Brexit hangover kicks in for EU leaders debating budget gap

Bloomberg

Twelve hours after the UK formally left the European Union, the bloc’s poorer members gathered in an old Franciscan convent in southern Portugal to rally against a looming
budgetary shortfall that’s partly due to the loss of British contributions.
Brexit is deepening the rift between richer and poorer EU states as they clash on the bloc’s trillion-euro ($1.1 trillion) budget for the next seven years. Poorer members are fighting to keep the hole created by Britain’s departure from being filled by cuts to development funds.
“This meeting is happening on a very special day as it’s the first day in which the EU has just 27 members,” Portuguese Prime Minister Antonio Costa said in Beja. “It’s important to give the clear message that the union will remain cohesive.”
The meeting of the “Friends of Cohesion” group on February 1, which brought together 17 eastern and southern nations, will be followed by a February 20 summit of all EU countries that will tackle stalled negotiations about the budget.

Budget Shortfall
The seven-year budget is a cornerstone of EU policy that allots funding to help farmers compete against imports from the developing world and underpins projects that bind the union together. But agreeing on the amount of contributions and how to spend them is a regular source of tension between the net contributors, like the UK was, and those who get more than they put in.
The poorer nations, which see the so-called cohesion policy as a key tool to help them catch up with wealthier countries, now want their richer peers to contribute more money to make up for the UK’s withdrawal.
The Friends of Cohesion group reaffirmed on February 1 that the EU needs to keep cohesion policy funding at the current level, in real terms, according to a statement
distributed by the Portuguese government.
“The EU should have resources for new goals, but not at the cost of instruments that are the foundation of its actions and have for years been functioning well,” Polish Prime Minister Mateusz Morawiecki told PAP newswire in an interview on Sunday. “It can afford more.”
Agreement on the size of contributions is needed before decisions can be taken on how they should be spent, and the conditions attached to the disbursements. EU spending amounts to about 1% of the bloc’s gross domestic product.
In the discussion about the next budget, positions are very far apart, Hungarian Prime Minister Viktor Orban told reporters on February 1.
“We need not just days but months to make an agreement that could be accepted by everybody.”

UK’s Johnson set to demand a comprehensive trade deal
Bloomberg

Boris Johnson is set to say he’s prepared to quit talks with the European Union over the UK’s future trade relationship with the bloc if he doesn’t get his way.
In his first speech since Britain formally left the EU, the prime minister will spell out to business leaders and diplomats on Monday his aims for negotiating the future trade terms with the bloc. Brussels negotiators are set to publish their own mandate the same day.
Johnson will say he wants a comprehensive trade deal at least as good as Canada’s agreement, but will be ready to take a looser arrangement like Australia’s if talks fail, according to a UK official.
The prime minister will again spell out that in brokering a Canada-style free trade accord, there’ll be no alignment with EU rules standards, European law courts will have no jurisdiction over the UK and he’ll make no concessions, the official said.
He’ll also make it clear that the National Health Service is not up for grabs in any trade talks.
Johnson’s speech is set to fire the starting gun on what will be 11 months of hard bargaining. After three years of bad-tempered talks on the U.K.’s political withdrawal, the early signs indicate that the parties will struggle to avoid a cliff-edge change in their trading arrangement come 2021. European Commission President Ursula von der Leyen has previously said it will be “impossible” to sign off on a full deal before Johnson’s hard year-end deadline.
According to the Daily Telegraph, Johnson has become “privately infuriated” with the EU’s stance.
The EU and Canada negotiated for seven years before signing the trade deal, known as CETA, in October 2016. It took almost another year before its provisional application began.
The prospect of a Canada-style deal with the U.K. received a guarded welcome from Irish Prime Minister Leo Varadkar, who said Friday that it would have to be based on minimum common standards. The U.K. is geographically much closer than Canada and can’t be allowed to undermine the EU, he said in Dublin.
Also Friday, BMW AG served a reminder that Britain’s formal exit from the EU didn’t necessarily mean that “Brexit was done.” Citing uncertainties over Britain’s future trade relations, the German car company said it was putting work on the next version of a Mini model on hold. The Mini is currently built in England and the Netherlands.