10 February 2019

Financial Times: Brexit goes to the brink

Wolfgang Münchau remains "moderately optimistic" that a Brexit deal can be done. He writes that, "once everybody enters the hall of smoke and mirrors at the European Council meeting on March 21, things will change" and both part will strive to reach an agreement.

[...] I remain moderately optimistic about a Brexit deal. There exists a narrow but clear path towards it — one that requires compromise in Brussels as well as in Westminister. At the EU end, Angela Merkel may yet emerge as an effective power broker. I yield to no one in my criticism of the German chancellor’s handling of the eurozone crises. But her detached, analytical approach is the mindset needed at the summit towards the end of March. She is right to say that the EU needs to explore creative solutions to the Irish backstop. We are once again approaching High Noon — a similar crunch point as the Maastricht summit in 1991 or the Greek crisis summit in 2015. In both cases, agreement seemed impossible. Until it happened.

History tells us we should not draw conclusions from the lack of agreement right now. The EU is not going to offer any concessions at this point. But once everybody enters the hall of smoke and mirrors at the European Council meeting on March 21, things will change.

It is also wrong to think about these negotiations as a staring contest. Both Mrs May and the EU have a powerful common interest in avoiding a hard Brexit; both are willing to compromise. And do not overstate the asymmetry in the costs of a hard Brexit. It is trivially true that a hard Brexit will affect the UK more than the EU, but this ignores that the UK voted for Brexit while the EU did not. There would be known losers such as the car industry, but many smaller ones as well. [...]

I also believe that agreement on the Irish backstop is possible. The EU will not agree to a formal end date. But it can give better legal assurances. Article 50, the basis for Brexit under EU law, allows the two sides to make arrangements for the transition. But permanent trade agreements fall outside its scope. Transitional arrangements cannot be indefinite: if Mr Macron decides to veto a trade deal over fishing rights, or if trade talks are abandoned, then surely the transition will be over.

The political declaration on the future relationship could also change — allowing for possibilities that could include a customs union. The final decision about the future would then be left to a vote in the UK parliament after Brexit.

The second crucial moment will come after the summit when MPs would meet to cast their final meaningful vote. It will be the last week before the Brexit deadline of March 29. It could, in theory, drag out all the way until that evening. There will be no options left to take off the table. And however it turns out, there will be angry people who did not see this coming.

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