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Political Information Last Updated: Sep 21, 2019 - 6:15:20 PM


Edging Closer To A Brexit Deal (Might Even Be A Fair One)
By Mike Shedlock
Sep 21, 2019 - 6:12:07 PM

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https://moneymaven.io/mishtalk/economics/edging-closer-to-a-brexit-deal-might-even-be-a-fair-one-6HRkSQ66K0-mAzwSrJZUJw/

 

Movement by the EU, by Boris Johnson, and most importantly by Ireland suggests a good chance of a reasonable deal.

Compromise Movements

  • Boris Johnson has had a series of good discussions with Ireland.

  • Out of the blue, Jean Claude Juncker gave an optimistic interview even to the point of scrapping the backstop.

Eurointelligence has an excellent discussion this morning on the political events. Emphasis is mine.

For a short moment last night, it appeared that the whole Brexit process was about to be solved. We don't normally care much about interviews here at Eurointelligence, but Jean-Claude Juncker was well worth watching on Sophy Ridge's show on Sky News.

He confirmed that a deal is possible. He said no-deal was catastrophic also for the EU. He was very clear that a deal would be based on a single market for agrifoods, with borders checks away from the border. He said the backstop was not sacrosanct, only a means to an end. And he said that he works on the assumption that Brexit will happen.

It looks to us that we are moving towards a deal vs. no-deal scenario by the end of the month. The whole dispute currently unfolding about prorogation and the Benn legislation is very much a sideshow. We will report on the UK Supreme Court's ruling next week when it happens, but we are thinking the political process is much more important than procedure.

If a deal were agreed, we assume that the EU will agree to a demand by Boris Johnson to foreclose formally the option of an extension - except a short technical extension to make time for ratification. We have been arguing that the main loophole in the Benn bill is not procedural but political. The biggest loophole in the legislation is the European Council, whose operations are poorly understood in the UK, and not understood at all by the legal profession which obsesses with domestic procedure.

What would the UK parliament do? Would they try to test whether the EU is bluffing? This is quite possible, but that game is dangerous. They could vote against the deal, and the next day pass a vote of no confidence in Boris Johnson. But Johnson is at that point under no obligation to resign. Under the fixed-term parliament act, the parliament could pass a vote of confidence in another MP with a specific mandate to seek an extension for an election. But would they? Would the EU relent, having committed itself in a Council conclusion not to do so? We cannot answer these hypothetical questions, but note that this would be a risky course that might backfire on those who take it. Would that course of action really advance the election prospects of Jeremy Corbyn?

Maybe the answer to all these questions is Yes. Stranger things have already happened in the Brexit process. But time is playing against hardline Remainers. We also get a sense from Juncker's interview and other reports that the EU's patience with the Remainer strategy is wearing thin. We think what tipped the balance was the EU's gradual awareness of Labour's policy that it would negotiate a deal only to allow Labour ministers to campaign against it. Labour obviously formulated this policy having not even consulted with the EU.

The big question is: could an agreed withdrawal agreement find a majority in the House of Commons? The math of this situation is the same as it always was. Johnson will need to get the DUP on board, quell his own rebellion, have a larger number of Labour MPs to support the deal. He can probably count on the group around Stephen Kinnock. Kinnock and Caroline Flint MP yesterday visited Michel Barnier to talk about the chance of a new deal. The hard-core group of Labour MPs in favour of a deal is around a dozen, but there may be up to 20 or 30 Labour MPs who could support a deal.

But we don't think the Labour Party or the other opposition parties will come to Johnson's rescue. The Remain campaign yesterday issued a dossier to warn Labour MPs against the right-wing policies that would follow a deal.

One possibility is that MPs might choose to abstain. In doing so they would still distance themselves from Johnson's deal, but without being accused of triggering no-deal.

What Happened?

  1. The EU now realizes Boris Johnson really wants a deal. Johnson may have been forced into that position by Parliament but that is the state of affairs.

  2. Boris Johnson, DUP, and Ireland are coming to terms on how to remove the backstop.

  3. The EU realizes the losses will not most be on the UK. Germany is outright scared as I stated from the beginning.

  4. The EU understands the Liberal Democrats will not win the election.

  5. The EU realizes that Boris Johnson is likely to win an election and the result will be No Deal unless it happens now.

  6. Labour's position of promising a referendum with a pledge to campaign against it makes no sense to the EU (or any reasonable person).

Point six was likely the last straw but point three is what forced the issue. Still, this was all a no-go without point two.

Fair Deal Increasingly Likely

Removal of the backstop is now a given. That's going to happen.

But the backstop is not the only odious thing. At a minimum, Johnson needs to insist on removal of language that puts the UK at the mercy of the European Court of Justice (ECJ).

Johnson also needs to strive for a Canada-style deal. This does not have to be resolved now, just the groundwork.

The closer he can come to that, the better things will be for both the EU and the UK.

Finally, and importantly, the EU needs to come up with a deal that Parliament will ratify.

If the EU wants a deal, it has to bend.

Juncker signals the EU really wants a deal.

Increasing Odds of a Deal

Yesterday I wrote Increasing Odds of a Bad Brexit Deal as Liberal Democrats Leap Ahead of Labour

That is still true.

But the odds of a fair deal have increased as well.

Thus, the odds of No Deal have fallen.

Ironic Setup

I told people for months the EU would deal if someone would back them into a corner.

Many thought I was nuts. I don't blame them but I have watched the EU in action for years and just like magic there is a compromise at the 11 hour.

That's what is happening now.

Here's the irony: The person backing the EU into a corner might not have been Boris Johnson, but rather Jeremy Corbyn running on the silly platform of promising a referendum and campaigning against it.

Remain is hopelessly split. The EU is not blind to that fact.

The EU was finally forced to consider this would drag on for years with the UK and the Brexit party disrupting European Parliament the whole time unless thew EU compromised or accepted no deal.

Not Over Yet

Many things can go wrong but the odds of a (both good and bad) are now rising.

Boris needs to negotiate carefully. The backstop is not the only issue.

Binary Choice

Here's the final irony.

Theresa May struggled for two years to produce a binary choice option for Parliament.

We may now finally have one thanks to the Tory revolt and and crazy stance of Labour leader Jeremy Corbyn.

Johnson and the EU need to find a solution that can actually pass Parliament.

If things go to plan, Parliament will have to accept No Deal or whatever Johnson can work out.

Pressure is on both sides!

Which is precisely what it takes to get a fair deal.

Kiss Remain Goodbye

Kiss Remain goodbye, it is not in the binary choice.




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