Boris johnson seems ready to blow up any hope of rapprochement between London and Brussels in the final stretch of the Brexit. His 'Trump-style' strategy, with his orderly demanding an agreement on the future commercial relationship before October 15 and with the news that it is preparing legislation that could annul some parts of the Withdrawal Agreement with the European Union (EU), specifically those related to irish border, has set off alarms. The fear of a hard exit has skyrocketed.
"The events divert the risks of a total or partial agreement towards a hard exit", warn the experts of Berenberg, who affirm that now, "more than before, we have to watch the risk of a disorderly Brexit at the end of the year", once the transition period is over. The problem is that all this has happened on the threshold of a new round of negotiations between the UK and Brussels, and things are getting increasingly difficult for the deal.
In the opinion of the analysts of the German firm, "it is not clear if it is a strategy of 'Trump-style' negotiation to up the ante in hopes of the EU blinking as the clock ticks or for a conscious UK approach to undermine ongoing negotiations on the future relationship and settle for the most difficult possible exit from the single market, rather than a agreement".
What is clear is that in Brussels they are not at all happy with the latest events. The EU's chief negotiator for Brexit, Michel Barnier, said a few days ago that the official deadline for the agreement was the end of October, and after learning of London's intentions on the Irish border (prepares, according to FT– legislation he will present to Parliament on Wednesday that could nullify the British obligation to control customs in Northern Ireland, as had been agreed with the EU) has said that "everything that has been signed must be respected". It remains to be seen how that affects his meeting this Tuesday with the British negotiator, David Frost.
In any case, in Berenberg they see "strange, to say the least, that the UK is about to undermine its commitments to Ireland with the upcoming legislation after taking steps in recent months to prepare the Northern Ireland border for the day of departure". In his opinion, this suggests that Johnson tries to "increase the pressure to get a deal more to his liking, instead of going for a hard exit ", although nothing can be ruled out at this point.
The strategy of the 'premier' does not increase the possibility of a good result in the negotiations, but adds problems to the already delicate situation that the British economy is going through. And it is that, says Berenberg, the cost of a hard Brexit would fall more strongly on the United Kingdom. "This strategy could harm the United Kingdom more than the EU, which is much larger," emphasize the experts of the German firm.
They also point out that a disorderly exit without agreement in key areas such as trade in goods and financial services "could make UK to re-enter recession in early 2021 and temporarily slow down the EU recovery ", although" the persistent threat of a second major wave of Covid-19 and the possible return of the closures add to the cocktail of risks for the British economy. "
"JOHNSON WILL NOT BE ABLE TO RESIST THE AGREEMENT"
In Goldman Sachs they also believe that this order by the British Prime Minister is nothing more than a way of trying to balance the balance in his favor in the face of negotiations, so that Brussels will give in. "The UK could ultimately decide that minimal access to the common market is a price worth paying for maximum regulatory autonomy," which is what would happen with a disorderly exit, the firm's economist Adrian Paul wrote in a report, as collected Bloomberg. "From a political perspective, however, the lure of a Brexit deal before the end of a tough year will be hard to resist", Add.
And it is that a hard Brexit would leave Johnson facing a "triple threat" to his leadership: first, because the Scottish National Party is getting stronger and that favors the independence of the region; second, because the leader of the Labor Party is gaining popularity; and third, it would be "a crucial test of competence in recovering from the coronavirus crisis," Goldman concludes.
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