Cameron Wins EU Deal to Avert ‘Brexit’ After Two-Day Summit

How Much of a Blow Might 'Brexit' Be for Business?
  • Final draft communique gives U.K. 7-year `emergency brake'
  • Deal lets Cameron call in-out referendum as early as June

European Union leaders reached a deal aimed at keeping the U.K. in the bloc, allowing Prime Minister David Cameron to call a referendum on EU membership as soon as June.

Twitter: David Cameron on Twitter

“Drama over,” Lithuanian President Dalia Grybauskaite said on Twitter, breaking the news of the deal as the 28 heads of government met for dinner at the end of a second day of their summit in Brussels Friday. EU President Donald Tusk confirmed the accord a few minutes later, saying on Twitter that there was “unanimous support” for the agreement.

Twitter: Dalia Grybauskaitė on Twitter

Shortly after the Lithuanian leader's tweet, European Commission President Donald Tusk confirmed the deal had unanimous support:

Twitter: Donald Tusk on Twitter

Danish Prime Minister Lars Lokke Rasmussen also tweeted his reaction:

Twitter: Lars Løkke Rasmussen on Twitter

The pound rose on the news of a deal after some 32 hours of negotiating that saw prolonged haggling over Cameron’s demands for welfare curbs, legal changes to the EU treaties and attempts to protect the financial industry in the City of London. The focus will rapidly shift to the domestic campaign that will determine the U.K.’s future in the EU.

“A deal to give the U.K. special status within the EU,” Cameron told reporters after the summit. “This is enough for me to recommend that the U.K. remain in the EU, keeping the best of both worlds.”

The pound rose for a second day against the dollar, gaining 0.3 percent to $1.4379 at 4:32 p.m. in New York. That’s up from a decline of as much as 0.6 percent earlier in the day.

The U.K. won a seven-year “emergency-brake” period in which it can impose welfare curbs on other EU citizens arriving to work in Britain, according to the final draft of an EU communique prepared for the dinner seen by Bloomberg. One of the most contentious of his demands, Cameron had surprised his counterparts by pressing for 13 years; the original proposal had been for five years. Each worker falling into this category would have their benefits phased in for over four years.

The draft text obliges the U.K.’s financial industry to abide by what the EU calls its “single rule-book” -- the common rules for banks and credit institutions in every country. However, it gives the U.K. some flexibility, stating that lenders outside the euro area may be able to have “specific provisions,” giving Cameron the ability to claim a shield for the British financial industry.

Business Leaders Stick to the Script on 'Brexit'

Cameron will now present the deal to his cabinet in London at a meeting at 10 a.m. on Saturday and recommend a vote to stay in the EU. “I have negotiated a deal to give the U.K. special status in the EU,” he said on Twitter.

Gove Opposition

While cabinet members have been told they will be free to oppose the accord and campaign for a U.K. exit, the prime minister is aiming to keep as many senior Conservatives as possible, such as London Mayor Boris Johnson and Business Secretary Sajid Javid, on his side. Justice Secretary Michael Gove has already decided to oppose the deal, the BBC and the Independent newspaper reported.

The announcement of the referendum means, though, another four months of the uncertainty that’s already rippling through markets and unsettling businesses over the prospect of the U.K. leaving the EU, a so-called Brexit. Pacific Investment Management Co. said this week that “uncertainty over the result is likely to weigh on U.K. markets for a good few months yet.” It assigned a probability of as much as 40 percent to a Brexit.

Opinion Polls

The latest opinion poll, by TNS, found 39 percent of respondents supporting leaving the bloc with 36 percent backing staying in, and 25 percent undecided once those who are unlikely to vote are stripped out. TNS questioned 1,120 adults online from Feb. 11 to Feb. 15 with a 3 percentage-point margin of error. Most other online polls recently have also shown the result too close to call, though less frequent telephone surveys have shown “Remain” clearly ahead.

Cameron obtained “special status” for Britain by getting wording excluding the U.K. from the EU’s principle of striving for ever closer unity. The agreement states that when the EU’s underlying treaties are next revised they will “make it clear that the references to ever closer union to not apply to the United Kingdom,” according to the draft.

The agreement was the result of nine months of intense diplomacy by Cameron during which he visited 20 EU countries to try to sign up other heads of government to his agenda. That was topped by more than 24 hours of sleep-deprived negotiation in Brussels that saw a meal originally billed as “English breakfast” pushed back first to “lunch” and then finally “dinner” as central and eastern European countries resisted welfare curbs that would hit those of their citizens living in the U.K.

But agreement in Brussels was only the first hurdle: voters at home may prove a harder sell. Cameron had warned his fellow leaders at the opening of the summit that the proposed deal was unpopular in Britain, and that any further watering down would damage his chances of winning the referendum.

Tory Splits

As he fights to keep Britain inside the EU, he faces the opposition of many in his own Conservative Party, which has been split over its attitude for a quarter of a century. The prime minister, who first announced plans for a referendum in January 2013, only agreed to put the matter to a vote under pressure from those on his own side for whom the issue is totemic. Alongside them, he will face a press that is largely hostile to the EU.

On his side, he has every living former prime minister and most of the other main parties. The main Labour opposition pledged to campaign Thursday to keep Britain in the EU, even as its leader, Jeremy Corbyn, dismissed Cameron’s talks in Brussels as “a theatrical sideshow, designed to appease his opponents within the Conservative Party.”

Cameron also has the advantage that the various campaigns to leave the EU are split and fighting among themselves over what their message should be and who should be their spokesman. Nigel Farage, the leader of the anti-EU U.K. Independence Party and most prominent campaigner for a Brexit, is seen as toxic by more mainstream politicians.

Cameron can also be encouraged by the basic conservatism of the voting public.

“In so many ways, the British are Euro-skeptic in their views while at the same time begrudgingly supportive of membership of the EU,” Joe Twyman, head of political polling at YouGov Plc, said in an interview. “Cameron has to hope he can persuade enough people that membership generally and the renegotiations specifically may be far from perfect, but they’re less bad than any alternative.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE