EU on Verge of Huge Tactical Brexit Mistake

-edited

For a while it appeared the EU was ready to negotiate with Johnson. Perhaps appearances were deceiving.

Only Way to Bridge the Backstop

Last Friday, Eurointelligence commented:

We would agree that the risk of a no-deal Brexit on October 31 is vanishingly small, but risk of it happening eventually is rising. At Eurointelligence we have been warning for some time that the risks of a no-deal Brexit have been widely underestimated. But we were cautious not to elevate the no-deal scenario to becoming our baseline.

If the EU were to reject the current proposal flat out, that would change. The EU should consider very carefully that Johnson yesterday managed to receive support not only from the DUP, but also from the rebel Tories who lost their whip over the Benn extension legislation. The EU does not want to give Johnson a believable excuse for a no-deal Brexit: having come up with a reasonable proposal whose rejections indicates that the EU was not serious even to engage with the idea of a dual border - one for customs and one for regulation. We think that duality is not only a reasonable starting position, but in fact the only way to bridge the differences over the backstop.

The amount of trade between the UK and the EU was over £600bn. Intra-Irish trade flows were about £5bn. Should the EU really want to endanger a large portion of the £600bn on the grounds that it is possible to blame Johnson for a no-deal Brexit? That would strike us as an entirely irrational strategy.

Last Minute Magic Deals

My position has been that deals in the EU magically happen at the last second after everyone gives up on them. I also cited trade differential noting in particular German Carmakers Warn “Seismic” and “Devastating” No Deal Consequences

We have seen that time and time again, with German Chancellor Angela Merkel or someone else moving from a fixed position at the end.

It almost has to be last minute because all 27 nations have to agree to do damn near anything. It's a fundamental flaw of the EU that cannot be fixed because all 27 nations would have to agree to fix it, and they won't. France insists on agricultural protections and German insists on budget protections.

France Enters the Fray

After movement towards a deal last week, France seems to have hardened its position. French President Emmanuel Macron told Johnson that his offer was not even a starting point.

The Guardian reported Macron gives Johnson until end of week to overhaul Brexit plan.

In response, Johnson warned 'Don't Be Lured Into the Mistaken Belief that the UK is Staying in the EU'.

Foolish Notions

Unfortunately, that appears to be precisely what has happened. The EU is taking its cues from Remainers who are hopelessly splintered.

Let's check back in with the Monday morning Eurointelligence view, emphasis mine.

This morning, the Telegraph reports that he is now preparing to launch legal action against the Benn Brexit extension bill. We don't think that this has any chance of succeeding, but the point of this action is political: he is seeking to demonstrate that the organs of the state conspire to subvert Brexit. The article suggests that Johnson may himself give evidence to the court. What appears to be a chaotic strategy has the sole purpose to demonstrate that he is doing his best to deliver Brexit.

So this is now our most likely scenario - from today’s vantage point: the EU does not agree to a deal; Johnson is dragged kicking and screaming into an extension; he wins the ensuing elections; a no-deal Brexit follows.

Most Likely Scenario - No Deal

That is the first time Eurointrelligence has held that view.

Wolfgang Munchau writes that the EU should not dismiss the underlying idea in Boris Johnson’s offer: the separation of a customs border from the regulatory border. The proposal itself cannot be a final offer.

Munchau writes the EU can only politically agree withdrawal agreements that keep the UK aligned as closely as possible with the EU. France fears that the UK might seek a competitive advantage after Brexit. The conclusion is that the EU will always extend the Brexit deadline but, as Munchau says, that strategy is short-sighted and ultimately self-defeating.

In particular, it critically misjudges UK politics. Opinion polls continue to show a widening lead of the Tories over the opposition parties. An Opinium poll in the Observer also showed that Labour has regained its lead over the LibDems. What we think is widely underestimated in Brussels is that the current alignment in UK politics strongly favours a no-deal Brexit. The chaos in British politics is benefiting Johnson more than it benefits opposition leaders. With every court battle, we expect Johnson to consolidate his political position.

Consolidating Political Opinion

Something happened today in the UK parliament that show the extent of political power consolidation. A Tweet chain has the results.

21 Expelled Tories Will Not Let MPs Seize Control

Political Reality

  1. The rebel ex-Tories will not go along with an Parliament takeover
  2. Jo Swinson and the Liberal Democrats have repeatedly rule against a caretaker government led by Jeremy Corbyn
  3. Jeremy Corbyn refuses to support any caretaker government unless led by him
  4. There is now actually Parliament support for the deal proposed by Johnson

Note the irony of point 4.

Theresa May and the EU had a deal that Parliament would not accept. Now Johnson and Parliament has a deal that the EU will not accept.

The DUP, rebel Tories, hardline Tories, and even some Labour MPs are all willing to go along with an Irish Sea solution.

As noted in Brexit Irony: EU Rejects Its Own Proposal the EU proposed a border in the Irish Sea and Theresa May rejected that offer because DUP would not go along.

Theresa May instead accepted the worst possible deal for the UK.

Miscalculation or On Purpose?

France may very well want the UK out on a hard deal for reasons we don't fully understand. That said, Germany does get hit harder than France in a No Deal setup.

Possibly it's just a large last-minute bluff.

But perhaps Eurointelligence has this right. The EU has seriously misjudged UK politics.

And that's another irony in this mess. It was the UK who for the longest time misjudged the EU.

The final irony is that by attempting to take "No Deal" off the table, Remainers just may have sealed the fate.

Even the expelled Tories have had enough.

Two Lies Exposed

It's now clear that taking No Deal off the table was a gigantic lie from the start.

  1. Labour, SNP, and some of the expelled Tories did not want to block "No Deal", they want to remain.
  2. If Ireland will not go along with Johnson's offer, then it never would go along with anything. This exposes the Backstop for what it really is: A lie to keep the UK in perpetual limbo forever.

Polls Go Johnson's Way

Mike "Mish" Shedlock

Comments (40)
No. 1-14
Stuki
Stuki

Not forcing someone who does not agree to something, to live with it anyway, is anything but a "flaw." People should do things they agree to. Not things someone else agrees to. Mob rule is never a good thing.

msurkan
msurkan

Ireland would love a no deal Brexit since it would very likely lead to unification with northern Ireland. As such, Ireland has very little incentive to agree to any deal which doesn't leave northern Ireland within the customs union since they will be able to achieve unification in the case of a no deal.

Deep Purple
Deep Purple

This is not an economic decision but hard strategic geopolitics. The EU must prevent any form of successful Brexit in order to survive. Moreover, the sabotage of Brexit would probably lead to further centralization immediately.

As I said more than once, I expect LibDems to blink and support Corbyn when "no deal" is close enough. This is a tactical expectation and it might be false. However, the deadlock is fully intact, so the default political scenario is extension.

Two things can break the deadlock:

  1. If the public opinion changes conclusively. Change is a slow process. Probably works towards Remain but it is not sure.
  2. If the rulebook changes. Election rules are the simplest example but I don't claim to know all the tricks. I think the pressure to change the rules can build comparably fast. And it works for Remain, too, at least the variations I can think of.

As long as none of the two happens, extension is likely, regardless of the theater.

themonosynaptic
themonosynaptic

There is a shit load of confirmation bias going on with Mish and Brexit that sadly makes me take much of this column, and many others on this subject, with a pinch of salt.

This is where the value of Mishtalk on GDP analysis separates from Mishtalk on other subjects (climate denial anybody).

It is interesting to read the "we want no-plan Brexit so much we see it everywhere" side of the story, but that is what is it - a strongly biased view on the situation based on a desired outcome.

This will make Mish as fabulously wealthy pundit in the RT sphere, one assumes, but lose the followers who embraced his marco-economic insights - which is his real forte - Sean Hannitt wannabees are 10 a penny.

themonosynaptic
themonosynaptic

God-all-bloody-mighty, why, at this point in British history, do we have Corbyn as the only viable alternative to Johnson.

You could have a monkey throw a dart at a list of Labour MPs and get somebody 100% better than this idiot.

JanNL
JanNL

Very interesting, Mish. By all means do carry on.

Mish
Mish

Editor

"I think the best that Corbyn could get is a VONC and an election. The next best option for Corbyn would be to support someone else who is Remain in a caretaker government, but an election will have to come anyway."

I am unsure if CORBYN has a good option. The Lib Dems do (if they could force it). Remain is not realistically going to happen so the best the Lib Dems can do is trigger an election and crucify Corbyn.

Harry-Ireland
Harry-Ireland

Either way, social cohesion is crumbling, trust in politicians is at an alltime low, the media pushes fearmongering and propaganda and are incapable of independent and unbiased reporting. Well done U.K. You are the joke of the world and your society is more polarized than ever before.

Maximus_Minimus
Maximus_Minimus

I hope, these two misfits on the front picture are not plotting some colonial carving up of the planet. Eh...probably not; you need intelligence, fortitude and discipline for that.

Stimpson
Stimpson

I'm not so sure this is a mistake by the EU. It would only be a mistake if the assumption is that they would settle for any temporary solution to the Irish border. I think that any temporary solution is unacceptable to the EU. They have such a solution anyway (i.e. "No Deal"), so why give up anything not to gain anything in return? I think that as soon (if) the UK offers a permanent solution there will be a deal very quickly. All the other stuff seems much easier to discuss in shades of grey, rather than in absolutes.

Also, the EU does not reject it's own idea: they're not rejecting the idea of a Sea border but the idea that such a border would exist only 4 years without any guarantees for the time afterwards.

krage
krage

They leaked now why Benn's law would not work... it is not UK side issue

FromBrussels
FromBrussels

Lol ! What to expect from a amorph non thinking entity calling itself the EU ?

JustASimpleMan
JustASimpleMan

It's comical that the whole outcome is being driven by two countries with whom we have long, historical emnities - France and Ireland. Both will end up goosed when the final results come in.

Ireland might dream of unification but the Brexit effects on their economy will just add fuel to the slow burn desire for an Irexit. Being an EU appendage, blowing round in the wind off the west coast of the UK will be hard, hard work.

Looking at the UK trade statistics, France is in for a kicking. Most of what we import from them is easily replaceable elsewhere (wine, fizzy wine, cheese, unreliable cars, etc.) and very amenable to a targeted replacement campaign. On the other hand the UK is a significant net foreign direct investor in France (which will dry up if they mess about with the City) and the country will explode when we bar their fishermen from UK waters.

But one question puzzles me immensely. Why has it all been the UK offering up deal proposals for Varadker and Macron to bat back? Why have we not asked the obvious question........, "It's your border and your problem, so what's your solution?"

.