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Britain's May calls in ministers to find way out of Brexit maelstrom

[April 02, 2019] By Guy Faulconbridge, Elizabeth Piper and Kylie MacLellan

LONDON (Reuters) - British Prime Minister Theresa May chairs several hours of cabinet meetings on Tuesday in an attempt to plot a course out of the Brexit maelstrom as she comes under pressure to either leave the European Union without a deal or call an election.

Nearly three years since the United Kingdom voted to leave the EU in a shock referendum result, British politics is in crisis and it is unclear how, when or if it will ever leave the club it first joined in 1973.

May's deal has been defeated three times by the lower house of the British parliament which failed on Monday to find a majority of its own for any alternative to her deal. May is expected to try to put her deal to a fourth vote this week.

The deadlock has already delayed Brexit for at least two weeks beyond the planned departure date of March 29 and May chaired a cabinet meeting in Downing Street in a bid to find a way out of the maze.

"Over the last days a no-deal scenario has become more likely, but we can still hope to avoid it," EU chief Brexit negotiator Michel Barnier said in Brussels.

Barnier said Britain could still accept the stalled deal negotiated by May, reiterating it was "the only way" for Britain to leave the bloc in an orderly way.

If May cannot get her deal ratified by parliament then she has a choice between leaving without a deal, calling an election or asking the EU for a long delay to negotiate a Brexit deal with a much closer relationship with the bloc.

"I hope that we can still find a solution. The British parliament has said itself that it doesn't want a disorderly Brexit," German Chancellor Angela Merkel said.

The third defeat of May's withdrawal agreement on Friday - the date the United Kingdom was originally scheduled to leave the EU - has left the weakest British leader in a generation facing a spiraling crisis.

The British electorate, its two major parties and May's cabinet are all divided over Brexit and May risks ripping her Conservative Party apart if she tilts toward a closer post-Brexit relationship with the EU or leaving without a deal.

If she backs or rejects such a move, she could face resignations.

BREXIT CHAOS

Investors and diplomats are in despair at the chaos and such is the volatility of Brexit news from London that some traders have stepped away from sterling - which has seesawed on Brexit news since the 2016 referendum.

"There is professional bewilderment that the motherland of common sense is in this place," one European diplomat said.

Sterling fell toward $1.30 and investors sought the safe haven of German and British bonds as the EU braced for the potential chaos of a no-deal.

"There is going to be disruption. There may be effects on liquidity," said the EU commissioner in charge of financial services, Valdis Dombrovskis.

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Britain's Prime Minister Theresa May attends a Serious Youth Violence Summit in Downing Street, London, Britain April 1, 2019. Adrian Dennis/Pool via REUTERS

A no-deal Brexit would push up food prices by 10 percent, force direct British rule in Northern Ireland and compromise national security, according to a letter by Britain's top civil servant Mark Sedwill quoted in the Daily Mail.

Brexit meaningful votes: https://tmsnrt.rs/2V4on0S

FOURTH TIME LUCKY?

With Brexit stalled, parliament has been trying to come up with an alternative but has thus far failed.

The option which came closest to getting a majority in parliament on Monday was a proposal to keep Britain in a customs union with the EU, which was defeated by three votes. A proposal to hold a confirmatory referendum on any deal got the most votes, but was defeated by 292-280.

Barnier said the EU was ready to accept Britain staying in the EU's customs union or a relationship akin to the one the EU has with Norway.

But May is boxed in by different factions: half of her lawmakers voted for a no-deal Brexit last week while just 37 voted for the customs union option on Monday and 15 for a confirmatory referendum.

Some Conservative lawmakers have warned they will support a motion of no confidence if she accepts calls for a Brexit that maintains many of the existing close economic ties with the EU.

That means May's thrice-defeated deal is back in focus.

Education Secretary Damian Hinds said he hoped May's withdrawal agreement would finally be approved this week by parliament, saying it remained the best outcome.

The Sun newspaper said Brexit-supporting ministers will demand May give a final ultimatum to fix the Irish backstop, the most controversial part of her deal, or see the United Kingdom leave without a deal at 2200 GMT on April 12.

The Times said finance minister Philip Hammond will tell cabinet that the Conservatives may have to make its own compromise or consider a referendum since neither the party or the country could afford an election.

(Additional reporting by Gabriela Baczynska and Jan Strupczewski in Brussels, Andreas Rinke and Michelle Martin in Berlin, and William James in London; Writing by Guy Faulconbridge; editing by Michael Holden and Angus MacSwan)

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