Lithuanian Leader Breaks EU Ranks Over No-Deal: Brexit Update

Thomas Penny, Alex Morales, Robert Hutton and Jessica Shankleman
Lithuanian Leader Breaks EU Ranks Over No-Deal: Brexit Update

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Pressure is mounting on Theresa May to rule out a no-deal Brexit, after Airbus SE threatened to leave the U.K. and her chancellor warned that leaving the EU without an agreement would be a “betrayal” of voters. Lithuanian President Dalia Grybauskaite broke ranks with EU leaders, saying a no-deal Brexit could be preferable to delaying the “chaos.”

Key Developments

Lithuanian leader says no-deal Brexit preferable to prolonging the “chaos”Hammond rejects businesses’ call for another referendumAirbus says it could be forced to move future investments out of U.K.BOE Governor Carney says U.K. firms can’t prepare fully for no-deal Brexit

Rudd Demands Free Vote on Brexit Options (6:25 p.m.)

Pensions Secretary Amber Rudd has told the BBC’s Newsnight she’s still arguing inside government for Conservative members of Parliament to be allowed to vote as they choose on the various Brexit options on Tuesday. Asked if she’d resign to vote as she wanted, she replied: “I am committed to making sure we avoid no-deal.”

Lithuanian Leader Breaks Ranks Over No Deal (5:15 p.m.)

Lithuanian President Dalia Grybauskaite, one of the European Union’s most colorful figures, went completely off-script on Thursday afternoon, effectively playing down the seriousness of a no-deal Brexit.

In comments that will alarm the EU core, Grybauskaite told TV channel Euronews that delaying Brexit would just prolong “chaos,” and a no-deal would perhaps be preferable.

“In that case, it’s better to finish this chaos sooner, even with no deal,” she said, according to a transcript. “Because I know that even in worst-case scenario we will start immediately to negotiate with the U.K. on special narrow sectoral questions. It will take a few months.”

The EU has always denied that it will make mini-deals to lessen the blow in the event of the U.K. slipping out of the bloc without a full agreement.

Grybauskaite said she thinks that while the EU will probably be “helpful” to the U.K. if it asks for a Brexit postponement, “the longer we will drag both sides in the process the more damage we will make.”

Hammond Warns Against Second Brexit Vote (3:15 p.m.)

Chancellor of the Exchequer Philip Hammond told businesses in Davos that a second Brexit referendum could lead to another vote for Scottish independence, and warned it would be a “Pyrrhic victory to play games with the political consensus round our current government and system of democracy.”

His comment is likely to garner significant attention given he’s considered by Brexiters as an “arch-Remainer” trying to keep the U.K. in by stealth.

But at a lunch for business leaders, Hammond also had some comments that will have made easier listening for his audience. The chancellor said he and Business Secretary Greg Clark would be open to relaxing the proposed 30,000 pounds ($38,000) salary threshold for skilled immigrants after Brexit.

“I’ve got a dossier in my office of advertisements by public sector bodies, including universities, for roles with salaries well below 30,000,” he said. “So we have to find a solution here as well.”

May Mulls Law on Workers’ Rights to Win Unions (1:25 p.m.)

The government is considering putting guarantees about post-Brexit employment rights into law, in an effort to win support from trades unionists.

May spent the morning meeting union leaders, and afterward one of them, Unison General Secretary Dave Prentis, said he’d told the prime minister her personal word wasn’t enough -- because she’s unlikely to be around for long. “We had no guarantee that a future prime minister would honor her commitments,” he said.

May’s office said later she was open to legislating. One option would be to attach something to a bill currently going through Parliament.

Kurz: U.K. Knows EU Prepared to Delay Brexit (12:15 p.m.)

Austrian Chancellor Sebastian Kurz said at the World Economic Forum in Davos that the U.K. government is aware that the EU is ready to extend the Brexit deadline -- if that’s what it takes to avoid a no-deal.

“The offer is there anyway. Many of my colleagues, myself, Chief Negotiator Michel Barnier, we’re all in touch with the British, in touch with Theresa May,” Kurz said when asked if the EU should actively invite the U.K. to extend the deadline rather than insist the U.K. be the one to request it.

“I believe there is an awareness in the U.K. that the EU is ready to do everything to avoid a hard Brexit, ” he said. “That we’re ready, if necessary, to postpone the exit date. But of course, Great Britain must want it, too.”

People’s Vote Backs Grieve, Cooper Amendments (12 p.m.)

Fresh from their announcement that they won’t be proposing a specific amendment calling for a second referendum, the People’s Vote campaign called for supporters to back four amendments -- from Dominic Grieve, Rachel Reeves, Caroline Spelman and Yvette Cooper -- seeking to avoid a no-deal Brexit on March 29.

“None of these amendments would, in themselves, bring about a People’s Vote,” said Guto Bebb, a Tory lawmaker who backs a second referendum. “But they would give Parliament the time and space it needs, without the threat of a deadline or no deal, to make an honest assessment of different versions of Brexit.”

Carney: Firms Can’t Prepare Fully for No Deal (11:55 a.m.)

Bank of England Governor Mark Carney warned that U.K. companies can’t fully prepare for a no-deal Brexit -- though he insisted the central bank has ensured Britain’s financial system is ready for that outcome.

“There are a series of logistical issues that need to be solved, and it’s quite transparent that in many cases they’re not,” Carney said at the World Economic Forum in Davos, Switzerland. “There is a limited amount that many businesses can do to prepare if there are going to be substantial delays on the logistical side.”

European Investment Bank Vice President Alexander Stubb also weighed in at Davos, saying the Brexit process is on a “knife edge.” He gave equal probability to three outcomes: May’s deal, no deal and no Brexit.

“There was the comment that the ball is in the British court. I think the problem is the Brits don’t know whether it’s a cricket ball, a tennis ball, a football or a rugby ball, and this is the big issue,” Stubb said.

EU Lawmakers Demand ‘All-Weather’ Backstop (11:50 a.m.)

A group of cross-party senior EU lawmakers which oversees the European Parliament’s Brexit work said Thursday the assembly will block the deal with the U.K. if it doesn’t include an “all-weather” backstop for the Irish border.

That’s code for a backstop arrangement that isn’t time-limited and which will always underpin the deal no matter what. Pro-Brexit lawmakers in the U.K. Parliament have signaled they will only support the agreement if the backstop is removed or limited.

The European Parliament’s stance appears to be a major blow to those hopes. The body will vote on the Brexit deal once British lawmakers have approved it. It has the power of veto.

Parliament February Recess Still in Schedule (11:40 a.m.)

As speculation mounts that the government doesn’t have enough time to pass all the necessary legislation before Britain’s scheduled departure from the European Union on March 29, Leader of the House of Commons Andrea Leadsom told lawmakers that the already announced February recess (Feb. 14 to Feb. 25) remains the current position. At the same time, she provided wriggle room to cancel the break, noting “it’s for the House to agree recess dates.”

She also said the government plans for next Tuesday’s session on the next steps for Brexit to be a full-day debate.

Government Challenged on Trade Deals (11 a.m.)

In the House of Commons, Trade Minister George Hollingbery has been challenged to see how many and which of some 40 trade agreements that the U.K. benefits from through its EU membership will be rolled over after the scheduled Brexit date of March 29.

Labour’s Chris Leslie said trade with the relevant countries is worth a combined total of 151 billion pounds in exports and imports. He urged Hollingbery to “slay those fantasy unicorn promises and admit that Brexit is not going well.” Hollingbery responded that the government is “working extremely hard” to make sure those deals are available on exit day.

“I believe that the majority of those will be in place by March 29,” he said. “There are a very wide range of reasons why some of these agreements have been challenging in many instances” including the uncertainty surrounding the shape of the eventual Brexit deal.

Second Referendum Move Will Have to Wait (10:45 a.m.)

The cross-party group of MPs who are calling for a second referendum have announced that they won’t be tabling an amendment proposing one next week. Instead they’ll be backing other amendments that reject a no-deal Brexit and demanding an extension of talks. “The priority for MPs next week will be to apply the handbrake by clearly demonstrating the opposition to no-deal,” Tory Sarah Wollaston said in a statement on Twitter.

There was no agreement among the second referendum group about putting an amendment down. Although support for the idea has grown markedly in the last six months, there still doesn’t seem to be a majority for it in Parliament. Labour leader Jeremy Corbyn is resistant to the idea, and even if he were to support it, several Labour politicians would be likely to vote against.

MPs Rattled by Airbus No-Deal Warning (10:35 a.m.)

Lawmakers who represent Airbus employees have also been rattled by the statement from the aerospace giant, which directly employs 14,000 people in the U.K. and supports another 110,000 jobs in the supply chain and servicing its plants.

Mark Tami, a Labour lawmaker whose constituency includes Airbus’s wing assembly plant in Broughton, north Wales, said on Twitter that the manufacturer’s concerns illustrate why he’s opposing a no-deal Brexit, even if it makes some of his constituents angry. Darren Jones, a Labour lawmaker from Bristol whose constituency is near Airbus’s Filton plant, also said he would do everything he could to stop a no-deal Brexit.

“For Airbus to be so clear that the Prime Minister’s position is a “disgrace” is a sign that No10 really isn’t listening,” Jones said.

Barclay: Airbus Warning Proves Need to Back Deal (10 a.m.)

Taking questions in the House of Commons, Brexit Secretary Stephen Barclay said the government takes the warning from Airbus “seriously,” and that businesses require certainty over Brexit. He criticized various amendments seeking to delay the U.K.’s departure from the EU, calling on lawmakers to back May’s deal.

“Many in business regard the deal as the way of delivering certainty through the implementation period,” Barclay said. “They want a deal to avoid the uncertainty of no-deal.”

May to Meet Trade Unions After Airbus Warning (9:50 a.m.)

The mood music for May’s meeting with trade union leaders later has been set by a chilling warning from Airbus SE that they will reassess their commitment to investment and jobs in the U.K. if there’s a no-deal Brexit.

Airbus boss Tom Enders has spoken out before on the proposed divorce agreement but the timing of his comments, in which he said it was “disgrace’’ that businesses are unable to properly plan for the future and condemned the “madness’’ of Brexiteers, will add bite to today’s talks.

Unite, whose General Secretary Len McCluskey will be at the meeting with May, immediately responded and demanded that a no-deal split should be taken off the table. “Ministers and MPs must stop gambling with the futures of U.K. workers and their families,’’ it said in an email.

Steve Baker, a leading Conservative Brexiteer, criticized the Airbus statement. “Airbus could make such a constructive contribution in the interests of the U.K., the EU and themselves,” he said. “I regret they do not choose to do so time and again, despite the obvious need for change emerging across the continent.”

Earlier:

No-Deal Brexit Risk Recedes as Calls Grow to Delay DivorcePostponing Brexit Is Worse for U.K. Economy Than May’s DealBrexit Bulletin: Why Won’t They Budge?BOE’s Haldane Says Brexit Deal Would Unlock U.K. Investment

--With assistance from Boris Groendahl and Ian Wishart.

To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net;Alex Morales in London at amorales2@bloomberg.net;Robert Hutton in London at rhutton1@bloomberg.net;Jessica Shankleman in London at jshankleman@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Stuart Biggs

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