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    Brexit set to blow hole in common EU budget, Brussels warns

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    According to an article in the Financial Times, Brexit risks stretching the EU’s common budget to breaking point. The European Commission released a paper stating “The gap in the EU finances arising from the United Kingdom’s withdrawal and from the financing needs of new priorities needs to be clearly acknowledged. The new priorities have been accommodated under the current financial framework, mainly by stretching the existing flexibilities to their limits.”  Brussels also warned that life as a European civil servant was becoming less attractive and that “a further reduction in staff levels could jeopardise the good functioning of the EU institutions”. The EU budget is equivalent to about 1 per cent of EU gross domestic product, and Britain’s impending departure means the EU will lose one of its main contributors. It was reported that Britain’s contribution to the EU is approximately 12%, which is one of the factors behind the push from EU capitals for Britain to pay a substantial exit bill.  About 80 per cent of the EU budget is financed by contributions from governments and a share of national VAT receipts, with much of the rest coming from customs revenues. While Brussels will present more detailed proposals next year, the paper sets out five broad reform “scenarios”, including scaling back the budget, establishing a system where groups of member states would establish common pots of money for particular projects, and a “radical redesign”.

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