EU leaders did two important things last night. They set April 12 as the new cut-off date. If the UK wants a long extension, it will need to hold European elections on May 22. What is not clear from this morning’s confused news coverage is that this process will not be automatic. The UK will still need to give a plausible reason for an extension - like an election or a second referendum. Regarding the long extension, nothing has changed, except that the cut-off date has been dramatically moved forward.

There is quite a bit of wisdom in the decision. As we argued before the European election date matters. And leaders realised fairly quickly in their discussions that they can’t keep the show going until May 22 because the elections have to be organised, and because nobody wants a no-deal Brexit on election day. Hence April 12.

The May 22 deadline is kept in case the House of Commons votes in favour of the meaningful vote next week, and informs the Europeans Council that it wants to proceed to ratification. We don’t think this scenario is likely now. The decision has exchanged one cliff-edge for another. We see no chance that Labour MPs will vote in favour of the current version of the withdrawal agreement/political agreement before they have the chance to give indicative votes on alternatives. One way or the other, that process will start next week. And here it is where this becomes interesting.

With a no-deal Brexit remaining as the default position, the indicative votes will be between a series of alternatives: outright revocation, a second referendum, a customs union, the so-called Norway 2 option, and the existing version. Most likely, none will carry a simple majority. It is quite possible, that Theresa May’s deal will have more support than any of the others. It is also possible that the other groups fail to reach agreement among each other. We note, for example, that the second referendum crowd remains unrelenting. Many of them reserve the highest degree of obbrobium not for the existing deal, but for the Norway option. Be prepared for another vassal state debate. There is some overlap in the positions of those, like the Labour Party, who propose the customs union, and those who propose membership of Efta/EEA. As a precondition for a compromise, all of them would have to acknowledge the reality that the only thing they can still change is the political declaration. The withdrawal treaty will not change. One of the things we expect to see in the next three weeks is that it will become very clear that May is not the only person who has been unwilling to compromise. 

This leads us to conclude that the no-deal Brexit is still very much on the table. The formal agreement forces May to hold the meaningful vote next week. Not clear whether it will actually happen. There is another Cooper amendment in the wings that would force the process, but what matters is that May herself now wants it to happen. We think that the best chance for a positive meaningful vote would come from a realisation that no option carries more support than hers. And that no option stands a better chance in a final vote - that her deal is the true compromise. Even if she were to hold a meaningful vote number three next week, it is theoretically possible that the House of Commons could hold a final and fourth vote just before April 12. 

The important implication is that the House of Commons can no longer seek refuge in meaningless procedural nonsense, like taking no-deal off-the-table. They would have to agree to hold European elections. The parties would have to face the electorate. We think there are only two routes - each improbable - towards a long extension. The first would be a vote of no-confidence between now and April 12, which Theresa May would have to lose. In that case, the most probable consequence would be May’s immediate resignation, her replacement as Tory leader, followed by elections. The European Council cannot conceivably maintain the April 12 deadline, but it will still insist that the UK prepares for European elections, in addition to national elections. 

The second scenario is an indicative absolute majority in the House of Commons in favour of a second referendum. We see no chance of this happening. 

We conclude therefore that the probability of a no-deal Brexit is no lower now than previously. And no, the European Council has not taken anything off the table. What they have done is to reach a sensible compromise, one that works politically for everybody, and one that respects legal and administrative constraints. 

We think that Emmanuel Macron’s threat still stands. His position - and that of Belgium and Luxembourg - have not changed in substance. Do not think for a minute that a long extension is automatic. The April 12 cliff-edge is more serious than the March 29 cliff-edge precisely because it allows fewer options for a fudge. Once you go beyond April 12, it really will be a long-term delay. And the UK will not be able to default into it automatically.