EU summit readies for Brexit in May - or next week

[March 21, 2019]  By Gabriela Baczynska and Francesco Guarascio

BRUSSELS (Reuters) - EU leaders will tell Theresa May on Thursday she can have two months to organize an orderly Brexit but Britain could face a hugely disruptive ejection from the bloc next Friday if the prime minister fails to win backing from parliament.

The pound was under pressure as investors saw risks of a no-deal Brexit rising on signs of impatience among the European Union leaders who meet May for a 24-hour summit in Brussels.

EU diplomats said her request for a delay until June 30 seemed likely to be met by an EU preference for Britain to have completed formalities and begin a status-quo transition to departure before Europeans elect a new parliament from May 23.

German Chancellor Angela Merkel's repetition in Berlin before her departure for Brussels that she would "fight to the last minute" to avoid a no-deal Brexit, highlighted the sense of danger. May could have an extension, ideally to May rather than June, she said. But if she fails to secure backing in London for a deal, Europeans are prepared for the worst.

The fate of one of Europe's major economic powers rests on whether Britain's own lawmakers will next week reverse two heavy defeats for the withdrawal treaty May agreed with the EU in November. With parliament and political parties divided, deadlock could mean Britain lurching by default into legal limbo outside the EU at 11 p.m. (2300 GMT) on March 29.

If the deal is saved, EU leaders would probably sign off remotely on an extension of the deadline to mid-May, or perhaps to the end of June, before the new EU parliament convenes.

"We could consider a short extension conditional on a positive vote on the Withdrawal Agreement in the House of Commons," summit chair Donald Tusk told leaders on Wednesday.

Diplomats said a meeting of national envoys indicated that most governments would prefer Britain out by mid-May or oblige it to hold its own EU parliamentary election on May 23.

But if May fails next week, leaders expect to return for an emergency council at which Britain could either be given another year or more to sort out its crisis - if it can convince them it has a plan to do that - or be told it is leaving on Friday.

PATIENCE SHORT

The other 27 states have struggled for three years since Britain voted narrowly to leave to avoid the disruption to their own economies and citizens of a hard Brexit.

But many now fear that simply rolling over the problem for more weeks and months with no clear resolution in sight is doing more harm to a Union beset by populist nationalists likely to do well in the EU elections and by a fast-changing global economy in which China and the United States are posing new challenges.

"The real question is what do we do in the event she loses again," one senior EU diplomat said. Concerns raised notably by French President Emmanuel Macron that Britain, long lukewarm on European integration, risked thwarting efforts to strengthen the bloc if it hung around in limbo, were "gaining ground rapidly".

"The appetite for a long extension is limited," he said. Any offer would require all 27 leaders to agree - as well as May.

Britain's Prime Minister Theresa May makes a statement about Brexit in Downing Street in London, Britain March 20, 2019. Jonathan Brady/Pool via REUTERS

May said in a televised address late on Wednesday she opposed any further postponement, telling parliament to pick between her deal, a no-deal divorce or no Brexit.

"It is now time for MPs to decide," she said. "You want us to get on with it. And that is what I am determined to do."

Any long extension would be conditional on a British leader coming to Brussels next week with a clear plan of how it would use more time to resolve its stalemate, possibly through a new election or a second referendum, EU leaders have said.

Britain would be frozen out of key EU decisions while still paying in its full share of the bloc's budget, conditions likely to hit serious opposition in Britain.

May's foreign minister, Jeremy Hunt, said on Thursday an emergency summit could offer a long extension but under "very onerous conditions" unlikely to satisfy parliament.

Some in May's Conservative Party would rather leave without a deal that keeps Britain closely aligned with rules in its main trading partner while many reject terms of the current deal that are intended to avoid disrupting traffic over Northern Ireland's land border once a transition ends in 2021 or 2022.

CORBYN IN BRUSSELS

The opposition Labour Party has opposed the deal, arguing for a closer relationship with the EU. Its leader, Jeremy Corbyn, will be in Brussels on Thursday, meeting EU negotiator Michel Barnier and center-left national leaders who will be attending the summit later with May.

All 28 leaders assemble in Brussels at 3 p.m. (1400 GMT). May will address her peers, repeating her request for a delay to June 30, before leaving the room while they discuss the issue.

The 27 are then expected to agree what will amount to a technical extension, intended to give Britain time to pass the necessary exit legislation - if the House of Commons approves the divorce package before March 29.

As Brexit is sapping EU resources, the leaders will also turn to other pressing issues on Thursday and Friday, including the state of their economies, ties with China, climate change and ringfencing the European elections from illegitimate interference.

Eyes will also be on Hungarian Prime Minister Viktor Orban, who will be meeting his peers a day after his Fidesz party was suspended from Europe's center-right alliance over a campaign against EU institutions and migration policies.

(Writing by Alastair Macdonald; Editing by Janet Lawrence)

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