The price of Brexit is high and rising. On top of previous demands such as a “fair but inferior deal” for the UK, the EU now wants a €20 billion divorce settlement as the UK’s “fair share” of inane projects the UK agreed to as part of the EU.

by Mish

EU officials insist the UK is on the hook for past spending commitments.

Here is the question of the day: Why Should Britain Pay for a Brexit Divorce?

Money has long been the subject of the most ferocious political fights in Brussels and the Brexit divorce — and Britain’s legacy bill of as much as €20bn — is shaping up to be one of the most epic of them all.

At the heart of the debate is a question about the nature of the bloc. Is it a club where a member’s liabilities expire on withdrawal or one where a member honours its promises even after it leaves?

For the EU-27 the answer is clear. One official compared it to Britain signing a five-year gym membership then asking for its money back after three. Another senior diplomat said it was like Britain “sitting at the restaurant, picking from the menu, then leaving before the bill arrives”.

Over time this has built up into a roster of outstanding payment promises — known in Brussels by the French term reste à liquider — running to more than €200bn. It could increase to €241bn by 2019. With Britain’s planned departure, it forces a financial reckoning that politicians had imagined would never be needed.

These are not the only liabilities. The EU accounts detail more than €300bn in shared payment liabilities, from fisheries agreements to pensions to promised funding for satellites building.

On top of that are about €56bn of shared contingent liabilities — where the EU raised funds to lend to countries such as Ireland, Portugal and Ukraine — and €21.4bn of loan guarantees that may generate costs in years to come.

Britain may argue it is no longer legally liable. It could be right. But the settlement will come in a political negotiation to leave the EU, not in a court.

The crucial point is that the EU is preparing to make payment of Britain’s legacy bill a basic condition of securing single market access or a transition agreement, which would provide a soft landing for British business operating in Europe.

Another Reason for Brexit

Inane EU projects provide yet another reason the UK was wise to kiss the EU goodbye.

Meanwhile the EU demands on the UK keep mounting.

Growing List of Demands

The free movement of persons and citizenship, including free movement of workers which is of course one of the reasons the UK left in the first place. Ongoing payment for access to the common market. A “fair” but inferior deal for the UK, a contradiction in terms. A €20 billion divorce settlement as the UK’s “fair share” of EU projects approved during the time the UK was part of the EU

Basic Math

It is mathematically impossible for something to become more impossible.

As noted previously, the Gang of 27 Hits UK with Impossible Demands: EU Seeks “Inferior” Deal for UK, Spain Wants Gibraltar

That makes the EU’s demand for a €20 billion divorce settlement on top of other impossible demands all the more laughable.

Piling On

Curiously, this absurd piling on is to the benefit of the UK.

The UK has the option of saying, OK we will pay your €20 billion bribe if you drop your free movement of persons demand and give us access to the alleged “single market”.

The UK is prepared to walk away already, so now it can walk away from another €20 billion demand.

Meanwhile, the costs on the EU continue to pile up.

Mike “Mish” Shedlock