We need to beware siren voices tempting us on to the Brexit rocks

Even if we quit the EU without a deal we will still need goodwill to avoid a major economic shock

Before a ship sets off on a difficult and dangerous voyage, it’s a good idea for everyone on board to agree on the destination. That, unfortunately, was not what our Government did before it triggered Article 50. We are now under sail, alas, with a crew that disagrees on where we’re meant to be going. So the passengers are anxiously casting about, listening out for any siren song floating across the water.

One is being sung by former Greek finance minister Yanis Varoufakis, the motorbike-riding economist who took his country to the brink of euro exit by playing (and losing) a match of game theory with the EU. Mr Varoufakis was out and about last week, promoting his second book this year. His advice for the UK in Brexit negotiations was to apply to join the European Free Trade Area, or Efta (the “Norway option”), for five years until we can get our political house in order. This is a classic of the Varoufakis genre: recommend a politically impossible version of something (a transition deal) that is already being tried. The Government, if it took his advice, would immediately collapse.

That has not stopped him being seen increasingly as a kind of prophet by Brexiteers. Earlier this year, Mr Varoufakis wrote a fascinating book documenting his experience of negotiating with Greece’s creditors. It was a very worthwhile read (do skip the first 200 pages of “how I became a hero”), because it revealed the inner workings of the Eurozone, often via Mr Varoufakis’s wiretapping of confidential meetings. But the thing to remember is that it is not an instruction manual. It is a cautionary tale.

Until recently, none the less, the UK seemed dead set on copying two of Mr Varoufakis’s major mistakes. The first was to make himself politically intolerable to the European politicians whose support he needed – by calling them “incompetent”, accusing them of “fiscal waterboarding” and using provocative examples, such as German war debts, to make his case. The second, an error he admits, was fundamentally to misread the domestic political situation in Greece, thinking he had government support for a playing hard-ball only to find out, at the last possible moment, that he didn’t.

With Theresa May’s Florence speech, and Boris Johnson’s apparent newfound ability to stop insulting Europeans for no gain, Britain has decisively moved away from Mr Varoufakis’s strategy of picking unnecessary, rhetorical arguments. This is welcome. It matters not because Britain has yet won anything from it (kind words from Angela Merkel don’t count), but because the UK will need a stock of goodwill in Europe in order to implement Brexit smoothly. This follows whether we get a deal or not.

I’ve explained many times why the political atmosphere on the continent will affect what deal we get. It is a mistake to see European governments as motivated purely by trade and money. But even if there is no deal, the atmosphere matters. The reason goes back to something Philip Hammond was mocked for bringing up recently. He alluded to the idea that there are two kinds of “no deal”. The first is a chaotic one, in which we run out of time and wake up (appropriately) on April Fool’s Day 2019 with a great big hole in our legal and trading system.

The economic shock from this situation will be considerable, probably enough to topple the Government and usher in Prime Minister Jeremy Corbyn. It does Brexiteers no good at all to pretend this would have no economic consequences, as they will only be punished by the voters when they are proved wrong.

But there is a second type of “no deal” that could be much closer to the arrangement that some Brexit hardliners advocate. This involves a relatively amicable acceptance of the fact that there simply isn’t the time or political capital available on either side to strike a decent agreement. The negotiations would therefore become an exercise in moving to WTO trading terms in an orderly way.

This is important because it means the EU and UK would still sign legal agreements to make sure planes aren’t grounded, for example, and to extend certain commercial arrangements, like the assignment of landing slots, until new terms could be agreed. Shifting trading on to WTO terms would lead to teething problems at ports and, while it might generate tariff income for the Government, would increase costs for consumers. With goodwill, however, it should be possible to shift into this arrangement without the debilitating economic shock we’d suffer from simply running out of time.

All of this, of course, depends on the cooperation of the Chancellor and Parliament, neither of which seem guaranteed. And its major disadvantage is that WTO terms are significantly less favourable than current terms. But it has a significant advantage, which is that we would then be able to start negotiating an EU free trade deal without the time pressure.

So it is definitely good news that Mrs May has managed to generate some goodwill in Brussels, however meagre, and it is quite wrong to applaud the political maverick strategy pioneered so disastrously by Mr Varoufakis. (Incidentally, even his strategy of applying to join Efta would require a negotiation on customs, fisheries and tricky issues such as the Northern Irish border.) And despite the aggravating intractability of France and Germany at last week’s summit, there is now work going on in Berlin and Brussels to prepare for trade negotiations.

The lesson that Britain has not learned from Greece’s trials, however, might yet prove our undoing. The Cabinet has still not agreed on a desirable destination for the good ship Britannia. In Athens, the result of a similar division was that Mr Varoufakis put all his time and effort into a game of brinkmanship that his own government wasn’t prepared to play, with the result that Greece simply caved in to all EU demands.

If it turns out that Britain cannot negotiate a decent deal, we will find ourselves with one of two options on the table: leave with no deal (and no preparations for this outcome), or sign up to whatever the EU wants. The Government – including all of its Cabinet ministers – needs to be confident about which one of those options it will pick, and it needs to prepare accordingly. Leaving this outcome to chance is the only strategy guaranteed to fail.