EU Economics

EU CASH CRISIS: Bloc to lose FIFTH of budget as Brexit ends scandal of soaring UK handouts

BRUSSELS is facing a major funding crisis when its cash cow Britain leaves with Brexit set to slash the EU’s budget receipts by up to a fifth, a leading think-tank has warned.

Eurocrats are staring at a colossal spending black hole caused largely by the astonishing rate at which they have milked the UK economy for cash, according to bombshell conclusions published by the European Policy Centre (EPC).Experts revealed how Britain’s budget contributions have ballooned at an unprecedented speed and are now a scarcely believable more than 50 times greater than they were when the country joined the bloc in 1973.

Jean-Claude JunckerGETTY   The EU is facing a major cash crisis after Brexit

For just one year in its five-decade EU history has the UK ever been a net beneficiary of the project, and that came in 1975 when the then Government was putting full membership to a referendum.And now Brussels has become hooked on British taxpayers’ cash, with experts warning both eurocrats and the other 27 countries face seriously painful decision about how to make up for the shortfall from 2019 onwards.

A graph showing UK budget contributions to the EUEPC    Britain’s budget contributions have ballooned by over 50 times since 1973

A graph showing UK budget contributions to the EUEPC    The UK is one of the biggest contributors to the Brussels budget

A graph showing UK budget contributions to the EUEPC   But whatever deal is agreed with Brussels those payments are set to significantly drop

In a report published this week the EPC says there are painful ways to mitigate the cost of Brexit, but bluntly warns European leaders: “Brexit means Brexit and budget cuts mean budget cuts.”The dossier, compiled by Economic Research Assistant Ewa Chomicz, says Brussels has three potential options for the future – hiking EU27 contributions, slashing spending or imposing its own taxes on citizens.She warns that all three are seriously politically difficult, with Germany determined not to pick up the tab for Brexit and support for the EU in Eastern Europe underpinned by generous spending projects.The idea of eurocrats slapping a direct tax on citizens, for instance by adding a two per cent levy to fuel continent-wide, is the most controversial of the lot and could further strengthen the hand of eurosceptics.
In its report the EPC concludes: “Loss of EU budget revenue linked directly to the UK’s membership could amount to EUR 20-27 billion, i.e. 14-19% of total EU revenue.“According to our estimates, considering current data and the models already in place, depending on the approach adopted by the UK, the UK’s gross and net direct contributions to the EU budget post-Brexit could amount to less than 1/6 of their current size.”Britain currently stumps up around 15 per cent of the bloc’s total revenue, according to the report, which says the UK “has been one of the main contributors to the EU budget, both in gross and net terms”.The dossier examines three potential Brexit options, ranging from a Norway-style deal already ruled out by Theresa May through to a free trade deal similar to the one recently struck by Canada.It actually concludes that a completely “hard” Brexit, whereby the UK falls out of the single market and trades on WTO terms, would in the very short term lead to a rise in the EU budget via the payment of tariffs.But the experts dismiss this option for the bloc because of the long-term economic chaos it would cause, and say that under all three expected scenarios Brussels will be poorer without one of its main net contributors.In particular they expect the EU cohesion fund, which pays for infrastructure projects in poorer member states, to be significantly slashed as a result of Brexit in a move which will infuriate Eastern European governments.The report states: “After considering the impact of the post-Brexit deal or a lack of one on the EU budget, the remaining financial gap could either be tackled by making budget cuts (where the cohesion area could be expected to be affected more than other fields) and/or by compensating it with additional payments from the rest of the member states.

“Both approaches would be very difficult to implement and would have to be applied according to a carefully designed key to limit political tensions and prevent further loss of solidarity among countries.“The latter solution could prove particularly challenging, with many powerful member states, led by Germany, being reluctant to pay anything more to the EU budget.”It adds that in the longer term farming subsidies, on which the French are heavily reliant, will have to go, saying: “In a longer perspective, the UK’s withdrawal should be treated as an opportunity to rethink the whole EU budget structurally, reconsider the concept of a eurozone budget, or other wide reforms.”

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