It’s all about the money
Everyone in the EU wants the British to pay up for Brexit
“Money makes the world go around,” goes the song in the 1972 film Cabaret.
Money, in the form of Britain’s Brexit “divorce bill”, is the chief obstacle blocking the start of UK-EU talks on transitional arrangements supposed to pave the way for a new, long-term partnership.
“This is all about money,” confirms one person briefed on the conversation that Theresa May held in Brussels on Monday over dinner with Jean-Claude Juncker, European Commission president.
This conversation was less of a fiasco than a Downing Street dinner in April. But it clearly failed to reconcile the two sides’ differences over the UK’s exit bill.
For the UK’s embattled prime minister, it is highly frustrating. As a German foreign ministry document obtained by Bloomberg indicates, Berlin is keen on a close UK-EU partnership after Brexit. It would cover foreign and security policy, counter-terrorism, criminal justice, energy, air transport, agriculture and much else. First things first, however: the money question needs an answer.
Mrs May thinks she made a constructive offer in a speech last month in Florence. There she implied that Britain would pay about €20bn, representing roughly two years of net contributions to the EU’s budget in 2019 and 2020, and would honour other unspecified financial commitments.
However, there is a snag, or rather two snags. EU leaders want the UK to set out its proposals in more concrete terms. At a minimum, they expect London to double its offer to €40bn before opening talks on the future EU-UK relationship.
On the British side, meanwhile, Mrs May is under pressure from hardline Brexiters in her government and Conservative party not to make more concessions to the EU27 — and even to walk away from the Brexit talks without a deal.
This willingness to embrace a “no deal” outcome strikes Sir Martin Donnelly, the former top civil servant at the UK’s international trade department, and many British business executives as reckless bravado.
Yet the EU will not lower its financial demands lightly. It is not just Angela Merkel and Emmanuel Macron, the German and French leaders, who are playing hard ball.
As Henry Newman, director of the Open Europe think-tank, observes, everyone wants the British to pay up. “One of the things that I was told by the Polish foreign minister [Witold Waszczykowski] is that the EU27 may disagree on all kinds of things, but there’s one thing that they agree on, and that’s that the UK should pay as much as possible for as long as possible,” says Mr Newman.
This should surprise no one in the UK. Along with Denmark, Germany, the Netherlands and Sweden, Britain is one of the EU’s largest net budget contributors on a per capita basis. Some 18 of the bloc’s 28 states are net recipients (although the data are skewed for Belgium and Luxembourg, where the EU spends billions of euros on administrative costs).
Still, money is not the only issue holding up the Brexit talks. In EU eyes, internal UK political disputes make it mystifyingly unclear what sort of long-term relationship the British actually want.
Mervyn King, a former Bank of England governor, says the UK’s desire for a transition deal shows that Mrs May’s government scarcely knows its own mind. “It’s more of a kick-the-can-down-the-road plan to put things off for a period,” he says.