Negotiations on the “Multiannual Financial Framework” are getting underway, but how to make up the Brexit-shaped shortfall?by Beth Oppenheim / May 10, 2018 / Leave a comment
The European Union has just begun negotiating its budget or Multiannual Financial Framework (MFF) for 2021-27, which will soon provoke the usual aggressive wrangling between member states. The EU27 will have to unanimously agree on the budget before it can be signed off. This time, the talks promise to be even thornier than usual. The UK’s planned exit will leave a hole of €10 to €15bn per year, which will need to be filled.
As it stands, net payers contribute less than half a percent of their gross national income (GNI). Nevertheless, the bloc’s finances are a highly charged issue. National leaders are under intense pressure to get a good deal on the budget. They will not want to take home news of higher contributions, or diminished receipts, for fear this could inflame euroscepticism and lose them votes.
In order to plug the Brexit gap, all member states would need to pay just 0.1 per cent of GDP more each. Whilst France and Germany have expressed willingness to step up their payments, the so-called Frugal Four—Sweden, Austria, Denmark and the Netherlands—have been vocal opponents. “I don’t think we should pay one krone more,” Danish Finance Minister Kristian Jensen has said.
Will they have to? The EU’s budget chief, Günther Oettinger, is seeking to increase the EU’s spending commitments to 1.11 per cent from 1 per cent of the Union’s GNI. This is equivalent to €1,279bn from €1,087bn. However, direct comparison is misleading for two reasons. First, Brexit and the loss of the UK’s large contribution makes calculating the budget more complicated. Second, previous budgets did not include the sizeable European Development Fund, which the Commission wants to incorporate into the new MFF. If you include the Development Fund and strip out inflation, there is no increase in the amount being spent. In fact, commitments decrease to €1135bin from €1138bn.
Still, faced with resistance from member states, Oettinger has proposed a 5 per cent cut to certain funding mechanisms, and to fisheries and the controversial Common Agricultural Policy. He has also found new income streams to indirectly increase contributions. For instance, the Commission wants to recoup more customs duties from member states; the 20 per cent that they currently keep would be reduced…