France Says It Now Sees No-Deal Brexit as the Likeliest Scenario

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21 aug. 2019, 16.31

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The French government expects the U.K. to leave the European Union without a withdrawal agreement, an official in President Emmanuel Macron’s office said, meaning the immediate imposition of border controls after Brexit at the end of October.

A so-called no-deal Brexit is now the central scenario for France, the official said. The comments come after British Prime Minister Boris Johnson sent a letter to EU officials demanding the removal of the controversial Irish border backstop from the deal, something the bloc has repeatedly refused to do.

Sterling slipped to the day’s low, touching $1.2112. It reached $1.2015 on Aug. 12, the weakest level since January 2017.

Since Johnson took office last month, EU officials have considered a no-deal Brexit the most likely outcome, though they still hope an agreement can be reached before Britain’s scheduled exit date of Oct. 31.

But that would require the new prime minister who has struck a hard-line position to back down over the backstop -- the mechanism designed to keep the Irish border free of checks agreed with Brussels by his predecessor, Theresa May.

The bloc has said the U.K. doesn’t have a realistic plan for an alternative to the backstop. The measure is despised by ardent Brexiteers in Johnson’s Conservative Party because it keeps the U.K. tied to many of the EU’s customs and trading rules, and Parliament has rejected the Brexit deal three times.

Ireland’s EU commissioner, Phil Hogan, spoke scathingly on Wednesday about Johnson’s approach to Brexit.

“If the U.K. fails to prevent a crash-out Brexit, they should be under no illusion regarding the foul atmosphere they will create with their EU partners and the serious consequences this will have for negotiating any future trade agreement,” Hogan said in a speech in Ireland, according to the Irish Independent newspaper.

Leaving without a deal would mean the U.K. won’t have the planned transition period, which could end as late as the end of 2022, and would have to trade with the EU on World Trade Organization terms rather than on a no-tariff basis.

Footing the Bill

The EU will also expect the British government to pay the 39 billion pounds ($47 billion) exit bill even if it leaves without an agreement, the French official said. Johnson has indicated he could use the financial settlement as leverage as he seeks concessions from the bloc.

Johnson meets German Chancellor Angela Merkel in Berlin Wednesday, and will have lunch with Macron in Paris Thursday to discuss Brexit. They will then meet U.S. President Donald Trump over the weekend at the Group of Seven summit in Biarritz, France.

The French official said Macron is fully aligned with Merkel, pointing to her comments this week. What’s more, EU leaders won’t be swayed by any intervention from Trump on this issue, the official added.

Johnson is within his rights to reject the backstop arrangement, the French official said, but added that without it, there can be no Brexit deal. The official said the Brexit date remains Oct. 31 -- which is also the timing Johnson wants -- and could only change if the U.K. requests it for a major political event such as a general election.

(Updates with official comment, pound reaction from third paragraph.)

To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net;Ian Wishart in Brussels at iwishart@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Flavia Krause-Jackson

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