Germany readies to pay for the Brexit gap in EU finance

Jean-Claude Juncker, President of the European Commission (first from left) and Donald Tusk, President of the European Council, take their positions for the Press conference after the European Summit of 23 February 2018. Shoot location: Bruxelles – Belgium. Shoot date: 23/02/2018. Copyright: European Union.

As expected, last Friday’s informal European Council of the 27 EU leaders didn’t produce any tangible result regarding its main agenda item; the future of Europe. The EU leaders just quarreled on who is to cover the hole in the budget, after Britain’s contribution ends with Brexit.

In relation to this perennial question of money though, there were some concrete revelations about who needs the European Union more. In any case, the Council discussed without much success the question of how to cover the EU budget gap which Brexit is going to leave. The real problem is how to finance the next long term EU fiscal plan for the period 2021-2027, without cutting down spending on key EU programs after losing UK’s contributions.

Oettinger covers the gap

As a matter of fact, no answer was shaped in Brussels. Surprisingly enough, though, a response came from Berlin. German EU Commissioner Günther Oettinger gave an interview to the prestigious news group ‘Handelsblatt’ and said his country is ready to cover the financial gap Britain is to leave. Mind you, Oettinger is a long term adherent of the austere financial policy line. He comes from the right wing side of the conservative and neoliberal Christian Democratic Union party, not famous for their fiscal generosity either within Germany or more generally in the entire European Union. Wolfgang Schäuble, the architect of German economic policies during the last eight years gained his reputation as being the magpie of Eurozone.

So, Oettinger’s statement about covering the EU budget gap didn’t come out of generosity but from a pressing need to keep the European Union in one piece, in these difficult times of global uncertainties and international relations chaos. Not to say anything about the dark prospects of a wild Brexit, estimated to hurt Germany – the largest exporter of the world – more than others.

Agony for free trade

On top of that, there are the threats of Donald Trump’s America, reading to undermine the international trade relations system and also hurt the German exports more by imposing extra tariffs. In such a global environment Germany would badly need the internally fully liberated and unified EU single market, as a last resort for her exports and prosperity.

Coming back to the European Summit of 23 February, Donald Tusk, the President of the European Council, revealed that only a few member states are willing to contribute more money to the common budget, in order the gap after the Brexit is bridged. In this context the German initiative to first open the list of the willing to undertake the burden of covering the budgetary hole, comes as a guarantee that the Union will not contract. So, the EU will be able to continue running all its key projects and external actions thus maintaining its global and European roles. Germany certainly doesn’t want to see the EU being compromised.

Who wants the EU more?

Given that, Tusk was happy to announce the 27 leaders decided to spend more on migration, defense and security. Under the circumstances, this avowal is an indirect confirmation that the European Union has neglected those hot sectors. For example, better security for the external borders of the EU in the Aegean Sea and the wider Mediterranean basin has become a critical priority nowadays. But this needs more money. Are the Europeans ready to commit more of their taxes to such common goals? In this critical question, Oettinger answered again in the affirmative. He stated, “Germans are certainly interested in our (EU) ability to finance important expenditures – for example, a secure EU external border in Greece”.

In short, the average German taxpayer is thought to finally have understood and answered the dilemma; in order to keep the European Union in one piece more money is needed. In any case, the country’s political elite appears ready to make the sacrifices, for the EU to overcome the current centrifuge tendencies. It’s very characteristic that in last week’s Summit the Eurosceptic Hungarian Prime Minister Victor Orban rushed to ask for €500 million for to his country from the Brussels coffers. He explained that the wall Hungary built on her borders to keep immigrants out has cost €1 billion. Since the usual EU contribution to national projects is 50%, Orban concluded the Union owes him the above sum.

Money heals

This is a perfect example of what is happening in the EU now. More money and differently allocated is needed. The Visegrád Four countries (Hungary, Czechia, Slovakia and Poland) would never accept to contribute more of their own money, to projects like a more powerful, more effective but much more money burning European Border and Coast Guard Agency, also known as Frontex. It operates in the Aegean Sea and the Mediterranean basin controlling illegal migration. In relation to that, the ‘four’ have stood by their decision to challenge Brussels, not accepting their ‘quota’ of immigrants and refugees camped in Greece and Italy. Certainly then, they would also deny to finance a bigger Mediterranean Coast Guard.

So, the conclusion is that Germany readies to pay and the question will be what the Teutons will ask in exchange. The Presidency of the European Central Bank will be a good start…

 

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