The Brexit chicken game

At last, there are signs a sense of reality is dawning on the EU’s negotiators about the futility of trying to force the UK to agree to a divorce settlement before talking about trade. However, there are still vestiges of a hope that Britain won’t leave the EU after all. Donald Tusk, the current European Council President, indicated it was still an option as recently as this week, but these hopes are wishful thinking.
It has taken thinly-veiled threats from the UK to leave without a deal, unless actual trade talks commence by next month. You can be certain the point has been made more forcefully to EU leaders in private, as well as at the negotiating table, than admitted in public. The EU’s problem is Brussels desperately needs Britain’s annual net contribution of 8bn, which is almost the entire annual cost of running the Brussels establishment. Brexit is nothing short of a disaster for the EU’s finances, and the EU is desperate for Britain’s money. Therefore, negotiations from the EU’s side have been frozen and unable to move onto the subject of trade. Impasse. A game of chicken, to be lost by the first to panic.
The British negotiators have deliberately presented themselves as willing to be helpful. They have insisted Britain will meet her legal requirements, though they must be itemised and justified. And that will not include funding the broader EU budget, amounting to 238bn on commitments incurred but not paid for, which is the basis of Brussels’ claim on Britain. Nor will it fund Brussel’s own budget shortfall, which is most likely where any money paid over will go first.

This post was published at GoldMoney By Alasdair Macleod.

 

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