This blogpost was written on Tues Oct 30th, 2018

Brexit negotiations have been on hold for the past week or so pending yesterday’s UK Budget. Both EU and UK negotiators waited nervously to see if the UK Chancellor, Philip Hammond, could deliver a budget that could win acceptance in the House of Commons. As I write, on Tuesday morning, it looks like he did.

The cause for concern on the part of the negotiators were recent statements from both hard-line Brexiteers in the Conservative Party and from the Ulster Democratic Unionist Party (DUP) that they would vote down the budget in a show of force over their Brexit concerns. However, after Hammond earmarked £350 million for Belfast and another £320 million for the Northern Ireland Executive, it is now unlikely that the DUP will vote down the budget.

But the government is not yet out of the woods as far as the DUP is concerned.  Sammy Wilson, a DUP MP, said the party was not yet planning to oppose the budget, explaining, “To date we haven’t seen the outcome of the withdrawal agreement, so it would be reckless of us to oppose the budget on the basis of something we haven’t seen.” Wilson added, “However, the government will need support when it comes to the finance bill… So, they shouldn’t take it for granted that just because they get the budget passed that they can do whatever they like with Northern Ireland.”

Hammond also loosened spending in what the Financial Times described as “an old-fashioned giveaway Budget”. As the FT further noted Hammond’s budget was “as much about politics as economics.”

The chancellor’s speech carried two messages: one addressed to the nation, the other to his own party. Incomes are rising, and austerity is coming to an end, Mr Hammond assured voters. This is what we can do to win the next general election if only you back the prime minister’s plan for a pragmatic negotiated Brexit, the chancellor was telling the Tory party at Westminster.

Meanwhile, the Office for Budget Responsibility (OBR) yesterday published its economic and fiscal outlook, writing that “The big picture in this forecast is of a relatively stable but unspectacular trajectory for economic growth – close to 1.5% in every year – plus a gradual further decline in the budget deficit and in net debt as a share of GDP.”

The OBR noted that “this forecast assumes a relatively smooth exit from the EU next year” and takes into account the transition period due to last until December 2020. It added, “A disorderly [Brexit] could have severe short-term implications for the economy, the exchange rate, asset prices and the public finances. The scale would be very hard to predict, given the lack of precedent.”

In other words, everything is contingent on Brexit.

With the budget out of the way, the focus now switches back to Brussels and the two teams of negotiators who are locked in what has become known as “the tunnel”, a negotiating process in which both sides are committed to absolute secrecy. We’ll come back to these negotiations a little later in this Briefing.

Hammond’s budget, for all its importance, was overshadowed yesterday by the announcement of Germany’s Angela Merkel that she is to step down as the leader of the CDU next month at the party’s annual conference but will stay on as Chancellor until 2021.

Merkel has been the towering political figure in Germany, and subsequently Europe, since 2005 when she first became Chancellor. The length of her tenure can be gauged by the other political figures elsewhere who have come and gone. As Jon Henley in the Guardian writes:

When Angela Merkel first came into office in 2005, George W Bush was in the White House, Tony Blair was British prime minister, and the Elysée Palace was occupied by Jacques Chirac.

Experts on German politics suggest that her “long goodbye” means that its political class will now be intensely focussed on the shape of German politics after she has quit the stage.

This means they will waste little time or energy on Brexit. Not that they ever did.

One of the great puzzles of Brexit is how often British politicians in general, and Brexiters in particular, thought that, somehow or other, Germany would come to their rescue and instruct the EU to give them the deal they wanted.

The former UK Prime Minister, David Cameron, believed that Merkel saw him as a “naughty nephew” and would help him in his “cake-and-eat-it” negotiations with the EU in which he was, in effect, looking for a British opt-out from the EU’s freedom of movement. Merkel was never going to go there. As she subsequently said in October 2016:

“If we don’t say full access to the internal market is linked to full freedom of movement, then a movement will spread in Europe where everyone just does whatever they want.”

There are stories that at one meeting Merkel, after Cameron again asked for help with freedom of movement, slammed her glass down on the table and reminded him that she had grown up in East Germany in the days when you needed a permit to move from one village to another and that freedom of movement was not something she would ever give way on.

Cameron came back with very little from his negotiations with the EU, called his ill-fated referendum, lost, and hasn’t been seen since. Rumour has it that he is writing his memoirs in a shed at the end of his garden but is afraid to publish them because no one would want to read them.

Albert Einstein is generally credited with exclaiming “The definition of insanity is doing the same thing over and over again but expecting different results”. So, after the UK voted narrowly to leave the EU the Brexiteers believed that Merkel would now come to their assistance, never stopping to ask the question: “If she didn’t before the referendum, why would she afterwards?”

Arch Brexiteer, David Davis, said shortly before the referendum in May 2016:

“The first calling point of the UK’s negotiator immediately after Brexit will not be Brussels, it will be Berlin, to strike a deal” he wrote in May 2016.

He subsequently wrote just before he became Brexit secretary in the UK government in June 2016:

“Post Brexit a UK-German deal would include free access for their cars and industrial goods, in exchange for a deal on everything else.”

With these remarks Davis showed that he failed to understand that the EU negotiates trade deals as a bloc, not as individual countries. They also show that he believed, as many other Brexiteers do, that Germany runs Europe and that German carmakers run Germany. The carmakers would pressurise Merkel into cutting a deal with the U.K., so they could continue to sell their cars there.

But German industrialists, including the automakers, have consistently said that retaining the integrity of the single market is their goal. “Defending the single market, a key European project, must be the priority for the European Union,” Dieter Kempf, president of the German Federation of Industries lobby group which represents around 100,000 companies, told the Observer.

What is all the more surprising about this mythical belief in “Germany to the rescue” is that a great many Brexit voters, though by no means all, were driven by a nostalgic view of Britain’s past. How often in the Brexit debate have we heard reference to the “Dunkerque Spirit” when, as they see it, Britain stood alone against the Nazis during the “darkest hour”?

Another strand of Brexiteer thinking believes that the EU is nothing but a “German racket”. As far back as 1990, the then cabinet minister, Nicolas Ridley, told the Spectator magazine:

“…that monetary union was… all a German racket designed to take over the whole of Europe… It has to be thwarted. This rushed take-over by the Germans on the worst possible basis, with the French behaving like poodles to the Germans, is absolutely intolerable.”

Yet, Brexiteers expected “German racketeers” to come and bail them out in their own “darkest hour”. If the “German racketeers” wouldn’t do it for Cameron while the UK was still a member of the EU why should they do it for a UK that was leaving? Einstein seems to have been right after all.

So, back to where the Brexit negotiations are as we write. Hard to say, but they still seem to be deadlocked, as we have previously written, over the Irish “backstop”. A fascinating article in today’s Financial Times quotes a senior EU diplomat closely involved in the talks as saying that “Britain’s acceptance of the backstop principle (was) ‘a catastrophic mistake’ that may have boxed in both sides.” Be that as it may, we are where we are.

As Irish Foreign Minister, Simon Coveney, said last week: “There will be no withdrawal agreement without the backstop…End of story.”

This is in line with our own interpretation of what happened, which you will find in back issues of this Briefing. The UK agreed to the backstop because its real priorities were to get to the future economic “framework” talks and then get a transition agreement. When UK ministers subsequently realised what they agreed to, they were horrified and suffered “negotiator’s remorse”. By then, it is too late.

For the moment, there is little point in speculating as to what might emerge from “the tunnel”. Best to wait and see. And we will see sooner rather than later because the sands of time on this are running out rapidly.

One observation, however.

I read the British press assiduously and every day I am surprised at just how little their journalists and commentators have actually internalised that “Brexit means Brexit” and that the negotiations under way are not just another “any old” EU negotiation.

This comes across in their constant surprise that the EU is backing “little Ireland” over the very much bigger UK. They really don’t “get” that this is what the EU is about: looking after the interests of one of its members rather than the interests of a soon-to-be ex-member.

They don’t understand that were the EU to abandon Ireland then the EU would be self-destructing because every small country would ask: “What’s the point of membership because, when push comes to shove, the interests of big countries, even non-members, will take priority over ours?”

Because they can’t understand, or maybe can’t accept, these things they keep seeing the Brexit discussion process as a classic EU negotiation where there will be a last-minute, midnight deal. In classic EU negotiations if talks break down then the status quo prevails, allowing time for all parties to come together again. The clock can be stopped.

If, however, the Brexit discussions break down then the status quo only prevails for one party: the EU27. The day after the night before the EU27 will continue to have all EU agreements, procedures and processes in place. That includes over 200 EU agreements with non-EU countries. Life will continue as the day before.

For the UK there is no status quo the day after. Just the first day outside the EU with all that that will mean. For example, as Chris Grayling, the UK Transport Secretary, admitted in a speech yesterday, it could mean flight difficulties between the EU and the UK. Of course, this has nothing to do with Brexit, Grayling said. It all had to do with the EU refusing to give the UK the same air transport agreement outside the EU as it had inside the EU. Grounded flights would be the fault of the EU, not Brexit. Go figure that logic.

It is the same sort of contorted logic that has a group of MPs pushing what has become known as the “Norway then Canada” option. Basically, they propose that the UK join Norway, Iceland and Liechtenstein in the European Economic Area (EEA), while also tacking on a customs union. This would give the UK all the benefits of the single market and customs union while, at its leisure, it negotiated a Canada-style free trade agreement with the EU. A temporary little arrangement, of course, you understand.

Well, we’ve had “Hard Brexit”, “Soft Brexit”, “Dog’s Brexit” and “Red, White and Blue Brexit”.

Now we have “Squatters’ Brexit”.

“We [the UK] have left our own place and have nowhere to go. We’re coming over and staying with you until we sort ourselves out.

How long will we be with you? No idea, but we’ll go when we are good and ready. Any chance you could have something prepared for us to eat when we get there? Along with a decent bottle of Bordeaux.”

That sound you can hear is Norway, Iceland and Liechtenstein padlocking their doors.