January 17, 2019
UK commentators are pretty clear. The no deal Brexit is off the table. German commentators have travelled in the exact opposite direction. The reason is that they tend to take codified law, like Art. 50, literally while the Brits treat it as an essay contest challenge.
We believe that the risk of a no-deal Brexit remains elevated. Theoretically, there may be a majority for a softer Brexit, either around Labour's customs union or a Norway model. The two are not the same. The customs union precludes trade deals, but allows an independent immigration policy. Norway allows some limited trade deals, but requires freedom of movement, tempered only by an emergency break. The trouble is that both, and especially the customs union, could end up splitting the Tory party. We see no way that May could end up supporting a second referendum or a customs union. A large Brexit party would emerge immediately taking a majority of Tory voters and MPs with them.
After yesterday's confidence vote, May invited Jeremy Corbyn for talks, but he declined with the argument that she must first take no-deal off the table. The very notion of "opposing no-deal" is a metric of the sophistry in the UK debate, given the legal reality of Art. 50. David Allen Green is spot on with his remark:
"A precondition that the automatic operation of law is off the table before discussing possible alternatives to the automatic operation of law is quite a precondition, if you think about it."
So what should we expect from the process going forward? First, we observe that support for a second referendum is faltering. Only 71 Labour MP's came out in favour of it at a rally yesterday. Owen Jones, the Labour activist and Guardian columnist, writes that a free vote among Labour MPs on this issue would split the party right down the middle. Corbyn is opposed, so is Diane Abbott, the shadow home secretary. John McDonnell is on the fence, some like Keir Starmer are in favour. And as David Aaronovitch points out in his Times column, Corbyn is surrounded by four people - all from the hard Left, and all pro-Brexit. They are the Cerberus guarding Corbyn's door.
We don't think that May would go for a customs union. She is more open to the Norway Plus option, precisely because it is mostly aspirational. On closer inspection, it is less attractive than her own deal, but there is probably no harm in opening up the political declaration to allow it as an alternative outcome if parliament so wishes.
Her initial direction of travel, however, is going to be a different one. May and her team will first try to win the 118 Tory MPs who voted against her deal, plus the DUP. In order to do, she will need to get a material concession on the backstop. She will go to Brussels to confront the EU with a clear choice: time limit with a legal force, or no deal.
There is another option we considered yesterday, and for which there seems to be some corroborating evidence. If there is no agreement by the end of March, and a no-deal Brexit beckons, could the EU agree to a long-extension - until the end of 2020 - and fold the transitional period into this framework? Informal trade talks would happen, the withdrawal agreement would be kept, minus the parts on the transition. The Ireland question would be dealt in the trade agreement. There are many reasons to think that the EU will not, and should not, go down this road. But we noted a story from Bruno Waterfield in the Times who said that EU officials were examining the legal aspects of a long delay. One other reason that speaks against it are the European elections. The UK would probably have to take part, and dispatch its MEPs to Brussels and Strasbourg, and strengthen the populists.
A more realistic scenario is that May will simply run down the clock, and confront MPs with the choice we always expected to come at the very end of the process - deal versus no-deal. No third options. Anand Menon seems to think so too. He writes that if the UK were to leave with a deal, then sure this withdrawal agreement will be part of that deal. He does not believe that the EU will water down the backstop. We are less sure on this specific point than he is because the EU has more scope to provide legal guarantees than it has done so far. But we agree with his conclusion that British MPs are only now beginning to grapple with the complex issues and the choices that confront them. The vote has no doubt damaged the deal, but it is too early to say that it is dead.
And finally, we would like to draw our readers' attention to a wonderful analysis by Daniel Finkelstein in the Times. He noted that both camps, but especially the Brexiters, have succumbed to a socio-psychological phenomenon known as "group polarisation". He points to a study on opponents to President Charles de Gaulle in the late 1960s, who started out as moderate critics but ended up radicalising each other through mutual reinforcement. We think this explains the radicalisation in the UK debate quite well, on both sides. Both Leavers and Remainers are taking irrational risks. A no-deal Brexit would not only constitute the ultimate defeat of Remain but would probably make a later campaign for re-entry much more difficult than May's compromise Brexit. And as we argued, the Brexiteers have irrational fears about being trapped in the Irish backstop forever so much so that they are incapable to see beyond it. This group polarisation has been going on for a long time, which is why we cannot be certain that even an eleventh hour compromise stands a chance of success.
We also have stories on how the Irish backstop backfired; on how Brexit is turning into a nightmare for the EU; on why Germany will probably not blink over Brexit; on the SSM's persistent pressure on banks to write off their non-performing loans; on why a Deutsche/Commerzbank merger is a bad idea; and on the links between the Greek confidence vote and the Macedonia name change.