The Brexit Game of Chicken Intensifies

in #busy4 years ago

Theresa May meets the European heads of state at a summit meeting tonight. They are still reeling from the way she kiboshed the negotiations on Sunday, sending the Brexit minister to Brussels in person to tell them she couldn't sign up to what they were offering.

She then had a cabinet meeting on Tuesday, and her cabinet backed her stance of no border in the Irish Sea. It has emerged that it's not just Northern Ireland's DUP (and UUP) who object - the Scottish Conservatives also object. She cannot budge on this point - any deal she brings back that divides the UK with a border (demanded by a hostile neighbour) will get voted down by Parliament.

The problem the EU has is that they have backed themselves into a corner. It's going to be hard for them to give up the idea of not annexing Northern Ireland, but unless they give it up, we are going to get No Deal.

It looks like Brussels is hoping that events will come to their rescue. Here is a piece written by a europhile in Politico:

With Greece in 2015, it took a run on the banks, financial market turmoil and businesses closing before a deal was clinched to avert a Grexit from the eurozone.

The situation is less extreme in the U.K., where unemployment is at a record low, bars and restaurants are heaving and the few warning signs of looming trouble include a sagging currency and a sharp fall in investment. That makes it harder for May to dramatize the dangers of a no-deal Brexit. But markets may well administer a sharper warning in the next few weeks if they decide it’s time to price in a breakdown.

The problem is that the markets are showing signs of calm - because Brexit Britain is performing well in contrast to European countries like France. Lots of company's have already started their No Deal plans (they all had deadlines by which they simply had to execute their plans to get everything ready on time). But because these changes are happening in a controlled way, they arn't affecting the economy.

Theresa May's Strategy

Put yourself in Theresa May's shoes. Her Chequers plan is the only one that squares all the circles. But because it is a genuine compromise, no-one likes it. The hard brexiteers feel it concedes too much to the EU. The EU feels that the UK would be a success under the plan, and they desperately want the UK to fail outside the EU.

If she simply caves and agrees to the EU's demands, there will be commotion in Parliament: the plan would be voted down. Some people will clamour for a general election (which will solve nothing as polls indicate a hung parliament returned again). Some people will demand a second referendum - but the Electoral Commission says this would take a year to organise and polls show not much change in voters minds. Some people would like the Conservatives to change leader, but there isn't time for that either, and there is no guarantee a new leader will do any better at negotiating than Mrs May. The EU meanwhile is desperate for turmoil in the markets to force Mrs May to cave to their demands.

So what is Mrs May to do?

Carry on as she is. Continue to "negotiate". As long as she continues to talk, the markets will be calm. Shes helped by the fact that the EU has a reputation globally for not doing deals till 30 seconds to midnight. So if no deal materialises in the next few months, few will panic, especially if she is still talking.

In the meanwhile she's continuing with her No Deal Plans. She has ordered work to start converting the M26 into a temporary lorry car park (they shut the motorway every night to complete the work). The NHS is stockpiling drugs. Businesses are stockpiling parts and dry goods. Suppliers are being switched. Some households are stocking up on baked beans.

As the deadline approaches, one of two things happens. Either the EU caves and throws Ireland over a bus, or the UK carefully slips over the deadline and we're out of the EU. As long as she keeps talking and talking to the last minute, getting over the line should happen with minimal panic.

After that we're in a new world. The backstop simply won't be an issue because we will already be outside the EU in all it's forms. What then happens is deals to deal with the aftermath.

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