Europe and Brexit,

Most TDs are in denial over how Theresa May’s poordeal strategy will play out on this side of the water, writes Colm McCarthy

APOOR Brexit deal for Britain is a bad outcome, but not just for Britain. The UK election a month hence will install a new Conservative government which has already boxed itself into a poor-deal strategy, damaging for Britain, damaging for members of the European Union but especially for Ireland. No country, other than the UK itself, has more to lose.

Theresa May’s hard Brexit strategy has begun to pay off for the Conservative party, reflected in the rich harvest of former Ukip voters at last Thursday’s local elections. But there has already been a fractious start to negotiations, there will be protracted rows about the financial arrangements and a disappointing trade deal is probable whenever agreement is finally reached. This is self-inflicted harm for the UK but an undeserved affliction for Ireland, to be managed with weary resignation. There is no course of action available to the Irish government other than damage limitation.

Expectations on the Tory right, encouraged recklessly by Mrs May, that exit from both single market and customs union could be executed painlessly, without damage to trade or financial cost, have always been unrealistic. The prospects for a practical deal aimed at minimising economic pain, the only attainable objective for either Britain or the EU-27, have worsened as the prime minister’s position has settled on the tedious mantra “no deal is better than a bad deal”. This is a slogan, not a policy.

The week began badly with a detailed leak of a private dinner at Downing Street involving Mrs May, European Commission president JeanClaude Juncker and EU negotiator Michel Barnier. The leaker appears to have been one of Juncker’s staff, with or without the president’s sanction. In any event, the account published in the Frankfurter Allgemeine Zeiting (‘Brits on a different galaxy’) rings true and has not been denied as to content by the British side. Instead the prime minister launched a remarkable attack on the motivation of the Europeans in leaking this unchallenged report of the exchanges. She alleged, in rehearsed remarks (not an off-the-cuff response to an ambush query from journalists) that the Europeans were seeking to influence the outcome of the UK general election, a preposterous notion which she cannot possibly believe. This considered intervention has a purpose aside from electioneering. It is called getting your retaliation in first.

The Brexit negotiations are almost certain to end badly for Britain given that the softer options have been ruled out by Mrs May. The row about the financial settlement will keep the Brexiteers hyperventilating for a while but is a sideshow — the amount of money involved is dwarfed by the negative impact of a poor deal on trade. If Britain departs both single market and customs union, it is virtually impossible to fashion a damage-limiting trade deal and sanity requires a climbdown.

So who is to be blamed? The only politically sustainable narrative for Mrs May, who will commence a five-year term in office a month from now after the inevitable general election victory, is that any damage to Britain resulting from Brexit is the handiwork of malevolent European politicians. Her remarks last Wednesday should be seen as the opening shot in a blame game that will dominate the remainder of her premiership.

After 44 years in a broad, deep and productive economic union with geographical neighbours and natural trading partners, it is not possible to engineer the complete rupture envisaged in Brexiteer imaginings without severe economic damage. After the referendum vote it was open to the British to remain in the single market, as some Leave campaigners had openly contemplated. This was ruled out quickly by Mrs May, since it would have constrained the tightening of immigration controls. To this has since been added the gratuitous decision, now almost irrevocable, to quit the customs union. This second leg in the capitulation is meant to facilitate the conduct by the UK of free trade deals with the whole wide world, presumed to compensate for any lost trade in Europe, itself to be downplayed and blamed on the Europeans’ inability to assess their own best interests.

There is no reputable economic research outfit to my knowledge which shares this assessment. Britain will lose trade access in Europe and will not make up the loss elsewhere, according to a succession of detailed studies. Repeated assertions to the contrary from cheerful Brexiteer ministers have driven Whitehall civil servants to distraction and in some cases to resignation.

The EU negotiates trade deals on behalf of all members, including Britain, with third countries. There are deals covering 60 countries around the world, including the deal recently negotiated with Canada and with important partners such as South Korea. A deal is under negotiation with Japan and the deal with the United States, temporarily in Trump-limbo, may be revived. Mrs May has, in choosing to quit the customs union, elected to seek bilateral British deals post-exit with these various countries while simultaneously negotiating a third-country deal for itself with the EU-27. Thus Britain will be negotiating with Japan, Japan simultaneously with the EU, and the EU with Britain. Bilateral deals are complicated and take forever. The trilateral scenario apparently envisaged by the British looks unmanageable and the prospect naturally concerns the Europeans.

The Irish government released a detailed and thorough document on its Brexit strategy last Tuesday. It is a measure of the challenge the Government faces that even at 60 pages there are potential snags and worries which do not get a mention and a further review of the economic issues is promised. The subsequent discussion in the Dail was disappointing, focused obsessively on the aspects affecting Northern Ireland. These are important of course but Ireland’s trade with mainland Britain greatly exceeds trade with Northern Ireland, as does tourist traffic and numerous other areas of economic interdependence. A bad outcome in the UK’s future relationship with the EU will do great economic damage in the Republic even if the border issues can be resolved.

The very first priority highlighted in the strategy statement received scant attention from the Dail deputies. It committed the government to “… sustainable fiscal policies to ensure capacity to absorb and respond to economic shocks, not least from Brexit”.

Figures released during the week confirmed some early signs of weakness in tax revenues and the Brexit uncertainty is not helping business confidence. The economy has in any event enjoyed a strong run these last few years and the unemployment rate should fall below 6pc, down from a high of 15pc, later this year. Most of the slack in the post-crash economy has been used up. There are good reasons for getting the public finances into surplus quickly, with a view to the re-attainment of economic sovereignty,

‘Her remarks were the opening shot in a blame game’