Why a Brexit Could Be a Losing Proposition for Everyone
After two days of intense negotiations, British Prime Minister David Cameron has proposed a new agreement that could allow Britain to stay in the European Union. Although not all of his demands were met in full, the potential deal focuses on migrant workers, protecting the pound and London’s financial sector from regulations, sovereignty, and competitiveness.
It may be just enough of a carrot to dangle in front of the “Euroskeptics”, or Brits that are skeptical of the benefits that Britain receives from EU membership.
However, the split between “stay” and “leave” is still very even according to polls:
With polls close and the “Vote Leave” campaign now in full gear for the referendum on June 23, investors around the world are trying to figure out the potential economic and political impact of a British exit from the EU.
Here’s What’s at Stake
The Bertelsmann Foundation, a non-profit foundation from Germany dedicated to European unity, has come up with a fairly compelling case against a Brexit.
Shown in today’s infographic, the impact of the UK leaving the economic union creates a situation where everyone loses.
While its true that the UK would have greater control over its own immigration and regulations, the downside is largely economic. Britain could avoid making payments to the EU budget, which works out to £350 million per week, but this would be likely outweighed by the increase in trade barriers. Currently 45% of the UK’s exports go to Europe, and without direct access to the single market, the cost of both imports and exports would likely go up.
The costs of trade policy isolation affect the United Kingdom, where GDP could drop from 0.6% to 3% lower by 2030, compared to if it remained in the EU. Bertelsmann warns it could be even worse once the effects of economic isolation factor into investment and innovation behavior, with the GDP dropping up to 14%.
Britain is not the only country that would be affected. As a result of a Brexit, the GDP per capita of Ireland (-2.66%), Germany (-0.33%), Netherlands (-0.35%), France (-0.27%) and Spain (-0.32%) could all also be impacted.
Does the financial community share these concerns? If the pound is any indication of Brexit fears, the currency is currently trading at seven-year lows.
Which Countries Are the Biggest Boost or Drag on the EU Budget?
As Brexit looms, the EU budget is under the microscope. Learn which countries contribute the most—and least—to the bottom line in this chart.
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:
|Rank||Member State||Absolute net contribution (€M)||Member State||Per 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:
- 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.
- 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.
- 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.
- 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:
- 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.
- 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.
- 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.
- Global Europe (2018 total: €9,500M)
This covers all foreign policy, including international development and humanitarian aid.
- 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.
- 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.
Animation: How the European Map Has Changed Over 2,400 Years
The history of Europe is breathtakingly complex, but this animated map helps makes sense of 2,400 years of shifting borders and nations.
How the European Map Has Changed Over 2,400 Years
The history of Europe is breathtakingly complex. While there are rare exceptions like Andorra and Portugal, which have had remarkably static borders for hundreds of years, jurisdiction over portions of the continent’s landmass has changed hands innumerable times.
Today’s video comes to us from YouTube channel Cottereau, and it shows the evolution of European map borders starting from 400 BC. Empires rise and fall, invasions sweep across the continent, and modern countries slowly begin to take shape (with the added bonus of an extremely dramatic instrumental).
Below are nine highlights and catalysts that shifted the dividing lines of the European map:
146 BC – A Year of Conquest
146 BC was a year of conquest and expansion for the Roman Republic. The fall of Carthage left the Romans in control of territory in North Africa, and the ransack and destruction of the Greek city-state of Corinth also kickstarted an era of Roman influence in that region. These decisive victories paved the way for the Roman Empire’s eventual domination of the Mediterranean.
117 AD – Peak Roman Empire
The peak of the Roman Empire is one of the more dramatic moments shown on this animated European map. At its height, under Trajan, the Roman Empire was a colossal 1.7 million square miles (quite a feat in an era without motorized vehicles and modern communication tools). This enormous empire remained mostly intact until 395, when it was irreparably split into Eastern and Western regions.
370 AD – The Arrival of the Huns
Spurred on by severe drought conditions in Central Asia, the Huns reached Europe and found a Roman Empire weakened by currency debasement, economic instability, overspending, and increasing incursions from rivals along its borders. The Huns waged their first attack on the Eastern Roman Empire in 395, but it was not until half a century later – under the leadership of Attila the Hun – that hordes pushed deeper into Europe, sacking and razing cities along the way. The Romans would later get their revenge when they attacked the quarreling Goths and Huns, bouncing the latter out of Central Europe.
1241 – The Mongol Invasion of Europe
In the mid-13th century, the “Golden Horde” led by grandsons of Genghis Khan, roared into Russia and Eastern Europe sacking cities along the way. Facing invasion from formidable Mongol forces, central European princes temporarily placed their regional conflicts aside to defend their territory. Though the Mongols were slowly pushed eastward, they loomed large on the fringes of Europe until almost the 16th century.
1362 – Lithuania
Today, Lithuania is one of Europe’s smallest countries, but at its peak in the middle ages, it was one of the largest states on the continent. A pivotal moment for Lithuania came after a decisive win at the Battle of Blue Waters. This victory stifled the expansion of the Golden Horde, and brought present-day Ukraine into its sphere of influence.
1648 – Kleinstaaterei
The end of the Holy Roman Empire highlights the extreme territorial fragmentation in Germany and neighboring regions, in an era referred to as Kleinstaaterei.
Even as coherent nation states formed around it, the Holy Roman Empire and its remnants wouldn’t coalesce until Germany rose from the wreckage of the Franco-Prussian War in 1871. Unification helped position Germany as a major power, and by 1900 the country had the largest economy in Europe.
1919 – The Ottoman Empire
The Ottoman Empire – a fixture in Eastern Europe for hundreds of years – was in its waning years by the beginning of the 20th century. The empire had ceded territory in two costly wars with Italy and Balkan states, and by the time the dust cleared on WWI, the borders of the newly minted nation of Turkey began at the furthest edge of continental Europe.
1942 – Expanding and Contracting Germany
At the furthest extent of Axis territory in World War II, Germany and Italy controlled a vast portion of continental Europe. After the war, however, Germany again became fragmented into occupation zones – this time, overseen by the United States, France, Great Britain, and the Soviet Union. Germany would not be made whole again until 1990, when a weakening Soviet Union loosened its grip on East Germany.
1991 – Soviet Dissolution
In the decades following WWII, the political boundaries of the European map remained relatively stable – that is, until the dissolution of the Soviet Union in 1991. Almost overnight, the country’s entire western border splintered into independent nations. When the dust settled, there were 15 breakaway republics, six of which were in Europe.
Bonus: If you liked the video above, be sure to watch this year-by-year account of who ruled territories across Europe.
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