{"id":164986,"date":"2020-02-14T12:16:14","date_gmt":"2020-02-14T17:16:14","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=164986"},"modified":"2020-02-14T12:03:15","modified_gmt":"2020-02-14T17:03:15","slug":"will-the-european-union-break-up-after-brexit","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/02\/will-the-european-union-break-up-after-brexit\/","title":{"rendered":"Will The European Union Break Up After Brexit?"},"content":{"rendered":"
February 14, 2020<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

Less than a year ago, the EC commissioned a study and found that the majority of Europeans felt that the EU as an institution would not be around within a generation.<\/p>\n

Only three countries had a majority of people who felt that the block would last beyond the next two decades.<\/p>\n

The survey was conducted in the middle of Brexit deliberations, and it\u2019s understandable that it might have thrown into relief the issue of the union\u2019s stability.<\/p>\n

There have been increasing populist movements across Europe, with a decided anti-EU perspective. But the survey also showed that a majority of European citizens had a positive view of the block. In fact, the highest support in decades!<\/p>\n

What About the Money?<\/strong><\/h2>\n

The political issues around the EU aside, it\u2019s undeniable that Brexit will have an impact on European finances, on both sides of the channel.<\/p>

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Each side of the leave\/remain question touted (and perhaps exaggerated) the financial benefits of their preferred option. But, like all things EU, the financial relationship between the UK and the continent is a bureaucratic mess and practically complicated.<\/p>\n

In non-bureaucratic terms, the UK contributed \u20ac19.4B to the EU budget in 2016 (when the process started). Or 13.4% of the total to be spent. This is not counting the budget shortfall, because we\u2019re trying to not complicate things. That\u2019s is about the size of the UK\u2019s participation in the European project. And it\u2019s comparable to population, budget and seats in parliament.<\/p>\n

Where\u2019s that Money Going to Come from Now?<\/strong><\/h2>\n

Well, the UK got some of that money \u201cback\u201d in the form of subsidies and other EU spending on the Isles.<\/p>\n

However, the UK was a net contributor to the EU. This means that adjusting for the loss of income and the decrease in spending, the EU will get 5% less income. Of course, that\u2019s pending the \u201cdivorce payment\u201d\u00a0following the completion of Brexit\u00a0negotiations. But again, let\u2019s not complicate things.<\/p>\n

For the current budget being discussed, that means the EU would be short \u20ac8.4B.<\/p>\n

The shortfall could be met with increased deficit spending. But that wouldn\u2019t look good for an EU trying to get many of its members to keep a lid on blowing out their budgets.<\/p>\n

More practically, the block would likely have to adjust some of its priorities. It would likely have to cut some spending, and \u2013 here\u2019s the complicated part \u2013 ask for more contributions from other countries.<\/p>\n

Germany vs Italy<\/strong><\/h2>\n

Germany is likely to have to pick up at least \u20ac2.5B of that tab, something that isn\u2019t going to go down well in the fiscally conservative Berlin.<\/p>\n

Italy and France, however, are already running budget deficits. They argue that Germany should be doing more to help the economy by increasing spending. The EU does not have the authority to levy taxes directly on its citizens. So, it\u2019s stuck negotiating with the member states to increase their budgets and contribute more to Brussels<\/p>\n

Up until Brexit, Britain had sided with the more liberal \u201cnorth\u201d. This includes Germany supporting fiscal austerity and open trade.<\/p>\n

Without the UK,<\/a>\u00a0the center of fiscal gravity shifts south, supporting more fiscal liberalism and protectionism. The prominent example of this is Italy. Recently, the country elected leaders largely skeptical of the EU. This prompted speculation that should the UK do well on its own, Italy might follow suit.<\/p>\n

Lack of Funds Likely to Heighten Tensions.<\/strong><\/h2>\n

Part of the motivation to seek a\u00a0harsh deal with the UK<\/a>\u00a0would be to discourage other countries from leaving.<\/p>\n

However, that would come at an economic cost for the EU block which is teetering dangerously near a technical recession. Rather than foster support for the EU, it might have the opposite effect. Already there is a strong view among Italians and Spanish that their economic situation has worsened over the last couple of decades.<\/p>\n

Of the remaining countries in the EU, however, only one has a majority of citizens who support leaving, and that\u2019s Greece. Arguably, the chance of a breakup has increased with Brexit.<\/p>\n

But, since we haven\u2019t seen the effects it will have on both the UK and the EU, for now, the Union seems to be firmly in place.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex Less than a year ago, the EC commissioned a study and found that the majority of Europeans felt that the EU as an institution would not be around within a generation. Only three countries had a majority of people who felt that the block would last beyond the next two decades. The survey […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-164986","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164986","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=164986"}],"version-history":[{"count":4,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164986\/revisions"}],"predecessor-version":[{"id":165004,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164986\/revisions\/165004"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=164986"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=164986"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=164986"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}