WellTax Blog

The Brexit hole in the EU budget

January 9, 2018

The long negotiations in view of the next community budget 2021-2027 began yesterday. Also due to the United Kingdom’s exit from the Union, the situation remains delicate. The President of the European Commission Jean-Claude Juncker took advantage of a conference here in Brussels to outline the principles of the next community proposal: among other things, he said, policies in favor of cohesion and agriculture will be modernised, but not reduced “beyond measure”.

The Twenty-Seven will be called upon to square the circle in the coming months. On the one hand, they will have to deal with the exit of Great Britain, expected in March 2019 (a loss of contributions amounting to 12-13 billion euros); on the other, they will want to review the Union’s financial priorities, as Juncker himself explained. There are many issues, because the negotiation will reveal the different national positions on the future of European integration.

«The budget is not an accounting exercise. Unlike in the past, our task must be to decide our objectives first and then the amount of the budget items – said the President of the Commission -. Globalization requires us to face new challenges, different from those dominant in 2014″, when the current budget came into force. The former Luxembourg prime minister then mentioned security, defence, immigration, climate change and employment.

The current budget has a value of around 1000 billion euros. Referring to the two most expensive items, agriculture and cohesion, President Juncker specified that it is urgent to “simplify, modernize, make spending more flexible”, but “reducing them excessively is not a choice that I would make my own”. He emphasized the need “to continue to reduce disparities between European regions” and to ensure “food autarky” for the Union, even in a future marked by climate change. The objective is to find an agreement (unanimously) in the European Council by May-June 2019, just after Brexit, scheduled for March. “We have already accumulated a lot of delay”, warned the president of the EU executive, noting that the next negotiation must allow Europe “to show Asians and Americans that the Union is capable of responding to the challenges of the future”, perhaps also slightly increasing the size of the budget (today equal to around 1% of European GDP).

In this sense, Budget Commissioner Günther Oettinger confirmed that Brussels will propose to compensate for the lack of British contribution half with spending cuts and half with an increase in own resources (VAT and customs duties). A working group led by former Italian Prime Minister Mario Monti has proposed new sources of income. Unlike his president, Oettinger spoke explicitly of “impressive cuts” in some programs.

Also present at yesterday’s conference in which representatives of 33 countries participated, given that there is such interest in the future community budget, the Minister of Economy Pier Carlo Padoan explained that Italy’s objective is to preserving the posts dedicated to cohesion and agriculture, while at the same time financing European public goods: «The fact that Italy pays for immigration for everyone not only in financial terms but also in political effort cannot go on like this».< /p>President Juncker’s exit regarding agricultural spending will reassure France, a major beneficiary. Minus Germany. At the same conference, German Foreign Minister Sigmar Gabriel noted how expenditure on agriculture and cohesion is “high” (equal to 73% of the 2014-2020 budget). At the same time, the politician admitted that Berlin is not so much a net payer, the Zahlmeister of the Union as the Germans like to describe Germany, as “a net beneficiary of the European budget”.

Article from “Il Sole 24 ore”

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