EU raises specter of no deal as Brexit talks drag

Bloomberg

European Union chief negotiator Michel Barnier raised the prospect of Brexit talks failing to reach a breakthrough by year-end, saying the UK has two weeks to come up with a better offer on the financial settlement. Barnier called for “real and sincere progress” on the three divorce issues, which include the separation bill, the rights of EU citizens and the Irish border, which has erupted back onto the agenda this week.
“I have to present a sincere and real picture on those three subjects to the European Council and the European Parliament. If that is not the case, then we will continue, and that will put back the opening of discussions on the future,” Barnier said at a news conference in
Brussels with Brexit Secretary David Davis.
Little progress had been expected in this sixth session of talks, but the mood of the news conference was more somber than in recent rounds. Poland’s European Affairs minister also raised the possibility that talks wouldn’t move on to trade until March.
That would narrow the available time to hash out a trade deal, and render almost useless the transition deal that UK companies are crying out for.
Britain is due to leave the EU in March 2019, with or without a deal, and the ratification of any agreement needs a few months.
“December is absolutely the most important crunch point,” said Mij Rahman of Eurasia group. If there’s no agreement by the December summit, he argues that the two sides will be forced to reassess the whole process, and could consider trying to hash out a minimalist exit deal instead—a “no-deal deal”. “There may be a rethink as to where we are headed.”
Back in October, as another summit that had been hailed as a crunch meeting was shaping up to be a flop, European Council President Donald Tusk made a similar assessment of what might lie ahead at year-end.
“If it turns out that talks continue at a slow pace, and that sufficient progress hasn’t been reached, then, together with our UK friends, we will have to think about where we are heading,” he said.
EU diplomats have begun work on two versions of draft summit conclusions for the December gathering—one for the possibility of a breakthrough and another one for continuing stalemate.
The pound rose as much as 0.5 percent against the euro, as investors were relieved that talks at least hadn’t ended acrimoniously.
Davis struck sunnier tone than Barnier, saying “significant progress” had been made on all three divorce issues. He continues to reject the demand that the bill is sorted before talks can move on to trade.
The issue of the Irish border, which had taken a back seat in recent months as the UK argued it would be easier to sort further down the line, came back on the agenda, as a memo that made clear that the EU has adopted almost wholesale Ireland’s position.
Davis said they have had “frank” discussions on the border—which bisects the island of Ireland and will become the UK’s only land frontier with the EU. The EU paper called for Northern Ireland to maintain the rules of the customs union and single market after Brexit to avoid a hard border between Northern Ireland and the Republic. Those demands are all but impossible for Britain, unless the whole UK stays in the customs union, which Prime Minister Theresa May has ruled out.
Allowing Northern Ireland to stay in the customs union could mean putting a border between it and mainland Britain.

British Vauxhall plants face hurdles
Bloomberg

PSA Group is pushing the UK factories acquired in its deal for General Motors Co.’s European operations to make a leap in competitiveness to offset the potential risks posed by Brexit.
British Vauxhall plants, where production costs are about twice as high as the French automaker’s domestic sites, face hurdles in either a hard or soft Brexit scenario, Carlos Tavares, PSA’s chief executive officer, said in an interview in Berlin.
If the UK reaches a trade deal with the European Union as it departs the bloc, the plants will need to be competitive with facilities in continental Europe. Without a trade agreement, they will need to vie with factories overseas, he said in the interview at the Automobilwoche conference.
Reviving the battered Vauxhall nameplate is probably the biggest challenge in PSA’s ambitious turnaround of GM’s former European operations, which were purchased earlier this year in a 2.2 billion-euro ($2.6 billion) deal. While the plan includes prospects to export Opel vehicles into more than 20 new markets, Vauxhall remains relegated to the UK, raising questions about its future.
PSA aims to change that by reducing Opel and Vauxhall’s production costs by 700 euros per car by 2020 to generate an operating margin of 2 percent of revenue.