Conflicts between net contributors
Given the budget constraints left by Brexit, conflicts between net contributors
and net recipients are almost inevitable and the risk of prolonged deadlocks in
upcoming negotiations is considerably high. Matters could become even more
complex if considerations within the Commission to link budget payments to
compliance with EU legal standards find their way onto the bargaining table. For
all these reasons, the Commission’s hope to finalise the budget before next
year’s elections for the European Parliament seems overly ambitious. We deem
it more likely that “last minute” agreement can only be found close to the end of
the current framework, i.e. In the second half of 2020 when Germany holds the
rotating EU Presidency.
But there is a fourth scenario that has not been addressed so far – no timely
agreement at all. As pointed out by a report prepared for European Parliament,
the current MFF does not provide guidance on how to adjust the budget to the
unanticipated event of a member leaving the union (it does address the issue of
EU enlargement and Treaty changes though 11). And any modifications to the
current MFF need to be agreed on unanimously by all EU27 members in the
European Council. So if members fail to find compromise, there is a non-
negligible risk that no new framework will be in place when the current ones
ends by December 2020. In that case, EU treaties foresee that the budget
ceilings and provisions from the last year of the previous MFF (thus in our case
2020) would be extended until a new MFF is adopted. This would coincide with
the end of the expected post-Brexit two-year transition period and accordingly to
the shortfall in financial resources from the UK. And given that the EU budget
cannot go into deficit, this could lead to increased uncertainty regarding the
budget’s commitment and payment appropriations.
In order to avoid unprecedented chaos in the EU’s finances, both net recipients and contributors
should have strong interest to avoid this scenario. This does not necessarily
make it less likely to materialize, though.
EU Forecast
euf:ba18h:183/nws-01