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Brexit Talks Put on Hold as Stalemate Deepens

European Union (EU) flags fly outside the Berlaymont building, which houses the headquarters of the European Commission, in Brussels, Belgium.? Photographer: Bloomberg Creative Photos/Bloomberg

Brexit talks were put on hold as the stalemate deepened, ramping up the chances of another diplomatic disaster for Prime Minister Theresa May with a critical deadline appearing to slip out of reach.

A weekend of intense talks — including a surprise dash by Brexit Secretary Dominic Raab to Brussels — failed to break the deadlock. In a clear sign that all was not well, a key meeting of EU governments scheduled for Monday was canceled and negotiations will be paused, according to EU diplomats.

The weekend was meant to be chance to crack the thorniest issue in talks — what to do with the Irish border — so that leaders meeting for a summit on Wednesday could declare some progress and signal that a final divorce deal could be signed in mid-November.

That timetable — which markets have started to price in — has been thrown off and there’s likely to be more talk of how to prepare for a chaotic and acrimonious no-deal split. The pound fell as much as 0.44 percent against the dollar on the news, in thin trading outside European hours on Sunday evening.

The U.K. government is now very pessimistic about the prospects of a breakthrough in this week’s summit, according to a person familiar with the British position. The two sides disagree on fundamentals, not just the details relating to the Irish backstop, the official said, asking not to be named in line with policy.

Read more about the lessons to be learned form the last summit on Brexit

Still, one shouldn’t discount the role of theatrics in EU talks. The September summit in Salzburg was billed a disaster, yet May was able to turn it to her advantage. A showdown in October could potentially help May at home by showing she had stood her ground.

Some EU diplomats speculate that she needs to have a messy fight in order to get the deal she does eventually deliver through Parliament. May is probably going to have to count on opposition votes, and will need to present it as the only viable alternative to chaos.

The U.K. is still committed to making progress at an October gathering of leaders, according to a government spokesperson.

Read more about the tricky arithmetic May has to contend with to get Brexit

EU negotiators briefed ambassadors that the U.K. rejected key parts of the draft deal and that the government needed more time to make concessions, diplomats said. They added that it was now unlikely that any agreement on the Irish border would be reached until November.

But with just five months until Britain is due to leave the bloc, with or without a deal, businesses are increasingly anxious to see the terms of the divorce and to secure the two-year transition period that they need to avoid the legal limbo of no-deal.

The biggest dispute in negotiations remains how to keep the border between Northern Ireland and the Republic of Ireland free from customs checks, without erecting barriers between Northern Ireland and Britain.

Read our explainer about why the Irish border is the intracatable Brexit riddle

As both sides come up with new ways of squaring the circle, it’s looking increasingly likely that the whole of the U.K. will stay tied to EU customs rules for years after Brexit — something many businesses will welcome, even if it brings added uncertainty.

But the plan for the Irish border has enraged at least two groups that May needs in order to get her deal through a Parliament where she has no majority. That’s reduced her room for maneuver.

At least one member of May’s Cabinet is considering resigning over her Brexit stance and former Brexit Secretary David Davis is rallying Brexit hardliners to rebel. Arlene Foster, the head of the Northern Irish party that props up her government, was quoted as saying she expects a no-deal exit because May’s proposals on the Irish border are unacceptable.

A Cabinet meeting on Tuesday is shaping up to be a showdown between May and those ministers most in favor of a clean break with the EU. DM

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