Plummeting pound risks EU spending plans, says budget negotiator

24 Oct 16

The fall in the value of the pound has created a hole in the EU’s budget for next year, according to the chief negotiator from the European Parliament.

In a statement released on Friday, Jens Geier, who will negotiate on behalf of the parliament regarding the 2017 budget (the bloc’s financial year mirrors the calendar year) called for fines levied on member states to be used to fill the gap.

Calculations of contributions from member states are made in euros. This means that the fall in the value of the pound since the UK’s vote to exit the bloc on 23 June would normally lead to a contribution increase.

However Geier acknowledged that such a request from the European Council may not be met following the UK’s decision to leave. “I don’t think that this would get a positive reception,” he stated.

“Secondly, they can ask other member states to contribute more so that we can balance this artificial deficit created by the depreciation of the pound. This probably won’t be welcomed by the member states.”

There was a third possibility, which he said he would prefer, of using fines levied against member states, such as for breaching public spending deficit targets that form part of the EU’s Stability and Growth Pact, to fill the hole.
“There’s a lot of money coming into the budget for example from fines and normally we’re not allowed to use this money. It’s only collected and then given back to the member states at a later stage,” Geier said. “We could use these fines in order to cover this money.”

Geier added the UK could not expect to retain a rebate on areas of EU spending that it may wish to continue to help fund once it leaves the bloc.

“For example, if they want to cooperate on research, which would be a win-win situation for the EU and the UK, they would have to give the EU money to finance the European research policies.

“If they want to cooperate, they would have to pay. Of course we will not give them a rebate again. But all the rebates for other countries are calculated on the basis of the British rebate, meaning that if the British rebate is lower, then the other rebates are lower as well. That will be an interesting point for the negotiations [for the EU's long-term budget] that come after 2020. How do we cope with that?”

Geier confirmed the European Parliament would propose a budget of €161.8bn for 2017. This is more than the €136.61bn put forward by the European Council, as well as an increase on this year’s €155bn spending.

He said this was needed to address the two crises that arose in Europe – of migration and economic stagnation – which needed to be addressed.
“This means that we need to show that the parliament is dedicated to doing more to tackle these issues.”

A three-week conciliation period will soon get underway intended to bridge the gap between the positions of the council and parliament by 17 November.

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