Brexit

Frustration grows among EU finance ministers over Brexit deadlock

Key Points
  • Olaf Scholz said that the current U.K. leader Boris Johnson's recent proposals to break the Brexit deadlock would not be acceptable if they have "an effect on the single market, on the customs union," or if the Good Friday agreement that resolved decades of violence in Northern Ireland might be "endangered."
  • The deadline for Britain's exit has twice been extended, after lawmakers in Westminster failed to approve the deal that Theresa May's government had eventually finalized in December last year, after 18 months of talks with the European Commission.

Germany's finance minister has said the EU and U.K. have a "common responsibility" to negotiate a settlement to govern Britain's departure from Europe, but insisted any solution to end the Brexit impasse in the coming days must meet the EU's long-standing list of criteria.

Olaf Scholz said that the current U.K. leader Boris Johnson's recent proposals to break the Brexit deadlock would not be acceptable if they have "an effect on the single market, on the customs union," or if the Good Friday agreement that resolved decades of violence in Northern Ireland might be "endangered." Instead, he said he hoped for a deal that would "follow the lines" of an earlier agreement finalized under former British prime minister Theresa May.

The German finance chief spoke to CNBC as he arrived in Luxembourg to meet his European counterparts, with less than a month until the current Brexit deadline of October 31st, and the possibility of a disorderly departure still a looming threat to several EU nations that have close trading relationships with the U.K.

Earlier this week, a U.K. official in Johnson's office had leaked to select U.K. media outlets the details of a phone call with Scholz's boss, Chancellor Angela Merkel, which indicated that the German leader was deeply dissatisfied with Johnson's desire to keep Northern Ireland out of the European orbit in future. The pound had fallen precipitously Tuesday after alleged details of that phone called were published.

Johnson will meet with his Irish counterpart, Leo Varadkar, in Dublin Thursday. The British and Irish prime ministers remain wide apart on the potential for technological solutions that the U.K. side says will obviate the need for physical customs checks and border infrastructure on the dividing line between the Irish republic and the separate nation of Northern Ireland, part of the United Kingdom.

Deal or no-deal?

This week, Ireland's finance minister Paschal Donohoe released an annual budget he told the Irish parliament was "without precedent." It included 1.2 billion euros ($1.32 billion) in extra spending to firewall the economy against a no-deal Brexit. Irish officials said that amount would likely be augmented by further emergency funds from the EU. The budget, Donohoe told lawmakers, was "developed in the shadow of Brexit," and Britain's exit from the EU without a deal was now Ireland's "central assumption."

But Spain's acting Economy Minister Nadia Calvino, who had acknowledged just days ago that Spanish government growth forecasts could be revised to account for a disorderly Brexit, told CNBC that such an outcome was not yet her baseline assumption. "I think that we still have some time to go," she said. "We must make every effort to try to avoid that worst case scenario."

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The deadline for Britain's exit has twice been extended, after lawmakers in Westminster failed to approve the deal that Theresa May's government had eventually finalized in December last year, after 18 months of talks with the European Commission.

Germany's Scholz reiterated a common European frustration over this in his comments to CNBC, insisting that the EU had already done "the necessary things" to organize an agreement.

But several European finance ministers said the delay - though frustrating, and for some, expensive - had ultimately proven to be helpful in terms of business and government preparedness.

"Let's face it, our government, and I would say most governments, probably most companies, most corporates, by now are as prepared as they would have been even for a no-deal Brexit," Cyprus finance head Harris Georgiades told CNBC. "And this very fact that it's been the baseline scenario now, probably makes Brexit less of a risk than it was a year or two ago."