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September 19, 2019


Why the chances of a deal are better than they look

There have been a lot of jokes about the German car industry coming to the rescue of the Brexiters. Admittedly, even we thought they would mount a somewhat more robust defence of one of its largest export markets. But it is important also to remember that all action will occur at the end. Angela Merkel said so herself. She wants a deal. A reminder of the German position came when Norbert Roettgen, chairman of the foreign affairs committee of the Bundestag, slapped down Xavier Bettel's grandstanding gesture at the beginning of this week. 

If you look at it from a technical point of view, as so many journalists and experts do, you could easily fool yourself. Successful EU negotiations are always preceded by periods of technical despair. We agree with Laura Kuenssberg of the BBC: it is impossible to mind-map your way towards a deal. It is politics that will decide. It's not a procedural issue.

James Forsyth argues that, if a deal is agreed, it would probably pass parliament this time. His conclusion is underpinned by some interesting information he got from Downing Street: if a deal were agreed, it would come with a threat by the EU that no further extension would be offered. Readers may recall that we suggested this very route to Theresa May - as opposed to her fateful three-way bet between deal, no deal and no Brexit. That ended with majorities for nothing. If the EU pledges not to extend, the choice narrows to deal-vs-no-deal. That will be the only way for the deal to pass. If Johnson manages to reduce the rebellion in his own party to about 5 or 10, there would then be enough Labour MPs to support the deal. Elections would then follow at some point.

The electoral dynamics also favour this scenario. The latest YouGov poll now has the LibDems ahead of Labour after they pledged to revoke Art. 50 without a referendum. 

The problem for the LibDems is that this policy self-destructs once the UK leaves before the next elections. This means the LibDems are desperate for elections to take place before Brexit is settled. It is the only chance for their policy shift to have meaning. The incentives for Labour are the exact opposite. The Remain alliance is permanently broken.

Labour's only chance of coming to power is for Brexit to be out of the way, followed by elections shortly thereafter. This is also why we think that Jeremy Corbyn will look the other way if some of his MPs end up supporting the withdrawal agreement. 

It looks to us that Corbyn is already looking beyond Brexit. The Times reports this morning that he is considering reversing one of the last remnants of Blairite history: the change in clause 4 of the party's statutes from a socialist to a centrist mantra. The FT reported yesterday that John McDonnell is supporting the abolition of private schools. All that radicalism would be lost in a pre-Brexit election.

Our other stories

We also have stories on the DUP signalling openness to a Northern-Ireland-specific deal; on stress in the US repo market; on the difficulties to agree Italy's 2020 budget; on what the repeat of elections in Spain is for; and on Austria's new soft spoken leader of the far right.

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