15 November 2016

Financial Times: UK faces Brexit bill of up to €60bn as Brussels toughens stance

Brussels’ rigid plans for the process, outlined to the FT by senior officials, show it is making a priority of a clean separation settlement — and Britain’s payment of a hefty exit charge — over London’s desire to focus on refashioning trading relations.

Assuming Britain starts formal Article 50 divorce talks in March 2017, the EU aims to complete a draft exit deal by autumn 2018 at the latest, leaving at least six months to ratify and prepare for Britain’s full exit at a set date in 2019. The European Commission recommends no detailed trade talks be carried out before a draft agreement on Article 50, but envisages transitional arrangements being tied to the exit deal.

Hardline commission negotiators in Brussels see no option but to take a step-by-step approach to Brexit, moving from divorce to transition to a trade deal over a period of five or more years.

But some European officials fear that such a narrow, divorce-focused agenda will significantly increase the risk of political breakdown and an unfriendly British exit without any withdrawal agreement. “This is all very dangerous,” said one high-level participant in talks. [...]

The commission is also leaning towards assuming Britain remains on the hook for some of the EU’s long-term budget beyond 2019 — planned spending that was promised to member states but not yet marked as a “commitment” in a budget year.

Taking account of these broader assumptions of liability, the commission’s opening demand on Britain’s gross bill would approximately range from €40bn to €60bn, according to the FT’s research.

Mr Barnier believes the exit bill would be potentially reduced by a transitional agreement, whereby Britain continues to make full budget contributions even after leaving the union as a full member.

However, the EU is preparing to insist that any extension of Britain’s single market privileges be conditional on London accepting free movement, EU rules, and the jurisdiction of EU courts. Such conditions would be extremely difficult for Downing Street to accept, particularly if they continue after Britain’s 2020 general election. [...]

Senior European diplomats fear the substantial exit bill will be intolerable for Westminster and kill the prospect of an amicable divorce. “There is a serious risk the Brits say, ‘To hell with it, you can sue us’,” said one.

Some EU countries plan to push back against the narrow negotiating approach during planned meetings with EU negotiators in coming days. “They want it boxed off, to focus on divorce, to link budget contributions to the exit terms,” said one EU diplomat involved in talks. “Other governments are more interested in the future relationship, rather than the divorce and the money.” [...]

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