The first post-Brexit European Union (EU) budget plan is causing tension between the region have’s and have-nots. The 2021-2027 EU budget was revealed on Wednesday by Budget Commissioner Guenther Oettinger. The financial hole left by the exit of the UK is a big gap to fill and the new budget reflects that shortfall. The hole will work out to be a deficit of €12-14bn annually, which will need to be made up through a combination of increased demands on other member nations, as well as cuts in spending elsewhere.
The current 2014-2020 budget accounts for approximately 1% of the 28-member county’s total gross national income (GNI). The new budget will clock in at about €1tn (£879bn; $1.2tn). This represents an increase of about .1% of total GNI, which equates to approximately €1.28tn spread over the seven years of the budget period.
The new budget proposal is far from a done deal. Politicians and economists are preparing for months of debate leading up to the vote to approve the new plan. Under EU rules, all member countries must approve the proposal with a unanimous vote. The EU budget officials will aim to have the plan approved prior to next May’s European Parliament elections. Other hot-button issues will surely be brought into the battle over the budget to use as leverage. Included among these issues is the debate over the EU’s obligation to take in fleeing refugees and anger that some countries are pulling more than their fair share of the weight.
Consumer price inflation in the UK dropped 0.3% in the month of February, the lowest data point since July 2017. Financial experts point to lower petrol prices combined with a slower rise in food costs as the reason for the drop. Heading into the month, price inflation had sat at 3%, but the month ended at 2.7%.
Diesel costs fell 0.1p per liter, while overall petrol prices fell by 0.2p per liter. The cost of food only increased 0.1% between the months of January and February. This small increase contrasted to a total rise of 0.8% for the year 2017. This smaller rise was to be expected since last year’s big increase was largely attributed to a shortage of vegetables due to poor weather in the southern Mediterranean negatively affecting export prices.
Consumers now look to the Bank of England to determine if interest rates will remain steady or if the Bank will continue with its anticipated plan to raise these rates at its May meeting. The Bank is hopeful that the economic future is bright for the country, as it has previously stated that it expects wage increases to outpace inflation in the coming year. Financial employment experts are confirming this optimism as data points to a wage increase of 2.6% over the first three months of 2018. The official pay growth data will be released on Wednesday by the Office for National Statistics (ONS).
UK Trade Secretary Liam Fox is traveling to the United States and meeting with government and economic officials in an effort to seek exemption from the newly announced US steel and aluminum tariffs. Two weeks ago, President Donald Trump declared that his country will begin imposing a 25% duty on imported steel and a 10% tariff on imported aluminum with the goal of strengthening and protecting the internal US production of those materials. Trump believes that the US production of steel and aluminum has suffered due to unfair trade regulations and his objective is to boost the domestic market for these industries.
In a response to these tariffs, the European Union said it will be requesting an exemption of the duties for all of its 28 member countries, including the UK. Many countries, including influential China, have criticized Trump’s new trade plan, which goes into effect in just two weeks. Neighboring nations Mexico and Canada were granted a temporary exemption from the tariffs due to their partnership in the North American Trade Agreement (NAFTA). The US risks alienating many of its most important global allies and these countries have already threatened to bring this matter in front of the World Trade Organization (WTO).