Irish Border Derails Brexit Negotiations as DUP Unwilling to Compromise

Theresa May failed to clinch a deal on Monday to open talks on post-Brexit free trade with the European Union after a tentative deal with Dublin to keep EU rules in Northern Ireland angered her allies in Belfast.

The British prime minister had sat down to lunch with European Commission President Jean-Claude Juncker hoping that a last-minute offer to the Irish government of “regulatory alignment” on both sides of a new UK-EU land border would remove a last obstacle to the EU open talks next week on future trade.

Yet as May and Juncker spoke in Brussels and the pound rose on prospects of free trade and perhaps even a very “soft Brexit” for Britain as a whole, Northern Ireland’s Democratic Unionist Party (DUP) issued an uncompromising reiteration of its refusal to accept any “divergence” from rules on the British mainland.

Irish Prime Minister Leo Varadkar canceled a news conference and the pound fell back, losing a cent against the dollar, as May and Juncker emerged to declare that there was still no “sufficient progress” on divorce terms to move ahead.

Varadkar later said he was surprised and disappointed with May’s U-turn after the British government had agreed on a text with the EU on Monday that would avoid any hard border which might upset peace in the north after decades of violence.

He added that he was happy to give London more time but also noted that the DUP, while the biggest party in the north, did not have a majority in a province that voted against Brexit. He said he was open to changing the wording of Monday’s agreed text, but only if its meaning remained the same.

The Irish border has emerged as a defining issue for Brexit. Hardliners in May’s government want to ensure Britain is not bound by EU regulations after it leaves the bloc, but that has proven difficult to reconcile with the 1998 Good Friday peace agreement, which promises an unguarded border between British-ruled Northern Ireland and the Irish Republic.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza