Brexit: €5 billion to help EU countries mitigate social and economic impact

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The Brexit Adjustment Reserve should primarily support the countries and sectors worst affected by the withdrawal of the United Kingdom from the EU.

On Tuesday, the Regional Development Committee adopted its position on the Brexit Adjustment Reserve (BAR), paving the way to start negotiations with the Council on the final shape of the tool. The draft report was approved by 35 votes in favour, one against and 6 abstentions.

The 5 billion euro fund (in 2018 prices – €5.4 billion in current prices) will be set up as a special instrument outside of the 2021-2027 Multiannual Financial Framework (MFF) budget ceilings.

MEPs want the resources to be disbursed in three tranches:

– pre-financing of 4 billion euro in two equal instalments of 2 billion euro in 2021 and 2022;

– the remaining 1 billion euro in 2025, distributed on the basis of the expenditure reported to the Commission, taking into account the pre-financing.

Allocation method

According to this new method, Ireland will be by far the largest beneficiary in absolute terms, followed by the Netherlands, France, Germany and Belgium.

Eligibility of funds

Under Parliament’s proposal, the Reserve will support public expenditure incurred from 1 July 2019 to 31 December 2023, compared to the period of 1 July 2020 to 31 December 2022 proposed by the Commission. The extension would allow member states to cover investments made prior to the end of the transition period, on 1 January 2021, in preparation for the expected negative effects of Brexit.

MEPs also demanded that financial and banking entities benefitting from the UK’s withdrawal from the EU be excluded from receiving support from BAR.

To be eligible for aid, measures have to be specifically set up in relation to the withdrawal of the UK from the European Union, including, support to:

– SMEs and those who are self-employed to overcome the increased administrative burden and operational costs;

– small-scale fisheries and local communities dependent on fishing activities in UK waters (at least 7% of national allocation for countries concerned), and

– help EU citizens who left the UK to reintegrate.

Quote

“We must ensure that EU aid reaches the countries, regions, companies and people most affected by Brexit. European companies already suffering from the COVID-19 crisis shouldn’t pay twice for the Brexit debacle. That is why this reserve is so important and needs to be paid out as soon as possible, on the basis of statistical and measurable data”, maintained Pascal Arimont (EEP, BE), rapporteur.

Regional Development Committee Chair, Younous Omarjee (The Left, FR), said: “The committee has shown remarkable unity. We have amended the regulation to make it as operational as possible, as close as possible to the expectations of the regions and sectors affected by the UK’s withdrawal from the EU. We are determined to move quickly and we expect the Council to display the same determination and, therefore, be flexible in the negotiations, in order to conclude the trilogue on time.”

Next Steps

Parliament is expected to confirm the draft mandate during its first plenary sitting in June. Talks with the Council will then start immediately with the aim of finding an overall agreement with Portuguese Presidency in June.

Background

On 25 December 2020, the Commission presented its proposal for the Brexit Adjustment Reserve, a financial tool to help EU countries to counter the adverse economic and social consequences of UK withdrawal.