Courtesy of Mish.
EU Prioritizes Penalties Over Trade
As I have commented numerous times in recent weeks, I am increasingly worried about a collapse in global trade.
Every day there are new stories that suggest this outcome.
Today, EU negotiators prioritized divorce-first penalties over trade relationships in a historic mistake that will gain the EU nothing but pain.
Please consider UK Faces Brexit Bill of up to €60bn as Brussels Toughens Stance
The EU’s Brexit negotiators are pushing for a draft UK exit deal by mid-2018 as part of a narrow, divorce-first negotiating approach that would demand an exit bill of as much as €40bn-€60bn.
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.
Michel Barnier, the commission’s chief Brexit negotiator, has indicated to colleagues that he will pursue Britain for an exit bill based on an expansive view of its liabilities under the EU budget.
His team is looking at a gross upper estimate that includes unpaid budget commitments, pension liabilities, loan guarantees and spending on UK-based projects. This would significantly exceed the FT’s estimates of a net bill of €20bn, which strips out UK-bound spending and contingent liabilities.
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.
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.
Mr Barnier has toured almost a dozen national capitals already, explaining a perspective on talks that one host described as “absolutely rigid”.
Dangerous Game
“This is all very dangerous,” said one high-level participant in talks.
“There is a serious risk the Brits say, ‘To hell with it, you can sue us’,” said one.
