Sleepwalking to No Deal

You have to hand it to Emmanuel Macron. Briefly last week he turned me into a Brexiter. As much as I agree with his reported remarks about the basis of Brexit, the way he said it and his actions in Salzburg provoked the opposite reaction to the one he intended. If Tusk and Macron hoped that their show of unity would force Theresa May into dropping Chequers and following the EU line then they were misguided. Instead, they've hardened the UK position - even moderate Brexit supporters in the Tory party are now contemplating a no deal scenario. 6 months ago the prospect of Jeremy Hunt supporting a no deal Brexit was unthinkable, now it's likely.

There are plenty of people in the EU who are deeply alarmed about what happened. Theresa May had a lot of good coverage from normally hostile sections of the European press last week. However, the problem with consensus-based decision making is that all countries in the EU need to agree with the negotiating position including the hardliners in Paris and Berlin.

The irony is that a no deal Brexit is the quickest way to break the solidarity of the 27 remaining EU members. Victor Orban has already said that Hungary would negotiate a unilateral deal in such a scenario. It is unlikely that Ireland would be willing to countenance the economic and political consequences of a hard border for long before they too struck their own agreement with London. Such deals would be illegal under EU law, but neither party would care. France has a long history of defying ECJ rulings, so don't have the moral authority to force compliance.

This illustrates the core problem that has bedevilled the Brexit negotiations throughout. Both sides are more concerned about internal politics and maintaining unity than with reaching a workable deal. Each stage has resulted in a series of tactical victories, with no consideration for the strategic consequences. This was perhaps predictable, the EU is famous for deferring major problems - negotiating short-term comprises without concern for the long-term consequences. This is especially true for Angela Merkel, but also for Theresa May who is essentially a managerial rather than a visionary leader.

A New Approach

There is still time for the Brexit negotiations to bear fruit. Everyone expected the talks to break down at some point prior to the two parties coming together again to reach a final agreement. However, doing so from this position would require a major change in attitude from all involved. At the start of the negotiations a set of red lines was outlined, but both sides have since spent the last two years trying to get the other side to shift those red lines without success.

The British have a reputation in Brussels for being good at drafting policy but terrible at building coalitions and negotiating support for the resulting directives at ministerial level. The Brexit negotiations have proved this reputation is justified. The commission holds some blame too. Throughout this process, the EU has relied on the British to come up with potential solutions for an eventual deal. It has become clear in recent weeks that Michel Barnier is beginning to be frustrated by this approach as well. He went to Salzburg looking for changes to the EU negotiating position. This was the basis of Theresa May's speech on Friday, in which she asked for detailed feedback on Chequers and a counter-proposal. The usual suspects interpreted this as her preparing to walk from talks, when in fact it is a request to continue them but on a more traditional basis. Whether it will work is unknown - but it's going to be more effective than anything said on Thursday.

Transitional Arrangements

Ultimately, both sides believe that no deal would be disastrous for everybody. No one is ready for it. This is likely to focus minds as November approaches. Given events, it is unlikely, but not impossible, that a long-term deal can be agreed in time. This will result in another episode of can-kicking. If this happens, Theresa May will have to respect the EU position that the UK must choose whether it stays in the Single Market in its entirety or leaves it completely. She rejected this choice on Friday, but when push comes to shove she will go for the gradualist approach - in then out. This will buy time for a Canada style free trade deal to be negotiated. Those talks will take years but do have majority support on both sides. Michael Grove will provide the leaver cover she needs to get this through - he's already indicated that he supports the principle of gradual divergence.

The DUP would be onside. It is widely recognised that their key priority is to prevent regulatory divergence between Great Britain and Northern Ireland. It is sometimes forgotten that they also want to prevent a hard border - their rural base benefits from the open border, so want to keep it.

More importantly, many Labour MPs would back it too. The bulk of them care far more about stopping Brexit than winning a hypothetical next election. They'll support any half way house transitional arrangements that keep the UK in the Single Market. Their aim will be to make these arrangements permanent, just as happened for Norway and Switzerland.

The big losers will be the Tory right, who will be left out in the cold. But then Theresa May has already lost their support over Chequers. Ultimately, she cares more about the opinion of the DUP than the ERG. The latter can be relied on to support the Tory government in a confidence vote, and she knows it. The former can't. The ERG will force a leadership challenge, but everyone knows that they're already planning one anyway. They've held off because they know they won't succeed whilst Brexit is being negotiated. That reticence was never going to last, but it still doesn't mean they'll win. They need support from a majority of Tory MPs, which they don't currently have.