As we discussed (see here) when Brexit talks resumed this week, the EU is piling pressure on Theresa’s May’s weakened government to extort more money out of the UK in the divorce settlement – now termed “moment of clarification” in EU parlance. Despite rumours before the latest talks began, that Theresa May was prepared to increase the UK’s offer, if this was the case, the EU wasn’t impressed. In the post-talks press conference. the beleaguered Brexit Secretary, David Davis, stated that there is positive momentum in the negotiations…

There is no doubt that we have made, and continue to make significant progress across a whole range of issues. Across the board we made progress to resolving some really difficult questions. That, of course will continue, at pace, between now and December.

…and the markets seemed to believe him. Sterling caught a bid, although it probably had at least as much to do with stronger-than-expected industrial production and a narrowing in the UK’s trade deficit. Meanwhile, the EU side did its fearmongering best to give the impression that insufficient progress will be made to progress to trade talks when the European Council meets in December. Bloomberg reported on comments from EU chief negotiator, Michael Barnier.

European Union chief negotiator Michel Barnier raised the prospect of Brexit talks failing to reach a breakthrough by year-end, saying the U.K. has two weeks to come up with a better offer on the financial settlement. Barnier called for “real and sincere progress” on the three divorce issues, which include the separation bill, the rights of EU citizens and the Irish border, which has erupted back onto the agenda this week. “I have to present a sincere and real picture on those three subjects to the European Council and the European Parliament. If that is not the case, then we will continue, and that will put back the opening of discussions on the future,” Barnier said at a news conference in Brussels on Friday with Brexit Secretary David Davis. Little progress had been expected in this sixth round of talks, as the focus has been on whether a breakthrough will be possible by December.

Prior to the resumption of talks, Davis had toured of European capitals trying to drum up support for the UK’s position. One person he met was Poland’s European Affairs minister, Konrad Szymanski. Szymanski was the first person this morning (before Barnier) to highlight the prospect that talks to resolve the financial settlement (and the Irish border – see below) could drag on into March next year. From Bloomberg.

“I think a satisfactory deal will be reached at the very last minute,” Polish European Minister Konrad Szymanski, who met Davis this week in Warsaw, told reporters on Friday in Brussels. “It could be March but it would be better in December.”

If agreement was delayed to March 2018, Szymanski noted that it would be difficult to negotiate a trade deal before Britain is due to exit the EU in March 2019. While Davis referred to “a few outstanding, albeit important, issues”, thanks to the EU, this is no longer just about money. A new “spanner” was thrown into the works by the EU on Thursday night. This is the border agreement between the Republic and Northern Ireland after Brexit. Perhaps not fully appreciating the EU’s negotiating tactics, we sighed when we saw a Bloomberg headline (with our emphasis) “Irish Border Throws Unexpected Hurdle Into Brexit Talks”. From the article.

The future of the Irish border erupted unexpectedly into Brexit talks this week, as the European Union made new demands on Britain that risk distracting from efforts to reach a breakthrough by year-end. The EU circulated a document to diplomats that called for Northern Ireland to maintain the rules of the customs union and single market after Brexit. It says there must be no hard border on the island, meaning regulations have to be the same on each side of the line that will become the U.K.’s land frontier with the EU after Brexit. The Irish issue, while one of the three divorce issues that need to be settled in the first phase of talks, had taken a back seat in recent months as the U.K. argued that it would be easier to find an agreement on the gnarly border issue once the future trading relationship was clear. Its re-emergence as an obstacle late Thursday distracted attention from what appeared to be some carefully choreographed efforts by the U.K. government to get euroskeptic critics onside as it prepares the ground for the concessions it may have to make to Europe in the next few weeks.

Late last week, Theresa May had set out the specific hour which the UK will leave the EU – 11pm GMT on 29 March 2019 – in an amendment to the EU Withdrawal Bill to please those “critics”. “There in black and white” she said, warning that she would not tolerate any attempts to block Brexit in parliament.

However, May’s attempts at “choreography” were overwhelmed by the EU’s machinations and, coincidentally (or not), comments from Lord Kerr hitting the media this morning. Lord Kerr, if you weren’t aware, is a cross-bench peer in the House of Lords who drafted Article 50, the formal procedure for leaving the EU. Kerr gave a speech in London today, leaked beforehand in the media, in which he stated that the UK electorate had been misled and the Brexit process could still be reversed. According to the BBC.

(Lord Kerr) will give a speech in London later in which he will say: "We can change our minds at any stage of the process. We are not required to withdraw just because Mrs May sent her letter (to Brussels). Actually, the country still has a free choice about whether to proceed. As new facts emerge, people are entitled to take a different view. And there's nothing in Article 50 to stop them."

Lord Kerr, it happens, is a "big time" globalist, having been a former member of the Bilderberg Steering Committee, Executive Committee member of the Trilateral Commission and Ambassador and UK Permanent Representative to the European Union.

As Bloomberg noted, it’s virtually impossible for the UK to meet the EU’s latest demands on the Irish border, which was almost certainly the point.

The EU’s demands on Ireland in the memo are all but impossible for Britain, unless the whole U.K. stays in the customs union, which Prime Minister Theresa May has ruled out. Allowing Northern Ireland to stay in the customs union could mean putting a border between it and mainland Britain. That’s unthinkable for the U.K., and more so at a time when the Conservative government is propped up by the pro-U.K. Democratic Unionist Party from Northern Ireland. The DUP would quit before accepting a border in the Irish Sea. “We recognize the solutions to the unique circumstances in Northern Ireland must respect the integrity of the EU single market and customs union,” Davis’s department said in response. “But they must also respect the integrity of the United Kingdom.” …Ireland has consistently argued that the U.K. remaining in the customs union would be the easiest way to avoid a new border. But May insists Britain will leave as it can’t strike trade deals around the world otherwise -- a key part of the pro-Brexit narrative.

We assume that Theresa May, David Davis and their colleagues have grown wise to the EU’s sleazy negotiating tactics and leaks to German newspapers (after Juncker has dinner with May – twice so far). Nonetheless, the ministerial resignations, party infighting and complaints from banks and the business community about the lack of clarification on the details and a transitional period are making it increasingly difficult for the UK side. However, we suspect that if the UK offers something approaching 60 billion euros, rather than the 40 billion euros it wanted to pay, the Irish border issue and others will magically melt away. May and Davis might see this as a price worth paying to stop having to be nice to the likes of Juncker and Barnier. And...the UK won’t have to cough up when a large German, French or Italian bank requires bailing out.