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September 08, 2020

Why you should not trust the media on Brexit

If one good thing came out of various hyperventilating UK news reports in the last few days, it is that the continental media have finally got no-deal Brexit on their agenda. Complacent minds are a little more focused now. The trigger for the latest bout of excitement is a story that the UK government would bring domestic legislation to nullify the withdrawal agreement. If true, this would have been astonishing. It's not going to happen, of course. The signal-to-noise ratio has hit another low point. 

Whatever the probability of a trade deal was after the end of the previous round of talks, it has not changed. We are very sure that the next round of negotiations will not change it either. This will go until the European Council in October. If EU leaders agree a material change in their negotiating mandate on state aid, there will follow a period of intense negotiations to conclude a deal. If there is no substantive change in the negotiating mandate, it's game over.

The big problem with hyperventilating news reports in the part of the UK press that is read on the continent is that they have been creating persistently false expectations among officials and politicians. From a Brussels perspective, the whole Brexit story has been a series of consecutive political misjudgements, fuelled by wishful thinking. 

This goes back to 2015. Was it really a victory for the EU to blackball David Cameron during the pre-referendum talks?  If you look back at this period today, he really didn't ask for all that much. In 2016, well after the referendum, we recall a well-known newspaper columnist declaring that Brexit was very unlikely to happen because a second referendum was now a near certainty. Subsequently, the media vastly exaggerated the momentum for the second referendum campaign. Brussels listened to those voices. After the lockdown, a well-placed UK journalist reported that the UK government would have no choice but to extend the deadline. That nonsense, too, was widely believed.  Everybody makes political misjudgements from time to time. So do we. UK eurosceptics have likewise misjudged the position of the EU, especially that of Angela Merkel and more recently on the wide support Michel Barnier enjoys. We support the EU in its refusal to accept cherry-picking deals, like the one with Switzerland. Membership of the single market is, and should be, binary. The UK's decision to leave the single market and the customs union invariably means that UK truckers will have to share quotas and that UK airlines will lose privileged access. 

What we know is that Johnson prefers to minimise the costs of a sudden rupture. He does not seek a no-deal outcome. For this reason alone, we are not betting against a deal. If the EU moves on state aid, we think there can be a breakthrough. But we also know that Johnson will not allow the EU to set the parameters of the UK's future state-aid regime. With an election not due until 2024, we think he has more to lose politically from a hamstrung competition policy than from one-off disruptions in trade. You might not want to put yourself into his position, but it is rational for him to reject the deal that is currently on offer, just as it is rational for him to continue the talks.

The news reports we should question the most are those confirming our most deeply-held beliefs. News and beliefs can easily become mutually self-reinforcing. Brexit is the most extreme example of that destructive interaction that we can remember. 

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