Merkel and May

Theresa May's supporters have been presenting the comments of Angela Merkel, that she wants to be able to do a trade deal with Britain, and the decision of the EU Council to start internal discussions on the kind of deal they might offer, as some kind of success. It is simply an indication of the extent to which their desperation is leading them into further self-delusion.

Merkel and other EU Ministers have simply cut off the potential for the Tory party's Loony Right being able to claim that the EU was being obstructive, and thereby pushing May into breaking off talks and pushing a sharp, hard Brexit. It has helped to isolate the hard Brexiters, but with Corbyn and Co also in Brussels, it is also increasing the pressure for May and the Tory soft Brexiters to come to some kind of a deal with Labour. It is an indication of the EU politicians, as they have been all along, being several moves ahead of the hapless Brexiteers.

The EU, as expected said that not enough progress had been made on the first stage talks to justify moving on to trade talks. Whilst Merkel, Tusk and others played good cop, holding out an olive branch to May, Juncker played bad copy, saying that he would have used the word “deadlocked” four times, as opposed to Barnier's use of the term three times. The fact is that there is a logjam, and it is is of the British government's making. It is still hard to see how the UK negotiators can get out out of it, and this is the easy bit of the negotiations. The difficulties are both political and technical for the UK politicians.

The Finances

Britain has tried to muddy the waters in relation to the financial settlement. It comes down to this. Imagine that a couple decide to divorce. In the previous years they have agreed to have a family, and now have three kids, and they have also agreed to send the kids to a fee paying school. They have also bought a house, and taken out a thirty year mortgage to pay for it. Now as they divorce, they are to sell the house. But, they are in negative equity. It is quite reasonable, that both parties are required to share the cost of covering the mortgage debt that exceeds the market price obtained in the sale of the house. And, the fact that one parent has custody of the kids does not excuse the other parent from having to meet their commitments to covering the cost of bringing up the kids, and paying their school fees for the next ten years and so on.

What the Tories are trying to do is to get out of the cost of paying for the kids upbringing, on the basis that they do not have custody, and they are trying to deny any liability for the mortgage debt outstanding. What Theresa may offered in her Florence speech was to pay €20 billion, to cover expenses up to 2020. In effect, she is only offering to pay what would in any case be the membership fees for that period, when she is trying to obtain a transitional membership of the customs union and single market. Its as though, during the divorce proceedings, she is saying she will stay in the house, and pay her half of the monthly mortgage payment, and the school fees.

But, that does not begin to address the longer term financial commitments that have to be resolved, such as the costs of EU civil servants pensions, and so on, which extend decades into the future. The Tories repeatedly talk in bland terms of meeting their commitments, but without nailing down the definitions of exactly what those commitments are, such statements are meaningless. May knows that technically this is easy to resolve. It is simply a matter of nailing down those commitments, and agreeing to cough up what Britain owes. Ultimately, whether Britain pays €20 billion or €100 billion is irrelevant, because for a $2 trillion economy, either sum is peanuts in the grand scheme of things, especially as the latter would almost certainly be paid in stages. The idea that this is a stumbling block or the main issue for the EU is also silly, because for a $14 trillion EU economy, the sums are even more trivial.

The problem is political. The EU cannot allow Britain to get away without meeting its commitments, because that would send very bad signals, but more importantly it has no need to do so. It is the EU in the driving sat, and it is the UK that triggered Article 50. The problem for May is that if she agrees to pay what Britain owes, she will face a revolt from her Loony Right, and may have to rely on support from Labour to face them down. But, in many ways the question of the money is the easiest to resolve.

EU Citizens in Britain

The issue of EU citizens living in Britain should also be easy to resolve technically. All it requires is for those citizens to be granted the same rights they have now, and for a reciprocal arrangement for UK citizens living in the EU. The cost of doing that is pretty minimal. In fact, given that those EU workers make a net contribution to the British economy, not doing so represents a cost. But, again the problem is political. Firstly, a large core of the 37% who voted for Brexit is accounted for by that 25% of the population that self-describes itself as racist. Recent vox pops, show a significant number of these bigots, particularly amongst the older sections of the population, who not only want to stop further immigration, but who want to send existing EU citizens back home.

There has been a notable increase in xenophobic attacks since the Brexit vote, and it is not surprising, therefore, that EU politicians are keen to ensure that the three million EU citizens living in Britain have the protection of the European Court of Justice behind them. Many of those citizens when they have come to apply for UK citizenship have found that their path has been obstructed, not least by the 84 page application form they have to fill in to do so. But, a main bugbear for the Tory Loony Right has always been the ECJ, and they are determined not to allow it any jurisdiction.

Ireland

Politically, the question of Ireland is the easiest to resolve, because on all sides there is agreement that the foundations of the Good Friday Agreement should not be imperilled, and that there should be no return to any kind of border between the North and the Republic. The problem is that this is technically impossible to achieve on the basis of the conditions that the Tories have already set down. From the beginning Theresa May has said that Britain is not only leaving the EU, but is also leaving the single market and the customs union. But, if you leave the customs union, then that means that there has to be a customs border between the EU and Britain. That means a border between Northern Ireland and the Republic, and a border between Gibraltar and Spain. That is a contradiction in aims that cannot be bridged.

Britain has said that in order to resolve this issue its necessary to couple it with the stage 2 trade talks. If as part of its aims in those trade talks, Britain was proposing to remain in the customs union that would be a valid argument, but Britain has already said that its aim is to be outside the customs union. If Britain is outside the customs union, no amount of discussion on future trade arrangements can overcome the requirement for a border. The only alternative would be if the EU allowed Britain to be outside the customs union and single market, and yet to still have free access to those institutions. That, obviously is what Britain wants to achieve, and is the reason it has tried to tie the two things together at this stage, but it is impossible to have your cake and eat it in this way. There is absolutely no way that the EU can allow the UK to be outside the single market and customs union, to make no contribution to those organisations, and also thereby to be free to make its own trade deals with other countries, and yet still have access to the single market and customs union, as though it were still a member. For the EU to do that would be to sign its own death warrant. It makes no more sense than for a trades union to give preferential treatment to non-members as opposed to members.

If Britain wants to have no border between Northern Ireland and the Republic and between Spain and Gibralatar, it has to agree to remain inside the customs union. But, then May will not be able to sell that to her Loony backbenchers. If Britain is outside the customs union then there has to be a border between Spain and Gibraltar and between Northern Ireland and the Republic. Its not just a question of the goods moving backwards and forwards across the border. In Ireland, any such border will quickly result in a return of the rampant smuggling that characterised the past. Many of those engaged in that smuggling are parts of sectarian gangs, and it will not take long for the more extreme of those to use the finances raised by such activities to resume the violent conflict of the past.

On top of that, EU citizens will be free to fly into the republic, and then to simply walk across the border into the North, and from there they can simply cross into the UK mainland. Any idea the Brexiters might have of reducing immigration, would, thereby go out of the door on day one. Britain outside the single market and customs union is simply incompatible with the idea of there being no border between the Republic and the North of Ireland, or between Spain and Gibraltar.

So, although the EU has given Britain more time to resolve these irreconcilable contradictions, its unlikely they will do so, and even less likely they will do so by Christmas. The idea that even if stage 2 talks started in January a trade deal could be agreed by next October is ridiculous, because those negotiations will be even more difficult than the current ones. What the EU have also done is to give businesses in Britain time to start making preparations for moving out, rather than facing a sudden cliff edge if the Tory Loonies had forced a walk-out. Many of those businesses have already said that December was a cut-off for them.

It makes sense for the big banks to start to move their operations to Frankfurt where the ECB is based. Lloyd Blankfein of Goldman Sachs has already been tweeting to that effect. The UK economy already facing rising inflation as the value of the Pound erodes due to Brexit, and facing increasing stagnation as its productivity slows, and businesses fail to invest due to Brexit induced uncertainty is set for a tough time, with no end to it in sight.

Labour would do well to create clear blue water between it and the Tories and the Brexit chaos they are bringing about. Now is the time for Labour to set out clearly just what a mistake Brexit is, and just how much people were deliberately misled by people such as Farage, Trump, Johnson and co. Labour should commit itself to a clear opposition to Brexit, and begin campaigning for Article 50 to be revoked, before it is too late.