EU auditors draw attention to risks related to Brexit Adjustment Reserve

In an opinion published today, the European Court of Auditors said that it is concerned with the recent proposal for a Brexit Adjustment Reserve.

It said that this fund of €5 billion is a tool of solidarity which is intended to support those member states, regions and sectors which were the hardest hit by the UK leaving the EU. According to the auditors, while the proposal allows for flexibility for member states, the design of this reserve creates a number of uncertainties and risks.

The European Commission proposes that through the Brexit Adjustment Reserve, 80% of the fund (EUR 4 billion) should be given to member states as a form of pre-financing. The member states can be allocated their share of pre-financing based on the impact on their respective economies, while consideration will be taken on two factors: trade with the UK and the fish which is caught in the UK’s exclusive economic zone.

According to this method of allocation, Ireland will be the principle beneficiary with almost one fourth of the package, (EUR 991 million), followed by the Netherlands (EUR 714 million), Germany (EUR 429 million), France (EUR 396 million) and Belgium (EUR 305 million).

The auditors drew particular attention to the architecture of the Brexit Adjustment Reserve, whereby the member states will have received an unusually high amount of pre-financing without having to provide details in advance to the  European Commission about the measures which need to be financed. While this will permit a rapid reaction for this unique situation, the eligibility of these measures will not be evaluated by the Commission prior to the end of 2023.

The auditors warned that the structure increases the risks that measures will be chosen which will not be optimal or eligible.

Apart from this, the proposal specifies that the period of eligibility for the implementation of the measures should be from July 2020 – December 2022.  The auditors point out that the Commission does not provide a reason for the choice of this period of eligibility nor does it examine its suitability.