EU on the Brink: ‘No Deal’ Brexit Leaves Brussels With No Money for France, Germany

Sean Gallup/Getty Images
Sean Gallup/Getty Images

The European Union’s unelected standing executive is growing nervous at the prospect of the budget cuts which a ‘No Deal’ outcome to the Brexit talks would entail.

The Brussels-based European Commission, headed by former Prime Minister of Luxembourg Jean-Claude Juncker, is worried that losing Britain’s net contribution will trim its budget by 12.5 per cent, or 14 per cent if the UK Rebate is not taken into account — and the EU is arguing it should not be.

In an effort to persuade the remaining member-states not to reduce its funding, the Commission’s Directorate-General for Regional and Urban Policy (DG Regio) has produced a ‘worst-case scenario’ report which suggests that, if Britain’s money is not replaced, regional aid for Western European member-states could be terminated entirely.

The report argues that the EU could only provide “support for less developed regions only”, according to POLITICO, with regional aid restricted to areas with a GDP per capita below 75 per cent of the EU average.

DG Regio spells out in no uncertain terms that “Support for Germany and mainland France would be discontinued,” with Belgium, Luxembourg, the Netherlands, the Scandinavian countries, and the Republic of Ireland also losing out.

DG Regio and the EU’s Committee of the Regions are extremely keen to maintain current spending levels by having countries like Germany increase their contributions to make up for the loss of British funding — but this could prove to be a tough sell, with Angela Merkel in a position of weakness following election losses and her historic failure to negotiate a new coalition government.

Germany, France, and crisis-wracked Italy would have to pony up an additional £3.4 billion, £1bn, and £900m, respectively, to keep the EU’s budget at the level it wants — but Merkel is unlikely to be able to pass an increase of more than £1bn.

U.S. Commerce Secretary Wilbur Ross has also said he believes a ‘No Deal’ scenario would likely be worse for the EU than the UK, given EU businesses sell more to British consumers than vice versa.

Research suggests trade with the EU under default World Trade Organisation (WTO) rules — the ‘No Deal’ option — would cost British exporters £5.2 billion in tariffs, but, Britain would raise £12.9 billion in tariffs on EU imports itself, allowing British businesses most impacted by the change to be amply compensated.

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