Unresolved UK EU divorce bill will cost Ireland

The continued failure by Britain’s negotiators to produce a meaningful proposal for exiting the EU has the potential to create significant collateral damage for Ireland. The infantile “go whistle” comments by Boris Johnson in relation to settling the EU exit costs does nothing to move the Brexit negotiations onto a serious and realistic level.

With 20 months outstanding to the exit date from the EU, there is precious little time for serious negotiations which should not be wasted on foolish game playing.

Our farmers, who rely on subventions under the EU’s common agricultural policy, have perhaps most to fear, as the loss of the significant UK contribution to the EU agricultural budget will inevitably reduce supports to the sector through a combination of direct payments to farmers, financial assistance towards investments in rural development, and environmental protection and market support measures. EU subsidies to farmers alone came to €1.6bn last year.

Apart from the agri-food sector, we can expect widespread changes to the EU budget as the UK’s membership of bodies such as the European Investment Bank (EIB) and ECB is terminated.

Of additional interest to Ireland is the European Financial Stabilisation Mechanism (EFSM), from which Ireland took a €22.5bn loan to bail itself out of the financial crises. This could have funding support problems when the UK terminates its membership. The EU negotiators have already pointed out the responsibility Britain must carry if the countries who received EFSM loans fail to repay them.

If, as a result of this, additional money is required to fund the EU budget, further contributions from EU members may be required.

The political and economic consequences of the UK leaving the EU without responding to claims under the EU budget are likely to be profound. If the UK wants a preferential trading relationship with the EU, including a transitional arrangement, the EU partners are likely to demand a financial contribution post-Brexit.

Last week, there were a number of indications that the Prime Minister Theresa May was moving to acceptance of the need for a transition deal after the two-year exit negotiations. This is a crucial development and one favoured by her chancellor, Philip Hammond.

Agreeing the details of the exit or divorce bill is, however, the first necessary step to getting a longer term transitional deal.

The EU will request a payment from the UK to cover its share of the EU’s outstanding spending commitments and liabilities when it leaves. There are assets which the UK owns, within the EU structures, which can be sold back to the EU as part of the final bill calculation, such as the 16% holding within the EIB which has an estimated value of €11bn.

Trade Minister Simon Coveney — as Ireland’s principal minister for overseeing our interests — needs to take the wider view in helping the UK negotiators reach a full financial Brexit settlement.

We need the financial breathing space that a solid contribution from the UK will give on leaving the EU. But also, we need to ensure a transitional period of at least two years is added onto the formal exit date of March 2019 so that Irish exporters do not face a cliff edge change in their trading with the critical UK market.