European Council President Donald Tusk rejected May’s request for a brief postponement to the U.K.’s membership, saying it would create a “rolling series of short extensions and emergency summits, creating new cliff-edge dates.”

Leaders will finalize the length of the delay to Brexit at a summit on Wednesday. Tusk wants them to agree to an extension of up to a year, and diplomats from member states see December 2019 or next March as the likely new departure date. Draft conclusions show EU leaders are planning to offer Britain an early exit clause in case a solution to the domestic deadlock turns up.

After months of uncertainty and knife-edge votes in the British Parliament, the prospect of a lengthy extension is good news for business, which wanted to avoid a cliff-edge departure at all costs. But the long delay is another political defeat for May, who had promised repeatedly to take the U.K. out of the EU by March 29.

Brexit Delay Until Year-End Could Spell Trouble for Markets

May’s ruling Conservative party has almost run out of patience with her leadership. Rival candidates to replace her are already engaged in barely concealed campaigning. With a long delay locked in, and the risk of an imminent no-deal departure averted, May’s Tory critics could decide they have no reason to hold back from trying to force her out. Pro-Brexit Tories will be furious at a long delay.

The EU is still discussing the conditions that it will attach to the extension with some countries more hardline than others. France wants the U.K. to have its decision-making powers curtailed. One French official said an intermediate exiting member shouldn’t be able to weigh in on decisions such as the EU budget.

But the EU has no legal way of curtailing Britain’s voting rights so will rely on the incentive of a future trade deal to make sure the country behaves reasonably, according to a person familiar with discussions at a meeting of the bloc’s envoys on Tuesday. Tusk, who tends to take a friendlier line toward the U.K., reminded leaders that Britain remained a member with “full rights and obligations.”

Tusk also had a warning to those who might be tempted to gloat at the U.K.’s failure to leave, three years after voters decided to pull the country out of the trading bloc in a referendum.

“Neither side should be allowed to feel humiliated at any stage in this difficult process,” he said.

May, who has been humiliated at summits in the past, will come to Wednesday’s meeting with little to show her fellow leaders since she last saw them on March 21. After her Brexit deal was rejected three times by a deeply divided Parliament, she invited the opposition Labour Party in for talks to find a new way forward. But while the government put a positive spin on the cross-party talks on Tuesday, Labour said May’s team had not moved enough.

No Compromise
“We have yet to see the clear shift in the government’s position that is needed to secure a compromise agreement,” the U.K.’s main opposition party said in a statement.

Still, there were hints on Tuesday that the government was willing to rub out some of its red lines and offer Labour one of its key demands: a customs union.

One person familiar with the situation said that’s where talks were headed, and Justice Secretary David Gauke described what sounded like a customs union in all but name as the “common ground” between the two parties. The government is reluctant to say so at least in public because of the strong opposition among May’s euro-skeptic Conservatives to remaining inside the EU’s trading regime.

If May can get a breakthrough on staying in the customs union, the EU would celebrate as the bloc wants to maintain close ties.

It’s even holding out hope Britain will change its mind altogether and cancel Brexit. Tusk reminded EU leaders that revoking the whole process is still an option. It’s a clear line in the draft summit conclusions too: “The United Kingdom has a right to revoke its notification at any time.” DM