The EU is very scared that we might not allow those workers to stay - they've already been stressing how important it is that we do so. This is a massive, massive issue to the EU - we have a very strong controlling hand.
I wouldn't suggest that we actually go ahead with it, but nobody in a negotiation is ever willing to go ahead with all of their threats - you just need the other side to see you're willing to do so.
Legal advice in this country suggests that we don't have to pay anything at all. The EU have been clear there's a deal to be done here - we want reduced barriers, they need our money. This is the easiest of the lot.
In the real world, very few negotiations end up in one side losing. If both sides are coming to the table then it means both sides want to deal.
They need our trade and our money, we need their trade. We will end up negotiating a settlement that both sides are happy with - I suspect there are weaknesses on their side that could be exploited, I don't know much about those negotiating for ours. We've done a good job of keeping our cards close to our chests - certainly better than they have.
Do you think the people on the other side are stupid? If we can discern that its not ever going to happen that we kick out these people, why do think the EU are incapable of coming to the same conclusion?
The legality of the financial commitments made over the past years makes no odds. You are missing the point. It's a simple: pay up what you committed to in the past, or else we won't give you access to our 500m consumers. Highly simple. Any come backs? Not really. Shave a bit off here and there.
We've already lost with a hard exit, that much is clear. We won't have much say in regulation (that we'll end up following), we will lose some free access to 500m consumers and we'll likely lose exports to the EU and pay more for imports. We win by working with countries who are less advanced and much much further away. It doesn't makes sense.
But as for a bargaining position, the best is: we would like to work closely with you, we love the EUs culture and civilisation, we are into you, but have to deliver this mandate, help us to do it as cousins rather than brothers.
Ironically the Tory hardline approach will do more to help the EU than a conciliatory approach, as a) brexit cancellation is possible and b) we'll end up being made an example of why not to leave.
I have seen next to nothing on a vision for the UK post exit. Nothing. It's shameful. Here is this supposed opportunity, yet we've presented no representations on what a bold fresh future would look like. If we had, that would be a small bargaining chip. To show the UK has a vision and purpose. I don't see that sadly.