MNI SOURCES: EU Expects No-Deal Brexit, Trade Talks May Follow

By David Thomas

     BRUSSELS (MNI) - EU leaders are braced for a no-deal Brexit, according to

European officials who had contact with them at the March 21-22 summit, and the

bloc is already giving thought to trade talks that may follow the UK's exit from

the EU without an agreement.

     "Leaders were even more pessimistic than officials. In fact, I would even

say that they regard it as the most likely scenario now," one official said.

     The comments follow a statement from the Commission earlier today that said

a no deal Brexit is "increasingly likely".

     Officials contacted by MNI cast doubt on whether the so-called indicative

parliamentary votes to be held on various different permutations of Brexit would

yield a solution. They are "a very positive way forward - but they should have

done it two years ago and not when they are running out of time," one said.

     Asked whether UK Prime Minister Theresa May would accept the result of the

votes if they went in favour of a softer Brexit, the official replied:

     "Probably not. She made clear on Thursday night that this is not the Brexit

she wants to deliver."

     A second referendum also seems unlikely, EU sources say.

     "I don't think so. The UK political elite doesn't want it and for good

reasons. It could be a very similar result - say 51-49 - and the UK would still

be left with no clear mandate," an official said.

     --TRADE TALKS AFTER NO DEAL

     Officials indicated that consideration is being given to how trade

negotiations might evolve once a no deal had started.

     "I think that will happen sooner or later regardless of no deal," one said.

     "We are so close to and so important to one another as trade partners that

some WTO arrangement of the kind we might have with Uganda is just not good

enough."

     But the official pointed out that once the EU and UK are actually in a no

deal situation then the Brexit process is no longer governed by Article 50 and

ratification of any deal has to take place by all parliaments of the EU28,

including, for instance, the six parliaments of Belgium, including the Wallonian

regional assembly, which proved such a significant if temporary obstacle during

the ratification of the EU-Canada FTA a couple a few years ago.

     "It becomes much more complex than just having the EP rubber-stamp the deal

and nor would there be a transition period - so no peace and calm for

negotiation of a new trading relationship."

     Officials also point out that "bad blood" and a lack of trust would be

likely to cast a pall over the talks from the outset.

     Litigation over money would be inevitable, with the EU likely to take the

UK to court for payment of its financial commitments. Any sum likely to be

sought could well be higher than the E39 billion under PM May's deal.

     In that context, the source recalled the E50-E60 billion which had been

mooted by the EU side before the talks on May's deal began.

     The EU side is also indisposed to accept the UK's proposals on how to

manage a no-deal situation in specific industry sectors, such as cars.

     "I think not. We will be back to cherry picking with the UK suggesting

areas where they will benefit."

     Areas where there are clear dangers of crisis will of course be sensitively

managed - those include air traffic and rail transport, where there are already

agreements between the two sides that would manage the situation at least until

the end of 2019.

     Visas too are governed by a similar agreement, although there is a slight

impasse on that topic because of an ongoing difference between Gibraltar and the

EU - but nothing to do with the UK - and officials say it should get resolved.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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