Reversing over the cliff edge?

18 September 2017
Fabian Zuleeg (Chief Executive and Chief Economist)

Ahead of Theresa May’s speech in Florence this week, Fabian Zuleeg analyses the stalemate in which the negotiations are.

  1. Biting reality: The UK now understands that enjoying the benefits of the single market comes with obligations.
  2. Sequencing: The talks on the Irish border, the financial obligations and the rights of EU citizens have not sufficiently advanced. The negotiations on the future EU-UK relations framework cannot start.
  3. Transition: It has become clear that a transition period is necessary to work out the details of a new relationship between the UK and EU.
  4. Future scenarios: There are two scenarios for the long-term relationship: either a variant of the Norway deal (membership without voting rights) or of the Canada deal; a negotiated trade deal, economically inferior to full Single Market membership and hard to negotiate.

Fabian Zuleeg explains how unenviable Theresa May’s position is, further weakened after the results of the general election. There is no majority in parliament for any type of Brexit, soft or hard. Though a growing number of voices have demanded an exit from Brexit, a large majority within both Conservative and Labour parties still believe that the result of the referendum must be honoured. So, what might the Prime Minister say?

  1. Have your cake and eat it? She could stick to the same old rhetoric signalling a hard Brexit and no compromise on the withdrawal conditions, including a rejection of the EU’s sequencing approach, while at the same time professing that there will be a transition agreement, that the Northern Ireland border will remain open and that the UK will continue to benefit from access to the Single Market.
  2. Soft landing? She could alternatively acknowledge that a transition post-Brexit and a softening on the red lines is necessary. Soft Brexit implies accepting unpalatable withdrawal conditions. For many Conservatives, this negates the whole purpose of Brexit, so they are unlikely to accept such a radical shift in position.

Today, a breakdown in the negotiations and the absence of a deal in the end appear increasingly likely. Fabian Zuleeg suggests three steps the EU could take, given this risk:

  1. To ease the negotiations, the EU should help the UK by fully defining the different scenarios and options. The UK, because of its internal divisions, is no longer able to come up with coherent positions.
  2. To protect itself from a potential blame game, the EU should keep the moral high ground. The most effective way is to make a grand gesture: to unilaterally guarantee the rights of UK citizens currently residing in the EU.
  3. Finally, the EU must seriously prepare for the no deal scenario. There must be contingency planning to minimise the impact on the EU27 if the UK chooses to throw itself over the cliff edge.
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