EU Budget Problems Highlight New Divisions

by Robert Tyler
EU Budget Problems Highlight New Divisions

The recent EU Council meeting in Brussels has yet again highlighted the gap in the European Union left by the departure of the United Kingdom. In fact, it has highlighted two – the first being a fiscal gap that needs to be plugged and the second being a political hole.

The United Kingdom acted as the voice of reason within the European Council. Its strict and sensible approach when it came to the budget – paired with its pragmatic approach to spending on areas in which the EU can do good – meant that the budget usually reflected the broad needs of the European Union.

Smaller countries would often rally behind the UK as a means of getting what they wanted. For example, more fiscally conservative countries such as Denmark, Sweden and the Netherlands were happy to support proposals to limit budgetary growth. Countries such as Ireland and Poland were equally happy with the UK’s position when it came to agricultural subsidies.

Of course, the greatest contribution of the United Kingdom during its time in the European Union was its financial contribution. The UK as an EU member, even after considering the rebate, was the second largest net contributor to the EU budget. In many ways by acting as a harmonious bridge within the Union, the United Kingdom sealed its own fate when it came to leave.

One of the greatest criticisms levelled against continued British membership of the European Union was that the size of the financial contribution made by the UK was completely out of proportion – especially while the UK was undergoing its own internal process of austerity. Many, on both the left and the right of the political spectrum, saw the fact that the UK sent so much money to Brussels while restricting domestic expenditure as outrageous.

While working class people in the north of England were losing their jobs and watching their schools and hospitals being shut, the EU was spending money on frivolous cultural projects in remote regions of Europe. This is, of course, all an exaggeration – the reality is that it’s the same local governments that were shutting schools that would have applied for the EU grant to begin with – however it made an easy narrative to win a referendum on.

The same arguments are now starting to play out in other countries across the European Union who have, since Brexit, found themselves footing more of the bill. The Netherlands, Austria, Denmark and Sweden – the so called ‘Frugal Four’ – have coalesced around the need to shrink the EU budget, or at the very least improve its efficiency. A coalition of countries that continue to favour free trade, economic freedom and favour a more broadly sound classical liberal approach to finance.

On the other side of the continent are the Visegrad 4 countries – Poland, Hungary, Czech Republic and Slovakia – who have used the budget to try and push for an assurance that so called ‘cohesion funding’ continues – money that is used to try and raise all member states to a similar level of economic development.

All of this isn’t to say that the EU won’t reach a fair conclusion on the budget – but it does show the difficulties that have emerged as Europe becomes more and more divided, both politically and the renewal of geographic self-interest. When asked whether the Netherlands was the new UK, Prime Minister Mark Rutter responded “No – we are the Netherlands”. But the point still stands, someone will have to plug the fiscal conservative gap in the same way that someone will have to plug the financial gap.

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