The U.K.’s Brexit bill shouldn’t derail talks

Bloomberg.- The first sticking point in Brexit negotiations is the size of the U.K.’s final bill with the European Union. It’s a silly dispute that both sides need to get past as quickly as possible so they can move on to more consequential matters.

This needn’t be difficult. All it requires is a willingness to compromise — something neither party, as yet, has shown.

The U.K.’s position has been that it should have to pay little if anything upon exit. Once Britain is no longer in the EU, its annual budget contributions and any EU spending in return will cease — and, for the most part, that’s that. The EU’s position is that the U.K. will continue to owe as much as 100 billion euros to cover a long list of actual and contingent liabilities. Asked to comment on that prospect, British Foreign Minister Boris Johnson responded that Europe can «go whistle» — a perfect example of how not to proceed.

Britain’s financial relationship with the EU is so tangled, and the laws controlling it so opaque, that there’s no clear answer to the question of how much the U.K. actually owes. Defensible estimates range from 25 billion euros to 65 billion euros. And those are net long-term figures: The U.K. could continue to receive some reimbursements from the EU even after Brexit, but its upfront payments could indeed run as high as 100 billion euros. The U.K. is at fault in failing to acknowledge that a hefty payment will be owed. The EU is at fault in maintaining that there’s one correct answer, with little room for give and take.

So the scope for compromise is plain. Right now, the U.K. government should make clear — not least to its own citizens — that the country does have substantial liabilities to the EU, and that a payment in the tens of billions of euros will be due on exit. The EU should say it’s willing to strike a deal on the amount, and stop insisting that the number must be nailed down before more substantive discussions can start.

The final figure will be more a matter of politics than accounting. The U.K.’s strategic position is weak, so it will have to give more ground than it would like — and the sooner it gets used to this idea the better. But if the EU decides to drive the hardest possible bargain, one that British politicians will be unable to sell to their voters, the result could be a shambolic exit that flattens the U.K., inflicts material collateral damage on the EU, and poisons U.K.-EU relations irreversibly. This cannot be in Europe’s interest.

As soon as possible, the two sides should agree to agree on a substantial exit payment, and let the details be worked out later. The discussions need to move to future economic relations, where the sums involved for both sides are vastly greater.

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