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13th Dec 2019

EU mulls post-Brexit budget options

  • Oettinger said there would have to be cuts in the next budget period (Photo: ec.europa.eu)

The European Commission has unveiled a reflection paper on the future EU budget, amid concerns that the departure of the UK - a net contributor - would stretch the current resources.

"We won't have the UK with us any more, but they were net payers ... so we will have a gap of €10 billion to €11 billion a year," EU budget chief Gunther Oettinger told a news conference in Brussels on Wednesday (28 June), referring to the fact that Britain paid more into the budget than it got back.

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At €150 billion, the EU budget is relatively small if compared to the US federal one, where 2016 spending was $3.9 trillion (€3.4 trillion).

Member states send roughly one percent of their general national income to Brussels, whereas Washington gets roughly 20 percent of the income of federal states.

Government contributions account for about 80 percent of the total budget. The rest comes from customs duties and a carbon emissions trading system.

Brexit comes just as the EU has been tasked with extra work by its member states: stronger border control, combatting terrorism, and forming a defence union.

“We can either spend less or find new revenues,” Oettinger said.

He put forward ideas for what such streams could be.

UK holiday makers could have to pay €5 each time they travel to the EU after their country leaves the bloc.

The EU could also introduce a tax on financial transactions, electricity, motor fuel or corporations, if member states agree..

But the EU will also have to make cuts and shift priorities to make ends meet, Oettinger warned.

In order to stimulate a broader discussion on what to keep and what to slash, the commission set out five possible scenarios for the future budget, with options ranging from carrying on as usual to far-reaching changes with less support to agriculture and cohesion policy, which currently take more than 70 percent of the money.

While member states are generally unwilling to pay more into the budget, it is likely that proposals to cut funding to agriculture or other programmes will turn out to be controversial.

The paper also questions the length of the budget period, which is currently runs over a seven-year span. This could be shortened to five years, to coincide with the mandates of the European Parliament and the commission.

Another proposal on the table is whether one should introduce conditionality on EU funds, so as to stop them from going to countries that violate the rule of law or refuse to take refugees.

When asked if he would support linking funds with such democratic conditions, Oettinger said he was “entirely open to the result to be achieved”, and welcomed a discussion on the matter.

Member states, the European Parliament and civil society will now be asked to discuss the five scenarios.

Their views will feed into the proposal for the next long-term budget, which will start running in 2021. The commission will present this budget bill in the middle of next year.

Brexit would already eliminate the rebates enjoyed by member states such as Denmark and Sweden, Oettinger said.

The budget could also be augmented by fines, such as the recent ones against Apple and Google, who were found to be in breach of EU antitrust rules and charged with paying billions in fines.

But these fines would take many years to end up in the EU coffers, because of lengthy appeal processes and Oettiinger said it was not possible to count on such income to finance EU policies.

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