May government could collapse on a potential Irish border deal

The party may have been too early, and not for the first time. The reported deal on a divorce bill of 45-55 billion euros ran into denials. And also the reports about an upcoming agreement on the Irish border run into obstacles.

Theresa May’s government relies on support from the Unionist Northern Irish DUP party. Their 10 MPs may withdraw support from the government if the “government stops defending the union”.

Reports on the talks between the British and Irish governments discuss some kind of “creative ambiguity” on the issue. In the background, we have the EU’s December 4th deadline to reach “sufficient progress” so that the EU Summit later in December can approve unlocking the next phase of the talks.

However, EU deadlines can be a fudge, and talks can always be extended.

It is hard to see how any agreement can be made on the border before an agreement on the future relations is made. If the UK continues remaining within the customs union, there is no need to erect a physical border that nobody wants. But if there are customs checks, there is a border.

All in all, the sequencing that the EU forced on Britain: divorce first, future relations later, complicates matters quite a bit.

GBP/USD dropped back below 1.35 and trades around 1.3485. However, this is related to the fall of the US dollar across the board rather than a pound-specific reaction.

More: GBP/USD could reach 1.36-1.37 by year end – two opinions


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