Pound Slides As 'Gibraltar Issue' Threatens To Blow Up Brexit Talks

Negotiations over the post-Brexit political statement had appeared to show some progress on Thursday ahead of this weekend's make-or-break summit of EU leaders, sparking a jump in the pound even as more sign of opposition to May's draft Brexit deal emerged. Though some might have sensed that there could be trouble ahead when media reports about the statement indicated that it included no references to Gibraltar despite Spain's threats to blow up the talks if the issue wasn't addressed.

As it turned out, this read turned out to be correct, as the pound has now reversed nearly all of those gains, and then some, as the EU Sherpas hammering out the 'political statement' that will accompany the Brexit withdrawal treaty have apparently reached an impasse over the issue of the post-Brexit treatment of Gibraltar. According to Bloomberg, the sherpas have failed to reach a deal over Gibraltar, jeopardizing the entire statement, and possibly May's draft Brexit deal itself, which Spain has vowed to oppose unless it receives assurances that it will have the opportunity to bilaterally negotiate with the UK over the issue during the transition period. 

Pound

EU sources confirmed that the issue of the post-Brexit treatment of Gibraltar - or rather, the framework for post-Brexit negotiations over the treatment of Gibraltar - remain the only significant issue preventing the statement from being finalized.

As a reminder, Statista's Martin Armstrong explains, Gibraltar is a British overseas territory, accounting for just 6.8 square kilometres and home to 33 thousand people. Located on Spain's south coast, and belonging to Britain since 1713, the peninsula is, despite its small size, of great strategic value to the UK. Speaking at the signing ceremony for the Armed Forces (Gibraltar) Act early this month, Armed Forces Minister Mark Lancaster said: "Gibraltar is of vital importance to the UK Armed Forces and our allies. Whilst our relationship with the EU is changing, our commitment to European prosperity and security remains steadfast and our duty to support Gibraltar, its people and its economy is resolute."

Infographic: Gibraltar: the rock to derail Brexit? | Statista

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Chief EU negotiator Michel Barnier told reporters that both the UK and EU are "working hard" on the compromise over Gibraltar after negotiators failed to finalize a deal during a Friday morning meeting in Brussels. Unlike virtually all of the Brexit-related contretemps until now, the UK isn't the problem here: the Gibraltar issue must be worked out between Spain and other EU members, after Spain accused the bloc of 'treachery' over Gibraltar and threatened to blow up the last stage of talks before this weekend's summit.

European Commission spokesman Alexander Winterstein emphasized that finding a solution to this issue rests with EU governments.

"Work on this issue, which is one of the issues that is still outstanding, is ongoing," Winterstein tells reporters in the Brussels headquarters of the commission, the 28-nation European Union’s executive arm.

BuzzFeed reported earlier that Spain has been asking if Article 132 - extending the Brexit transition period - could be changed, then why couldn't Article 184, which says the EU and UK must do their best to negotiate a future trade deal during the transition.

For everybody who is still confused about why the post-Brexit status of Gibraltar is suddenly such a major sticking point in the negotiations to establish what is merely a non-binding framework for post-Brexit trade talks, the BBC's Katya Adler offers a thorough explanation in the thread below:

Meanwhile Tory Brexiteer Iain Duncan Smith threatened on Friday that he and his fellow eurosceptic Torys would kill May’s Brexit plan regardless of promises to adopt a "tech solution" to the Irish border problem and implied it is meaningless.

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