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?
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 According to this website (in the left side infographic in the page) the EU budget in 2011 (a bit outdated) was 129.3 billion euros.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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
