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25 April 2017

EU plays currency game

The European Union’s petty approach to Brexit negotiations has been laid bare by a leaked document outlining key elements of Brussels’ draft negotiating directives – the guidelines under which the European institutions will hash out a deal with the United Kingdom.

Financial agreement

The prospect of a hefty Brexit “divorce” bill has been in the news for some weeks despite controversy over who exactly owes funds to whom. Europhiles initially insisted that Britain would owe £52bn upon exit, based allegedly on prior commitments to contributions to the EU budget. The draft directives refer to “obligations undertaken before the date of withdrawal” and insist on “the principles that the United Kingdom must honour its share of the financing of all the obligations undertaken while it was a member of the Union”.

Even the European institutions don’t fully endorse such an obscene figure though, with chief negotiator Michel Barnier confirming that establishing “broad principles” will be the aim of the first phase of negotiations, with the calculation of a bill coming later down the line.

But many see the obligation being quite different, with patriotic Eurosceptics highlighting Britain’s share of massive EU assets accumulated over decades of waste and excess. It includes lucrative property and funds in the European Investment Bank. The UK’s stake in the European Investment Banks alone is £9bn, although Brussels has thus far refused to recognise the claim.

Payment in Euros

But the controversy is set to deepen as the EU insists that the bill be worked out in euros. “The obligations should be defined in euro” reads the document in the section dealing with the UK-EU financial settlement.

The decision could leave the UK dependent on volatile foreign currency markets if payment is handled over an extended period of time and could reasonably be seen as a hostile gesture from a bitter and resentful EU establishment. The Euro, of course, is now considerably stronger than sterling, much to the annoyance of businesses across the Eurozone struggling to remain competitive with an overvalued currency.

“Fraud” fine

But that isn’t the end of the story with the EU now also demanding that Britain pay an absurd fine to the tune of £1.7bn, alleging that the payment is owed due to “fraud”. The claim is that Chinese gangs have been importing undervalued imported goods to avoid duties and taxation as they entered Dover and Felixstowe, flouting the rules of the European customs union

If the Government respects the will of the British people, however, Brussels will be lucky to see a single penny. Recent polling from ICM shows that 64% of the public oppose paying even £10bn more into the European Union’s coffers, showing that the principle of financial justice even cut across traditional Leave/Remain lines. Only one third of Brits back a £3bn bill.

Hopefully, the Tory government of Theresa May hears the call of the public and delivers the clean break from the bloc that a majority of Brits demand.