© 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
© Jörg Haas and Eulalia Rubio, January 2017
‖ 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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© Jörg Haas and Eulalia Rubio, January 2017
‖ €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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© Jörg Haas and Eulalia Rubio, January 2017
‖ 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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© Jörg Haas and Eulalia Rubio, January 2017
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?
© Jörg Haas and Eulalia Rubio, January 2017
How to adapt? Overview of the scenarios
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© Jörg Haas and Eulalia Rubio, January 2017
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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© Jörg Haas and Eulalia Rubio, January 2017
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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© Jörg Haas and Eulalia Rubio, January 2017
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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© Jörg Haas and Eulalia Rubio, January 2017
‖ 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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© Jörg Haas and Eulalia Rubio, January 2017
Implications for the next MFF negotiations
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© Jörg Haas and Eulalia Rubio, January 2017
Possible coalitions, based on scenario 1
Raise
contributions
Reform or cut budget
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© Jörg Haas and Eulalia Rubio, January 2017
‖ 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 and Eulalia Rubio, January 2017
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