You Brexit, You Fix it!

March 29^th – the date that Brexit was supposed to have kicked in – has come and gone. Friday, April 12^th was the extension date. Unless… more below. Oops, the European Union has told us will not be extended unless there is an agreement in place. Did they really mean that knowing the EU economy would be slammed too? The U.K. Parliament has only one majority view: that it would be best if there were a plan in place; it’s just that there is nothing approaching a majority behind any one plan. There are still lots of unresolved issues, but nothing illustrates the point like the only place where the UK has a hard land border with the rest of the EU, the 499 kilometers (310 miles) shown above between Northern Ireland and Ireland.

The conflict in Northern Ireland – minimalized by the label the “Troubles” – began in 1960 and ended with the Good Friday Agreement in 1998. British troops took charge of what was a rising civil war between the majority Protestants against the minority Catholic in that circle of land that belonged to the UK. According to Wikipedia, “More than 3,500 people were killed in the conflict, of whom 52% were civilians, 32% were members of the British security forces, and 16% were members of [Protestant and Catholic civilian] paramilitary groups.” Most of the British forces were Protestant, which only made a bad war so much worse.

But what does this have to do with Brexit? Ireland, predominantly Catholic and a sovereign nation that is not leaving the EU, today shares that open and unguarded border with the UK territory of Northern Ireland, which is. Memories of the Troubles, just two decades past, seem erased – although occasional flare-ups have occurred. The notion of an open border with majority Protestant Northern Ireland and majority Catholic Ireland is comforting, particularly for the Northern Irish Catholic population. The notion of an immigrations/customs enforced border, armed officers on each side, is an ugly reminder of what most in the UK and Ireland would like to forget. Would the Troubles rise again?

But this is one of the biggest sticking points in the UK/EU negotiations. Install a full border? Leave the border open, but then require some form of immigrations and customs enforcement for Northern Irelanders traveling across the water to the rest of their own country? Something else? At least in the rest of the UK/EU connection points, there is the English Channel serving as a natural boundary.

Just looking at the UK/EU negotiations as a whole, the only thing the factions in Parliament have in

common is disunity. So, what are the possible scenarios? The April 8^th Los Angeles Times summarizes:

No Deal “If Britain can’t break the impasse, it risks crashing out of the EU without a deal… Last month, the EU agreed to postpone the March 29 departure date, but gave Britain only until April 12 to pass Prime Minister Theresa May’s original agreement, to come up with a new plan and seek a further extension, or to leave without an agreement or a transition period to smooth the way.

“On Friday [4/5], May requested a further extension until June 30 and on Saturday, she acknowledged that after three rejection votes by British lawmakers, there is little prospect they would back an agreement ‘in the near future.’

“Most politicians, economists and business groups think that leaving the world’s largest trading bloc without an agreement would be damaging for the EU and disastrous for the U.K. It could lead to tariffs on trade between Britain and the EU, as well as customs checks that could cause gridlock at ports and shortages of essential goods.” 

A Breakthrough “With so much at stake, and so little time, there are at least two ways in which Britain might find a compromise solution that gains majority support in its deeply divided Parliament… First would be a breakthrough in ongoing negotiations between the odd couple of May and opposition Labor Party leader Jeremy Corbyn. If May can gain Corbyn’s support, he could shift the parliamentary math in her favor and a deal could probably be reached.

“Few are holding out hope for this outcome, in part because it would probably require May to dramatically alter some of her long-held positions and embrace a much softer version of Brexit. Indeed, Labor’s Brexit spokesman, Keir Starmer, said Friday [4/5] after three days of talks that the government is not showing any willingness to change its approach and find common ground.

“A second possibility revolves around May’s promise to hold a series of ‘indicative votes’ in Parliament if her talks with Corbyn are unsuccessful. These votes would gauge Parliament’s sentiment for getting a majority behind a version of Brexit… May has said the government would abide by any such vote, but it is unclear when — and how — these votes would be held.”

The “flextension” “If Britain’s warring factions don’t agree on a way forward, European Council President Donald Tusk is urging a Brexit delay of up to one year, but with built-in flexibility to let Britain leave earlier if it has an agreement in place… This approach has been dubbed the ‘flextension’ in yet another addition to the crowded and sometimes confusing glossary of Brexit-related terms. Tusk hopes to get this option approved at an EU summit on Wednesday [4/10].

“A ‘flextension’ is not exactly what May is seeking; she wants a shorter delay. If Britain stays for another year, it would have to take part in European Parliament elections set for late next month… Britain’s participation in the balloting would be required to protect the integrity of the European election process, but it would tie the U.K. closer to the EU at a time when politicians are trying to finalize the country’s divorce from the rest of the bloc.”

Back to ballot box? “Parliament already has narrowly rejected a proposal for a new referendum on whether to leave the EU, and the government has ruled out holding another plebiscite, saying voters in 2016 made their decision to leave… But with divisions in both Parliament and in May’s Cabinet, handing the decision back to the people in new balloting might be seen as the only way forward.

“A proposal for any Brexit deal to be put to a public vote in a ‘confirmatory referendum’ was backed by opposition parties, as well as some of May’s Conservatives… At least one prominent Cabinet member, treasury chief Philip Hammond, says such a proposal might have merit.” 

This latter proposal would take time to implement, is not remotely uniformly supported by May’s own party, and just might repeat the results from the June 23, 2016 Brexit referendum: Leave won by 51.9% to 48.1%. Many outside the UK believe that if put to the vote, the UK would remain in the EU, but many in the UK think the world just might be surprised… again… with an affirmation of Brexit. If the UK and the EU do in fact separate, or if this process continues to drag on, economists predict that global GDP will be slammed, but not as hard as the EU and not nearly as hard as the UK itself.

Stand-by… do I hear a loud trumpet sounding? A reprise? Shivering in their shoes, on April 10^th, the EU voted to give the UK one more extension… this time until October 31^st. Any significance that this date just happens to be Halloween?

              I’m Peter Dekom, and in a world with more than enough economic complexities suggesting a recession is just around the corner, Brexit could be simply more gasoline on that economic fire.