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Discussion > How Strong is the EU's Case For a Brexit Payment from the UK?

Sep 13, 2017 at 11:10 PM | Radical Rodent

Thanks!

The point about "democracy" (demoncracy) was what I was getting at, in my previous post at:
Sep 13, 2017 at 2:20 PM | golf charlie.

The EU has evaded democracy, having had too many close calls, by simply not having Referenda, if the outcomes looked dodgy.

We have then suffered from UK Prime Ministers (+ Deputies from Conservatives, Labour AND Liberals) signing away UK Rights on the basis of a presumed "Consensus", supported by other Politicians (from all Parties), and the majority of the media.

It is the EU now pushing for a Hard Brexit, with what Mark Hodgson (and others) have explained/confirmed are outrageous terms, that the "Consensus" either did not expect (they did not understand the EU's dependency on UK money), or kept quiet about, due to fear of the consequences.

As time goes by, the evidence of the EU serially abusing the UK mounts, as Farage is proved right.

It would be interesting to hear a Remain politician justify the EU's demands during a TV interview, and explain how long he/she had been aware of the cost to the UK of REMAINING in the EU, if we don't BREXIT.

From Junckers Wednesday announcements, costs of EU Membership will be increasing, and Sweden have to be Consensused into the Euro. A slap around the face with some rotting fish should clear his head.

Sep 14, 2017 at 1:04 AM | Unregistered Commentergolf charlie

golf charlie (and others); it gets worse! So far I have concentrated just on the EU budgets and how they want the UK to fill their budget gap after we leave. Here's what the EU position paper says about the European Investment Bank:

"Through its subscribed capital (callable and paid-in), the United Kingdom committed to guarantee the financing made by the EIB while it was a Member State. Following the withdrawal, the United Kingdom should cease being a member of the EIB.
As part of the financial settlement, the United Kingdom liability resulting from the guarantee for the financing made by the EIB while the United Kingdom was a Member State should be maintained and its level decreased in line with the amortisation of the EIB portfolio outstanding at the time of United Kingdom withdrawal, at the end of which the paid-in capital of the United Kingdom in the EIB should be reimbursed to the United Kingdom."

What happened to the principles of fairness? In EU-land the UK must leave the EIB when we leave the EU, but we have to maintain our guarantee of its liabilities until all financing undertaken while we were a member has come to an end - and we also have to wait until then (which might be years or decades in the future) before they will deign to retain the capital we invested in the EIB.

Of course, unreasonable as it is, it's a negotiating position. They will no doubt concede the point in return for something else being conceded by the UK. While concessions may be necessary to achieve a mutually satisfactory outcome, my concern is that the EU's starting-point is so unreasonable (and so unjustified/unjustifiable) and that so many in the UK in favour of remaining, led by the BBC, are insistent that we must do what the EU wants, that we may end up making excessive and unwarranted concessions, for the sake of being "reasonable."

At the risk of sounding ridiculous, we've seen what happened in the past when we made too many concessions to unreasonable European leaders. I'm not suggesting it will lead to WW3, but I am confident that Juncker would "do a Hitler" and pocket all our concessions, responding with weasel words, and then dreaming up more unreasonable demands in the expectation that in our desperation for a settlement and in our desire to show what it is to be reasonable, we will just roll over again and again. The real Juncker showed his true colours in the EU Parliament yesterday. Apparently he walked out in the middle of a speech critical of him and his dreams, but the BBC didn't report that (nor did any of the UK news channels that I watched). Equally they all showed a very brief clip of Farrage's speech and edited out the substantial applause that it generated from all around the Parliament, not just from the UKIP enclave. Our pro-EU media are little more than a 5th column at this critical stage of the departure process.

Sep 14, 2017 at 9:00 AM | Unregistered CommenterMark Hodgson

By way of a slight diversion - here is a gif - reminding us of a little bit history. The UK came a long and painful distance from Runnymede - Europe - well - not so much. Don't think they know (or care) much about democracy. Click in the link below for the gif

Bismark-Junkers

Sep 14, 2017 at 9:54 AM | Unregistered CommenterKleinefeldmaus

Mark Hodgson, when Mr Chamberlain flew back from meeting Hitler he brandished a piece of paper guaranteeing "Peace in our Time". He seemed very pleased about it, and by all accounts, so did Hitler. Cameron didn't even get a piece of paper

If UK based news media are trying to portray Juncker's speech as a rallying call for the Brave New World of the EU, and that Farage and BREXIT are inconsequential, their claims of political impartiality and honest reporting are further exposed. The BBC are now ACTIVELY" promoting a sham consensus on Europe, and I don't just mean the Eurovision Song Contest.

I wonder if Sweden are aware that they must join the Euro, because the EU have decided they must?

All the more reason for giving Farage a Peerage, and bringing him, formally, into the Government's BREXIT Team. (I have never been UKIP, but my respect for Farage grows as he continues to give the EU a Churchillian two-fingered salute.) For domestic political reasons, it will either make or break May.

Thank you for your recent posts. I am starting to get a better understanding of what the UK is legally contracted to pay versus what it was presumed to have agreed to pay, both subject to additional demands that the UK would have to pay.

From what I saw of Juncker's speech, the EU has decided that it does not have a problem with funding.

Sep 14, 2017 at 12:20 PM | Unregistered Commentergolf charlie

https://order-order.com/2017/09/14/time-for-european-businesses-to-stand-up-for-a-fair-brexit-deal/

Sep 14, 2017 at 2:01 PM | Unregistered Commentergolf charlie

Interesting debate. Here are some thoughts on current news.

Juncker's speech was mostly covered by the Five President's report of a few years ago but it confirms the assertion at the referendum that the status quo was not an option.

Democracy has always been in short supply in the EU. Juncker may have rustled a few feathers with his plans for the nation states. They will begin to understand why we voted for Brexit. I detect the beginnings of concern that Barnier and the EU are treating the UK badly. The member states don't want the bureaucrats to precipitate a crash landing for Brexit.

The Germans have an election which Merkel will probably win. Some people think that she will get the negotiations moving once she is re-elected.

Sep 14, 2017 at 7:00 PM | Unregistered CommenterSchrodinger's Cat

It gets worse. Here is the what the EU's Position Paper says about the European Central Bank:

"As part of the financial settlement, the paid-in capital of the United Kingdom in the ECB should be reimbursed to the Bank of England (BoE) as prescribed by the schedule of payment referred to in part VIII. Modalities and other practical arrangements should be established by the ECB Governing Council following the rules of the Treaties and its Protocols."

That doesn't sound too bad until you look at Part VIII of the Position Paper, which says:

"Except for the payments linked to the EDF, the EU Trust Funds and the Facility for Refugees in Turkey, all other United Kingdom's payments related to the financial settlement should follow a schedule of payments that should aim at mitigating the impact of the United Kingdom withdrawal on the budget for the Union and on its Member States. This schedule and practical modalities for these payments should be defined in phase 2 of the negotiations."

In other words, the schedule of payments shouldn't be based on broad principles of fairness, or the logic of the UK being repaid its funds on leaving, but should instead be based on what makes life easiest for the EU.

Sep 14, 2017 at 7:27 PM | Unregistered CommenterMark Hodgson

R4 at 9:30pm Patrick Wright meets the philosopher Sir Roger Scruton, who argues that the EU has encroached on the fundamentals of Englishness: the landscape, and the common law.

And he hears from others who question the idea that the European Union has encroached in this way, including Martha Spurrier, the Director of Liberty, author Robert Winder, and Greg and Teresa Malciewicz, editor and publisher of UK-based Polish-language weekly New Time.

(Pakistani born guy has just phoned Nigel Farage "Why are you sending aid money to Pakistan ? It just goes to rich people getting richer, it doesn't help the poor village people")

Sep 14, 2017 at 7:43 PM | Registered Commenterstewgreen

At least someone at The Guardian can see potential problems with Juncker's "vision", and that other EU States can too.

https://www.theguardian.com/world/2017/sep/13/jean-claude-junckers-federalist-vision-for-the-eu-is-far-from-reality

Juncker claims the EU has "wind in its sails". He maybe right, but he has no idea where he is going to end up.

Sep 14, 2017 at 7:50 PM | Unregistered Commentergolf charlie

Sep 14, 2017 at 7:27 PM | Mark Hodgson

Interesting. That could undermine business and financial confidence in the EU and Euro, at a time when the EU needs to borrow more.

If the the size of any debt is known, that should be taken into account in any divorce settlements.

Perhaps the EU owes the UK, rather than the other way around? We could stop paying tomorrow.

Sep 14, 2017 at 8:09 PM | Unregistered Commentergolf charlie

Having investigated a little further, I think our funds in the European Central Bank are a very small digression:

https://www.ecb.europa.eu/ecb/orga/capital/html/index.en.html

Most of the funds in the ECB do seem to come from Eurozone countries. The Bank of England seems to have subscribed paid-up capital of only 55,509,147.81 Euros. The ECB web-site also says this:

"The non-euro area NCBs [National central banks] are not entitled to receive any share of the distributable profits of the ECB, nor are they liable to fund any losses of the ECB."

All of which seems to suggest that it isn't terribly important. So why couldn't the EU's position paper simply say that we could have our £50M back on the day we leave?

Sep 14, 2017 at 8:36 PM | Unregistered CommenterMark Hodgson

The situation with the European Investment Bank is more difficult to ascertain, since its website seems to be more about advertising what it does than giving details of where its funding comes from.

But here:

https://fullfact.org/economy/uks-stake-european-investment-bank/

I found this:

"Along with Germany, France and Italy, the UK is one of the largest shareholders in the EIB with shares of 16%.

Earlier this year a committee of Lords said that “it is likely that the UK would claim its called up capital in the event that it ceased to be a shareholder of the EIB”, that was around €3.5 billion in 2016. But it said that “a more useful measure” would be be the UK’s share of the bank’s equity, reserves and profits for that year (known as the bank’s ‘own funds’.)

The EIB had around €66 billion of its own funds in 2016. The UK’s 16% share of that would be €11 billion or just under £9 billion."

So it seems a bit unreasonable to make us wait to get this money back.

In fairness, remainers would be well within their rights to point out that:

"As well as the UK having shares in the EIB, the bank also invests in projects in the UK. This investment totalled more than €29 billion between 2011 and 2015, followed by another €6.9 billion in 2016. Whether or not the EIB would continue to lend money to projects in the UK is likely to be discussed during Brexit negotiations. It would be possible for this to happen, but it would need the unanimous agreement of finance ministers in all the remaining EU countries."

Sep 14, 2017 at 8:43 PM | Unregistered CommenterMark Hodgson

Sep 14, 2017 at 8:36 PM | Mark Hodgson
Have the UK acted as underwriter or guarantor for any loans made by the ECB? Do we have liabilities that outweigh any credit?

Sep 14, 2017 at 8:50 PM | Unregistered Commentergolf charlie

I can recommend reading this paper to gain an understanding of the EU finances and the roles of its banks (EIB, ECB), and the potential liabilities under guarantee we have whilst we remain a member (but which fall away with our membership automatically unless we agree otherwise). It really is an eye-opener, and explains why the EU should be concerned about our leaving as much for its impact on their creditworthiness as for the end of our budgetary contributions. It also explains some of the positions the EU has adopted.

Sep 14, 2017 at 8:56 PM | Unregistered CommenterIt doesn't add up...

golf charlie

I don't know the answer to your question, as I'm still finding my way here, and some of the Euro institutions' websites aren't as forthcoming as I would like them to be.

It doesn't add up.... Thank you for the link. It looks interesting, though I will treat with some modest caution, given that the Bruges Group isn't entirely unbiased where the EU is concerned (but then, who is?).

Sep 15, 2017 at 8:44 AM | Unregistered CommenterMark Hodgson

Returning to my analogy of a golf club and being a devil's advocate, if one were to leave after participating in a decision to renovate the club house had been agreed, especially if this had already involved some commitment of funds and/or signing of contracts, I would feel morally bound to pay at least some of the sum I had already committed to pay. Not necessarily all of it because, after all I am not expected to benefit. There would also be a sound practical reason for making a payment. I would wish to continue playing golf and so would wish to associate with other clubs and not be blacklisted.
So I don't particularly like the idea of the UK proceeding in future as if it owed nothing.
On the other hand the golf club should not proceed as if it were legally entitles to full recovery. If later the club is found to have a war-chest into which I had contributed, then I would expect return of my stake without delay.

Sep 15, 2017 at 11:38 AM | Unregistered CommenterSupertroll

Mark Hodgson, thank you for your continued efforts!

It all helps to bring into perspective the "scandal" that was manufactured about what may, or may not, have been said, about NHS funding, prior to BREXIT. Clearly journalist were fed stories to bamboozle the UK, and divert attention away from the actual economics.

https://www.theguardian.com/politics/2016/apr/05/nhs-loses-700m-a-year-treating-eu-citizens-brexit-campaign-claims
http://www.telegraph.co.uk/news/2016/06/24/nigel-farage-350-million-pledge-to-fund-the-nhs-was-a-mistake/
https://www.theguardian.com/society/2017/may/31/nhs-faces-500m-a-year-bill-post-brexit-for-returning-retirees-says-thinktank

I wonder whether those journalists and politicians would care to reflect on whether they were conned, into further attempts to con the UK?

When any person or business requires "overly complicated" financial accountancy, it normally indicates an attempt to conceal, from outsiders such as the Taxman, AND (the majority of) insiders.

Not all Europeans are convinced by what Juncker did say.
http://www.politico.eu/article/europes-papers-pick-apart-junckers-state-of-the-union/

It does seem that Merkel will win her election, but the percentage of those not voting for Merkel can be compared to those not currently voting for Macron. Merkel has deliberately kept out of BREXIT arguments recently. Many will be looking to her, to rebuild Europe from within, as the EU's official Leaders have simply spread further dissent to an increased audience.

I genuinely wish Merkel well. She is the best hope for common sense over BREXIT, and the future of the EU. Surely she must be aware of the nightmare hole in Junckers " financial dreams"?

Sep 15, 2017 at 12:53 PM | Unregistered Commentergolf charlie

Sep 15, 2017 at 11:38 AM | Supertroll

Yes, agreed. But you would not expect to have a liability for rebuilding the Club House, without any financial limits, or any involvement in decision making about increasing the size of the Club House or quality of the finished product during construction.

The EU has already relied on the UK to pay up for financial shortfalls, that were "unforeseen" when previous budgets were agreed.

Unlimited Liability is a scary concept, when current EU Countries are bottomless pits, that so far have not been filled with other people's money.

There is a recent precedent.
http://www.bbc.co.uk/news/business-40778365

Sep 15, 2017 at 1:27 PM | Unregistered Commentergolf charlie

Sep 15, 2017 at 11:38 AM by Supertroll

If Britain did agree to these projects, did it do so freely?

What would have happened if they had voted against them?

Were they agreed in order to avoid financing something worse?

Our village has recently extended the village hall, and we were told that the cost should NOT be borne just by the existing residents as future residents, those that move here next year, the next decade, will be benefiting from the expense.

Surely, if the EU are building an office to house bureaucrats, I can't see a reason to contribute. If it is part of the nuclear programme or something like ITER, and we want to stay within its jurisdiction, we should pay an appropriate amount, and if it is International Aid, then we need to see just how stupid, corrupt it is and how effective it is in taking wealth, hope and skills from the poor in rich countries and giving it to the rich in poor countries, like the Somali Spice Girls. They could delay new projects, not just demand, with menaces, the money from Britain.

Unfortunately, it needs common sense and some spirit of collaboration, but the Euro-Elite show no signs of this. In fact, even Vince Cable is fed up with their behaviour!

The EU want to be in charge, want to be in total control, yet they want Britain to do the running, yet that will open them to bring shot down by the party that thinks they have might and right on their side, and much of the British Establishment.

Then there is the problem of what to do with a country that has handed over the second largest amount of money, yet received a disproportionately small reward and sees a large, very valuable, real estate, that we helped finance. What happens if countries leave, one by one, until there is only one left? Do they get the jackpot? :)

This should have been thought about before we got into the situation that we are in. Just as the Wine Lakes and Butter Mountains appeared because the Continental Bureaucrats were unable to imagine that Europe would have too much food and drink, so they still cannot understand that we are leaving and are treating us as very naughty children that require reeducation.

Westill are not yet at the stage were constructive talks can take place and made public.

Sep 15, 2017 at 1:50 PM | Unregistered CommenterRobert Christopher

Not specifically BREXIT, or EU Financial planning, but.....

http://openeurope.org.uk/today/blog/view-from-brussels-junckers-state-of-the-union-speech-the-good-the-bad-and-the-ugly/

Sep 15, 2017 at 6:05 PM | Unregistered Commentergolf charlie

Supertroll

Please do keep playing Devil's advocate. There is no totally correct answer to all this - my purpose is not to say that we should pay nothing, rather to point out that the EU has no legal basis for its claims, and is being totally unreasonable in its demands.

Your golf clubhouse example is not a bad one, but I would meet it by asking if you think you should contribute to the cost of refurbishing the clubhouse, even though when you first joined the club 45 years ago as a very young man, you were forced to pay through your subs for it to be refurbished then - a decision taken by the existing members before you joined. I do not see why we were expected to make our contributions from the moment of joining, based on budget decisions taken by the pre-existing members when we joined, and were not offered a rebate to reflect the fact that we did not participate in those spending decisions; yet we are expected when we leave to pay our share in full for spending decisions we did participate in.

There is also the point Robert Christopher makes - assuming my golf subs have also gone towards some major capital investments, am I not entitled to a return of some of my money to reflect the enhanced capital position of the club following my payments?

The Eu's position truly is one of having its cake and eating it. We obtained no rebate on joining for spending decisions taken before we joined. We are expected to pay our share in full even after we leave for spending decisions taken while we were a member. Return of contributions relating to capital improvements even isn't on the agenda.

Of course there should be scope for sensible compromises here - but it takes 2 to tango.

Sep 15, 2017 at 7:23 PM | Unregistered CommenterMark Hodgson

Mark Hodgson & Supertroll

If you left a Golf Club, attempts to block future association with any other members, might be considered extreme.

Threats to ostracise the UK and UK residents, may bring happiness to the EU, but may spread fear amongst other Europeans.

Whether on benefits, or gainfully employed, the number of EU citizens in the UK, and sending money "home", far exceeds the reverse flow.

It is not in UK interests to lose those gainfully employed. The rest of the EU does not have employment for the employable, let alone the unemployable, and does not want to pay them Benefits either. Many EU States are far better off with the UK in the EU, and the money that flows directly from the UK and into their economies, having bypassed the EU completely.

Sep 15, 2017 at 9:34 PM | Unregistered Commentergolf charlie

The EU position paper hasn't ended there. There's more...:

"The United Kingdom should remain liable in full for the obligations of the successive European Development Funds and should therefore continue to contribute to the payments necessary to honour all commitments related to all unclosed Funds (8th, 9th, 10th and 11th EDF) in accordance with the specific financing keys of each EDF and their specific financing rules."

https://ec.europa.eu/europeaid/funding/funding-instruments-programming/funding-instruments/european-development-fund_en

"Created in 1957 by the Treaty of Rome and launched in 1959, the European Development Fund (EDF) is the EU's main instrument for providing development aid to African, Caribbean and Pacific (ACP) countries and to overseas countries and territories (OCTs).

The EDF funds cooperation activities in the fields of economic development, social and human development as well as regional cooperation and integration.

It is financed by direct contributions from EU Member States according to a contribution key and is covered by its own financial rules. Although the 11th EDF remains outside of the EU budget, the negotiations in the Council of Ministers on the different elements of the 11th EDF have taken place in parallel with the negotiations of the external Instruments financed under the budget, to ensure consistency. The total financial resources of the 11th EDF amount to €30.5 billion for the period 2014-2020.

In the field of the external actions of the European Union, the applicable legislation is composed in particular by the international agreement of Cotonou for the aid financed from the European Development Fund, by the basic regulations related to the different cooperation programmes adopted by the Council and the European Parliament, and by the financial regulations.

The 11th EDF was created by an intergovernmental agreement signed in June 2013 – as it is not part of the EU Budget – and entered into force on the 1st March 2015, after ratification by all Member States. In order to ensure continuity of funding for cooperation with ACPs and OCTs, a 'Bridging Facility' was set-up to cover the period between the end of the 10th EDF (December 2013) and the start of the 11th EDF (March 2015). This 'Bridging Facility' seized to exist when the 11th EDF entered into force.

There are only minor modifications in the 11th EDF compared to the 10th EDF. Mainly, Member States' contributions keys to the Fund are further aligned with the keys used for the EU budget. Furthermore, it aims to ensure more flexibility and fast reaction in case of unexpected events. Regional funding also includes allocations to cover unforeseen needs with a regional dimension and a new shock-absorbing scheme is set up to help ACP countries to mitigate the short-term effects of exogenous shocks such as economic crisis or natural disaster."

Given that the UK is one of only 5 EU countries meeting the EU's 0.7% of GDP target for foreign aid (the others being Sweden, Denmark, Netherlands and Luxembourg, and notably excluding the other major EU economies such as Germany, France and Italy) this requirement on the part of the EU does seem grossly unreasonable. The position paper contains no foot notes or other explanation for the EU's position.

Sep 16, 2017 at 8:32 PM | Unregistered CommenterMark Hodgson

I genuinely wish Merkel well. She is the best hope for common sense over BREXIT, and the future of the EU. Surely she must be aware of the nightmare hole in Junckers " financial dreams"?

Sep 15, 2017 at 12:53 PM | Unregistered Commentergolf charlie

So do I. Germany has a lot of things to manage and Western Europe must necessarily be heavily influenced by a successful and prosperous Germany. I don't think of Brexit as being anti-German at all. After all, they are being asked to pay more than the UK for the schemes of the Euro-elites

Yes the EU is dominated by what Germany wants, but any over-representation is not as much as is the case with France (The EU being a German horse ridden by a French jockey, as I once recall it being described). Germany is still the best hope for a reformed EU if they can just manage to reduce the supply of LSD to Brussels.


Back on topic, I don't really see why positions on both sides can't be wound-down over an extended period. I know I must be over-simplifying and naïve, but is there not some basic principle of 'amortisation' that could be agreed to by both sides without outrageous demands for one-off payments?

I'm sure the UK could be willing to continue paying for many projects for a few years to come. Knowing that we have no say in their future direction seems little loss because, frankly, we know we never did have much say in the first place. So what's changed? A gradual tactical withdrawal seems best for all sides.


But I just don't see any simple way to offload Prince Charles onto either Europe or Scotland.

Sep 17, 2017 at 2:11 AM | Unregistered Commentermichael hart

Forgot to mention, has anybody told Jean-Claude Junckenfest yet that his goons are now also negotiating with the demands of Ulster Unionists? I have always thought there are more ramifications to the recent UK election results than first meets the eye.

Sep 17, 2017 at 2:36 AM | Unregistered Commentermichael hart