October 18, 2019
Think for a second of Boris Johnson’s strategic accomplishment. First, he manages to kill off the Brexit party and then does a U-turn to get a deal, in the process of which he stitches up the DUP as well. Remember all those predictions that he was not serious about a deal - or that the EU would never agree to reopen the withdrawal agreement? What happened yesterday was one of those rare big moments in European diplomacy.
What surprises us was that Johnson at no point tried to play a Brexit extension blackmail game. He still insists on October 31 as the Brexit date. But he did not ask EU leaders to rule out a Brexit extension ex-ante. Maybe he was told that such a request would be rejected. Or maybe he concluded that such strong-arm tactics would be counter-productive. He managed to get Jean-Claude Juncker to say it. But this is not quite the same, given that the decision is not his to make. Maybe, however, Juncker's carefully-chosen words will be enough to instil at least some doubt into the minds of some of the MPs who are sitting on the fence. It will be a difficult decision for some of them. Imagine the position of deal-supporting Labour MPs in case the deal passes with a one vote majority. Then again, Jeremy Corbyn would probably find it easier to win an election after Brexit, as the campaign focus would shift to Labour’s policies.
So, will the House of Commons support the deal on Saturday?
Saturday’s vote looks very close. Sebastian Payne of the FT did the math, and concluded that 318 could definitely be expected to be in favour of the deal, short of the 320 threshold. That list did not include Stephen Kinnock, among others, who alongside other Labour MPs has some reservations. The journalist Robert Peston writes that this time he believes victory is possible. Peston got the previous meaningful votes almost spot-on. The Times also leads this morning with a Churchillian final-hurdle-in-sight story. There is momentum behind Johnson now.
A potentially important development is the slow death of the second referendum - probably the most overhyped hypothetical story of our time. As the Guardian reports, second referendum supporters have concluded what the rest of us have known all along - that they don’t have a majority. They decided to pull the plug on a second referendum vote on Saturday, so they can focus on assembling a majority against the deal. This makes sense to us. It allows them at least to keep their preferred option alive.
But this means that Johnson’s deal is now the only game in town. The House of Commons rejected the only other deal available. There is now no majority in favour of a government of national unity, let alone unilateral Brexit revocation. The 21 Tory rebels who lost their whip held talks with the Tory leadership yesterday, and came back pledging their support. We expect most of them to get their whip back once they support Johnson's deal.
So, what if the House of Commons were to vote no - with a narrow majority? In this case we would expect a general election followed by a deal. The EU would extend if asked by the government, but would insist on some form of political resolution. Of the two possibilities - elections or second referendum - elections are the most likely.
The Tories will be able to make a credible get-Brexit-done pledge, based on this deal. This is also why the eurosceptics are lining up behind Johnson. If they voted down this deal, they would face political extinction.
What about Farage? Our bold prediction is that he is politically finished. The Brexit supporters in the UK are lining up behind Johnson as the politician they trust the most to get Brexit over the line. And there is no way to criticise the deal as Brexit-in-name-only: this is the most distant future-relation deal the EU could possibly negotiate. The UK will not be part of the single market nor of the customs union. But it agreed to keep up with the EU’s labour and environmental standards.
We are now in a situation where the two most-likely Brexit scenarios both involve the deal: either directly, or following elections.
And finally, spare a thought for all those Brussels-based commentators who predicted that the EU would never re-open the withdrawal agreement and would never negotiate another deal. They are fan-boys who got outmanoeuvred by their own team. We yield to no one in our criticism of EU policies, but the EU is very skillful at deal-making. It would be a sign of folly - or more likely inexperience - for pundits to bet against it based on some briefings they had with anonymous sources pushing their own agendas.
We also have stories on why negative interest rates are bad for insurers; on the halt of the Turkish operation in Syria and the EU reaction; on the lessons to be learned from the Fed' unwinding of QE programmes; and on Merkel's 5G decision and its horrifying implications for the EU.
For premium access, please SOLID WOODEN LATTED DOG BEDS - ALL SIZES - MADE TO MEASURE - 07985 161977 or register
for a free 3 day trial access to the Eurointelligence Professional edition. The best independent intelligence on the eurozone in a fast and easy to read format.