EU auditors highlight risks of Brexit Adjustment Reserve

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In an opinion published today, the European Court of Auditors (ECA) raises some concerns over the recent proposal for a Brexit Adjustment Reserve (BAR). This €5 billion fund is a solidarity tool which is intended to support those Member States, regions and sectors worst affected by the UK’s withdrawal from the EU. According to the auditors, while the proposal provides flexibility for Member States, the design of the reserve creates a number of uncertainties and risks.

The European Commission proposes that 80% of the fund (€4 billion) should be granted to Member States in the form of pre-financing following the BAR’s adoption. Member States would be allocated their share of pre-financing on the basis of the estimated impact on their economies, taking into account two factors: trade with the UK and fish caught in the UK exclusive economic zone. Applying this allocation method, Ireland would become the main beneficiary of prefinancing, with nearly a quarter (€991 million) of the envelope, followed by the Netherlands (€714 million), Germany (€429 million), France (€396 million) and Belgium (€305 million). “The BAR is an important funding initiative which aims to help mitigate the negative impact of Brexit on the EU Member States’ economies”, said Tony Murphy, the Member of the European Court of Auditors responsible for the opinion. “We consider that the flexibility provided by the BAR should not create uncertainty for Member States.”

In particular, EU auditors point to the architecture of the BAR, under which Member States would receive an unusually high level of pre-financing 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 auditors warn that the proposed structure and timing would increase the risk of sub-optimal and ineligible measures being chosen.

Moreover, the proposal outlines that the eligibility period for implementing measures should run from July 2020 to December 2022. However, the auditors caution that the Commission does not provide reasoning for choosing this eligibility period or examine its suitability.

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