(Bloomberg) -- The European Union is gambling on U.K. Prime Minister Theresa May making concessions on the contentious issue of the Irish border after her party’s annual conference next month to pave the way for a Brexit deal in November, according to EU diplomats.
EU officials are starting to redraft the language on the so-called Irish “backstop,” in an attempt to make it more acceptable to the U.K. But the British side will also need to make concessions, and EU diplomats said the U.K. team has indicated that it would be ready to do so once the Conservative Party conference is out of the way in early October.
Party conference is already shaping up to be a difficult moment for May, who faces opposition from within her party over her Brexit policy. Boris Johnson, a rival who resigned from her government over Brexit, is expected to dominate the event with his criticism of her negotiating strategy. Any concessions to Brussels before then would hand Brexiteer rivals an advantage.
British officials’ hints that they could be ready to accept a compromise on the border issue after the conference is what has led to a change in tone from the European side in recent weeks, diplomats said. There is now "inexorable momentum" toward a deal, according to one of the diplomats.
The pound jumped to a fresh high against the dollar for the day after the report. Sterling was up 0.2 percent and approaching the almost two-week high of $1.3079 set Monday.
A U.K. spokesman wasn’t immediately available to comment. Brexit Secretary Dominic Raab has implied that the U.K. may be ready to offer concessions to solve the border problem -- the main obstacle to a divorce deal.
The EU’s Brexit negotiators are bracing themselves for tough and bad-tempered talks over the next eight weeks, the diplomats said. Both sides are expecting a summit in mid-November, where a deal could be signed -- but only if an agreement on the border can be reached.
On the issue of the border, efforts are focused on how to minimize the checks between Northern Ireland and Britain, according to diplomats. The EU side is looking at technical solutions that it can play down, they said. Chief EU negotiator Michel Barnier has spoken of the need to "de-dramatize” the issue. EU officials believe they can set out simply how checks and controls would take place between Northern Ireland and the British mainland so that it looks less like a border.
Any text needs to win over the Northern Irish Democratic Unionist Party that props up May in Westminster. One diplomat said a new text might allow the DUP to sell it to their voters as a victory.
The Path to a Deal
The next part of the choreography will happen at a summit in Salzburg, Austria next week. Leaders are likely to signal they are ready to give the U.K. an agreement on security and defense cooperation to give May something to sell to her party at the conference. At the same time, they are likely to put pressure on May to agree to the Irish backstop and, recognizing that an EU summit in mid-October may come too soon after the Conservative Party gathering, are likely to call a leaders’ meeting for the week of Nov. 12.
The acceptance by both sides that the declaration on the future relationship doesn’t need to be as detailed as once envisaged also gives hope that a deal can be done. The withdrawal treaty, including the Irish backstop, will be legally binding, but the agreement on the future is just a statement of intent, meaning diplomats are leaning toward writing “whatever suits Britain politically to get us across the line," according to one diplomat. That could include a vague pledge that future U.K.-EU ties should ensure that the backstop will never be needed.
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