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Sterling and U.K. stocks fell on media reports, which cited unnamed EU diplomats, that talks had stalled over a future trade deal and fair competition clauses, as well as renewed opposition to the proposed deal by Northern Ireland’s Democratic Unionist Party (DUP).
Irish Prime Minister Leo Varadkar also confirmed that there were still outstanding issues, particularly surrounding Northern Ireland, that were “yet to be resolved” and that talks may need more time.
“There is a pathway to a possible deal but there are many issues that still need to be fully resolved, particularly around the consent mechanism and also some issues around customs and VAT,” Varadkar said in a speech, according to Reuters.
He said he had spoken to his British counterpart Boris Johnson Wednesday morning and said progress in talks had been made, nonetheless. “I do think we are making progress but there are issues yet to be resolved and hopefully that can be done today.”
He added that there was the possibility of an additional EU summit before the departure date of October 31 if necessary.
Final day of talks
A deal needs to be reached Wednesday if it stands any chance of being approved by the EU, and then by the U.K. Parliament at the weekend. If a deal is not approved by October 19, U.K. Prime Minister Boris Johnson is legally obliged to ask the EU for an extension to the current departure date of October 31.
Sterling was trading 0.4% lower against the dollar Wednesday morning, at $1.2737, and fluctuated for much of the session. It had soared to a four-month high against the greenback on Tuesday.
‘Glimmer of hope’?Earlier on Wednesday, French Finance Minister Bruno Le Maire boosted optimism for a deal saying that “there is a glimmer of hope, from what I hear from the negotiators.” Speaking to Europe 1 radio, in comments reported by Reuters, Le Maire added that protecting the European single market was the “red line” for France in Brexit talks.
The U.K. proposed alternative arrangements to the so-called Irish “backstop” several weeks ago and these are the focal point of last-minute talks. The backstop was an insurance policy designed to prevent a hard border on the island of Ireland if the U.K. and EU failed to agree a trade deal in a 21-month transition period.
Brexiteers and politicians in Northern Ireland’s Democratic Unionist Party hadn’t liked the backstop as they saw it as keeping Northern Ireland, a part of the U.K., more aligned with the EU.
Johnson’s new plan would’ve seen Northern Ireland largely stay in the EU’s single market but leave the customs union, necessitating customs checks on goods entering the EU from Northern Ireland and the U.K.. However there are reports that this plan may have been tweaked following talks with EU negotiators.
The U.K. had suggested customs checks away from the border to prevent physical infrastructure, which all sides want to avoid in order to maintain free movement between Northern Ireland and the Republic of Ireland.
Johnson spent 90 minutes in discussions with Arlene Foster, the leader of the DUP, on Tuesday night but her party is reportedly unhappy with new plans to put a customs border in the Irish Sea.
If a deal is reached, EU leaders will have to ratify it at their summit on Thursday and Friday, then it will have to be approved by a majority of U.K. lawmakers at a special parliamentary summit on Saturday. The European Parliament would also have to approve any Brexit deal too.
British MPs had rejected a Brexit deal arrived at by previous Prime Minister Theresa May three times largely because of objections to the Irish “backstop.”