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A UK-size budget hole threatens EU leadership on climate action

European Council President Charles Michel
REUTERS/Francois Lenoir
Post-Brexit there’s a big hole in the EU budget—just ask European Council president Charles Michel.
  • Annabelle Timsit
By Annabelle Timsit

Geopolitics reporter

London

Brexit finally happened. But Europeans are still arguing about it.

As they do every seven years, EU member states will gather next week (Feb. 20) for a summit convened by the European Council president, currently Belgium’s Charles Michel, to negotiate a deal for the bloc’s future budget—what’s known as a multi-annual financial framework (MFF). At stake in the next seven-year budget is financing for major initiatives, including the European Green Deal, a $1 trillion plan to make Europe a carbon-neutral continent by 2050.

The MFF discussions are usually rancorous, because they involve deciding how much countries will contribute to the EU’s budget, and (most importantly) how that money will be allocated. But this time there’s an even more contentious issue on the agenda: Post-Brexit, member states must find a way to plug a hole of up to €80 billion ($86.6 billion) over the next seven years created by the UK’s departure from the bloc.

The fault line is between member states willing to contribute more to the post-Brexit budget and those not. The more frugal countries want to cap their contributions at 1% of EU Gross National Income (GNI), roughly what it is now (pdf, p.7). The European Commission has requested 1.3%. Michel has proposed a compromise of about 1.1%, but he does not appear to have the support he needs from countries in the so-called “frugal camp”: the Netherlands, Austria, Denmark, and Sweden.

Germany and France, the two largest economies in the bloc, appear willing to spend more in order to match the EU’s ambitions of global leadership in areas such as innovation and fighting climate change. This budget agreement will determine whether programs like the European Green Deal—a slate of 50 or so proposed climate-related policies—have the legs to succeed. Last month, European Commission president Ursula Von der Leyen said that about half of the funding for the deal would come from the EU budget, while the rest would come from national governments, other European financing mechanisms, and private industry.

Whatever deal they reach has to be approved by the European Parliament—not a given. This week the leaders of the institution’s four centrist groups warned Michel in a letter (pdf) that they would not consent to any draft agreement unless it included “the right level of funding for the Union’s political ambitions, policies, and programs.”

Among their demands are the introduction of a “basket of new own resources from the very first day of the entry into force of the next MFF,” a clear commitment to “further introduce other new own resources in addition to this first basket in the course of the next MFF,” and the abolition of all rebates. The latter controversially repay some member states for parts of their contributions to the budget that they judge to be excessive.

“We don’t accept to be confronted with a ‘fait accompli’ by the Council on any aspect of these negotiations,” the letter warns. Both the Council and Parliament have the right to amend the draft MFF agreement and each must approve its final version.

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