The European Union presented the U.K. with a draft divorce deal that Theresa May said no British prime minister could ever accept. The pound fell.
Brexit talks once again look to be stuck around the intractable issue of the Irish border — an obstacle that was papered over in December with a temporary fix but now has the potential to derail the whole process. The U.K. is due to leave in just over a year and if no deal is reached then a chaotic exit will ensue.
The EU presented a draft exit treaty that set out in great detail a so-called fallback option to avoid a hard border emerging on the island of Ireland after Brexit. If a future trade deal between the EU and U.K. isn’t comprehensive enough to avoid a hard border on Ireland then Northern Ireland will remain aligned with the Republic of Ireland. That would mean a border between the province and the rest of the U.K.
The EU doesn’t expect a trade deal to be completed by the time the U.K. leaves the bloc next year. So when the U.K. leaves, and is seeking to clinch a trade deal with the EU, it will be negotiating in the knowledge that failure to get a good deal will mean Northern Ireland is cut off.
“No U.K. prime minister could ever agree to it,” May said in parliament, adding that she plans to make that “crystal clear” to the EU.
It’s also unacceptable to the Northern Irish lawmakers who prop up Theresa May’s government, and to plenty of Britons of all parties.
May is fighting Brussels as her ability to negotiate is curbed by her wafer slim parliamentary majority at home. She faces rebels on each end of the Brexit spectrum. Rebels who want her to keep closer EU ties are gaining in strength, and are backing an amendment that has enough support to defeat her.
Read more: Pro-EU Tory Rebellion Grows Further as May Ever More Boxed In
They might be encouraged by the words of chief EU negotiator Michel Barnier, who said on Wednesday that staying in a customs union — as the pro-EU rebels and opposition Labour party want — would go a long way to solving the problem of the Irish border.
May is set to make a landmark Brexit speech on Friday that will set out what she wants from the future relationship. The EU has branded what it has seen so far of the U.K. plans as based on illusion. Irish Foreign Minister Simon Coveney warned that even a free trade agreement might not be enough to avoid a border, and said staying in the customs union and single market — options May has ruled out — would be a solution.
According to the legal proposal in the draft treaty, Northern Ireland will form a “common regulatory area” with the Republic of Ireland and will have to follow the EU’s rules and rates on customs, sales tax, state aid, excise duties and even sanitary and phytosanitary rules. U.K. officials working at the Nortern Irish customs will have to follow EU rules.
The bloc resisted British efforts to insert an explicit commitment that Northern Ireland will be treated the same as the rest of the U.K. into the Brexit treaty. May made that promise in December to placate the Northern Irish lawmakers, and its exclusion adds to their ire.