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However, Her Majesty’s Treasury has downplayed any risk – and said the EU had already begun repaying the money it owed. Bob Lyddon claimed current, underpublicised arrangements leave the nation dangerously entangled with the European Investment Bank (EIB) – and in grave danger of being held liable for massive future payments. Mr Lyddon, the founder of Lyddon Consulting Service, was speaking at the start of a crunch week, with Mr Johnson having set a deadline of Thursday for the conclusion of talks aimed at sewing up a wide-ranging trade deal with the bloc.
However, Mr Lyddon believes the problem is more fundamental than disagreements over fishing rights or state aid and dates back to the withdrawal agreement Mr Johnson signed last year, which he said left Britain boxed in to a number of key financial areas.
He said: “The fact that we voted to leave the EU should mean that when we leave, we sever our connection with the EIB.
“But that isn’t what has been negotiated at all.”
Currently, the UK has an invested capital in the EIB of €3.6billion (£3.26billion), Mr Lyddon said.
In addition, he said there was an extra block of capital which the UK has subscribed to, totalling €35.6billion (£32.2billion).
Mr Lyddon said: “Only €3.6billion is already paid in.
“The €35.6billion is callable to make good losses that the EIB couldn’t cover from their own resources. That money would come from the Treasury.
“But another way we could be whacked is if the EIB makes losses up to the amount for which it has got EU guarantees, which is currently €77.5billion, if it made losses on those programmes it could call the whole lot back to the EU, and theoretically we would have to pay all of that.
“Because the EU’s budget structure is what is called joint and several liability.
“Any one member state could have to pay everything and under the Withdrawal Agreement, we don’t get out of that at all.”
He added: “The worst possible case is we get called up for €35.6billion to the EIB, the whole subscribed but uncalled capital, and the €3.6billion that we’ve paid in already and lose the entire €39.2billion (£35.5billion), that’s the base.
It is a genuine risk
“Then we have to pay up for all the EU’s current guarantees to the EIB – they total €77.5billion (£70.1billion).
“So that is for the EIB’s loans outside the EU plus the first two chunks of Invest EU, all our capital of €39.2billion, plus this €77.5billion – we’ve lost €116.7billion (£106billion).”
Mr Lyddon said he was particularly concerned by InvestEU, the investment programme aimed at kick-starting the European economy, which he said was a rebrand of the European Fund for Strategic Investments, and which has investments totalling €500billion (£452billion).
He explained: “Because InvestEU is all structured like a Private Finance Initiative, €500billion of total project assets would only have to be reduced by 15 percent for the EIB to be completely wiped out.
“It is a genuine risk. The total loans of the EIB built up over its first 30 years of life is about €400billion.
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“But over the last three or four years with InvestEU, it has added another €500billion.
“It’s more than doubled in size but we don’t see that in the EIB’s accounts because like PFI it’s all done off the books, or done off the balance sheet.
“They have radically increased the amount of risk they are taking in countries that we know are in difficulties and that was before COVID-19.
“It’s an invisible monster.”
Mr Lyddon said Mr Johnson needed to act now to resolve the situation, rather than waiting until after December 31, the end of the transition period.
He explained: “We should tear up the withdrawal agreement and that would save us from the EU guarantees to the EIB of €77.5billion, so we wouldn’t have any residual liability for the EU’s guarantees to the EIB.
“What we should also do is say, ‘look, we want our capital, our percentage of the ownership of the paid-in capital and reserves of the EIB, we want that back and our callable capital should be cancelled’.
“In exchange for that, and this is not entirely unreasonable, we should also buy out the EIB’s loans into UK borrowers.
“That’s not meeting an expense, we get an asset, we buy their UK asset book for a figure, and that’s not difficult to determine.
“I think they have about £40billion loans into the UK.
“We’d have to borrow perhaps £36billion to buy out the asset book, but then you get the asset book and those loans pay out, and that would draw a line under it.”
A spokesman for Her Majesty’s Treasury told Express.co.uk: “These calculations are wrong and misleading.
“We have left the European Investment Bank and they have already started paying back our €3.5bn paid-in capital.”
Express.co.uk understands the EIB, which was established in 1958, has never before made a call for capital, a legal term referring to the right of an investment firm to demand a portion of the money promised to it by an investor.
Express.co.uk has also approached the European Commission, led by President Ursula von der Leyen, to ask them to comment on the situation.
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