Search ForexCrunch
  • The European Union’s full devastating point-by-point rejection of Boris Johnson’s Brexit proposals…
  • Brexit uncertainty prevails and to continue to pressure the Pound.

The European Union’s full devastating point-by-point rejection of Boris Johnson’s Brexit proposals for the Irish border has been revealed in documents obtained by the Guardian as follows…

The confidential report chronicling the latest negotiations reveals:

  • The British have been warned that the proposed Stormont veto provides the DUP with an opportunity to block the all-Ireland regulatory zone from ever materialising.
  • The proposals for a customs border were said to risk a major disruption of the all-Ireland economy. EU negotiators have pointed out that it has been rejected by groups representing Northern Irish business.
  • The UK is seeking a fallback of no controls, checks and border infrastructure, even if the DUP vetoes Northern Ireland’s alignment with the single market. The bloc’s internal market would be left wide open for abuse, the European Commission has said in its rejection of the proposal.
  • The UK’s proposal leaves it up to a joint EU-UK committee to work out how to avoid customs checks and infrastructure near the Irish border once there are two customs territories and sets of rules on the island of Ireland, without offering a plan B if no such solution is agreed.
  • The UK has called for reform of the common transit convention so as to avoid the need for new infrastructure in the shape of transit offices on either side of the border for the scanning of goods that have passed through multiple territories. Brussels has refused as it would lead other non-EU countries to seek similar exemptions, endangering the internal market.
  • The text affords what is seen as an unacceptable wholesale exemption for small and medium-sized businesses from customs duties and processes, but it fails to provide details on how to then combat smuggling.
  • On VAT, the British negotiators were told that the proposals fail to offer any solutions as to how to avoid payments and checks at the border.
  • Under the UK’s proposals all the state aid and level-playing-field conditions Theresa May agreed to in order to reassure the EU that Northern Ireland businesses would not enjoy a competitive advantage have been deleted. But Northern Irish firms would still be able to compete in the single market for electricity.
  • The UK would have access to an unlisted number of EU databases to allow it to police the customs border on the island of Ireland and the regulatory border between Great Britain and Northern Ireland. Whitehall would maintain such access even if the DUP vetoed alignment with the single market.

FX implications:  

This is unlikely to impact the market which has already priced in the news that the EU had rejected Johnson’s proposal, news that was  published over the weekend already. However, whatever hopes there might have been that the  EU might be prepared to  negotiate on the detail will now have been well and truly squashed given what sources have described as the “fundamental flaws”.  

An EU commission spokeswoman said, “The UK’s proposals do not meet at present the objectives of the protocol on Northern Ireland/Ireland and this is the shared view of the EU parliament but also all member states.”  

GBP/USD is trapped like a rabbit in headlights   – on one hand, an extension request  should be the default protocol according to the Benn amedment if no deal is reached, along the lines of:

“Dear Mr President,

The UK Parliament has passed the European Union (Withdrawal) (No. 2) Act 2019. Its provisions now require Her Majesty’s Government to seek an extension of the period provided under Article 50(3) of the Treaty on European Union, including as applied by Article 106a of the Euratom Treaty, currently due to expire at 11.00pm GMT on 31 October 2019, until 11.00pm GMT on 31 January 2020.

I am writing therefore to inform the European Council that the United Kingdom is seeking a further extension to the period provided under Article 50(3) of the Treaty on European Union, including as applied by Article 106a of the Euratom Treaty. The United Kingdom proposes that this period should end at 11.00pm GMT on 31 January 2020. If the parties are able to ratify before this date, the Government proposes that the period should be terminated early.

Yours sincerely,

Prime Minister of the United Kingdom of Great Britain and Northern Ireland.”

On the other hand, there has been  no court ruling that  Boris will be forced to do so…A petition was dismissed in the effort to gain the court order to make Johnson seen a Brexit extension. All in all, the GBP should remain under pressure all the while uncertainty prevails.