Prospect of Brexit Deal Bolstered After Irish-U.K. Talks -- Update
October 11 2019 - 9:41AM
Dow Jones News
By Laurence Norman in Brussels and Max Colchester in London
European Union and U.K. officials will intensify Brexit talks in
an attempt to reach an agreement on Britain's split from the bloc
before a leaders' summit next week, fueling hopes that a yearlong
impasse over Britain's departure from the trade bloc may soon
end.
European leaders and British Prime Minister Boris Johnson gather
in Brussels on Oct. 17 to try to hammer out a deal to seal
Britain's divorce with the trade bloc before an Oct. 31 deadline.
Mr. Johnson has said he is determined to take Britain out of the EU
by the end of the month, even if a deal isn't secured.
Both sides have been in informal talks for weeks on a possible
deal the leaders would consider at the summit. But following a
meeting Thursday between Mr. Johnson and Irish Prime Minister Leo
Varadkar, diplomats and other officials said talks will step up
over the weekend.
However, European diplomats cautioned that a deal was far from
guaranteed and that significant obstacles remain to an accord.
Still, the unexpected optimism coming from top EU officials of a
breakthrough in the Brexit logjam sparked a rally in the British
pound and U.K. stocks.
"Yesterday when the Irish Taoiseach and the U.K. Prime Minister
met they both saw - for the first time - a pathway to a deal," said
European Council President Donald Tusk during a news conference in
Cyprus on Friday morning, using the Irish moniker for the leader.
"I have received promising signals from the Taoiseach that a deal
is still possible."
According to officials familiar with the situation, the U.K. has
presented fresh ideas to resolve the problem of how to prevent a
hard border emerging between Northern Ireland, which is part of
Britain, and the Republic of Ireland, an EU member.
Investors have long fretted that a failure to find a deal to
quit the EU could result in an abrupt and economically damaging
split with the EU. The fresh optimism sent British banking stocks
soaring, with some local lenders gaining over 10%. The pound rose
1.7% against the dollar, extending gains it made on Thursday after
the meeting between Messrs. Johnson and Varadkar at a wedding venue
near Liverpool.
"This changes everything -- We now expect a deal," JP Morgan
Chase & Co. analysts wrote in a note.
Despite the investor exuberance, European officials warned that
talks may still not result in a deal.
Mr. Tusk said the U.K. "has not come forward with a workable,
realistic proposal" that could break a monthslong stalemate over
the terms for Britain's exit from the EU.
Even if a deal is reached between EU leaders, Mr. Johnson must
secure approval in the U.K. Parliament, where he has a minority. A
British law forces the Johnson government to request another
extension -- the fourth since the original March 29 deadline for a
split -- if a deal isn't agreed by Oct. 19.
A central challenge for both sides is to find a way to avoid a
hard border between Northern Ireland, which is in the U.K., and the
Republic of Ireland, which is in the EU, after Brexit. Both sides
worry the introduction of border checks would be economically
damaging and could undermine the peace that came with the Good
Friday Agreements.
Officials say that some progress has been made to address the
Irish conundrum. The British offer revolves around a form of
customs partnership for Northern Ireland, according to diplomats,
which would effectively see Northern Ireland remain in both the
U.K.'s and the EU's customs unions.
According to that proposal, if Britain exits the EU without a
new trade agreement with the bloc in place, customs checks could be
carried out alongside regulatory checks on goods arriving on the
island of Ireland from Britain, effectively putting a border
between the EU and the U.K. down the Irish Sea.
Because both the Republic of Ireland and Northern Ireland would
remain in the same customs zone, it would reduce the need for
customs checks -- and therefore no border -- between the two
countries.
Moreover, according to officials, Mr. Johnson has also suggested
he could compromise on his insistence that the Democratic Unionist
Party, a small Northern Irish party allied with his Conservative
Party, would have the power to scratch such an arrangement in the
future.
The DUP has long resisted the idea that its province could be
subject to different governance than the rest of the U.K. Without
their support in Parliament, Mr. Johnson is unlikely to have the
votes to get an eventual deal approved.
Moreover, one European diplomat familiar with discussions
cautioned that the new British position remained very unclear,
making it hard to assess whether it can form the basis of a
deal.
Mr. Tusk added that "there is no guarantee of success and the
time is practically up. But even the slightest chance must be used.
A no-deal Brexit will never be the choice of the EU."
Write to Laurence Norman at laurence.norman@wsj.com and Max
Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
October 11, 2019 10:26 ET (14:26 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.