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Most current estimates of the UK exit bill show that the sum is somewhere around 50 billion Euros. This is equivalent to 0.3% of the EU's yearly GDP, so it's pretty much a negligible sum for the EU governments taken altogether.

So why is this payment such a huge deal to EU negotiators? Are they simply using it as a bargaining chip since the sum is somewhat more significant to the UK?

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    Don't compare against the total GDP. Instead, compare against the EU budget. (Not the budgets of the individual member countries, but the EU budget.) I haven't looked, but I strongly suspect that it'll be far, far more than 0.3% of that... – a CVn Aug 31 '17 at 9:29
  • comments are only to help the questioner improve the question - please consider posting an answer or using chat chat.stackexchange.com/… – Qsigma Sep 4 '17 at 15:45
  • This post might be of interest too. – luchonacho Oct 23 '17 at 6:34

10 Answers 10

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First off, per the other answers so far, €50 billion (or €100) is by no means peanuts.

More importantly, this article gives, I think, a reasonably level-headed breakdown of what the Brexit bill is about and what's at stake in practice.

A large chunk of the money being asked for by the European commission was pledged by David Cameron, when he was prime minister, to the long-term EU budget for the period of 2014 to 2020.

But the EU, with the UK as a member, has also agreed to pay for programmes that will be implemented in the years 2019 to 2025 and possibly beyond, including road, rail and investment projects.

Brussels further wants the UK to pay up to cover the costs of pension promises to officials and MEPs, and other long-term EU liabilities. If the EU’s loans go wrong, for example, the European commission wants the UK to play its part in covering the losses. These are known as contingent liabilities.

There are a few numbers a bit further down in the article:

Some commission briefings have pointed to an estimated gross bill of about €100bn, including:

  • €86.4bn to honour commitments the UK made as a member state, including about €20bn to cover 2019/2020, the last year of the seven-year budget to which the UK was a willing signatory.
  • €11.5bn of contingent liabilities, in case organisations or states, such as Ireland or Ukraine, fail to repay their loans.
  • €1.7bn in development funding pledges to help countries in Africa, the Caribbean and the Pacific.

The EU doesn’t necessarily want all the money in one sum, however. It is open to regular payments over a period of years.

Moreover, regardless of the precise figure for the gross bill, various factors will bring the net bill down.

... with this addendum after some discussion:

The EU has so far insisted that the UK cannot offset its share of European Union assets, such as buildings, or indeed the commission’s generous wine cellar, from the bill. However, there are cracks appearing in the united front and, privately, European commission officials admit that member states may be being a bit unreasonable.

At any rate, the commonly quoted gross bill is closer to €100 billion rather than the €50 billion you're citing without source. The article puts the net bill at around €75 billion. It's anyone's guess what it'll be in practice.

Either way, what the bill is about should shed light on the EU's insistence. It's actually money that the UK already has committed to pay. Either outright, or to cover losses in case of defaults by third parties, plus some foreign aid and pensions for UK citizens that served as MEPs and EU officials.

The UK arguably has some room to negotiate the bill down, if only by insisting to offset the bill by the value of assets it lets go in the process. The pension of its own citizens who worked for the EU will hopefully be a no brainer.

The rest seems like negotiation leverage in that, per the above-mentioned article, nothing obliges the UK to foot the bill after leaving the EU. However, the UK is not in a good position to renege on payments it already has committed to. The EU's interest is to send a clear signal that leaving the EU is not a panacea; both the EC and the EP have been making pretty clear statements earlier this summer that they intend to send that message.

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    This is the best answer so far. It's simply down to UK commitments that the EU, quite rightly, expects to be honoured. – user Aug 31 '17 at 9:53
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    You can judge a contract by how much thought has gone into the termination clauses, and as far as we can see, very little thought went into defining what would happen financially when a member state decided to leave; so the parties are making up the rules as they go. Should the UK pay for infrastructure assets in the UK that were originally EU-funded? Or get its share back of similar assets outside the UK? Should it pay relocation costs for EU agencies located in the UK? If no-one defined this in advance, then it's all up for negotiation. – Michael Kay Aug 31 '17 at 11:46
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    The exit clause was added at the request of the UK. No one expected anyone to be stupid enough to use it, it was just assumed to be a political crutch to help sell it. The rules were actually written by a British citizen, and are reasonably fair. As for assets, the EU considers them to be largely irrelevant to the calculation since each country benefited from building them anyway must have expected that on leaving entire buildings wouldn't be transported brick-by-brick to another country. – user Aug 31 '17 at 16:13
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    @MichaelKay Well to be fair, both EU and UK negotiators seems to be at a loss as to what the goal of the negotiations really is. That referendum only said "leave" but not "to where?". Hard to write termination clauses for every eventuality apart from a hard exit. – Guran Sep 4 '17 at 8:17
  • The real reason has nothing to do with any of this, and the fact it's been so heavily upvoted shows that people have fallen for it. It's all to do with the principle that the EU didn't want the UK - or any other country - to leave. So if they just said to the UK you can leave without paying a price, other countries may decide to follow suit. The EU can't even itemise certain costs that are in the 100k EUR range, and they certainly can't itemise what is/isn't included in billions of Euros that they are demanding. In other words, they have no idea what it covers, and neither does anyone else. – Andy Sep 4 '17 at 12:49
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The sum is quite small compared to the EU GDP, but that is not what you should be comparing it to. It would make more sense to compare it to the EU budget (as there the additional money would gradually end up to). According to this website (in the left side infographic in the page) the EU budget in 2011 (a bit outdated) was 129.3 billion euros. Compared to it, 50 billion euros is quite a substantial amount.

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    This is an interesting point, but I am not completely sure about comparing the € 50 billion to the EU budget, as that budget is not disconnected from the EU members' budgets. I mean, if the EU gets the money, that means either that the EU members need to pay less to the EU in the coming years or that the money is invested back into those same countries... maybe it would be somewhere in the middle between EU budget and total public budget of the EU countries. – SJuan76 Aug 30 '17 at 17:28
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    If you want to compare the total amount to the EU budget, you need to consider several years. – Relaxed Aug 30 '17 at 22:36
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    @ゼーロ The answer is fairly obviously implied. The question is, why does the EU care if the amount is insignificant? The answer here is that they care because the amount is not insignificant. – JBentley Aug 31 '17 at 10:01
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    @JBentley In that sense it's not quite correct. The EU budget per year is €130bn, but the bill won't be paid in a single hit. It will be over several years, and significantly less than the UK's current contribution. But the more important issue is that the reason they care is that the money has been committed and allocated, with agreement from the UK, and withholding it would create a hole. It's not just a cash grab, it's expecting the UK to honour its agreements up until this point. – user Aug 31 '17 at 16:10
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    @ゼーロ The EU budget per year is €130bn, but the bill [will be paid] over several years. Ok, so a budget of €650bn over 5 years? €50bn is still almost 10% of that, and if the €75bn or €100bn figures quoted elsewhere are true then it'd be closer to 15%. Not negligible at all. – walen Sep 4 '17 at 6:48
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  • A received payment is money you have. GDP is something entirely different.
  • Politically, giving up 50 billion € is likely to be used against the politicians who are believed to be responsible, whenever they need funding for any project in the future.
  • A budget has income and expenses. The income of the EU is around 150 billion € a year, and the expenses of the EU are around 150 billion € a year. An imaginary stackexchange user might earn 100'000 € a year, but if expenses for rent, taxes, child care, food, etc add up to 99'000 € a year, all they need to double the money available for the fun stuff is another 1'000 €, or 1%.
  • The value of 50 billion € is given by the question "what can I buy with 50 billion €?". There are tons of politicians with pet projects that can benefit a lot from 50 billion €.
  • This is factually incorrect. The value of €50bn was given by simply adding up all of the UK's financial commitments to the EU, e.g. projects it had said it would contribute towards in the future and which had been started on that basis. – user Aug 31 '17 at 9:59
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    @ゼーロ Can you tell me which part is factually incorrect? – Peter Aug 31 '17 at 10:23
  • "The value of 50 billion € is given by the question "what can I buy with 50 billion €?". There are tons of politicians with pet projects that can benefit a lot from 50 billion €." – user Aug 31 '17 at 13:50
  • @ゼーロ Still don't get it. Did you understand "value" to mean "amount"? – Peter Aug 31 '17 at 14:43
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    In this context it isn't clear. Perhaps you could re-word it to make it clear that you are suggesting that the amount isn't trivial, not that it was calculated according to what they want to spend it on. – user Aug 31 '17 at 14:50
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It's not primarily about the amount of money, although the amount is very non-neglegible as well. Consider that although not all EU countries contribute the same to the overall budget, it is nevertheless very much in the interest of all the remaining countries (not just the three Big Players) that the "revenue" which was forecast indeed keeps coming in.
Otherwise, they'll either have fill the gap which is not favourable even in the countries which contribute less per-capita or in total, but even moreso in three particular countries which already pay more than many citizens would like. Or, they will have to cut budgets (which, as we know, will not be budgets for EU officials, but budgets for schools, development, research, and art). None of that is something you want to explain to your voters.

The official (and in my opinion legitimate) reason is pacta sunt servanda. The UK had, while taking the benefits of the EU, agreed on particular long-term contributions to some particular parts of the budget. This is a binding contract that is to be fulfilled.
Now, the UK obviously don't like fulfilling that contract, since paying so much money to the evil EU was one of the main reasons to leave. Thus, their point of view is that after the two years of Article 50 have passed, it's UK law and nothing else, or to say it in Konrad Adenauer's famous words: "What do I care about the blather I told yesterday".

The real reason, apart from retaliating for the insult of wanting to leave this fine union (that's mostly Mr. Juncker's motive), is that it would be a very, very bad signal towards others, both inside and outside the EU.

What would an EU member state think? The British don't pay, and they no longer allow anyone in their country whom they don't like, they just do what they want, but they still get all the same benefits of free trade etc. as we do. Actually, why are we paying? Why are we being told to host more of those people that we don't want in our country? Imagine how Orban would be spitting fire and brimstone.
In the worst case, this might trigger a chain reaction.

What would a foreign nation which maybe isn't very much well-known of fulfilling contracts that are unfavorable think? Clearly it's no problem to break a contract, the UK demonstrated that. Imagine what Trump would make of that.

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    +1 for mention of Chain reaction. This IMO is the primary reason: to make an example of the UK – axsvl77 Aug 31 '17 at 13:42
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    I think at least a billion pound is added to the bill just because of the way Farage pissed everyone off in the EU. – gnasher729 Aug 31 '17 at 19:00
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    "they still get all the same benefits of free trade etc. as we do." -> is far from agreed. As a British person, I wouldn't mind paying the divorce bill at all, if we continued to receive the benefits those monies were supposed to pay for. Negotiating the bill as a whole seems a bit silly to me since some of the money, like guaranteeing Irish loans, will only be needed in some circumstances. The UK would expect to get paid back their fair share of the Irish loan money and to provide the guarantee money if they default, or neither. – Puppy Sep 2 '17 at 18:59
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We will probably never know how much the administrative costs of Brexit will be. Since it's the first time a member country is leaving the EU, there will probably be at least tens of thousands of lawyer, diplomat and bureaucrat working days spent to figure out what the terms will be, how to ensure the terms are followed, negotiating with the UK and EU members, and so on. Then there's the opportunity cost - the time spent dealing with Brexit could have been spent on other things. So that basically doubles the bill. Then there's post-Brexit costs like updating content of an unknown number of documents, re-arranging work permits for millions of EU citizens living in the UK (which would probably amount to millions of work days unless some sort of general work permit can be negotiated), and generally ensuring that EU citizens don't come out of this with their lives screwed up.

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    "Then there's the opportunity cost - the time spent dealing with Brexit could have been spent on other things. So that basically doubles the bill." That's not how opportunity cost works... – reirab Aug 30 '17 at 20:08
  • Don't forget Westminster working for years on laws and treaties normally done in Brussels. – Martin Schröder Aug 30 '17 at 21:54
  • @reirab I meant it in the sense that any sensible organisation would charge at least double for unplanned work which those in charge consider unnecessary faff. Nobody learns anything particularly interesting, everybody has to work double to keep the wheels turning while the work is being done, and everybody is just miserable for it. – l0b0 Aug 30 '17 at 22:03
  • If I resign from a sports club, the club incurs expenses, but they can't invoice me for those expenses unless I signed up to rules that said I would pay. The Lisbon treaty defines what happens when a member leaves and doesn't mention any administrative charges. – Michael Kay Aug 31 '17 at 11:57
  • @MichaelKay Article 50 states that "[i]n the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union." It doesn't mention administrative charges because it would be impossible to pre-calculate them to any reasonable extent. – l0b0 Aug 31 '17 at 12:31
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A number of good reasons have been named but it's also conceivable the EU does not care that much. For all we know, it could be prepared to substantially reduce this payment as part of an agreement on some other issues. Similarly, the Commission has been adamant the ECJ must play a role in any future dispute on the status of EU citizens in Britain, which is unheard of and does not seem plausible. Even EEA countries like Norway haven't agreed to that, instead relying on a separate court. And those are things that nobody had been talking about before and that do not even touch to the core issue of the relationship between the UK and the single market.

The thing is that, as long as it remains united, the EU has a very strong negotiating position. The UK has a lot more to lose from a hard Brexit and the clock is ticking. So the EU can afford to make anything and everything an issue and might just be preparing ammunition for the next rounds of negotiations or try to defuse anything that might provide leverage to the UK in the trade negotiations. It has no reason to concede ground before the UK has put forward specific proposals that could be negotiated down as part of a quid pro quo and EU diplomats have been complaining loudly that such specific proposals are still missing.

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    unheard of and does not seem plausible, citation needed. If two parties make an agreement it makes sense to agree on an arbitration court. If 28 parties make an agreement the same, and in this case that's called the ECJ. Claiming the ECJ is not impartial is like saying you can't sue the UK government because a UK court is not impartial. Of course the ECJ is impartial, it's called separation of powers. If EU citizens are guaranteed to keep their current rights under EU law, it would seem obvious that EU courts would interpret this in case of disputes. – gerrit Sep 1 '17 at 14:35
  • @gerrit Honestly, your objection does not make sense on its face, no citation needed to explain that. it makes sense to agree on an arbitration court is precisely right and the parties in this case is the EU on the one hand and the UK on the other. An arbitration court would be something between them, it's the way the EEA works, trade agreements work, etc. Crucially, all parties have a role in the composition of these bodies. And as long as the UK is a member, sure, that's what the ECJ is supposed to be. – Relaxed Sep 1 '17 at 22:46
  • The problem is that the only agreement between 28 parties is the EU itself but the UK won't be part of that anymore, it certainly won't name a judge to the ECJ, etc. So once they leave, the ECJ is only a court of the 27, i.e. one of the parties and not a plausible forum to hear disputes involving both of them. The correct analogy would therefore be a Dutch court hearing disputes on Dutch citizens rights in the US or Japan or something and that's unheard of. (I haven't even used the word “impartial” and I don't think separation of powers means much or guarantees anything in this case.) – Relaxed Sep 1 '17 at 22:46
  • As I understand it, this is about people's current rights. So I think a better analogy would be that if Scotland were to leave the UK, that the rights of already present English and Welsh residents in Scotland would be guaranteed and could appeal to a court in London in cases of arbitration. The point being that if the promise "your rights will stay the same" is to be kept, then one of those rights is to appeal to the ECJ in conflict cases. Anything else means rights are being taken away. – gerrit Sep 1 '17 at 23:38
  • @gerrit OK but that doesn't make a difference, that is still unheard of and would also be very hard to imagine in your Scotland scenario. The ECJ will not be the court of “28 parties” and that's the problem. It's interesting you put it that way because that is really the crux of the matter and shows why it's not plausible. – Relaxed Sep 2 '17 at 5:32
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It is also worth remembering that if countries keep leaving the EU it could implode, let alone the already mentioned loss of power and influence for the EU as it gets smaller. Making leaving a problem helps discourage other countries from trying it.

  • Yes, I get the impression there is a strong sense here of "pour décourager les autres": especially at the centre of the EU. The other member states want a good transition, the politicians at the centre want to defend their power base. – Michael Kay Aug 31 '17 at 12:04
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There are various explanations why the sum is not negligible, from the fact that money in your pocket is much better than GDP out there (the EU needs to convince the states if it wants more money), to the fact that the leaving of the UK leaves a hole in said budget and the divorce bill plugs it for some years.

But I think the main point is that the EU has no reason to give up a single cent, so it won't. It's the UK who is in a hurry to get negotiations concluded not to be left in a void.

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The EU is currently getting about €7 billion per year from the UK due to its membership in the EU.

Leaving the EU not only has one time costs associated with spinning down some administrative tasks, but has ongoing costs such as the reduction in bargaining power in world trade and world politics, in addition to the reduction in membership fees.

It's going to be expensive to the EU for the UK to leave, so before they actually leave the EU needs to understand how this transition is going to be paid for, and the need to plan on restructuring so they can operate without the membership payment in the future.

Without this payment plan there's no money for the work that will need to be done as a result of brexit, and so there's no point in proceeding with talks about how to do brexit if there's no money to make it happen.

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It's business. When you say "it's only 0.3% of the EU GDP", that's an awful lot of money. If you were the boss of one of those negotiators (in other words, a EU tax payer), you would be very, very angry about every million Euro that is left on the table. A million Euro is a lot of money. Lots of people have to work hard to produce a million Euro of tax income for the EU countries. And we are talking about 50,000 times that.

From what I read in some UK newspapers, the UK politicians try to make claims that EU demands are "to punish Britain for leaving the EU". That's as far as I know something that has a deep tradition in Britain, the feeling that someone is out to get them. For example, they somehow think that Germany wants to punish them for losing in the 1966 football world cup, and Germans are totally surprised when they here this and are not aware of any such hard feelings. I think it is the same here; the EU wants their money (and obviously the UK is not part of a friendly EU community anymore), but I don't think there is any animosity here. Except for EU negotiators apparently being annoyed with the unpreparedness of the British negotiators.

protected by Philipp Aug 30 '17 at 21:29

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