Time to think “out of the box”!

The sorry picture conveyed by the stalled negotiations over the departure of the United Kingdom from the European Union is fostering various scenarios among which a disastrous outcome is rapidly becoming a self-fulfilling prophecy.

With each passing day the likelihood of an exit “with no agreement” is increasing. In the futile search for a “culprit” some may regret the intransigence of the EU in its refusal to perfectly rational in light the British government’s incapacity, either to formulate adequate proposals regarding the terms of the divorce and its future objectives or to provide the necessary assurances that they will be endorsed.

Under these circumstances it is hardly surprising that the Union wishes to ensure that other priorities, such as the reform of the Union and/or the Eurozone, are not contaminated or delayed by problematical Brexit negotiations.

On the British side, the authority of the Prime Minister, shaken by the recent elections, contested by internal dissension within the Cabinet and her parliamentary majority and further weakened by allegations of inappropriate behaviour extending to the political class as a whole, is significantly limiting the capacity of her Brussels negotiating team to deliver constructive results.

In principal, all options remain on the table:

– An exit with no agreement on March 29 2019.
– A Free Trade Agreement (“FTA”) (implying an extension of the negotiating period as envisaged by Art. 50 and requiring the unanimous agreement of the EU27 and also of the European Parliament).
– A Norwegian style accord (with the UK remaining within the Single Market and the Customs Union).
– Continued membership of the UK in the EU (requiring unanimous agreement of the EU27 and of the EP which will inevitably be subject to conditions).

Each of these options entail constraints which are non-negotiable:

– The exit without an agreement will require settling outstanding financial obligations, whose existence has been acknowledged by the PM in her Florence speech. Additional negotiations should cover amendments to a series of current agreements (aviation, fisheries, EURATOM, WTO, etc.,) in order to ensure the fluidity of trade and travel between the UK and the EU.
– Negotiations over an FTA will enshrine the differences between privileges accruing to Members of the Single Market and the Customs Union and the rights of the contracting party, in order to prevent harming the cohesion of the EU. A hard border will be required.
– A Norwegian style accord entails the passive acceptance of all Single Market rules (including the four freedoms of movement), a contribution to the EU budget and the jurisdiction of the European Court of Justice.
– Remaining an EU Member is likely to require abandoning the “budget rebate” and all other “opt-outs” including the dispensation from EMU membership.

Prior to broadening discussions, the UK must determine which option it intends to pursue, in full knowledge of the constraints each one entails and that an exit without agreement is the “default” option. The EU 27 are anxiously waiting for this decision and it is useless to pretend that it is up to the EU to break the current deadlock.

The main obstacles lie with Britain where public opinion, political parties, the media and the government are profoundly divided. Failing a consensus, a major political crisis is becoming more likely bringing down the government and leading to new elections. At this point the situation created by Brexit becomes inextricably enmeshed with the spectre of seeing the Labour Party, currently dominated by its left leaning Marxist wing, returned to power, an outcome that frightens the majority of electors but whose probability increases in the face of a split Conservative party.

Should this latter eventuality prevail, failing a swift and firm rebuilding of Tory party unity – an unlikely scenario in light of the dogmatism and egos of the actors – Brexit negotiations will inevitably be suspended, at least until a new government is in place. In the face of this new set of uncertainties, the accelerated implementation of measures based on a “no agreement” Brexit scenario is to be expected. This will have adverse consequences, not only on the economy, the currency, employment, etc., but will also further weaken the stature of the UK on the world scene. In this regard the recent declaration by 50 American banking institutions should ring alarm bells!

In spite of this analysis, that some will consider excessively pessimistic, their remain opportunities to find a more positive outcome but it requires both imagination and unfailing political will: relying on a parliamentary majority that is supposed to exist in favour of “remaining” within the EU, it is at least conceivable to build, on the wreckage of the conservative and labour parties, a new pro-European party which, with the support of the liberal-democrats, would fight elections on such a manifesto.

President Macron has won such an audacious wager in France where he overturned an overwhelming Eurosceptic and/or sovereigntist majority, destroying in the process the Socialist then the Republican parties. Conditions may be ripe to attempt something similar in the United Kingdom so as to offer a positive alternative to its citizens – and in particular the younger generation – rather than a choice between two enfeebled and largely discredited political parties. Within the British context, the initiative for renewal would emanate from the Parliament itself (rather than from the broader civil society as in France) which would ensure the continuity of its institutional framework at this key moment of the country’s history.