February 07, 2019
Forget Tusk - the real action is elsewhere
There is a lot more movement regarding Brexit than it appears if one judges from the soundbites. Donald Tusk's much-reported remarks tell us nothing we did not know already, starting with the perception of Tusk himself. The more important development is the ongoing rapprochement between the Labour Party and Theresa May. Some Labour MPs are already hinting that they will support a deal. The news that Theresa May is considering primary legislation to enshrine into UK law the current EU level of employment protection could persuade some Labour MPs to support a withdrawal agreement. And, as the Guardian reports this morning, Jeremy Corbyn has set his own five conditions for supporting a deal. They reflect a subset of Labour's six tests - all minus the demand that the exact same benefits as with membership are achieved. The remaining conditions still include the customs union. We see no solution on this point, except a general opening of the political declaration to different designs of a future relationship. This does not need to be cast in stone right now.
In Brussels, meanwhile, there are growing fears that a no-deal Brexit is becoming very likely. The simple reason behind that perception is the knowledge that the EU will not be able to make any more promises to May simply because she cannot guarantee a majority in the Commons. What if she loses the next vote and comes back with more demands? This is not a game the EU is in a position to play. Consequently, we have no expectations that today's meeting will produce any tangible results, except perhaps on some technicalities such as codicils, or an Art. 50 extension which is now inevitable under any scenario.
What we thought most remarkable about Tusk's comment yesterday was his resigned acknowledgement that Brexit is actually happening. He said there were no majorities for Remain. He made a specific reference to the pro-Brexit stance of both May and Corbyn. Like so many other Europeans, Tusk has only slowly woken up to the possibility that Brexit might actually happen. There has been a lot of denial over this in Europe, coupled with hopes that the UK would find a way to re-run the referendum. In the UK, too, we followed the progression of second-referendum advocates through various stages of mourning - with some only now reaching the anger phase. They, too, did not expect Brexit would happen.
Alex Barker reports in the FT that the focus in Brussels is no longer about preventing a hard Brexit, but about finding someone to blame for it. He quotes one senior EU official involved in the Brexit process as saying that the central expectation now is for a no-deal Brexit, perhaps not on March 29 but in June at the latest.
Our own experience is to treat such comments with a pinch of salt. Every success in EU diplomacy - without exception - was preceded by a period of projections of existential gloom by the most senior officials. This is both expectations management and a sign that the negotiations are terribly difficult. This experience in itself does not make us optimistic. The risk of an accident remains high. If the EU ends up humiliating May with a careless and thoughtless aside - and with Tusk you never know - we would not rule out the possibility of the British retreating to their shores and breaking off the talks.
In the absence of such an accident we expect both sides to run down the clock. We see little chance of the UK parliament being able to take control of the process. It is hard to legislate against the UK government. And, before any such coup could succeed, we would expect to see elections.
One crucial figure to watch is Angela Merkel, who has kept a very low profile but who is keen on preventing a hard Brexit at a time when the German economy is slowing down and several elections loom. We see Merkel's role as a possible go-between. Of all the EU's leaders, she seems calmest and has made the fewest enemies.
The most worrying part of Barker's story in the FT is the comment by an EU ambassador who noted that the accelerating Brexit preparations are creating their own dynamic. This is something we feared might happen: is people believe - rightly or wrongly - that they can handle it, the cliff-edge loses its potential to scare. We believe that there are very strong arguments against a hard Brexit - but long queues at Dover and temporary shortages of some luxury foods do not scare the majority of voters.