http://www.bbc.com/news/world-europe-36659900
> "Any agreement, which will be concluded with the UK as a third country, will have to be based on a balance of rights and obligations. Access to the single market requires acceptance of all four freedoms."
Are you saying that they're bluffing? (Well, that's possible, I guess.)
Regardless, I suspect they won't do it because it would be irrational. Of course they have every incentive to make threats. But actually going through with them would hurt them just as much as the UK. Trade is a mutual benefit after all.
Anyway it just strikes me as mean-spirited. I doubt the EU leaders really care about immigration that strongly. They are also holding the UK to a different standard than other non-EU countries, and there is no justification for that.
I'll believe their serious if they start demanding the US, Australia, etc, open their borders or lose trade. Good luck with that. Yet somehow they find it weird the UK doesn't want unrestricted immigration.
If Amex offers $500 credit to any new card holder, and if I happen to have the card, cancel it, and immediately re-apply, chances are that Amex won't give me $500. In fact, if Amex did, it would be financially irresponsible to its shareholders.
You may not like it, but EU does not really need a justification to treat UK differently from Australia. The leaders of France and Germany are elected to represent the interest of French/German people, and if they believe that discouraging more countries from walking out is in the best interest of EU and their own people (now you might disagree, but they can surely believe that themselves), then they are morally obliged to act tough to UK.
Freedom of movement of trade, people/labour, capital and services is the core founding principle of the EU - they care about it a lot.
> Regardless, I suspect they won't do it because it would be irrational.
If Britain is given a deal that allows them all of the benefits of EU membership without any of the perceived downsides, all other EU member states will want this better deal too. Giving the UK such a deal would cause a number of additional countries to leave the EU. Thus, it would be irrational for the EU to give the UK a deal which would lead to the eventual breakup of the EU.
> I believe the EU has free trade deals with Australia and Canada, without unrestricted immigration.
There are essentially three ways to trade with the EU: As a member state (Britain's current position, France, Germany, etc.), as a member of the EEA (Norway), or under WTO rules (Australia).
If the UK wants one of the first two options they will need to allow freedom of movement. If Australia (somehow) applied for membership of the EU or EEA it would need to allow freedom of movement for EU citizens.