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Today in Brexit: With four little words, Boris Johnson and Leo Varadkar have breathed new life into Brexit.

What’s happening? With light fading and poor weather closing in, the British and Irish leaders have finally found a map. The next question is whether they know how to read it.

Hopes for a Brexit deal were crumbling just a few days ago. Remember Tuesday’s difficult phone call between Prime Minister Boris Johnson and Germany’s Chancellor Angela Merkel? Yet this morning U.K. Brexit Secretary Steve Barclay meets the European Union’s chief negotiator Michel Barnier with the pound surging and hope springing anew. 

What has changed? That’s the key question. Irish Prime Minister Leo Varadkar emerged from talks with Johnson on Thursday proclaiming that it is now possible to reach a deal by the Oct. 31 deadline. Johnson did not appear on camera, though Downing Street mirrored the phrase “pathway to a possible deal.” Of what was actually discussed — and what compromises might have been floated — we have nothing, yet. That’s the focus of today’s meetings in Brussels.

It’s still all about customs and consent. Two key problems remain unsolved: Details of a future customs regime between Northern Ireland and the Republic of Ireland (and thus the EU), and how to handle Johnson’s proposal to give Northern Ireland’s assembly consent powers over future regulatory alignment with the EU. 

Varadkar has a real incentive to strike a deal. As Bloomberg’s Dara Doyle reports this morning, Ireland’s central bank is now projecting that a no-deal Brexit would cost the country 73,000 jobs over the next two years. That’s why the Irish leader’s tone is so important. As John Authers notes for Bloomberg Opinion, his positivity is extraordinary and hints at genuine breakthrough. 

The focus now switches to Brussels. Today’s Barnier-Barclay meeting will provide the crucial evidence of whether the U.K. has adapted its proposals enough to kick-start formal talks. The pathway to the elusive negotiating “tunnel” may be in sight. We will know more soon. Barnier found plenty of issues with Johnson’s original plan, the BBC’s Adam Fleming notes this morning.

Today’s Must-Reads

  • Varadkar holds real power over Great Britain, John Authers writes. For proof, just look at how the currency and gilt markets reacted to a few kind words.
  • Back on the domestic front, the Telegraph highlights polling it says shows Johnson cannot win an electoral majority unless he delivers Brexit by Oct. 31.
  • The party is over for the Liberal Democrats — revoking Article 50 is not the policy of a party with its eyes on Downing Street, writes Philip Collins in The Times.

Brexit in Brief

Irish Problem | Those 73,000 job losses would drive Ireland’s unemployment rate to 5.8% in 2020 and 6.9% in 2021, the Central Bank of Ireland forecast in its quarterly bulletin. An accord would mean a much lower rate, below 5% in both years. Meanwhile, as the U.K. government continues its rollout of Brexit preparedness adverts, Ireland is doing much the same.

Nissan Impossible | Nissan Motor Co. issued its starkest warning yet against a no-deal Brexit, saying any tariffs on auto exports to the European Union are likely to render its U.K. operations unviable. Tariffs of 10% on U.K.-built cars shipped to the EU would be impossible to offset through cost cuts, Nissan Europe Chairman Gianluca de Ficchy said Thursday at the company’s Sunderland factory in northeast England.

But… | The U.K. is looking at the tools it can use to support carmakers, Business Minister Nadhim Zahawi told Bloomberg in an interview. Zahawi said he is working out how he can help car makers “within the confines of either World Trade Organization state aid rules, or, if we have a deal, EU state aid rules.”

Data Bump | Are cross-border data flows at risk after potential no-deal Brexit? Not really, but it would tip companies into a legal limbo and prompt put them at risk of fines and lawsuits for breaching the EU’s strict data protection rules. Bloomberg’s Giles Turner explains all.

No Recession | The U.K. economy unexpectedly shrank in August as manufacturing slumped but it remains on course to dodge an imminent recession. Gross domestic product fell 0.1% after a 0.4% increase in July, the Office for National Statistics said Thursday. It left output up 0.3% over the latest three months.

‘Just the Beginning’ | One of the best-known international schools in Paris says it received 247 applications from London-based families for the current school year, which began last month — almost double the level from two years earlier. Just 41 of those children were admitted, according to Bernard Manuel, chairman of Ecole Jeannine Manuel. “We are willing to consider an expansion due to the special situation of Brexit, and to help France be attractive to foreign expats,” Manuel said.

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To contact the author of this story: Adam Blenford in London at ablenford@bloomberg.net

To contact the editor responsible for this story: Caitlin Morrison at cmorrison59@bloomberg.net, Alyssa McDonald

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