The Centre for Policy Studies has said that the EU’s “existential challenges” mean it “has a lot to lose” from an acrimonious divorce.
The conclusions come after hardliners in Brussels have pushed for a “punishment” deal with Britain and made the prospect of the talks being terminated early more likely with a exit fee demand of £85 billion.
The thinktank’s report has also made leading Remainers such as Nick Clegg and shadow Brexit Secretary Sir Kier Starmer look ridiculous over their claims that Brussels has “a strong hand” in the talks and Britain is in “a weak position”.
The paper questioned how well the European Commission's negotiating position would stand up to "inherent long-term tensions".
The Centre for Policy Studies has said the EU ‘as a lot to lose’ from an acrimonious divorce
A 'no deal' scenario would have consequences for the EU's financial stability
Centre for Policy Studies report
Crucially, it argued that the opposite was true for the Conservative government which it predicted would secure an "increased majority" in next week's General Election.
It noted: “It is therefore mistaken to take the EU’s negotiating position at face value while criticising the UK’s position as being weak and vulnerable.”
In comparison it pointed out that German and Italian elections pose a huge problem for the stability of the EU, with Angela Merkel in particular facing “challenges”.
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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.
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"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."
Brussels have pushed for a ‘punishment’ deal with Britain and demanded an exit fee of £85 billion
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.
The paper predicted the Conservatives would secure an ‘increased majority’ in the election
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."
On immigration it highlighted internal conflict already in the EU between east and west states.
The paper said: “The loss of control of Europe’s external border has caused increasing tensions, with the [eastern European] Visegrad group refusing refugee quotas.
It pointed out that German and Italian elections pose a huge problem for the stability of the EU
“The EU has launched infringement proceedings against Hungary and [French] President Macron has called for sanctions against Poland.”
And the way the euro has caused mass unemployment across the continent also means that it will struggle to stick together on economic lines especially with the British labour market being potentially more difficult to enter for young people.
The paper said: “It is highly questionable as to whether high unemployment can be indefinitely sustained in weaker Euro economies.
“Over 60 per cent of 16-34 year olds in Greece, Italy, Spain and France would be willing to join a large scale uprising against their governments.”