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Brexit Bulletin: Can the Truce Hold?

  • May won support from both sides of Tory Brexit spectrum
  • EU will set out its negotiating stance on trade this week

'Brexit Is Stupid,' Says Peterson Institute's Posen

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Theresa May has secured a temporary ceasefire in her Conservative Party with a Brexit speech on Friday that had something for everyone. But the European side didn’t like it much and there are tests for Tory unity ahead – several tough decisions, long postponed, will finally need to be made.

May described a position in which Britain would leave the European Union’s single market and customs union but stay closely aligned in many areas, keeping EU regulations. In the future, she told the BBC, Parliament would be able to decide whether to diverge, “taking a decision and balancing the interests between keeping the same rule or changing for the future.”

Theresa May delivers her speech at Mansion House.
Photographer: Chris J. Ratcliffe/Bloomberg

Jacob Rees-Mogg, chairman of the European Research Group, which favors a hard Brexit, called the proposal “sensible, pragmatic and generous.” Those around him believe that the important thing is to keep the option of divergence on the table, so that they can exploit it in the future, Rob Hutton reports. Tory rebels who want to keep close ties to Europe also praised the speech, with lawmaker Sarah Wollaston calling on colleagues “to give the prime minister breathing space.”

The Text, Decoded: May’s Brexit Compromises, Fudges and Red Lines

But the reaction from within the EU was less generous. While Chief Negotiator Michel Barnier was diplomatic enough, welcoming the “clarity,” the European Parliament’s Brexit chief Guy Verhofstadt said he hoped “serious proposals have been put in the post.” Manfred Weber, a key ally of German Chancellor Angela Merkel, said he was “even more concerned” after the speech than beforehand. “I don’t see how we could reach an agreement on Brexit if the U.K. government continues to bury its head in the sand like this.” 

Catch Up: Six Things We Learned From Theresa May’s Vision for Brexit 

This week we will start to see the bloc’s negotiating position on the future relationship. Less than two weeks ago, the EU made clear it wouldn’t accept anything that looked like partial access to the single market, which it views as indivisible. And the EU’s reaction will dictate how long the truce in the Tory Party can last. Wollaston, who is one of the rebel Tories backing an amendment that aims to force the U.K. to stay in a customs union with the EU, said as much.

“A lot depends on how the EU responds,” she said. The key issue is whether business would be able to function. “It’s about whether we have some form of partnership so that we have frictionless trade at our borders,” she said on ITV.

And that’s the rub. One of May’s most important messages on Friday was that neither side in the negotiation would get everything they want. May continued to ask for everything, but acknowledged she might not get it. Cabinet Office Minister David Lidington underscored that point at the weekend, describing May’s speech as “an ambitious opening bid for what will be a complicated set of negotiations.” 

Brexit Latest

Melodrama or Real Threat? | How real is Brexit’s threat to the Irish peace process? Opponents say it could re-ignite the conflict. The Democratic Unionist Party says that’s just “scaremongering,” and officials in London privately call such comments melodrama. The truth probably lies somewhere in between, report Dara Doyle and Kitty Donaldson. Ireland’s Deputy Prime Minister Simon Coveney meanwhile expressed frustration that May didn’t go into more detail on the border in her speech on Friday.

Stocking Up Before Brexit | Airbus SE may need to stock up on the parts it needs to build wings at its U.K. plants to avoid the risk of delays to deliveries after Brexit, Ben Katz reports. “If we think there’s going to be a kind of a gumming up of the docks and the airports in March of next year and during a transition period then we’re going to have to start ordering additional components now,” Tom Williams, chief operating officer of Airbus’s commercial aircraft arm, said in an internal video posted to employees. 

Pharma Warning | Merck KGaA CEO Stefan Oschmann, who is also president of the European Pharmaceutical Association, is advising industry colleagues to prepare for potential restrictions, Welt am Sonntag reports. The relocation of the European Medicines Agency may also cause delays to authorization and supply bottlenecks, he says.

Trade Cliff-Edge | The European Commission is preparing to take a hard line over U.K. plans to roll over during the Brexit transition period 50 free trade agreements it has access to now as an EU member, the Telegraph reports. The EU’s approach opens the possibility that countries such as South Korea could have access to U.K. markets during the transition but not be required to give the U.K. reciprocal access, the paper says. 

Moving to Frankfurt | JPMorgan has increased its office space in Frankfurt by 50 percent, its regional head for Germany told Frankfurter Allgemeine Sonntagszeitung, but that doesn’t mean a mass exodus from London. “That gives us the room to maneuver to stay flexible and adjust the number of employees, depending on the outcome of Brexit negotiations,” Blessing told the newspaper. And the bank will hire new people externally, as not every banker wants to leave London.

On the Markets | As the risk of another deadlock in Brexit talks rises, pound traders seem to have seen it all before, Charlotte Ryan writes. With just weeks before a key summit where the U.K. wants the EU to agree to a transition period following Brexit, sterling options aren’t showing an increase in demand for volatility hedges. Some analysts see a last-minute agreement, similar to December’s. And expectations of an interest-rate increase from the Bank of England are also supporting the pound.

This Week | May addresses Parliament at 3:30 p.m. Monday to update lawmakers on her speech. There’s a new round of talks in Brussels, focusing on the transition, a “technical clarification” on the financial settlement and the Irish border. EU Council President Donald Tusk will circulate the EU’s draft negotiating guidelines for talks on the future relationship. Chancellor of the Exchequer Philip Hammond and Brexit Secretary David Davis will both give Brexit speeches.

And Finally...

U.S. lobbyists are trying to get the U.K. to drop geographical name protections after Brexit so American exporters can sell Cornish pasties and Scotch whisky to British supermarkets, inews reports. Remainers see a chance to horrify Brexiters into reversal.

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