Brexit totally dominates the UK political landscape—but in Europe the 27 are preoccupied with talks on something else entirelyby Jill Rutter / February 23, 2018 / Leave a comment
While all attention in the UK is focused on whether the government and opposition can come up with a clear view of what future trade relationship the UK wants with the European Union, the other 27 member states are focussing on something much closer to their collective heart: their budget after 2021.
This will be the first EU Budget since 1973 without a significant net contribution from the UK. How to cover that gap is likely to prove a divisive issue over coming months.
The EU Budget is very small in relation to the EU’s overall size—or indeed national budgets—at only 1 per cent of the bloc’s GDP. Even so, making a big adjustment to a small budget is not that easy. The UK contributed around 15 per cent of total revenue: losing a sixth of your income overnight requires some painful decisions.
Three camps seem to be emerging.
The first is formed of those who think that the important thing is to maintain spending and increase revenue to compensate for the loss of the UK contribution. Although overall EU spending is relatively small, some countries are big beneficiaries: the Commission estimated that in 2015 EU spending accounted for 6.4 per cent of Gross National Income in Bulgaria and 5.2 per cent in Hungary. In Germany conversely it was a blink-and-you-would-miss-it 0.5 per cent.
And even after reform attempts, the EU budget is still very unbalanced, with agriculture still making up 40 per cent of the EU Budget. It is impossible to cut EU spending without reducing farm subsidies. The German EU Budget commissioner, Guenther Oettinger has already indicated that he is under pressure to spend more on other things and that everything has to be on the table. Even the French government is signalling more flexibility—but farmers have proved adept at mobilising in the past.
The opposing camp wants to see spending cut to avoid having to increase their contributions. Covering the UK’s net contribution would not mean big budget hikes—Germany would have to pay around €2bn euros a year more (and seems to be ready to countenance that—after all one of the issues in Germany is what to do with its budget surplus). But other…