EU budget: Will Germany alone manage Britain’s gap?

Press conference by Jean-Claude Juncker, President of the EC, and Günther Oettinger, Member of the EC
Date: 14/02/2018. Location: Brussels – EC/Berlaymont. © European Union , 2018 Source: EC -Audiovisual Service. Photo: Lukasz Kobus

The EU budget will be the main topic of the EU summit which will be held in Brussels on Friday. The leaders of the 27 member states have to deal with the annual gap that UK will leave after Brexit occurs ensuring that the priorities set for the Union will be adequately funded.

According to the European Commission, the EU budget will face a hole of about 12-15 billion euros per year and Germany as the biggest EU economy is most likely to increase its contribution after the establishment of the grand coalition government.

However, many EU countries such as the Netherlands, Austria, Sweden and Denmark have expressed their opposition to provide additional financial aid to the long-term EU budget which could cause crucial and severe impact to the sustainability of various projects.

The EU budget hole and its consequences

Brexit is about to create another headache to the EU leaders who are struggling to find out new cash to bring to the bloc in order to close the budget shortage. The 27 EU countries have to provide additional funds while Germany should pay 3-3.5 billion euros more from 2021 till 2027 as the budget Commissioner stated. More specifically, Günther H. Oettinger mentioned last Friday that: “With 3 or 3.5 billion euros [3.76-4.4 billion dollars] more from Germany, we could close the gap left by Brexit and finance additional measures. That would be about a 10 cents per day more increase per head of population”. Furthemore, Mr. Oettinger said that it should be achieved without any delays.  His exact words were:  “We must not repeat the unfortunate experience of 2013 when the current EU budget was agreed with considerable delay. If such a delay were to happen again, more than 100,000 EU-funded projects – in key areas like business support, energy efficiency, health care, education and social inclusion – would not be able to start on time, and hundreds of thousands of young people would not be able to benefit from an Erasmus+ exchange in 2021”.

The EU budget should be modified adequately in order to be able to use all funds efficiently. The EC has been providing options in order to be able to connect the goals of the long-term budget with the way they can be funded effectively. It is critical to evaluate all goals and set priorities in order to make them reality as it is possible that the Old Continent will not to be able to finance all projects.

How much more will Germany contribute?

Germany is the biggest contributor to the EU. In 2016, the country paid 12.9 billion euros more into the EU budget than received back in EU funding. Angela Merkel’s conservatives and the Social Democrats (SPD) have admitted that more money is needed to cover the hole of the 2021-2027 EU budget. But this challenge will be dealt by the new coalition government and it remains to be seen whether and how much more they will decide to contribute.

Angela Merkel said that the need to finance EU defense and migration projects has created difficulties to the EU countries to cover the gap that Britain will leave. What is more, the German Chancellor stated last Monday that “not all countries can pay more” after having met and discussed the issue with the Prime Minister of Luxembourg and the Netherlands.

EU budget seems doomed

According to the German daily newspaper Sueddeutsche Zeitung, the Dutch government has mentioned two days ago that will not pay anything more to the EU. Particularly, it was reported that:  “The Netherlands cannot accept increasing its gross contribution to the EU budget. A smaller EU means a smaller EU budget. In addition, new priorities need to be funded from the savings of existing programmes.”

However, unless more net contributors such as France, Italy, the Netherlands, Sweden start providing additional financial aid to the EU, it will be very difficult to maintain the budget to before Brexit levels. The EC has to put its final budget proposal till May while at the same time listening to all EU stakeholders and attempting together with countries such as Germany to convince more countries to put more money on the table.

All in all, even if Germany increases its financial aid, it is highly unlikely that the rest of the EU countries will show similar stance. Thus, the fact that the next EU long-term budget will probably be short compared to the last one is worrying as it will have serious impact mainly on countries which are not able to finance projects on their own.