EUR75bn is the amount of money the European Union need to find to fill the gaping Brexit hole in their budget, and the opening salvoes between the remaining 27 members have not gone well. Last Friday, the remaining EU countries failed to agree on, it seems, everything from the overall size of the bloc’s budget, to how to spend it, to who should make up the difference. Although the UK exit is the major spanner in the works, it’s not the only problem. Along with finding more money, the EU also has new challenges to deal with, all of which cost a pretty penny. The growing digital economy and the ability to tax it, managing migration, especially for those southern European countries, and the big one; climate change. The standoff exposed rifts between countries rich and poor, developed and less advanced economies, between east and west and north and south. After 2 days of fraught negotiations, Angela Merkel summed up the mood when she told reporters ‘We have to acknowledge that the differences are too big still to find agreement’.
At least the UK did not get all the blame for the feud. As Emmanuel Macron put it ‘These divisions are there. We don't need Britain for that. They were playing out during the financial crisis a decade ago, during the migration crisis, we're now seeing them on budget issues’.
At the moment there is not even an agreement on the overall size of the budget. The biggest net contributors, including Germany and the so-called 'Frugal Four' – Austria, Denmark, the Netherlands and Sweden - want the budget to be kept at no higher than 1.0 percent of the EU GNI. This is especially key to Mark Rutte, the Dutch prime minister, who has pledged this in his coalition agreement.
One of the biggest policy areas of the budget is the cohesion fund, which has been cut by around 12%, although some countries stand to lose double that, which has not gone down well. The so-called Cohesion countries, especially those from eastern and southern Europe where often over 85 percent of public funds are financed from EU money, think the cuts are too arbitrary. ‘Friends of Cohesion’, a loose coalition of 15 countries, recently argued that cohesion funds should remain at current levels. They argue that at least 50% of the money invested in the cohesion countries flows back to the net contributor nations through tenders and investment.
And of course, we have the decades old argument over farming subsidies… Maybe a Daily Update for another day on that one.