EU budget post-Brexit - Confronting reality, exploring viable solutions

Among the many contentious issues that will have to be discussed during the upcoming Brexit negotiations, money will be one of the most difficult problems. This research indicates that, as one of the biggest contributors to the EU budget, the UK’s eventual withdrawal from the Union could leave a financial gap in the EU revenue of 14-19%, or EUR 20-27 billion (the UK rebate should not be omitted). In this paper, Ewa Chomicz analyses the potential implications of Brexit for the EU budget in great detail from a political economy perspective. She finds that the hardest Brexit (relying on WTO rules) might be in the short-term interest of the EU27, and presents a number of ideas that could serve to launch the discussion on ways of making any cuts or extra payments to fill the gap less painful and more acceptable to the member states. The discussion on the EU budget post-Brexit will be crucial and in the current political reality could more readily pose a threat than an opportunity. To mitigate that threat, and successfully address an eventual financial shortage, this paper provides a clear set of policy proposals, which are further developed in the text:

• adjust the EU budget size to the shape of the future EU-UK deal;
• maintain the EU27 payments to the EU budget that were once made to cover the costs of the UK rebate;
• make budget cuts in all areas, equivalent to the level of the UK’s receipts estimated there;
• decrease funding for areas considered of lower priority in the outcome of discussions on the revision of the current MFF.

The next MFF negotiations (for the period post-2020) will be more grueling than ever, but the UK’s leaving should be the push for the remaining EU27 to finally rethink the Union’s financing in a structural and forward-looking way.