The weakness at the heart of the EU

The Conservative victory in the 12 December general election has paved the way for intensive negotiations on Britain’s departure from the European Union. It is now dawning on people that only the barest bones of that agreement are laid out in the Withdrawal Agreement and the Political Declaration negotiated by Boris Johnson. 

But what has been agreed already is worrying enough – including concessions on fishing quotas (see Break clean for fishing), and a plethora of “level playing fields” that would tie us to current and future EU regulations.

Already, the EU is making clear where it will be making its demands. First will be the “rights” of the 3.5 million citizens of EU member states living in Britain. Brussels will want their special status to be enshrined in law and continued in perpetuity.

Just as importantly, what the news website politico.eu calls a “new mantra” is emerging: the EU wants no tariffs, no quotas (except in fishing!), as few checks as possible, and all on the basis of “minimum standards” (Irish PM Leo Varadkar’s words) on a host of issues, including rules on state aid.

It’s being widely said that Johnson will have to make many concessions if the transition period is to end, as he says he wants, at the end of 2020. What’s more, he would have to make these concessions quickly, as any decision on extending the transition period must be taken by 1 July 2020.

Desperate

The voices of doom and defeatism start from the principle that Britain is weak and the EU is strong. What a strange notion! In fact the EU is desperate for a deal, for an end to Brexit uncertainty. 

A government in Britain determined to secure independence should be looking at the chaos and fragility in the EU and seeing how weak that bloc is – and how to take advantage of that weakness. 

Yet the establishment purveys the myth that the EU is all-powerful and that Britain is insignificant. In the coming period, Leavers’ groups around the country will need to be hammering home the message that the advantage lies with us. We don’t need to compromise on independence.

At the heart of the EU’s problems is money. The political power it has depends entirely on its ability to dispense billions of euros to its clients. This power is now under threat.

‘Brussels simply doesn’t know how much money it has to play with…’

A large part of the reason for this is Brexit. Without certainty on how much (if anything) Britain will hand over to the EU, Brussels simply doesn’t know how much money it has to play with.

On top of this the entire Eurozone economy is stagnating. The European Commission’s own financial forecast, published in the first week of November 2019, is for growth of around 1 per cent for the next two years.

With a static economy, and budget contributions determined by reference to Gross National Income (an updated form of Gross National Product), belts are going to have to be tightened. But how far? The answer is, the eurocrats don’t know.

The timing of all this couldn’t be more difficult for the EU. In May 2018 the European Commission published its proposed budget, totalling €1.14 trillion over the six years. The Commission said then that it expected final agreement by the European Parliament elections in July 2019.

The end result is that the EU has been unable to decide on its seven-year Multiannual Financial Framework – called the MFF – which runs from 2021 to 2027. That is crucial, because the MFF sets out the parameters not just of the main strands of the EU budget but also sets in stone the level of contributions that each member state is obliged to make.

Blockage

And because of Brexit – because Britain is leaving, along with its huge contribution to EU finances – nothing can be settled. Nor does it seem likely that anything will be agreed until the second half of 2020 (at least), when Germany takes over the rotating presidency of the European Council.

The delay matters, because without a budget for 2021 onwards announced months before it starts, the new programmes cannot hit the ground running. Researchers looking for grants won’t know whether they will be funded.

Worse, they don’t even know who they will be able to collaborate with. The EU has frozen all negotiations with Switzerland while it seeks to settle with the UK, including over Swiss participation in Horizon Europe, the upcoming research programme. And the terms of possible UK participation in the programme have still to be agreed.

In agriculture, farmers won’t know until the budget is set how much they will be getting, or even (given reform plans announced in 2018 but still not agreed) how the subsidy system will operate.

Agriculture currently receives around 37 per cent of the EU budget – a figure the Commission wants to cut to 28 per cent. But 19 of the EU’s member states are net beneficiaries from the budget and heavily reliant on agriculture money, so good luck with that.

Talk of reducing EU grants to farmers has already brought tens of thousands of them out onto the streets of Paris, Dublin, The Hague and most recently Berlin, along with thousands of tractors.

The farmers are furious now. One report says they think they have been “thrown under a bus” by the European Commission as a trade-off to open the South American market to motor manufacturers. Imagine the fury when deep cuts are piled on to make up for Britain’s departure.

The Commission wants the shortfall from Britain’s contributions – estimated to be around €12 to €13 billion a year – to be made up by increased contributions from the EU’s wealthier countries. In these nations, that is going down like a lead balloon. They want cuts.

In response, five of them – Austria, Denmark, Germany, the Netherlands and Sweden – have insisted that the budget should be capped at 1 per cent of Gross National Income, implying significant cuts in spending. The group even have a name: the “frugal five”. A further three countries want a figure lower than the Commission’s proposed 1.11 per cent.

Let’s remember all this when the negotiations start.