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There’s a battle over money looming in Brussels that will make the £39 billion Brexit bill look like peanuts.
The European Union’s 27 remaining countries have started thinking about how to cover the shortfall in their centralized budget left by the U.’s exit, which is adding extra tension to the process of agreeing on the bloc’s long-term spending plan. It’s fraught at the best of times, let alone when it starts in parallel to negotiations with Britain.
Britain is one of the biggest contributors to the EU budget and its departure leaves a hole of up to €15 billion a year in the bloc’s finances after 2020. This is when the U.’s annual payments and the EU’s current €960 billion seven-year budget run out. But it also comes at a time when some in the EU want to increase spending power to tackle terrorism, cope with migration and bolster the euro area, as well as continuing to fund infrastructure projects and subsidize farming.
Fighting over the budget is nothing new. After leaders dip their toes in the murky water at a summit next month and the European Commission presents a formal proposal in May, expect the wrangling to take at least 18 months and for the negotiations to become increasingly bitter as big creditor countries like France and Germany battle it out against net beneficiaries like Poland, Romania and Greece. The final decision must be agreed unanimously. There’s not even agreement yet on the length of the period the budget should cover.
No one quite knows how the hole left by Britain will be plugged or how new initiatives will be funded and (surprise, surprise) it’s hard to find a government in the mood to pay more. The Commission in Brussels, which manages the budget, has floated an EU-wide tax on plastics and a heftier-than-planned post-2020 visa-waiver fee for non-EU citizens (including Britons, of course) crossing its outer borders, but this is unlikely to be enough.
Despite the process pitting government against government – in a way that only the budget discussions manage to do – just as Brexit talks are coming to a head, EU diplomats are adamant that it won’t affect their unity over dealings with Britain. The two issues aren’t entirely unrelated, however. knows that waving around its wallet gives it some sway and some in the British government believe that making continued payments to the EU, in the way that Norway does for example, would look quite attractive to the bean-counters in Brussels and could secure it a better trade deal.
And one thing is clear: if the Brexit negotiations collapse, so does the U.’s promise to pay its £39 billion. That would create an even bigger headache.
Brexit Latest
Parlez-Vous Brexit? | France is to offer language lessons to London-based bankers and their families in a bid to attract financial services to Paris, the Daily Telegraph reports. The newspaper says French authorities are beefing up bilingual schools and opening a special English-speaking hotline to help new arrivals navigate the education system.
Spain Visit | “Spain’s position on Brexit is constructive; we want to have a positive relationship afterward,” Spanish Economy Minister Luis de Guindos said on Tuesday after a meeting of EU finance ministers. De Guindos said he had a short bilateral meeting with U. Chancellor of the Exchequer Philip Hammond on Tuesday, and that Hammond will visit Spain in the next few weeks.
On the Bright Side | Britain’s departure from the EU is boosting the euro’s popularity by depriving detractors of the common currency of the gravitational pull provided by the bloc’s second-largest economy, according to Margrethe Vestager, the EU’s Competition Commissioner. “Non-euro members will have no natural center once Britain leaves. That’s likely to increase the number of euro members over the next 10 years,” Vestager said in an interview in Copenhagen.
Liberal Brexit | Foreign Secretary Boris Johnson will lay out his vision for a “liberal case” for Brexit next month, the Times reports. Johnson will anger cabinet colleagues who told him to keep his views quiet by giving his own account of what Britain should look like outside the bloc. The intervention could clash with the Theresa May’s next speech on the subject, the newspaper says.
Future Proof | Some of the chatter at the World Economic Forum’s annual meeting in Davos, Switzerland, is about what Europe will look like after Brexit and, according to some of those present, it’s not going to be too bad. The EU has the opportunity to become a trade leader and counter Donald Trump’s protectionist policies, according to Manuel Caldeira Cabral, Portugal’s economy minister. “The EU has an important chance at this moment, which is to reaffirm itself as a leading region in the world, and a leading region that believes in open trade,” he said.
Downsizing | The European Parliament should shrink to 705 members from 751 as a result of the U.’s decision to leave the EU, a key panel of lawmakers said in what could be the first concrete change to the bloc’s post-Brexit institutional makeup. The parliament’s constitutional affairs committee voted to reallocate 27 of Britain’s 73 seats among some EU countries and to put the remaining 46 in a reserve.
On the Markets | In a market crowded with investors who call U. government bonds overvalued, Allianz is sticking its neck out with a contrarian view, Charlotte Ryan reports. The investment manager, which oversees €494 billion ($604 billion), has bought gilts on conviction that inflation in the country has peaked. Its bullishness stands in contrast to Aberdeen Standard Investments and Pimco, both of which consider the securities as rich.
One of the European Union’s most frequent refrains since the Brexit negotiations started – repeated most notably by chief negotiator Michel Barnier – is that the U. won’t get away with “cherry picking” the elements of EU membership it likes (such as easy access to the single market) while discarding the bits it doesn’t (such as paying into the budget and allowing European citizens unrestricted access to jobs).
That was given a new twist on Twitter on Tuesday when Stefaan De Rynck, a member of Barnier’s team, described an opinion piece in the Financial Times about the EU giving up “regulatory control over finance” after Brexit as a “cherry pickle.”
Some brief internet research reveals that pickled cherries can last up to a year (which may or may not add to the sense of foreboding for phase two of the Brexit talks that need to be concluded long before departure day in March 2019) and that they go particularly well with charcuterie, smoked duck salad, cheese or roast pork.
Far be it for Bloomberg’s Brexit Bulletin to suggest that Barnier and his team might have preferred a delicious pot of cherry pickle instead of the jar of uniquely British Marmite presented tothem by a delegation of pro-Brexit campaigners earlier this month.
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