Brexit and the EU Budget: Threat or Opportunity? · © Jörg Haas and Eulalia Rubio, January 2017...

© Jörg Haas and Eulalia Rubio, January 2017

Brexit and the EU Budget: Threat or Opportunity?

Jörg Haas| Research Fellow, Jacques Delors Institut – Berlin

Eulalia Rubio | Senior Research Fellow, Jacques Delors Institute


‖ How could Brexit impact EU public finances?

‖ Data and assumptions

‖ How big would the yearly ‘Brexit gap’ be?

‖ Four scenarios:

‖ 1 Increased contributions

‖ 2 Budget cuts

‖ 3 Combination of increased contributions and budget cuts

‖ 4 No agreement

‖ Implications for the next MFF negotiations

‖ Possible coalitions

‖ Conclusion: What to expect?

Overview

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‖ €20-60 billion “divorce bill”, e.g., pension claims of British EU employees

‖ UK might stop paying into the EU budget before 2020

Cost for EU depends on Brexit negotations

‖ Structural funding gap in the EU budget aslarge net contributor leaves

‖ Shift in contributions as rebates expire

‖ Changed dynamics in budgetarynegotiations

Less salient, but more important for EU

How could Brexit impact EU public finances?

One-off losses

Permanent effects

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‖ Give an impression of key dynamics andchallenges post-2020

‖ Actual revenue and spending data from DG BUDGET (adjusted for 2014 ORD)

‖ Calculations based on average of 2014-15 to even out one-off effects

‖ UK rebate expires,‘rebates on the UK rebate‘ expire

‖ No UK contributions, no TOR raised in the UK

‖ No EU expenditure in the UK

Data and assumptions

Data

Assumptions

Objective

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How large would the yearly ‘Brexit gap‘ be?

‖ Hard Brexit: Tariff income

‖ Soft Brexit: UK budget contributions

‖ Increase revenues or cut spending

Possible additional revenue sources

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How to adapt?


How to adapt? Overview of the scenarios

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Scenario 1: Increased contributions

‖ Maintain spending on the EU27 constant need to increase revenue to make up for €10 billion Brexit gap

‖ Countries benefitting from rebates on the UK rebate would be hit hardest: Netherlands +16%, Germany +€3.8 billion per year

‖ Expensive for all & unequal burden-sharing politically very difficult

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Scenario 2: Spending cuts

‖ Maintain absolute contributions constant

‖ Would require spending cuts worth around 10 bn € per year

‖ Large cut compared to some of EU‘s most popular programmes

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Scenario 3: Combination of increased contributions and budget cuts

‖ Cut spending by 5 bn € per year

‖ Fund remaining shortfall via contribution increases

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‖ If no agreement on a new Multiannual Financial Framework (MFF) until the end of 2020:Budget ceilings of the current MFF continue to apply *

higher contributions

‖ But: If UK leaves before the end of 2020, current MFF must be revised **

any scenario possible

‖ No agreement would be a bad outcome for everyone: Net contributors could be obliged to pay against their will, but net recipients could be blocked from receiving funds if legal acts are not extended

* Art 312.4 TFEU; Art. 25 MFF regulation** Art. 20 MFF regulation

Scenario 4: No agreement

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Implications for the next MFF negotiations

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Possible coalitions, based on scenario 1

Raise

contributions

Reform or cut budget

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‖ Differences between net contributors and net recipients entrenched further

‖ Potential key role for France, Ireland, Italy and Spain

‖ Controversial question: What happens ifthere is no agreement on a new MFF?

‖ Threat: „Non-allocated“ spending (e.g., research, infrastructure) is vulnerable tocuts

‖ Opportunity: Net contributors couldaccept contribution increase in exchangefor deep budget reform

Conclusions: What to expect?

Hardbargaining

Threat oropportunity?

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Jörg Haas Email: [email protected]

Twitter: @jorg_haas

Eulalia RubioEmail: [email protected]

Twitter: @eulaliarubio

Full study (in EN/FR/DE): Jörg Haas and Eulalia Rubio. “Brexit and the EU Budget: Threat or

Opportunity?” Policy Paper No. 183, Jacques Delors Institute –Berlin, January 2017.

http://tinyurl.com/BrexitBudget

mailto:[email protected]

mailto:[email protected]

http://www.delorsinstitut.de/en/publications/brexit-and-the-eu-budget-threat-or-opportunity/

http://tinyurl.com/BrexitBudget

Brexit and the EU Budget: Threat or Opportunity? · © Jörg Haas and Eulalia Rubio, January 2017...

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