A 'no deal' with UK over Brexit 'would significantly ration EU resources'

The European Union has "far more to lose" from a "no deal" with the UK in its forthcoming Brexit negotiations compared to a "no deal" with Greece, a British policy think tank report has suggested.

The advent of a "no deal" with Britain in its Brexit talks is "likely to exacerbate the EU's existential challenges, rather than reduce them", a Centre for Policy Studies paper said.

The CPS Economic Bulletin argued it was "mistaken to take the EU's negotiating position at face value while criticising the UK's position as being weak and vulnerable".

It said: "The EU's existential challenges illustrate that both sides have a lot to lose from an acrimonious divorce."

The paper questioned how well the European Commission's negotiating position would stand up to "inherent long-term tensions", arguing that the opposite was true for the UK government which it predicted would secure an "increased majority" in next week's General Election.

Entitled The Existential Challenges Looming For The EU, the paper said: "A 'no deal' scenario would have consequences for the EU's financial stability and would significantly ration resources, not to mention have a huge impact on many of its exporting industries.

"It would also impact some EU countries far more than others, which could lead to increasing tensions within the bloc.

"This will give the European Union as much of an incentive to come to a reasonable accommodation on the Brexit talks as it does for the UK."

On the Brexit "divorce bill", the paper maintained there was no legal obligation for the UK to "pay what the EU is demanding" acknowledging that the UK government has indicated it would meet any legal obligations it has.

The paper outlined a series of existential challenges facing the EU including: economic issues relating to a possible Italian sovereign default, high youth unemployment, resistance to moves towards fiscal union, tensions over immigration and refugee quotas, plus Euroscepticism across Europe.

It said: "Both net contributor and net receiving countries will be keen for a deal to be agreed that softens the blow from the UK ceasing its full net contributions.

"The UK's security and defence capabilities are also required by many European countries, and the trading relationship between the UK and the EU is far more substantial than that of Greece and the EU."

The paper was written by Daniel Mahoney and Tim Knox.