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Thursday, Jul 31, 2025

Brexit riddle: UK could still bail out EU countries despite leaving bloc

Brexit riddle: UK could still bail out EU countries despite leaving bloc

BREXIT was backed by UK voters in order to secure economic independence from the EU - but claims Britain could be forced to bail out EU countries after leaving the bloc sparked a row.
Bickering between the EU and the UK over a £33billion divorce bill has plagued talks – but Prime Minister Boris Johnson eventually accepted the terms in his withdrawal agreement. Much to the dismay of leavers in the UK, the divorce bill could still be being paid off in 2060, according to the Office for Budget Responsibility (OBR).

The OBR estimated in January that the bill stood at just under £30billion – most of this to be paid by 2022, with some relatively small payments still being made until the 2060s. However, the costly bill could be the least of the UK's worries, as the withdrawal agreement is filled with numerous clauses which threaten to pile on further costs. This is because beyond the divorce bill, the withdrawal agreement between the UK and the EU places future financial liabilities on Britain.

The agreement, which was passed by Parliament and settled on by both the UK and the EU, saddles Britain with a responsibility to pay for a portion of any future losses on those loans and financial commitments, regardless of whether any benefit was reaped from them.

One caveat is that this only applies to loans and commitments made when the UK was still a member state.

The withdrawal agreement states that the UK will pay a portion through the EU budget – around 12 percent – because that is the average contribution the UK made between 2014-2018.

But this figure could change if a European country finds itself in economic turmoil, claimed Bob Lyddon for Global Britain.

He suggested in a 2019 paper that if, for example, Spain, Italy or Ireland are unable to pay their full contribution to the EU budget due to economic struggles, the UK may have to up its contribution to compensate.

As the eurozone is in the midst of its deepest contraction on record in the wake of the coronavirus pandemic, this could become a fear.

Spain was plunged deepest after its economy shrank by 18.5 percent in the April-to-June period, having already fallen by 5.2 percent in the first three months of the year.

The country was the worst performer in the eurozone, which saw its overall GDP decline by a record 12.1 percent.

The official Eurostat agency said the bloc-wide falls were the largest since it began recording the figures in 1995.

However, economic analyst for the Telegraph, Jeremy Warner highlighted that this isn't necessarily true.

He said in July last year that the claim that the UK would have to bail out European countries was an "alarmist and unwarranted claim".

Mr Warner highlighted that former Prime Minister David Cameron secured an arrangement with the EU that eases these concerns.

It read: "Emergency and crisis measures designed to safeguard the financial stability of the euro area will not entail budgetary responsibility for member states whose currency is not the euro, or, as the case may be, for those not participating in the banking union.

"Appropriate mechanisms to ensure full reimbursement will be established where the general budget of the Union supports costs, other than administrative costs, that derive from the emergency and crisis measures."

Mr Warner adds that the UK could be beholden to the so-called Payments Appropriation, but this would require extreme circumstances for these liabilities to be triggered.

He also added that the UK may bail out European countries voluntarily.

Mr Warner added: "It is true that during the last eurozone crisis, the UK did participate in the Irish and Portugese bailouts, but on a bilateral, voluntary basis commensurate with supporting UK interests in these countries.

"These loans are in the process of being repaid with no loss.

"We have no problem standing behind the International Monetary Fund’s sovereign bailouts because we think it is in our own best interests to do so."
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