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Brexit Update – Boris Johnson Heads to Mainland Europe

Bob Mason

As Things Stand

British Prime Minister Boris Johnson kicks off a 2-day tour of the EU in a bid to bring the EU back to the negotiating table.

First up is German Chancellor Angela Merkel, whom Johnson is scheduled to meet with later today.

It’s the British Prime Minister’s first official overseas trip and it comes at a particularly delicate time.

The change of tact has not been missed and once more can compare to U.S President Trump’s ‘Art of the Deal’ tactics that have contributed to the gyration in the global financial markets in recent years.

Johnson had refused to discuss Brexit with EU member states until the backdrop component of the Brexit deal had been dropped.

Perhaps unsurprisingly, Brexit hard-liner Donald Tusk sent a clear message ahead of Johnson’s brief visit to Germany and France.

In response to a Borish Johnson letter to the EU on dropping the backstop, Tusk stated that Britain had failed to provide an alternative solution.

The message from Tusk was quite simple, deliver an alternative to the existing backstop or accept the existing Theresa May deal.

Theresa May’s deal seems to be dead for now, with Prime Minister Johnson likely to do his best to avoid reviving it. Parliament had voted the deal out and Theresa May along with it.

An alternative to the existing backstop also seems to be beyond the Prime Minister’s reach for now. Well, at least an alternative that is acceptable to both the EU and to the UK Parliament.

That continues to leave a no-deal exit from the EU as the most probable outcome.

The Day Ahead

German Chancellor Merkel gave the Pound a boost on Tuesday. Merkel said that she would consider options to prevent Britain from falling out of the EU without a deal.

Merkel’s softer stance may give Johnson hope of being able to change the EU’s current stance on the Withdrawal Agreement.

There has been a changing of the guard in the EU, however. Once the voice of Europe, Merkel is on her way out. The Chancellor’s powers of persuasion are not what they used to be and all member states need to agree to any amendment to the Agreement.

In reality, Merkel’s hope to avoid a no-deal Brexit event is likely common view. The onus remains on Britain, however, to find an alternative solution to the backdrop.

Leaked documents, attempts to thwart Britain’s departure from the EU and even the threat of withholding the divorce bill will not have done Johnson any favors…

Of the two meetings scheduled, Johnson and the Pound will most likely enjoy today’s meeting the most…

The Rest of the Week

Following today’s meeting with Angela Merkel, Johnson will travel to France to meet with French President Macron on Thursday.

Since taking office back in May 2017, Macron’s voice and influence have been on the rise. Macron will likely be Johnson’s nemesis this week. Alongside Donald Tusk, Macron has taken a hard line with Britain and things are unlikely to change.

If Johnson fails to provide an alternative solution to the backstop issue, talks are unlikely to favor the Pound.

Jeremy Corbyn, Tory Party rebels, Nigel Farage and the Lib Dems will all be watching intently.

On the one hand, an unwillingness by the EU to return to the negotiating table will give Nigel Farage voice. On the other, however, the unwillingness will also give Jeremy Corbyn’s plan to oust Johnson greater weight.

Johnson has every incentive to find a solution to the Brexit conundrum. Failure could give Johnson the accolade of being the Prime Minister with the shortest period in office. The current honor goes to George Canning, who made it to 119-days.

Johnson will need to deliver an alternative deal and likely prevent a no-deal departure from the EU to avoid becoming the shortest-serving Prime Minister. From taking office to 31st October, that’s just 100-days…

The Pound

Angela Merkel gave the Pound a brief reprieve on Tuesday. The reality remains that the probability of a no-deal Brexit remains exceptionally high.

The UK Parliament remained intent on voting down any Brexit options ahead of the summer recess. Not recalling Parliament early at such a critical time says it all…

While Merkel may give hope, any upside for the Pound remains limited at best. Tusk and Macron are more aligned on Brexit.

If Johnson fails to deliver an alternative solution, this week’s meetings will simply highlight the fact that the 2-sides are unable to find common ground.