Brexit
throws EU budget off course
As
MEPs prepare to vote on the EU budget, concern about what happens
once the UK leaves the bloc.
By MAÏA DE LA BAUME
AND QUENTIN ARIÈS 10/25/16, 11:15 PM CET Updated 10/26/16, 5:48 AM
CET
STRASBOURG —
There’s a new plot twist in the already complicated EU budget
negotiations — Brexit.
On Wednesday, MEPs
are scheduled to vote on a proposed budget worth €161.8 billion in
spending commitments, including funds to tackle the migration crisis
and unemployment across the EU. The Parliament and Council will begin
budget negotiations on Thursday and have until November 17 to strike
a deal.
But many in the
chamber and beyond will be wondering what will happen to that pot of
cash once the Brits have gone.
At least in the
short-term, the U.K. remains a member of the EU and will have to
continue making contributions to the budget. “As long as they are
in, they need to pay and receive,” said Jens Geier, a German
Socialist MEP who is leading the budget negotiations on behalf of the
Parliament.
When the Brits
leave, those other rebates will likely go as well.
But the U.K.’s
future status within the bloc raises a number of questions, including
how the EU will make up for the shortfall caused by the slump in the
value of the pound; how the end of the U.K.’s controversial rebate
will affect future EU budgets, and how much the U.K. will owe the EU
after the divorce is finalized?
“Brexit is looming
large on the budget,” said Indrek Tarand, an Estonian Green. “It’s
not Romania or Estonia who are leaving. It’s a big contributor so
we have a lot of unanswered questions – and no good answers.”
Sterling has lost
almost a fifth of its value since the Brexit vote on June 23. At
current exchange rates, the U.K.’s £10.3 billion annual
contribution is worth just €11.5 billion, well short of the agreed
€14 billion.
How will the EU
close that sizable gap? If the Commission gets its way, the money
will come from fines levied against companies and member countries
for breaking EU competition rules, according to a draft of plans to
amend the budget. So far this year, such fines have been worth €1.1
billion.
Many MEPs believe
that the rest of the EU will have to make up the remainder of the
shortfall.
“We will have to
fill the deficit. At the end of the year we are not allowed to have
red figures, we have to have a zero debt budget on December 31,”
Geier said. “It is possible that the pound rises again, but for the
time being … we have a deficit.”
Officials from both
the Council and Commission said those fears are unfounded as the 2016
budget won’t be fully used up before the end of the year and what
is left over can cover any shortfall.
Re-rebate
When Margaret
Thatcher famously negotiated a permanent rebate for the U.K. at
Fontainebleau in 1984, other countries wanted rebates too —
Austria, Denmark, Germany, the Netherlands and Sweden have all had
them, albeit granted on a temporary basis.
When the Brits
leave, those other rebates will likely go as well.
“Since all the
rebates are calculated on the basis of the British rebate, the other
rebates will also disappear,” Geier said
Ingeborg Grässle,
the combative German center-right MEP who chairs the Budgetary
Control Committee, said the central question would be how much the
U.K. has to pay into the EU budget even after it leaves.
“We are looking at
the sums, and how the U.K. will need to pay in liabilities,” she
said. “In my view, there is a risk the U.K. will need to pay more
after it leaves.”
If the U.K. wants to
remain part of several long-term schemes, such as Horizon 2020, the
research and innovation project, it will come at a cost. Grässle
believes the U.K.’s bill might top €20 billion after it leaves
the EU.
He said it would put
Britain “on the same level as Chile or Mexico” when it came to
free trade deals with the EU.
But sources in the
Council believe the impact of Brexit is limited – at least for now
– as the U.K. has yet to trigger Article 50.
“The EU budget
issue will be a top priority for sure when the negotiations start,”
an EU diplomat said. “Filing the British contribution is essential
for the EU to avoid bankruptcy. And it will be a test to check if
finding a EU27 position is actually realistic.”
Geier said he
regretted Prime Minister Theresa May’s apparent shift toward a
“hard Brexit” that would see the U.K. leave the single market. He
said it would put Britain “on the same level as Chile or Mexico”
when it came to free trade deals with the EU.
The real change, he
said, would not be seen until 2019 when the EU finalizes the next
seven-year, long-term budget – the multi-annual financial
framework. The Commission is expected to present budget plans
post-2020 late next years and negotiations are likely to take years.
Commission’s
sources and diplomats confirmed they have started to brainstorm on a
post-Brexit budget but they said that much will depend on the UK’s
future agreement with the bloc.
“We will have to
think about what do we want for the EU, which policies we want to
strengthen and recalculate the budget on this basis,” Geier said.
Authors:
Maïa de La Baume
and Quentin Ariès
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