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€5 billion Brexit support fund contains design risks, ECA warns

€5 billion Brexit support fund contains design risks, ECA warns

by John MONAGHAN 2 min. 01.03.2021
With no requirement to inform Commission in advance, money risks ending up in "sub-optimal or ineligible" schemes
The UK formally left the European Union on December 31
The UK formally left the European Union on December 31
Photo credit: Shutterstock

The creation of a multi-billion euro fund to help EU countries deal with the economic impact of Brexit carries a number of risks in its design, the European Court of Auditors (ECA) warned on Monday.

In an opinion published on Monday, the Luxembourg-based court assessed an EU proposal for a €5 billion pot called the Brexit Adjustment Fund (BAR).

The plan by the European Commission, submitted at the end of last year, envisages handing out €4 billion in financing in 2021 to assist countries to deal with immediate challenges, and another €1 billion to be paid in three years’ time to cover any further expenditure.

The share of the funds allocated is based on the estimated impact of Brexit on a country’s economy, calculated by trade with the UK and the amount of fish caught in the UK’s exclusive economic zone.

Of the initial €4 billion payment, four countries – the Republic of Ireland, Netherlands, France and Germany - will share more than 60% of the total amount, or €2.5 billion. The Republic of Ireland, the only state which shares a land border with the UK, is by far the largest proposed recipient, and is due to be paid almost €1 billion.  Luxembourg will receive just €114 million, or 2.9%, of the first tranche of money. 

Full impact still unknown

The ECA questioned the ability to assess the effectiveness of the measures and pointed at the risk that the funding “may not fully reflect the specific exposure of a member state’s economy” given the “many uncertainties” yet surrounding the full extent of the impact of the UK’s withdrawal from the bloc. 

The ECA also raised concerns that the funding facility allows countries to receive financial assistance “without having to give the European Commission advance details of the measures to be funded”.

“While this would allow for a swift reaction to the exceptional situation, the eligibility and appropriateness of these measures would not be assessed by the Commission before the end of 2023,” the ECA said. This would increase the likelihood of “sub-optimal and ineligible” projects being selected.

Lack of clear targets

A question mark also remains over the arbitrary nature of the eligibility period for implementing measures, from July 2020 to December 2022, the ECA said, querying that the Commission “does not provide reasoning for choosing this (timeframe) … or examine its suitability”.

The European Commission has proposed carrying out an evaluation of several aspects of the facility, but EU countries are not required to set targets for any of the indicators, “which will make it even more difficult to provide a meaningful assessment of the BAR’s effectiveness”, the ECA said.

Although the scheme is intended to be evaluated through a report to the European Parliament and Council by June 2027, the Commission “does not explicitly state that the evaluation would be independent”.

And while both the European Parliament and the Council requested the ECA’s opinion, legislators are not obliged to address the concerns expressed in it.

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