11 October 2019

Today’s front pages are adorned with the joint statement from yesterday’s surprisingly upbeat meeting between Boris Johnson and Leo Varadkar, after which both leaders said they could see a “pathway to a deal” at next week’s European Council. However, EU Council President Donald Tusk appeared to downplay a breakthrough this morning by repeating the Brussels line that “the UK has still not come forward with a workable, realistic proposal.”

Following the UK’s proposal that Northern Ireland would align with EU regulation for agriculture and industrial goods, the major sticking points remain the customs regime and a mechanism for consent to govern whether Northern Ireland aligns with EU or UK rules in the future.

On customs, the UK’s red line is that it must be possible for Northern Ireland to leave the EU’s customs union along with the rest of the UK. However, the EU appears to have rejected UK proposals for a light-touch Irish border with exemptions for small businesses and checks away from the border. There is little detail about the latest round of talks but the speculation is that both sides are considering a dual-tariff model for Northern Ireland, resembling the New Customs Partnership Theresa May’s government once proposed for the entire UK-EU relationship. This would mean that goods moving to the island of Ireland from the UK would need to be checked. Those for final consumption in Northern Ireland would be eligible for UK tariffs, which might be lower than the EU tariff, and would mean Northern Ireland could benefit from any trade deals struck by the UK post-Brexit. It would therefore grant something the DUP wants – the ability to state that Northern Ireland will be subject to the same trade regime as Great Britain – but with some customs checks in the Irish sea, which they have previously opposed vociferously.

Regarding consent, the challenge is to find a mechanism which does not inherently favour one community over another. The UK proposals have been criticised for granting Unionists an effective veto, yet a rumoured EU counter-offer would have given a similar veto to nationalists. This will be a difficult issue to fudge but if a long-term package on customs can be agreed now that the DUP can live with, finding a mechanism to deal with regulatory convergence and divergence in the future might be a little less contentious. Much therefore still depends on the political calculations of the DUP.

Varadkar has said that any deal would include mechanisms for co-operation between Britain, Northern Ireland and the Republic. It is worth reading my colleague David Shiels recent Open Europe report on how the various strands of the Belfast (Good Friday) Agreement could be employed to grant the major parties a stake in a new compromise for Northern Ireland.

All this said, the pathway to a deal remains very narrow indeed. If a deal isn’t agreed, attention will again turn to Parliament and a possible election after an Article 50 extension beyond 31 October. The likelihood of an imminent election is no doubt playing into the calculations of the UK and EU as they ponder the desirability of a deal prior to 31 October. Politically, the EU faces a difficult choice between an impulse to get a Brexit deal done and move on, and the hope that something better might turn up if Parliament is given more time or an election produces a new Government.

Equally, if the prospect of a deal between Boris Johnson and the EU is killed off completely, then the Prime Minister will have little option but to pivot more forcefully towards No Deal, which the EU still desperately wants to avoid. On the other hand, a “we will leave come what may” approach in an election could yet leave open the possibility of a deal under a new Conservative government. Either way, as Open Europe’s recent report argues, a No Deal outcome is something the Government needs to be prepared for – and can be managed with the right set of responses. You can read the full report here.

News in brief

1. Donald Tusk: “promising signals” of a deal but time running out 
Speaking this morning, European Council President Donald Tusk said, “we are still in a situation in which the UK has not come forward with a workable, realistic proposal… However, yesterday when the Irish Taoiseach and the UK Prime Minister met they both saw – for the first time – a pathway to a deal. I have received promising signals from the Taoiseach that a deal is still possible.” EU Chief Brexit negotiator Michel Barnier held what he described as “constructive” talks with UK Brexit Secretary Stephen Barclay this morning.

This comes after a Downing Street source told the BBC earlier this week that a deal was “overwhelmingly unlikely”, following a phone call between Johnson and German Chancellor Angela Merkel earlier this week.

2. Government publishes report on No Deal preparedness
On Tuesday, the Government published its No Deal readiness report, which includes details of the Government’s plans to ensure that businesses and citizens are ready in the event that the UK leaves the EU on 31st October without a deal. The Chancellor of the Duchy of Lancaster, Michael Gove, said regarding No Deal, “Of course risks remain and challenges for some businesses cannot be entirely mitigated, even with every possible preparation in place. But the UK economy is in a much better position to meet those risks and challenges thanks to the efforts of these sectors and companies.”

3. French Commission candidate rejected by European Parliament
On Thursday, MEPs on the European Parliament’s Internal Market and Industry Committee voted to reject France’s candidate for the European Commission, Sylvie Goulard, by 82 to 29.

4. EU ministers agree eurozone budget
European Union finance ministers yesterday agreed on a eurozone budget expected to raise €17bn over the next seven years. President of the Eurogroup, Mário Centeno, said the budget would be a new “pillar” underpinning the euro. Denmark and Sweden gained assurances that they would not have to contribute.

5. Socialists win Portuguese election
Portugal’s Socialist Party won Sunday’s general election but failed to secure an outright majority in Parliament. The Socialists won 36.6% of votes, followed by the centre-right Social Democratic Party on 27.9%, Left Bloc on 9.7%, the communist party on 6.5% and the conservatives on 4.2%.

Elsewhere, Poland’s governing Law and Justice (PiS) party leads the polls on 42% going into Sunday’s general election.

Open Europe in the media

Dominic Walsh spoke to BBC Radio 5 Live about the prospects of a No Deal Brexit, arguing that the prospects of a “delayed” No Deal after 31 October are “underpriced.” Writing for The Article, Walsh points out that “No Deal has resurfaced this autumn after a six-month extension; there is every reason to believe it would do the same if another extension is granted this month.” Walsh also discussed the Government’s ability to manage a No Deal outcome in a piece for Brexit Central, arguing, “Those who pretend it won’t trigger any short-term disruption are kidding themselves – but so are those who claim it will be an unmitigated disaster.”

Pieter Cleppe argues in The Telegraph that securing a Brexit deal will require the EU to compromise. He was also cited by the Express discussing the EU’s approach to Johnson’s Brexit proposals, and appeared on Luxembourg radio and Al-Jazeera.