Britain is facing a divorce bill from the EU for as much as €20bn, according to a Financial Times analysis that shows the bloc’s shared budget is emerging as one of the biggest political obstacles to a Brexit deal.
More than €300bn of shared payment liabilities will need to be settled in the divorce reckoning, according to EU accounts. It is a legacy of joint financial obligations stretching back decades — from pension pledges and multi-annual contracts to commitments to fund infrastructure projects — that Brussels will insist the UK must honour.
The sheer size of the upper estimate, which some EU-27 officials reckon is too low, threatens to poison the politics of the break-up and derail a Brexit transition and trade deal, according to several senior European figures involved in the process.
The €20bn upper estimate covers Britain’s share of continuing multiyear liabilities, including unpaid budget appropriations of €241bn, pensions liabilities of €63.8bn and future contractual and other spending commitments totalling about €32bn.
British Eurosceptic MPs are likely to react badly to the news that UK taxpayers might have to pay billions of pounds to Europe as the price of Brexit. One minister said: “It will have to be explained very carefully, to explain what we are getting in return for market access.”
The pound hit its lowest level on record on Wednesday, according to a Bank of England trade-weighted index, as markets priced in the possibility of a hard Brexit and the prospect of difficult negotiations with the rest of the EU.
I think what they mean is that there is a total unpaid budget appropriations of €241bn, pensions liabilities of €63.8bn and future contractual and other spending commitments totalling about €32bn in the EU as a whole and UK has a share of 20bn for that?
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'Many things happen in the real world that prompt a sudden rush to buy sterling on currency markets. It is rare that the event that triggers excitement is something said by a lawyer in the High Court. That, however, is precisely what happened on Tuesday in the high-profile hearing over whether Theresa May needs parliamentary approval before triggering Article 50, the pathway to Brexit.
At one point in the hearing, James Eadie, a government lawyer, said the Commons would “very likely” be asked to approve the final deal that Mrs May agrees with Brussels in a little over two years. His comment prompted the pound to rally to its biggest gains since mid-August. On Betfair, the chances of Article 50 not being invoked before July 1, 2017 this morning shot up from 18 per cent to 35 per cent.
The excitement is overdone. It was always likely that the Commons would have the right to ratify the final UK-EU deal at the end of the Article 50 process, so what Mr Eadie said was hardly surprising. More importantly, by the time Britain has agreed any pact with the EU in two years, the opportunity for MPs to vote it down will be extremely limited. If the Commons refuses to ratify what has been agreed, Britain will “fall off a cliff” and on to World Trade Organisation rules which impose high tariffs, including 10 per cent on cars. That will probably be a worse outcome than any UK-EU agreement — and is one that MPs would want to avoid.'