JOHN WHELAN: Little clarity on who pays for EU once UK is gone

EU leaders struggle with threat to Europe’s budget, writes John Whelan.

EU leaders at the summit in Malta to discuss the future of the Union were quick to attack the Trump administration, but held back on the more pressing issue of how to balance the books after the UK exits.

The summit, held at the Grand Master’s Palace in Valletta, was the British prime minister’s first encounter with the other EU leaders since a meeting in Bratislava in December where she was somewhat isolated.

This time, Chancellor Angela Merkel talked at length with Theresa May as they walked together through Valletta during a mid-morning tour of the city.

There was much to discuss, as Germany and the UK account for over half of the EU budget surplus that is used to support development across other member states.

Ms Merkel will be keenly aware that UK exiting will either lead to Germany paying more, or the EU Budget being cut.

That means a reduction in supports for Ireland and other member states.

The summit was officially focused on the Mediterranean migration crisis. Later, with Ms May absent, the remaining 27 EU leaders began their critical discussions on how Brexit should be handled.

In the week that the UK government published its Brexit white paper, Taoiseach Enda Kenny and other EU leaders faced the reality of Brexit, as they planned next month to mark the 60th anniversary of the Treaty of Rome, which founded the community.

The 27 leaders discussed both budget shortfalls and how the EU should move forward without the UK in the next phase of integration. The potentially explosive issue of the bill that the UK should be asked to pay for leaving, estimated by some at €50bn was discussed.

That included commitments the UK made, before the Brexit vote, to pay into the EU budget until 2020. In effect, the sum is its advance EU subscription, as agreed in the last round of budget talks. Maltese prime minister Joseph Muscat was unequivocal, saying there would be no special favours for the UK.

After Germany, the UK is the highest contributor to the EU’s net income stream. Official EU releases show that 26% of the EU budget surplus came from the UK. This surplus was then distributed amongst other less developed member states.

Finding a way to balance the EU Budget after the UK’s exit will be difficult and is likely to create hardship for many farmers and disadvantaged regions that rely on EU grants to survive. There are many in the EU who believe that extracting a continued contribution from the UK close to its existing net contribution of €11.5bn a year, will only come if access to the single market is agreed.

Non-EU countries, who currently have access to the EU’s single market, pay sizeable net contributions to the EU budget.

In relative terms, Norway pays similar amounts to those of the UK. Switzerland and Liechtenstein pay surprisingly small amounts.

Of course, immigration is likely to be a major stumbling block for the UK government, and if conceded by the EU, it will come at a price. The Taoiseach will have to run with the hare and hunt with the hounds, to secure Ireland’s best interests.

John Whelan is a leading consultant on Irish and international trade.



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