Brexit Bites, 23 October 2017

Oct 23, 2017

The UK has eight weeks to convince EU leaders to advance the Brexit talks after five rounds have ended in deadlock.  The UK’s hopes of beginning a dialogue on trade were dashed last week at the EU Summit when the EU27 said that sufficient progress had not been made.  Now Theresa May needs to convince her UK counterparts that the UK and EU need to come to some common ground on the financial settlement so that trade talks can begin.

EU say no

EU leaders gathered in Brussels last week for a critical EU Summit to establish whether sufficient progress has been made on the financial settlement, citizens’ rights and Northern Ireland.  It seems that after five rounds of negotiations, talks are at a standstill.

The EU have categorically said that talks cannot progress to trade until the divorce Bill, among other matters have been clarified and the EU has given the UK eight weeks to convince them that the deadlock can be broken. 

UK Prime Minister Theresa May reportedly made a plea to the EU 27 to allow talks to move on to trade and asked that the EU and UK work together to achieve a good deal for their respective citizens.

The German Chancellor Angela Merkel struck a positive tone regarding the talks reportedly saying that she doesn’t believe there is any reason that talks would not be successful.  She urged both sides to be clear about the details of the future relationship.

Taoiseach Leo Varadkar, who attended the Summit said he was encouraged that the other EU Member States understood the particular issues Brexit brings for Ireland and Ireland has their support.

It’s come down to money

In terms of the divorce Bill, Theresa May said in her speech in Florence that "the UK will honour commitments we have made during the period of our membership". So what’s the issue?

The problem could very well lie in the way the EU funds future projects. The Reste à Liquider (RAL) is the term given to the EU’s unfunded future liabilities.  The way the RAL works is that rather than seek funds from member states upfront, the EU commits to expenditure on infrastructure and other projects on the assumption that Member States will continue to fund it.  For example the EU might agree to fund a €200 million project over two years but might only receive the money from other EU Members States over a six year period. Therefore there is a gap between income and liabilities and sometimes this difference can be significant. It’s reported that it currently stands at over €230 Billion. 

So with projects completed now and funded later, what happens if the UK leaves EU during this time lapse?  And this is the very problem the EU has. When Theresa May says the UK will honour commitments but offers no practical detail, the EU is left wondering whether the UK will honour all of its commitments. Article 50 doesn’t say anything about financial settlements once a country has departed the EU so we are in unchartered legal waters. Some Brexit supporters see any payment as being a form of goodwill rather than an obligation. The EU sees it differently and therein lies the quandary.

Brexit Shorts

  • EU and UK agree that Common Travel Area between Ireland and UK should remain
  • In an open letter, Theresa May tells EU Citizens that they can stay after Brexit
  • Ministers look set to delay debate on the European Withdrawal Bill
  • OECD report says reversing Brexit would benefit the UK economy