EU Looks to Johnson to Stop No-Deal Brexit With Talks Stuck

(Bloomberg) -- The European Union will try to convince Boris Johnson to forge a compromise later this month in an attempt to stop the U.K. from breaking away from the bloc without a trade deal.

With the negotiations deadlocked, and the latest talks set to end Friday without a breakthrough, the EU is pinning its hopes on a dramatic intervention by the British prime minister when he speaks to European Commission President Ursula von der Leyen and EU Council President Charles Michel later this month, according to people familiar with the matter in Brussels.

Johnson will be told where the EU could potentially make concessions -- as long as the U.K. takes a similarly conciliatory approach, the people said. That could allow the two sides to reach an accord in the second half, they said.

But there is no guarantee that the prime minister will agree. On Tuesday, Johnson's spokesman, James Slack, dismissed suggestions of a compromise as “wishful thinking by the EU.” The U.K. government has threatened to walk away from the negotiations in June if they haven't made adequate progress.

If the two sides fail to reach an agreement by year-end, Britain will default to trading with the bloc on terms set by the World Trade Organization, leaving businesses and consumers grappling with the return of tariffs and quotas.

During a telephone call on Tuesday, Bank of England Governor Andrew Bailey told bank chief executive officers to step up their preparations for leaving the EU without a trade deal, according to a person familiar with the matter.

Compromise Efforts

The EU is demanding that, in return for any deal, the U.K. agrees to apply some of the bloc's rules after Brexit to maintain a level competitive playing field. It also wants the European Court of Justice to continue to have jurisdiction in the U.K. and for European fishing vessels to maintain their access to British waters.

So far, though, British officials have ruled out accepting those demands. Johnson has made it clear that he believes Britain's vote to leave the bloc means that the country should be fully independent, one U.K. official said.

Behind the rhetoric, though, diplomats say the two sides have started to map out where a deal could be done as they work out which positions are genuine red lines and which leave room for maneuver.

European diplomats say the bloc could water down its demands on fishing and, to a more limited extent, on the level playing field.

In return, they expect the U.K. to make a similar leap -- but so far, one hasn't been forthcoming. While the U.K. has offered to stick to current EU standards to prevent unfair competition by way of a so-called non-regression clause, the EU doesn't believe that promise goes far enough.

Much of this week's discussions will be focused on fisheries. The EU's public position is to demand the status quo, where European fishing boats have access to British waters under a quota system based on historic catch areas. The U.K. wants to replace that with annual negotiations that reflect more accurately where fish are found today.

‘Manifestly Unbalanced'

At the end of the last round of talks, the U.K.'s chief negotiator, David Frost, called the European approach “manifestly unbalanced.” His EU counterpart, Michel Barnier, acknowledged that both sides had taken “maximalist” starting positions that they could move away from.

Even if the two sides inch closer toward agreement on fishing, though, they will still have to reconcile their divisions on the role of the EU courts. One U.K. official warned that Britain will never agree to align with EU laws or accept the continued jurisdiction of the European courts -- and accused the EU of ignoring the political realities of Brexit.

In addition to fisheries, negotiators will on Wednesday also discuss:

• trade in goods and services
• the level playing field
• cooperation on law enforcement and energy matters
• governance
• the U.K.'s continued participation in EU projects.

©2020 Bloomberg L.P.