Europe Should Brace for One Last Brexit Delay

(Bloomberg Opinion) -- European leaders have placed a lot of faith in Theresa May's ability to get her Brexit deal through an increasingly fractious U.K. parliament.

That optimism looks increasingly misplaced after British lawmakers rejected her plan three times. MPs are now preparing for yet another attempt at sketching out what flavor of Brexit they would prefer: Staying in the customs union, staying in the single market, holding a second referendum – or leaving with no deal.

This confusion may be great news for Remainers, but it will be of cold comfort to Brussels, which faces a choice between extending the seemingly interminable Brexit process or pushing out an undecided Britain. Even if parliament decides on a course of action, it may not be enough either to get the government to change course or to get May's deal voted through.

European capitals don't relish this decision, because the risk of self-harm is high either way. The Article 50 process has already been extended once, to April 12; to extend it again, even just for six to eight months, would allow Brexit to taint key political events for the EU, from the European elections in May to the start of the new European Commission in November.

On the other hand, a no-deal scenario – whether imposed on April 12 or potentially held back until May 22, as some diplomats expect – would be economically painful for not just the U.K., but Ireland, Germany and France as well. It's hard to say who is really “ready” for this.

The balance is tilting towards another extension, if only because the U.K. has the power to appease a lot of European capitals if it agrees by April 12 to hold European elections. Remaining as a member state without taking part in the vote would break EU law and put the parliament's decisions at risk of being challenged.

By fulfilling Britain's legal duties as a member of the EU and by making a highly symbolic gesture that would be seen as betrayal by Brexiteers like Nigel Farage, May (or whoever has replaced her by that point) will have at least extended an olive branch. Refusing to hold the ballot would be akin to begging for a no-deal exit.

But the longer Brexit drags on, the greater the EU's readiness for a no-deal becomes – and the greater the risk that some countries start advocate cutting the cord. Capitals like Paris and Vienna are already grumbling that allowing a departing EU power to take part in parliamentary elections is a big concession.

The U.K. may offer up sweeteners like a general election or a second referendum to persuade the EU to let the country stay. But it's hard to imagine a figure like Boris Johnson or Dominic Raab in Downing Street will look like progress for Brussels. Ironically, the leader that would probably be easiest for the EU to deal with – opposition Labour leader Jeremy Corbyn – would be even worse for British business than Brexit, at least in the eyes of short-seller Steve Eisman.

The likelihood of accidentally sleep-walking into a no-deal Brexit is falling, at least in the near term. But the chances of importing the U.K.'s political chaos into the continent are rising. Europe should brace for another Brexit delay, most likely until the end of this year. It should be the last, for everyone's sake.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.

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