressed that they would rather have a hard Brexit - to prove how disastrous the whole thing is - than a soft compromise like May's deal. For the hardcore second-referendum supporters, Norway is the real enemy. It appears to us that at least some moderate Tory MPs like Nicky Morgan, and moderate pro-Remain Labour MPs like Caroline Flint or Lisa Nandy, have a clear vision of the trap. They are now moving towards supporting a compromise.