EU Ready to Call Johnson Bluff, Betting He Won’t Quit Talks

(Bloomberg) -- The European Union has no plans to offer concessions to Boris Johnson before next week's Brexit deadline, betting that the U.K. prime minister won't make good on threats to walk away from trade negotiations if he doesn't get what he wants.

The bloc is ready to let U.K. talks drag on into November or December, and even take a chance on Johnson pulling the plug on the deliberations rather than compromise on its red lines, according to a senior EU diplomat. The high-stakes strategy was confirmed by a second EU official.

The pound fell by as much as 0.5% to $1.2917 and 0.4% against the euro.

Johnson is already softening his demands somewhat, telling the EU last week that Oct. 15 -- the first day of an EU summit -- isn't the final date for concluding a deal but rather for establishing that an agreement is possible. U.K. officials are nonetheless adamant they need to see significant progress.

Still, the EU is refusing to play ball, and doesn't expect negotiations to have advanced significantly by then unless the prime minister personally intervenes, the diplomat said. A separate official said the bloc has no intention of negotiating to an artificial deadline.

Read More: Why the Brexit Negotiations Still Threaten Chaos for Britain and Europe

Johnson is serious about his ultimatum and if there isn't progress in the next two weeks, he will tell the British people that a deal isn't possible, according to an official with knowledge of the government's position.

Missing the deadline would leave Johnson with a dilemma: breaking off talks would set the U.K. on course to crash out of the EU single market on Dec. 31, leaving British businesses grappling with quotas and tariffs; but if he stays at the table, exposing his threats as bluster, he'll be in a weakened position for the final stretch of talks.

While the EU has always said it doesn't recognize the U.K.'s Oct. 15 deadline, officials from both expected that the bloc would be willing to make an effort to find a breakthrough by then to keep negotiations on track.

There are still huge divisions around the negotiating table, notably on access to the U.K.'s fishing waters and restrictions to Britain's state-aid regime, and although officials on both sides are cautiously optimistic that they can be bridged, it's by no means certain. EU officials say there has been little progress recently and they weren't impressed by the five compromise text proposals the U.K. submitted last week.

“No significant progress could be recorded with respect to the key chapters” during last week's negotiating round, according to an EU document seen by Bloomberg.

EU officials said they are pessimistic about the chances of a deal because the disagreements between the two sides are about points of principle. For progress to be made, they said, the U.K. will need to change positions rather than necessarily intensify negotiations.

It's possible that Brexit could be added to the agenda of a Nov. 16 EU summit in Berlin, currently arranged for leaders to discuss the bloc's relationship with China, according to an official.

Johnson's Role

To break the deadlock, the EU wants Johnson to become more personally involved in the process. There is consternation in European capitals that the prime minister has been largely absent from negotiations so far.

His video call with European Commission President Ursula von der Leyen on Saturday was the first since June and French President Emmanuel Macron is the only major leader he has spoken to since negotiations started in March. One EU official said Johnson would have to hold talks with German Chancellor Angela Merkel before a deal could be done.

The U.K. rejects the idea that it's up to Johnson to deal with EU capitals, preferring to leave talks to his negotiating team.

A U.K. spokesman said the government remains fully committed to seeking to reach an agreement by Oct. 15.

©2020 Bloomberg L.P.