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U.K. Parliament's Rejection of Brexit Deal Puts European Union in a Bind -- 2nd Update

DOW JONES & COMPANY, INC. 7:52 AM ET 1/16/2019

BRUSSELS -- The British Parliament's overwhelming rejection of the Brexit agreement raises an uncomfortable question for the rest of the European Union: whether it has been too successful in negotiating the U.K.'s departure from the bloc.

Late last year, the other 27 EU members and officials in Brussels celebrated a deal that met almost all their negotiating objectives. Britain agreed to pay a sizable divorce bill, protect EU citizens in the U.K., guarantee there would be no hard border in Ireland and not demand frictionless trade on similar terms to an EU member.

They were so successful that British lawmakers couldn't swallow the deal. On Tuesday, Parliament voted it down by a 432-202 margin.

European officials are already talking about extending the negotiation deadline if Prime Minister Theresa May asks for that. German Economy Minister Peter Altmaier said Wednesday that would be a "reasonable request," though some officials have suggested the U.K.'s European partners could attach conditions.

However, Tuesday's vote reopened a tortuous debate that governments had hoped to avoid over what fresh concessions, if any, to offer Mrs. May without shattering the bloc's unity.

Failure to act could leave the U.K. heading for a damaging no-deal Brexit on March 29. It would leave the EU with an increasingly fragile eurozone economy, present leaders with a large EU budget bill to fund and leave the bloc facing nightmarish choices on how to prevent a border arising on the island of Ireland.

European officials insist no Plan B has been discussed in recent weeks, and the repeated message from Paris, Berlin and Brussels has been that the Brexit deal Mrs. May and EU leaders approved in November is the best and only deal possible. EU leaders reiterated that after the vote, with European Commission President Jean-Claude Juncker saying the November deal was the "only way to ensure an orderly" Brexit.

"We still have time to negotiate but we are now waiting to see what the British prime minister will propose," German Chancellor Angela Merkel said Wednesday.

For now, the ball remains in Mrs. May's court and European officials will continue listening, European diplomats said. The British leader has several days to decide how to proceed in Parliament. Mrs. May said she will set out her plans on Monday.

Yet officials acknowledge they must still discuss what steps the EU can offer Mrs. May and some officials say it is impossible to rule out what has until now been a red line for the bloc: reopening the legally binding withdrawal agreement that sets out Britain's exit terms and forms the heart of the Brexit deal.

The room for concessions, however, is heavily constrained and depends in large part on Mrs. May showing her European partners that she can win support for a deal at home. After Parliament's vote, that looks difficult.

"We need to know can she get support from parliament for whatever she is doing next," said one EU diplomat.

A narrower result on Tuesday could have made it easier for the EU to unite around a set of limited changes to the Brexit deal to help Mrs. May. European officials also say a major change in British negotiating red lines could mean a more-significant shift on the EU side, but there was no sign of that from Mrs. May on Tuesday.

In recent weeks, the tone of the messages to British decision makers from EU capitals has varied, but the substance hasn't. While French officials have insisted that the November deal isn't up for negotiations, German officials appeared more concerned about the strategic consequences of a rancorous split. Mr. Altmaier publicly mused last week that he was feeling Britain's pain, saying on Twitter the EU "should patiently wait" until there was closure to what he called "the epic struggle of the British people" over Brexit.

At the most fundamental level, the conundrum for the EU lies with the Irish backstop, the guarantees in November's deal to avoid a physical border between Northern Ireland, which is part of the U.K., and the Republic of Ireland.

The backstop works by keeping the U.K. in a customs area with the bloc if a post-Brexit EU-U.K. trade deal fails to materialize. That has drawn fire from Brexit supporters who say it prevents the U.K. pursuing an independent trade policy and keeps the U.K. anchored to many EU economic rules.

Any effort by the EU to water down the backstop would mean abandoning the Irish government and unraveling a central pillar of the EU negotiating strategy with Britain. European officials fear this would encourage British lawmakers to pocket the concession and demand more.

Yet failure to find a way around the issue would almost certainly guarantee the restoration of a hard border between Northern Ireland and Ireland after Britain leaves.

The most likely option is an extension of talks but that doesn't automatically resolve the conundrum of what concessions to offer the U.K.

The bloc could also agree to go back to the nonbinding political declaration on the shape of EU-U.K. trade ties the two sides agreed on in November, though few European officials believe that would sway many votes in London.

The most difficult step would be to reopen the withdrawal agreement. Officials and diplomats say the most they could currently envisage is some changes to the language, further entrenching the idea that the bloc isn't seeking to trap Britain permanently in a customs union as part of the backstop.

Any push for concessions from within the 27 would increase the pressure on Ireland to help craft a compromise from which it would benefit. Hints of that pressure have started to emerge but Irish officials say there can be no weakening of the backstop guarantees on the border. Ultimately, few believe the EU will abandon Ireland and accept concessions that Dublin rejects, meaning the U.K. may once again have to cede ground in its red lines to secure a deal.

"Most member states are flexible," one senior EU diplomat said, but standing with "Ireland is the key."

--Paul Hannon and Bojan Pancevski contributed to this article.

Write to Laurence Norman at [e-mail]


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