‘EU in world of pain’ Why Brussels needs Brexit trade deal with UK in fight for survival

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Prime Minister Boris Johnson struck a deal on the withdrawal agreement with the European Union towards the end of last year to include small amendments to the Irish backstop, an issue that was a thorn in the side of his predecessor, Theresa May. Mr Johnson had no such problems, using the Conservative Party’s huge 80-seat majority gained when crushing political rivals in December’s general election, to get his amended withdrawal agreement voted through the Commons by MPs and delivering on his promise to “get Brexit done” on January 31. The UK and EU quickly got trade talks underway, with Britain’s chief negotiator David Frost taking a team to Brussels to meet one led by EU counterpart Michel Barnier.

But already both sides have traded vicious insults over each other’s respective negotiating stances in talks, with huge cracks widening from bitter disagreements over a number of crucial demands being made in the post-Brexit agreement.

Following the conclusion of the latest round of virtual talks earlier this month, Mr Frost has warned the EU would have to dramatically relent in a number of areas before the next set of negotiations begin on Monday.

Mr Johnson is insisting a post-Brexit trade deal with the EU must be signed before the end of the transition period on December 31, and is refusing requests to extend this deadline to allow more time to get one agreed – a move that has left leading EU figures furious.

Prior to the start of the first negotiations with Brussels in March, he also warned the UK would walk away from the negotiating table if sufficient progress had not been made by next month.

Political experts have warned this piles huge pressure on the EU, especially with the bloc desperately struggling to manage the fallout from the coronavirus crisis.

The International Monetary Fund (IMF) has warned the eurozone could shrink by as much as seven percent this year, sparking fresh fears for the future of the under-pressure single currency.

John Macdonald, Head of Government Affairs at the Adam Smith Institute think tank, explained how the coronavirus crisis has “radically changed” the negotiating positions of the UK and EU in the space of just a few months.

He warned the EU is “about to be in a world of pain” as the economic fallout throughout the bloc is threatening to leave the continent near breaking point.

Mr Macdonald said: “The coronavirus crisis has radically changed the negotiating positions.

“The UK, like nations across the world has been ravaged by the pandemic. But the swift and extensive action of the Chancellor has staved off economic collapse.

“On the other hand, the EU is about to be in a world of pain.

“As Spain, Portugal and Italy face the prospect of sovereign debt crises, the pooling of debt, greater fiscal transfer from larger EU economies and potential tax hikes will likely become necessary, jeopardising the EU’s already compromised finances and increasing tensions between member states.”

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Patrick Sullivan, chief executive of the Westminster-based Parliament think tank, told Express.co.uk: “The UK now has the upper hand in trade talks.

“Eurozone-fledgling companies are still over-reliant on bank debt funding compared with, for example, their American counterparts.

“Eurozone banks are still not strong enough to fund a new financing for European business from their own balance sheets.

“They need global investors with risk appetite to invest, and London’s financial expertise is essential to achieving this. Given the perilous state of the eurozone, the EU now needs this trade deal more.

“A post-COVID-19 recession European continent will be crying out for a new generation of entrepreneurs to create companies which will go on to be world leaders, generating employment and wealth for Europeans.

“This requires interconnected and efficient access to their largest trading bloc, not artificial barriers to trade and investment.”

The pressure on the EU intensified after the European Central Bank warned the eurozone’s most debt-ridden countries risk bringing the single currency bloc to its knees as the impact of the coronavirus pandemic is laid bare.

Debt levels are expected to rise well above those witnessed after the 2008 financial crisis, according to the ECB’s biannual financial stability review.

Eurozone Governments’ budget deficits are forecast on average to rise to eight percent of gross domestic product.

The ECB has also forecast aggregate government debt to increase from 86 percent of GDP to over 100 percent across the eurozone.

The review warned: “The pandemic represents a medium-term challenge to the sustainability of public finances.

“A more severe and prolonged economic contraction than envisaged would risk putting the public debt to GDP ratio on an unsustainable path.”

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