Angela Merkel: Brexit to leave 'very challenging' budget hole

Angela Merkel has acknowledged European Union financing challenges for the remaining 27 member states after 2019. The chancellor later discussed the problem with the leaders of Luxembourg and the Netherlands.

London Protest gegen Haushaltsplan - Maybots mit Masken

Brexit is set to cause a "very challenging" shortfall in the EU's budget, German Chancellor Angela Merkel said on Monday ahead of meetings with the prime ministers of Luxembourg and the Netherlands in Berlin.

Britain's departure from the bloc will leave an estimated €12 billion ($15 billion) annual shortfall in the 2021-2027 EU budget. Merkel's admission comes a week after the EU's budget commissioner, Günther Oettinger, said he expected Germany to pay at least €3 billion more annually to the bloc.

Bridging the budget after Brexit:

Merkel said the need to finance EU defense and migration projects also made it more difficult for the remaining 27 member states to plug the Brexit hole. The chancellor also said "not all countries can pay more."
Merkel later met separately with Luxembourg Prime Minister Xavier Bettel and Dutch Prime Minister Mark Rutte to discuss the challenge.
Rutte's government has reportedly told the EU Commission it will not pay more into the budget after Britain leaves in 2019, German daily newspaper Sueddeutsche Zeitung reported on Monday citing an internal Dutch government paper.
Oettinger, a German politician from Merkel's center-right Christian Democrats (CDU), had said on Friday that Germany should make up €3-3.5 billion of the resulting shortfall. "That would be about 10 cents per day more than now per head," he said.

German finance minister weighs in: In Brussels, acting German Finance Minister Peter Altmeier said after a meeting with EU finance ministers on Monday he could not say whether Germany would pay more into EU coffers. That, he said, would only be possible after a new government had been formed in Berlin.

Germany open to paying: Merkel's conservatives and the Social Democrats (SPD) have said they are willing to increase Germany's contribution in a recently agreed coalition agreement. But party leaders are yet to name a figure. SPD members are currently voting on whether to accept the coalition agreement.

What happens next: EU leaders are set discuss the bloc's future finances at a summit in Brussels on Friday. The Netherlands is reportedly not the only EU member that opposes paying more. Officials from Sweden, Austria, Finland and Denmark have reportedly also said they will not foot a higher annual bill.

Brexit negotiations: What are the key issues?

Two phases

EU leaders agreed to negotiating guidelines during a summit in April 2017 that divided the divorce talks into two phases. Phase I, in which both sides aimed to settle the basic terms of Britain's departure, started in July and ended with an agreement on "sufficient progress" in December. Officials are now holding Phase II negotiations on the post-Brexit relationship between Britain and the EU.
Brexit negotiations: What are the key issues?

The "Brexit Bill"

London agreed to a formula for calculating what it owes in its "divorce bill" to the EU in early December after months of haggling by British officials. The current EU budget expires in 2022 and EU officials have said the divorce bill will cover financial obligations Britain had committed to before triggering article 50. The final bill will reportedly total around £50 billion (€67 billion).
Brexit negotiations: What are the key issues?

Citizens' rights

Both sides agreed in early December that the 3 million EU citizens currently in Britain and the 1.1 million British citizens in the EU keep their residency rights after Brexit. British courts will have immediate jurisdiction over EU citizens living in Britain. But the EU's highest court, the ECJ, can hear cases until 2027 if British judges refer unclear cases to them.
Brexit negotiations: What are the key issues?

The Irish border

Britain and the EU also agreed in December that no border checks between the Republic of Ireland and Northern Ireland would return post-Brexit. How feasible the commitment will be is unclear, as Britain's commitment to leaving the EU Single Market and Customs Union makes it difficult to avoid customs checks at the Irish border.
Brexit negotiations: What are the key issues?

Transition period

Theresa May envisages a two-year transition period after March 2019. Both sides still have to hash out the details of the transition period in Phase II, including the exact end-date, whether new EU laws passed during the period will apply to Britain, and whether Britain can negotiate its own free trade deals. British officials hope to agree on the terms of the transition by March 2018.
Brexit negotiations: What are the key issues?

Trade

May has repeatedly said Britain will leave the European Single Market and the EU Customs Union. Leaving both could disrupt British-EU trade, but allow Britain to negotiate its own free trade deals and restrict EU migration — key demands by pro-Brexit politicians. London has said it wants to negotiate a new EU-UK trade deal during Phase II to minimize trade disruption before March 2019.
Brexit negotiations: What are the key issues?

Immigration

Britain has also vowed to restrict EU migration into Britain after Brexit. However, some British lawmakers are wary that a sharp drop in immigration could lead to shortfalls in key sectors, including health, social care and construction. The EU has warned that Single Market access is out of the question if London decides to restrict the ability of its citizens to live and work in Britain.
Brexit negotiations: What are the key issues?

Security

Recent terror attacks across Europe including a string in Britain underline both sides' support for continued security cooperation after March 2019. But access to EU institutions such as Europol and programs such as the European Arrest Warrant require compliance with EU laws. Whether Britain will still be compliant after it leaves is unclear.

Author: Alexander Pearson