Little Macron’s Threats


Boris Johnson certainly struck a nerve in Paris when he suggested that under his leadership the £39B divorce bill may be retained. President Macron said that if we were to not pay the bill it would be like a sovereign debt default and there would be ‘consequences’. This sinister, threatening tone conjures up images of being punished by international markets with a lowering of national credit rating and an increase in the cost of servicing debts with a devaluation of the pound. Boris is right, however, to suggest that withholding the £39B may give us some leverage in determining the rest of the deal with the EU. Their minds are likely to be concentrated by the money in ways that they wouldn’t be by less prosaic stimuli.

Boris is promising to be tough with the EU in a way that the more brittle Mrs May never was. It may be exactly what we need as the EU believes it has the upper hand since the negotiation of the withdrawal agreement.  The EU was keen to settle the financial commitments as the first stage in negotiations and Mrs May went along with this wish. Boris says he was never sure this was the right thing to do and he would rather see how the rest of the deal panned out before making firm financial commitments.

Mr Macron may posture and threaten but the truth is we are still immersed in a negotiation. Even if the EU is right and there is no further negotiation on the withdrawal bill there is still the matter of our future relationship with the EU. Until that is sorted out nothing is set in stone. The EU would do well to recognise that as a new PM comes into office he or she could do with an early victory to allow them to say they have contributed to the process. There is no way that the withdrawal bill as is will make it through the House of Commons. This leaves the EU with a choice between no deal and looking again at the withdrawal bill. It is in the economic interests of both parties to come to a deal. If this means that there needs to be some movement on the part of the EU in regard to the backdrop then so be it.

Something needs to be done to persuade the EU to take another look at the withdrawal agreement and pointing out that the divorce bill is not forthcoming is the right sort of move. If there is no deal with the EU then the divorce bill becomes a very interesting point. It may be that it should not be paid at all. This would go some way towards building up credit for Boris’ claimed £350 million per week.

Boris needs to stand tough in his approach to the EU. On the other hand he must be careful what he promises in his bid for leadership, because if he is successful he will be expected to deliver. Boris can’t be browbeaten by Macron, Merkel et al. He needs to stand firm in the face of threats and cajoling. He knows what needs to change in order for him to have a deal that he can sell to the UK parliament. If Boris is given the top job he needs to hit the ground running. This sort of statement is meant to focus minds in anticipation of that requirement.

In the end the divorce bill is likely to be paid. Boris just wants to make sure that if it is going to be paid it has gained as much as it can as a bargaining chip. The EU’s hunger for the money is tangible. It is a powerful bargaining chip to hold over their heads. Boris recognises the power of his position as does President Macron.

In the end nothing is certain. Boris may not succeed in his bid to become leader. If he doesn’t, whoever does become leader will have the same issue to deal with in the divorce bill. Whoever it is would be wrong to give away such a powerful bargaining chip for free. The EU leaders can postulate as much as they like but in the end it will be up to them to behave properly. If they do not they may become £39B poorer. Whatever other consequences there may be, that is one of the consequences of holding too rigidly to their position when the need for compromise is clear.