Danish minister: ‘We will not pay more’ to EU after Brexit

Minister of Finance Kristian Jensen says he is determined that Britain’s imminent exit from the EU will not mean more expensive membership for Denmark.

Danish minister: 'We will not pay more' to EU after Brexit
Finance Minister Kristian Jensen. Photo: Martin Sylvest/Scanpix

The Scandinavian country currently benefits from a membership discount due to the contribution made by the UK for its membership.

Sweden’s prime minister Stefan Löfven said Monday that the EU would have to adjust its budget for the multi-billion euro hole left in its finances by Britain’s exit.

But Jensen said that Denmark would rather focus on the total amount it pays into the European Union.

Denmark, Sweden, Austria, Germany and the Netherlands currently benefit from a discount on their EU memberships that is measured proportionally to the UK’s own contribution, which in turn is given an instant discount or rebate, despite it making up a large proportion of the union’s total income.

Once the British rebate disappears, the basis for the other countries receiving discounts on their membership goes with it, reports Danish news agency Ritzau.

But Jensen told the agency the he did not see any cause for concern.

“Our [discount] already has an expiry date and runs out in 2020. So the most important thing for me is how much we must pay to the EU,” Jensen said.

Löfven and Swedish finance minister Magdalena Andersson expressed their concerns Monday about having to partially foot the bill following the loss of Britain’s membership contribution.

Sweden risked ending up with a bill of ten billion Swedish kronor (€1.05 billion) per year if the EU did not reduce its expenses following Brexit, said Andersson.

Britain current membership fee is around €21 billion before the rebate is applied, approximately 15 percent of the total membership fees paid by the 28 EU countries.

Some of this contribution is offset by spending on Britain by the EU however, making the net loss of income from the country’s departure lower.

Löfven said that he hoped that other countries that were net contributors to the EU – including the Netherlands, Germany and Austria – would support the reduction of costs to offset loss of income from member contributions.

Andersson added that she supported the reallocation of EU spending, with more less money going to areas such as agricultural and regional aid and more to what she described as “genuine common problems and challenges”, including migration, competitiveness and climate change, reports Swedish news agency TT.

But the primary concern for Denmark would be the total amount Denmark pays for its membership of the union, Jensen said.

“The important thing is what Denmark has to pay. And I don’t think we should pay one krone more than we do now,” the minister said, according to Ritzau.

Like Löfven, Jensen underlined the need for the EU to adjust its budget according to the income change after Brexit.

“The EU must make sure that it adjusts its cost according to the income sources it has. Including after Brexit,” he said.

The British membership discount dates back to the 1980s, when eurosceptic prime minister Margaret Thatcher negotiated cheaper membership for the UK with the words “I want my money back”.

In 2013, former Danish prime minister Helle Thorning-Schmidt pushed through an agreement saving the country one billion kroner (€134 million) on its fees, with the justification that Denmark’s membership was costing more than the economic support it received from the union.

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How European countries are spending billions on easing energy crisis

European governments are announcing emergency measures on a near-weekly basis to protect households and businesses from the energy crisis stemming from Russia's war in Ukraine.

How European countries are spending billions on easing energy crisis

Hundreds of billions of euros and counting have been shelled out since Russia invaded its pro-EU neighbour in late February.

Governments have gone all out: from capping gas and electricity prices to rescuing struggling energy companies and providing direct aid to households to fill up their cars.

The public spending has continued, even though European Union countries had accumulated mountains of new debt to save their economies during the Covid pandemic in 2020.

But some leaders have taken pride at their use of the public purse to battle this new crisis, which has sent inflation soaring, raised the cost of living and sparked fears of recession.

After announcing €14billion in new measures last week, Italian Prime Minister Mario Draghi boasted the latest spending put Italy, “among the countries that have spent the most in Europe”.

The Bruegel institute, a Brussels-based think tank that is tracking energy crisis spending by EU governments, ranks Italy as the second-biggest spender in Europe, after Germany.

READ ALSO How EU countries aim to cut energy bills and avoid blackouts this winter

Rome has allocated €59.2billion since September 2021 to shield households and businesses from the rising energy prices, accounting for 3.3 percent of its gross domestic product.

Germany tops the list with €100.2billion, or 2.8 percent of its GDP, as the country was hit hard by its reliance on Russian gas supplies, which have dwindled in suspected retaliation over Western sanctions against Moscow for the war.

On Wednesday, Germany announced the nationalisation of troubled gas giant Uniper.

France, which shielded consumers from gas and electricity price rises early, ranks third with €53.6billion euros allocated so far, representing 2.2 percent of its GDP.

Spending to continue rising
EU countries have now put up €314billion so far since September 2021, according to Bruegel.

“This number is set to increase as energy prices remain elevated,” Simone Tagliapietra, a senior fellow at Bruegel, told AFP.

The energy bills of a typical European family could reach €500 per month early next year, compared to €160 in 2021, according to US investment bank Goldman Sachs.

The measures to help consumers have ranged from a special tax on excess profits in Italy, to the energy price freeze in France, and subsidies public transport in Germany.

But the spending follows a pandemic response that increased public debt, which in the first quarter accounted for 189 percent of Greece’s GDP, 153 percent in Italy, 127 percent in Portugal, 118 percent in Spain and 114 percent in France.

“Initially designed as a temporary response to what was supposed to be a temporary problem, these measures have ballooned and become structural,” Tagliapietra said.

“This is clearly not sustainable from a public finance perspective. It is important that governments make an effort to focus this action on the most vulnerable households and businesses as much as possible.”

Budget reform
The higher spending comes as borrowing costs are rising. The European Central Bank hiked its rate for the first time in more than a decade in July to combat runaway inflation, which has been fuelled by soaring energy prices.

The yield on 10-year French sovereign bonds reached an eight-year high of 2.5 percent on Tuesday, while Germany now pays 1.8 percent interest after boasting a negative rate at the start of the year.

The rate charged to Italy has quadrupled from one percent earlier this year to four percent now, reviving the spectre of the debt crisis that threatened the eurozone a decade ago.

“It is critical to avoid debt crises that could have large destabilising effects and put the EU itself at risk,” the International Monetary Fund warned in a recent blog calling for reforms to budget rules.

The EU has suspended until 2023 rules that limit the public deficit of countries to three percent of GDP and debt to 60 percent.

The European Commission plans to present next month proposals to reform the 27-nation bloc’s budget rules, which have been shattered by the crises.