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Which Countries Are the Biggest Boost or Drag on the EU Budget?

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Which Countries Are the Biggest Boost or Drag on the EU Budget?

Which Countries Are the Biggest Boost or Drag on the EU Budget?

With 28 countries and over €15.8 trillion in 2018 GDP (PPP) to its name, there’s no doubt the European Union (EU) is highly influential in economics and politics. The “superpower” tackles a wide range of issues from climate change and health to external relations, justice, and migration.

Of course, the money required to address these concerns must come from somewhere—and that’s where the EU’s budget comes in. Each member state contributes revenue, but it’s been argued that not everyone is pulling their weight.

Today’s chart is based on budget data from the European Commission, and ranks the member states who contributed the most, and least, to the 2018 EU budget. Specifically, we’ve charted the net contributions—measured as the country’s total contribution less expenditures—on an absolute and per capita basis. We also break down the EU’s main revenue sources and areas of expenditure for the year.

An Unequal Share

Perhaps not surprisingly, Germany and the UK are the top two net contributors in absolute terms. Combined, these two powerhouses had a GDP (PPP) of over €5 trillion in 2018.

At the other end of the scale, Poland tops the list of net beneficiaries with a deficit of -€11,632 million—more than double that of second-place Hungary. In the wake of the European sovereign debt crisis, Greece and Portugal slide into fourth and fifth place respectively.

When population is taken into account, these rankings shift dramatically. Per capita, the Netherlands tops the list with €284 contributed per resident, whereas Luxembourg lands in last place with a deficit of -€2,710. The small country is home to many EU institutions, resulting in high administrative spending: in 2018, administration amounted to 80% of total expenditures.

Here’s a full ranking of the 28 member states, in both absolute (€M) and per capita (€ per resident) terms:

RankMember StateAbsolute net contribution (€M)Member StatePer capita net
contribution (€ per resident)
#1🇩🇪 Germany€17,213M🇳🇱 Netherlands€284
#2🇬🇧 United Kingdom€9,770M🇩🇰 Denmark€254
#3🇫🇷 France€7,442M🇩🇪 Germany€208
#4🇮🇹 Italy€6,695M🇸🇪 Sweden€196
#5🇳🇱 Netherlands€4,877M🇦🇹 Austria€174
#6🇸🇪 Sweden€1,983M🇬🇧 United Kingdom€147
#7🇦🇹 Austria€1,534M🇫🇮 Finland€123
#8🇩🇰 Denmark€1,468M🇮🇪 Ireland€112
#9🇫🇮 Finland€679M🇫🇷 France€111
#10🇮🇪 Ireland€542M🇮🇹 Italy€111
#11🇲🇹 Malta-€41M🇪🇸 Spain-€9
#12🇨🇾 Cyprus-€61M🇨🇾 Cyprus-€70
#13🇪🇸 Spain-€42M8🇲🇹 Malta-€85
#14🇸🇮 Slovenia-€471M🇭🇷 Croatia-€154
#15🇪🇪 Estonia-€516M🇷🇴 Romania-€155
#16🇭🇷 Croatia-€633M🇨🇿 Czech Republic-€201
#17🇱🇻 Latvia-€93M5🇧🇬 Bulgaria-€225
#18🇧🇬 Bulgaria-€1,585M🇧🇪 Belgium-€227
#19🇸🇰 Slovakia-€1,600M🇸🇮 Slovenia-€228
#20🇱🇹 Lithuania-€1,624M🇸🇰 Slovakia-€294
#21🇱🇺 Luxembourg-€1,631M🇬🇷 Greece-€298
#22🇨🇿 Czech Republic-€2,136M🇵🇹 Portugal-€305
#23🇧🇪 Belgium-€2,590M🇵🇱 Poland-€306
#24🇷🇴 Romania-€3,035M🇪🇪 Estonia-€391
#25🇵🇹 Portugal-€3,136M🇱🇻 Latvia-€483
#26🇬🇷 Greece-€3,202M🇭🇺 Hungary-€514
#27🇭🇺 Hungary-€5,029M🇱🇹 Lithuania-€578
#28🇵🇱 Poland-€11,632M🇱🇺 Luxembourg-€2,710

It’s easy to see what the net beneficiaries might gain from the EU—but what about the top net contributors? Beyond straight budgetary allocations, member states have access to a single open market, and benefit from the political clout of 28 united countries, among other perks.

Following the Money

So, how does the EU collect its revenue, and what does it spend its money on? Revenue is broken down into four main categories:

  1. Value Added Tax (VAT)-Based Own Resource (2018 total: €17,600M)

    Member states pay based on how much they receive in VAT. The VAT “base” is capped at 50% of a country’s Gross National Income (GNI), and a standard levy of 0.3% applies. Germany, the Netherlands and Sweden benefit from a reduced rate of 0.15% in an effort to re-balance their excessive contributions.

  2. Gross National Income (GNI)-Based Own Resource (2018 total: €105,800M)

    Calculated as the difference between total expenditure and the sum of all other revenue, this revenue stream is the amount needed to balance the EU budget. The EU applies a standard percentage across member states, with Denmark, the Netherlands, and Sweden receiving a lump sum reduction in 2018.

  3. Traditional Own Resources (2018 total: €20,200M)

    Member states collect customs duties and sugar levies, which goes directly towards the EU budget after the country deducts a 20% collection cost.

  4. Other Revenue (2018 total: €15,700M)

    This consists of various items including taxes on EU workers’ salaries, interest on late payments and fines, and contributions from non-EU countries to research programs.

Revenue might also include a budget surplus from the previous year, or net adjustments made to previous years’ financials. On the other side of the budget, the EU has a wide variety of expenditures, broken down into six main categories:

  1. Smart and Inclusive Growth (2018 total: €75,900M)

    This category focuses on boosting growth, creating jobs, and fostering economic and social cohesion through training, education, research, and social policy.

  2. Sustainable Growth: Natural Resources (2018 total: €58,000M)

    The EU allocates funding for the sustainable growth of agriculture, rural development, and fisheries. It also finances programs dedicated to climate action.

  3. Security and Citizenship (2018 total: €3,100M)

    Focused on the safety and rights of its citizens, this budget line item encompasses everything from migration and border protection to food safety and consumer protection.

  4. Global Europe (2018 total: €9,500M)

    This covers all foreign policy, including international development and humanitarian aid.

  5. Administration (2018 total: €9,900M)

    The expenditures of all EU institutions are captured under this heading, including staff salaries, building rent, information technology and training.

  6. Special Instruments (2018 total: €200M)

    This area enables the EU to mobilize funds for unforeseen events, such as natural disasters and major world trade patterns that displace workers.

The 2018 budget resulted in a surplus of two billion Euros, but will it be balanced in future years?

The 2020 Budget and Beyond

The EU’s current budgetary framework ends in 2020. A proposal for the 2021–2027 budget has already been set forth, and council meetings are ongoing.

With Brexit’s twice-postponed deadline looming, the UK’s departure will leave a “sizable gap” in the EU budget. This could leave member states scrambling to find additional revenue sources and ways to reduce expenditures.

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Visualizing the Biggest Risks to the Global Economy in 2020

The Global Risk Report 2020 paints an unprecedented risk landscape for 2020—one dominated by climate change and other environmental concerns.

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Top Risks in 2020: Dominated by Environmental Factors

Environmental concerns are a frequent talking point drawn upon by politicians and scientists alike, and for good reason. Irrespective of economic or social status, climate change has the potential to affect us all.

While public urgency surrounding climate action has been growing, it can be difficult to comprehend the potential extent of economic disruption that environmental risks pose.

Front and Center

Today’s chart uses data from the World Economic Forum’s annual Global Risks Report, which surveyed 800 leaders from business, government, and non-profits to showcase the most prominent economic risks the world faces.

According to the data in the report, here are the top five risks to the global economy, in terms of their likelihood and potential impact:

Top Global Risks (by "Likelihood") Top Global Risks (by "Impact")
#1Extreme weather#1Climate action failure
#2Climate action failure#2Weapons of mass destruction
#3Natural disasters#3Biodiversity loss
#4Biodiversity loss#4Extreme weather
#5Humanmade environmental disasters#5Water crises

With more emphasis being placed on environmental risks, how much do we need to worry?

According to the World Economic Forum, more than we can imagine. The report asserts that, among many other things, natural disasters are becoming more intense and more frequent.

While it can be difficult to extrapolate precisely how environmental risks could cascade into trouble for the global economy and financial system, here are some interesting examples of how they are already affecting institutional investors and the insurance industry.

The Stranded Assets Dilemma

If the world is to stick to its 2°C global warming threshold, as outlined in the Paris Agreement, a significant amount of oil, gas, and coal reserves would need to be left untouched. These assets would become “stranded”, forfeiting roughly $1-4 trillion from the world economy.

Growing awareness of this risk has led to a change in sentiment. Many institutional investors have become wary of their portfolio exposures, and in some cases, have begun divesting from the sector entirely.

The financial case for fossil fuel divestment is strong. Fossil fuel companies once led the economy and world stock markets. They now lag.

– Institute for Energy Economics and Financial Analysis

The last couple of years have been a game-changer for the industry’s future prospects. For example, 2018 was a milestone year in fossil fuel divestment:

  • Nearly 1,000 institutional investors representing $6.24 trillion in assets have pledged to divest from fossil fuels, up from just $52 billion four years ago;
  • Ireland became the first country to commit to fossil fuel divestment. At the time of announcement, its sovereign development fund had $10.4 billion in assets;
  • New York City became the largest (but not the first) city to commit to fossil fuel divestment. Its pension funds, totaling $189 billion at the time of announcement, aim to divest over a 5-year period.

A Tough Road Ahead

In a recent survey, actuaries ranked climate change as their top risk for 2019, ahead of damages from cyberattacks, financial instability, and terrorism—drawing strong parallels with the results of this year’s Global Risk Report.

These growing concerns are well-founded. 2017 was the costliest year on record for natural disasters, with $344 billion in global economic losses. This daunting figure translated to a record year for insured losses, totalling $140 billion.

Although insured losses over 2019 have fallen back in line with the average over the past 10 years, Munich RE believes that long-term environmental effects are already being felt:

  • Recent studies have shown that over the long term, the environmental conditions for bushfires in Australia have become more favorable;
  • Despite a decrease in U.S. wildfire losses compared to previous years, there is a rising long-term trend for forest area burned in the U.S.;
  • An increase in hailstorms, as a result of climate change, has been shown to contribute to growing losses across the globe.

The Ball Is In Our Court

It’s clear that the environmental issues we face are beginning to have a larger real impact. Despite growing awareness and preliminary actions such as fossil fuel divestment, the Global Risk Report stresses that there is much more work to be done to mitigate risks.

How companies and governments choose to respond over the next decade will be a focal point of many discussions to come.

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The Sum of Its Parts: The Smartphone Multiplier Market

Every day, 3.3 billion people rely on their smartphones to stay connected. The products and services enabling this—the smartphone multiplier market—is now worth $459 billion.

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The Sum of Its Parts: The Smartphone Multiplier Market

There’s a 60% chance you’re reading this article on a smartphone right now—a testament to how ubiquitous these devices have truly become in our lives.

We rely on smartphones every waking minute to stay connected. However, the various products and services—also known as the smartphone multiplier market—that allow us to use these devices in the first place can often be an afterthought.

Today’s chart uses data from Deloitte Insights to show just how sizable this ecosystem is becoming, and why it’s heating up as a battleground for big technology companies such as Apple, Alphabet, and Amazon.

The Smartphone Plateau

There are over 3.3 billion smartphone users in the world today.

The smartphone economy—estimated to pull in $944 billion in total revenue in 2020—is so massive that it rivals the GDP of countries like Indonesia and the Netherlands.

At the moment, the smartphones themselves contribute over half the market value. Despite the continued hype surrounding the release of new models, global unit shipments of smartphone devices appears to have reached a saturation point:

Smartphone Sales

There are two theories as to why shipments are leveling off. First, product innovation is more iterative today than in the past, which means there are fewer groundbreaking features to entice consumers into purchasing new devices. A second factor is that people are simply holding onto their devices for longer than in the past.

As device sales plateau, tech giants are diversifying efforts to find new ways to lure customers back in—and another related market is growing more lucrative as a result.

What is a “Smartphone Multiplier”?

When people think of the smartphone market, hardware likely springs to mind first, but an equally important part of the equation is the plethora of apps, services, accessories, and complementary devices that help us connect with the digital world.

The ecosystem of these products and services are known as smartphone multipliers. According to Deloitte, this ecosystem will drive $459 billion of revenues in 2020, an impressive 15% increase from the prior year.

The market can be broken down into three main categories:

CategoryMarket Value (2020e)Sub-categories
Content$312B
(68% of total)
$176B: Mobile ads
$118B: Apps
$10B: Music
$8B: Video
Hardware$111B
(24% of total)
$77B: Accessories
$25B: Wearables
$9B: Smart speakers
Services$37B
(8% of total)
$18B: Insurance
$12B: Repairs
$4B: Others
$3B: Storage

Largely driven by mobile advertising and app sales, content is by far the largest subcategory, accounting for 68% of revenues:

  • Mobile advertising surpassed TV as the largest advertising channel in 2019, partially thanks to the relentless growth of online video and social media, making ads virtually unavoidable on a smartphone.
  • Gaming apps are benefiting from the immense processing power of today’s smartphones—and will bring in over two-thirds of total app revenue in 2020. Apple’s app store brought in approximately $1.8 billion in sales between Christmas Eve and New Year’s Day alone.
    • If you’ve ever owned a pair of headphones or a powerbank, it’s easy to understand why accessories are the third-largest subcategory in the smartphone multiplier market. With more people ditching the cable for wireless headphones, this subcategory is also set to grow even more.

      The Next $1T Economy?

      In the U.S., 73% of adults go online several times a day or almost constantly, which makes it clear that they aren’t going to give up their smartphones anytime soon.

      As a result, smartphone multipliers will continue to evolve and flourish, presenting a unique opportunity for investors and businesses.

      Altogether, it’s expected that the smartphone multiplier market will grow between 5 and 10% annually through 2023, likely propelling the entire smartphone economy past the $1 trillion benchmark in the coming years.

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