May's Brexit deal goes down in flames and the EU is singed

Prime Minister Theresa May lost her bid to bring the ill-fated Brexit deal through the House of Commons by a huge majority of 230 votes. The tally of 432-202 had 118 Conservatives voting against their own Prime Minister in the most lopsided government loss in history.

Jeremy Corbyn, the opposition Labour leader immediately moved for a no-confidence vote. But despite her electoral drubbing Ms May will retain her post.  In order to succeed a no-confidence motion requires a two-thirds majority. Though many Tories defected on the treaty vote they are very unlikely to vote themselves into a general election that they would stand a good chance of losing. The vote will be held on Wednesday evening.

The Democratic Unionists of Northern Ireland and the European Research Group both of whose members voted against the Brexit bill said they would support the Prime Minister.

The options before the British government are numerous and undefined. They range from a second referendum, various customs and trade arrangements to a renegotiated deal with the EU, a ‘clean break without pre-arranged terms or no exit at all.  Even the most extant concern the hard date EU exit on March 29th    is not fixed since the EU has said an extension request will be granted all Ms May has to do is ask.

Ms May is required to report back to Parliament by Monday how her administration intends to proceed.

The size of the defeat, worse than almost every prediction is not just a problem for the British government but for the EU. It lays bare the inadequacy of the European response to the British departure. The EU Commission took a hard stance against Ms May’s entreaties in the latter stages of the negotiations, particularly on the Irish backstop.

EU officials have hinted that there may be room for accommodation even legal assurances on the backstop.  But any concessions offered now would be unlikely to win over many Tory members. Why, they might ask, if the EU was willing to make these changes were they not offered before the vote when they might have done some good?

 President Macron of France said that Britain would be the biggest loser from a non-negotiated exit.

The EU position, mostly unstated but everywhere evident that Brexit, even a no-deal exit, was a largely a risk for the UK and the British economy was belied by the currency response.

Just before the vote sterling was trading at 1.2677 against the dollar. As the totals were announced by the Speaker of the Parliament the pound shot higher reaching 1.2892 before closing at 1.2873, two figures above the low.  The euro on the other hand barely stirred. Before the vote it was at 1.1390 by the close it was 1.1413. On the day it was down 56 points.  The cross fell from 0.8913 to 0.8866 its lowest level in five weeks.

The best interpretation for the difference is sterling has priced in its Brexit risk and the euro has not.  

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