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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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Chart of the Week

War and Peace: How Violence is Disrupting the Global Economy

This graphic estimates the direct and indirect costs associated with violence, and explores how they are negatively impacting the global economy.

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War and Peace: How Violence is Disrupting the Global Economy

Although you may not see it, millions of lives are disrupted by violence everyday.

War, homicide, terrorism, suicide, and sexual assault can be found across the world in various degrees. While certain types of violence can incur costs that result in personal traumas, violence can also create significant economic disruptions.

In today’s Chart of the Week, we visualize data estimates from the Global Peace Index 2019 on the global cost of violence, and its geographical spread.

How is Violence Linked to the Economy?

The Global Peace Index calculates the total cost of violence using purchasing power parity (PPP) by considering three factors:

  • Direct costs: Immediate consequences to the victims, perpetrators and the government
  • Indirect costs: Delayed economic losses following the violent event, including the after-effects of trauma experienced by the victim
  • Multiplier effect: Calculates the additional economic activity that would have accrued if the direct costs of violence had been avoided.

Between 2012-2017, the cost of violence increased by 11% to $14.6 trillion—mainly due to rising violence in Syria, Libya, Yemen, and other parts of the Middle East and North Africa.

In 2018, the total cost of violence decreased for the first time in six years to $14.1 trillion. That’s the equivalent of 11.2% of global GDP (PPP), or $1,853 for every person.

In this one year, the $475 billion saved from decreased violence costs was largely due to lower levels of armed conflict in Syria, Ukraine, and Colombia.

The Top 10 Worst Affected Countries

It comes as no surprise that countries affected by conflict incur the greatest costs due to a higher than average death toll, and sizable military expenditures.

Here are the countries with the highest cost of violence according to the report:

RankCountryCost of violence (% of GDP)    
#1🇸🇾 Syria67%
#2🇦🇫 Afghanistan47%
#3🇨🇫 Central African Republic42%
#4🇰🇵 North Korea34%
#5🇮🇶 Iraq32%
#6🇻🇪 Venezuela30%
#7🇨🇾 Cyprus30%
#8🇸🇴 Somalia26%
#9🇨🇴 Colombia25%
#10🇸🇻 El Salvador22%

Since 2017, Venezuela has climbed the ranking and now sits in the top 10, due to continuing political repression and a spiraling economy as a result of hyperinflation.

The Global Composition of Violence

Government spending on military comprises 40% of the global total, or $5.7 trillion in constant purchasing power parity (PPP).

Type of economic impactShare of total     
Military expenditure
40.2%
Internal security expenditure
31.7%
Homicide
8.6%
Private security expenditure5.8%
Suicide5.2%
Armed conflict4.8%
Violent crime2.6%
Other1%

Naturally, the types of violence costs vary by region, and the most noticeable difference is in military expenditure. It represents 59% of Middle East and North Africa’s violence costs—but only 8% for Central America and the Caribbean.

regional costs violence

Interestingly, the Middle East and North Africa boast the lowest levels of violent crime, homicide, and suicide, representing only 4% of the total, compared to South America’s 45%.

Keeping the Peace

Despite today’s chart painting a picture of the world as a dangerous place, it is worth noting that there are two sides to this story.

Of the 163 countries ranked in the index, 86 countries improved their peace score in the last year, with Iceland retaining its number one position for over a decade. In fact, the country has not had any gun murders since the Global Peace Index began in 2007.

Is the recent drop in costs of violence a sign that we are moving towards a more peaceful planet, or just a blip on the radar?

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Business

Ranked: The 20 Easiest Countries for Doing Business

Entrepreneurship is challenging at the best of times. Here are the countries where at least starting a new business is easy to do.

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Easiest Countries to do Business

Ranked: The 20 Easiest Countries for Doing Business

Contrary to popular belief, the hardest part about running a business may not be finding customers, it’s getting one started.

Depending on the public policies and application processes of your country, you might struggle or succeed in opening and operating a business.

If you live in New Zealand, for example, you can get a new enterprise up and running in half a day. If you live in Luxembourg or Argentina, however, it’s a different story─with the process sometimes taking over a year.

Today’s chart uses data from the World Bank’s annual Doing Business 2020 report, which delves into the ease of doing business in countries around the world.

Measuring the Ease of Doing Business

Now in its 17th year, the Doing Business (DB) report measures how easy it is for someone to start and run a company in an economy, using 12 key factors throughout a business lifecycle:

  1. Starting a business
  2. Employing workers
  3. Dealing with construction permits
  4. Getting electricity
  5. Registering property
  6. Getting credit
  7. Protecting minority investors
  8. Paying taxes
  9. Trading across borders
  10. Contracting with the government
  11. Enforcing contracts
  12. Resolving insolvency

Of the 190 countries reviewed last year, only 115 made it easier for entrepreneurs to do business.

Note to readers: this year’s DB score did not factor in Employing Workers or Contracting with the Government when ranking economies.

Top 20 Easiest Countries to Run a Business

RankCountryDB Score
#1🇳🇿 New Zealand86.8
#2🇸🇬 Singapore86.2
#3🇭🇰 Hong Kong85.3
#4🇩🇰 Denmark85.3
#5🇰🇷 South Korea84
#6🇺🇸 United States84
#7🇬🇪 Georgia83.7
#8🇬🇧 United Kingdom83.5
#9🇳🇴 Norway82.6
#10🇸🇪 Sweden82
#11🇱🇹 Lithuania81.6
#12🇲🇾 Malaysia81.5
#13🇲🇺 Mauritius81.5
#14🇦🇺 Australia81.2
#15🇹🇼 Taiwan80.9
#16🇦🇪 United Arab Emirates80.9
#17🇲🇰 North Macedonia80.7
#18🇪🇪 Estonia80.6
#19🇱🇻 Latvia80.3
#20🇫🇮 Finland80.2

In the top spot for the fourth year in a row, New Zealand only requires half a day to start a business. Singapore also stands out for having the shortest timeframe when it comes to paying business taxes and enforcing business contracts.

Only two African nations─Rwanda and Mauritius─are listed in the top 50 countries, with Mauritius being the only one to crack the top 20 list.

Latin American economies are noticeably missing from the rankings, as many countries in this region are fraught with bureaucracy and prolonged processes.

Most Improved Scores

Several developed and developing economies made significant strides in 2019 to implement reforms that opened doors for new business owners.

The Doing Business 2020 report shows that the cost of starting a business has fallen over time, particularly in developing economies.

Top 10 Most Improved Economies, 2018-2019

Top 10 most improved economies for doing business

Saudi Arabia made the greatest improvement overall, adding 7.7 points to its score.

Bahrain also made improvements over the most number of factors (9). While Jordan showed improvement in the fewest factors (3), it showed the second highest jump in DB Score.

Gains Among Low-Income Countries

The DB 2020 study also shows that developing economies are making progress: it’s now cheaper than ever before to run a business in developing economies.

However, a significant disparity still remains when we consider the difference in business costs between high-income and low-income economies.

An entrepreneur starting a company in a low-income economy will spend about 50% of per capita income (PCI) to launch a venture, whereas an entrepreneur in a high-income economy spends only 4% PCI to accomplish the same task.

Put another way, entrepreneurs located in the bottom 50 economies spend an average six times more to open a new company as those in a high-income economy.

Entrepreneurship and Economic Growth

Generally, more entrepreneurs will enter a market where they can easily conduct business─adding more value to local economies.

While the rankings clearly illustrate the link between ease of doing business and economic growth, there are still significant barriers in place that not only deter entrepreneurship but also inhibit a relatively simple strategy for growth.

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