Bottom-Line Brexit Part VII

What business needs to know about how Brussels sees the process of Britain leaving the European Union, as related to BCW by senior EU sources.

        Still fog in Channel, continent in the dark

The bottom line from Brussels this week is that little has changed since the EU summit last Friday. Unless Prime Minister Theresa May can overturn two previous heavy defeats for her Brexit treaty in parliament, Britain could be leaving the EU without a deal, engendering substantial trade and other business disruption, as early as Friday, April 12.

No Brussels functionary will try to second-guess the House of Commons. Michel Barnier, the EU’s Brexit negotiator, confined himself in briefing national ambassadors from the 27 other states on Thursday, March 28, to assuring them that their governments and the EU institutions are about as prepared as they can be for no-deal chaos. But chaos there will be. The Belgian government, among Britain’s nearest neighbours, said it was bracing for a 0.9 percentage point hit to GDP if the UK lurches out – along with long delays for truckers and others moving goods across the tightly woven North Sea supply chain. Financial markets, the ECB and Commission have told EU governments, are not fully pricing in the risks. 

 The eternal questions: How, When … and even If

Friday the 29th at midnight – 11 p.m. in London – should have been the moment of Brexit. Now, following the summit shuffle to give May more time and help the EU dodge the appearance of forcing Britain out precipitously, tomorrow is the deadline for May to get her Withdrawal Agreement through parliament in time to secure EU membership until May 22. Lose, or fail to hold the vote, and the European Council – the 27 national leaders – will have to meet again before April 12 to decide what to do. If May belatedly secures a deal with MPs next week, that summit decision should be something of a formality to set a May 22 exit date. The possibility of a swift but orderly Brexit still remains fair, if far from certain.

Were total political paralysis to continue in London until that next, fateful EU summit – almost certain to be on Wednesday, April 10 – the UK would appear to be on the way out with no deal and no transition period to ease its passage. That, too, remains a fair possibility, but not particularly more likely than an orderly departure. And EU governments are divided over whether Britain must leave abruptly at midnight on April 12, or be given some weeks more so that both sides might make arrangements to mitigate disruption. Whatever might happen, the EU would still want Britain out before EU elections on May 23-26.

Finally, upheavals in parliament – including potentially Theresa May’s downfall after her promise to quit as prime minister in the coming months if MPs back her deal – could end up with London asking the April 10 summit to put Brexit on pause for a year or so. That, at any rate, is the offer from the EU, although not one that all are equally keen on. Summit chair Donald Tusk, a former prime minister of Poland, one of Britain’s traditional allies in Brussels, urged the Union this week not to “betray” millions of Britons campaigning to remain in the EU and to be open to letting Britain take its time to review its Brexit options — or even to cancel its departure altogether. But from Paris, where President Emmanuel Macron is keen to end the dallying with France’s long-time opponent in EU affairs, there are more signs of impatience – Macron’s former Europe minister, now leading his party’s EU election campaign list, said a second referendum would betray those who democratically voted for Brexit: “Britain must leave,” Nathalie Loiseau said.

A long delay to the process, leaving a status quo in which the UK would be ordered to hold its own, rather surreal, EU election in May, and which would broadly allow business to go on as usual, is still a realistic possibility for many in Brussels. For it to happen, Macron would have to fall in with a unanimous EU decision before April 12. German Chancellor Angela Merkel is keen to avoid unnecessary upset. But if she and the other leaders remain unconvinced that Britain has a real plan, they could refuse an extension. There is a possibility Britain could use an EU Court of Justice ruling to revoke unilaterally its notice of withdrawal under Article 50 of the EU treaty, but this seems an outside chance.

Read our previous Bottom-Line Brexit insight

Bottom-Line Brexit Part VI

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