Theresa May's Early Election Gambit Reduces Brexit Risks
April 19 2017 - 6:32PM
Dow Jones News
By Simon Nixon
Brussels officials always believed that Theresa May would
eventually come around to their way of thinking.
For months, they have been privately warning that the U.K. Prime
Minister's approach to Brexit was wholly unrealistic: that two
years wasn't long enough to negotiate a divorce settlement and a
trade deal; that the UK's best chance of securing a constructive
post-Brexit trade deal was to build goodwill by reaching
constructive early agreements on contentious areas such as the UK's
outstanding financial obligations and the rights of EU citizens in
the country; and that Mrs. May would need a stronger mandate if she
was to deliver the compromises necessary to reach an agreement,
meaning she would have to hold an election before any final deal
was made.
By calling a snap election to be held on June 8, Mrs. May has
effectively accepted this analysis. Not surprisingly, one senior
official who a month ago thought there was less than a 50% chance
of a negotiated exit deal now claims to be "very delighted,"
believing the chances of a good outcome to the negotiations have
risen significantly.
Contrary to the popular narrative, the European Commission isn't
out to harm the U.K. Although it will be representing the interests
of the EU in the negotiations, the overriding interest of the
remaining 27 member states lies in reaching a deal that ensures the
U.K. will remain as close a partner of the EU in trade and security
as possible.
Certainly Mrs. May's decision reduces the risk of the most
disruptive Brexit outcomes. Assuming her election gambit is
successful and she is returned with a substantially increased
majority, Mrs. May will have secured for herself an extra two years
to 2022 to reach a final Brexit deal before she has to face the
voters again.
She also will have the political latitude to accept the EU's
proposed sequencing for the negotiations -- divorce first, then
trade talks -- and its conditions for a post-Brexit transition,
which would require the U.K. to continue to abide by EU rules.
Above all, she will have strengthened her hand domestically
against hard-line Brexiters in her own party who are opposed to any
compromises. That will give the EU greater confidence that she can
in fact reach a deal.
But Mrs. May is likely to be disappointed if she really
believes, as she has claimed, that securing a larger majority will
give her a stronger negotiating hand with the EU. The EU may want a
friendly relationship with the U.K., but its overriding priority is
to protect the integrity of its single market and the edifice of EU
law that supports it.
No British election is going to persuade it to drop its own red
lines. If Mrs. May doubts this, she need only look at what happened
in Greece in 2015, where Prime Minister Alexis Tsipras won a
resounding victory in a snap referendum designed to boost his
negotiating position during his seven-month standoff with the rest
of the eurozone. But the EU didn't blink and within 48 hours, his
government had capitulated completely.
The signs are that Mrs. May understands this. The past nine
months have provided ministers with a brutal education in European
legal, political and economic realities. In January, Mrs. May
finally accepted that the EU wasn't bluffing when it insisted that
the right of free movement of EU citizens was a nonnegotiable
condition of membership of the EU's single market. More recently,
ministers have accepted that the vital role that EU agencies play
in the U.K. economy and security arrangements -- and the
near-impossibility of replicating them within two years -- makes
Mrs. May's threat to walk away from the negotiations with no deal
implausible.
Some senior ministers now acknowledge that the toughest
compromises facing the U.K. won't be over the terms of the divorce
deal, difficult as those may be, but over the mechanisms required
to underpin Mrs. May's goal of a deep and special partnership with
the EU.
In the eyes of Brussels, Mrs. May made two mistakes since July.
The first was to reject so emphatically the jurisdiction of the
European Court of Justice. The second was her threat to turn the
U.K. into a low-tax, light-regulation competitor if talks
failed.
Much of the negotiation inevitably will be focused on finding
ways to work around these positions, devising mechanisms to ensure
the UK's continued effective compliance with EU rules and ECJ
judgments, and securing safeguards to reassure the EU that the U.K.
won't engage in social dumping by weakening its fiscal, social and
environmental rules.
Brussels will be hoping that Mrs. May's election gamble will
provide her with the political capital to make the compromises
necessary to pave the way for a wide-ranging association agreement
that will keep the inevitable new barriers to trade to a minimum.
The risk is that the gamble backfires, either because Mrs. May is
forced to harden her own negotiating position in the heat of the
election battle, or because a large majority of newly elected
Conservative parliamentarians proves even more hostile to
compromise, forcing her to seek a more complete break with the
EU.
Of course, there is also the possibility that opponents of
Brexit somehow manage to combine forces to deprive Mrs. May of her
increased majority. But even in Brussels, most have long since
accepted that is a hope too far.
(END) Dow Jones Newswires
April 19, 2017 18:17 ET (22:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Mar 2024 to Apr 2024
FTSE 100
Index Chart
From Apr 2023 to Apr 2024