Who said faceless, gray-suited bureaucrats don’t have a sense of humor?
The European Union has ordered the U.K. to pay an extra €2.1 billion ($2.65 billion) into its central budget by December, once again inflaming the British sense of grievance at the perceived machinations of unelected Eurocrats in Brussels.
The timing for Prime Minister David Cameron just couldn’t be worse: his Conservative Party is already set for a second humiliating by-election defeat in as many months after another of his lawmakers defected to the U.K. Independence Party (UKIP), which wants to take Britain out of the E.U.. The new bombshell is just so much grist to UKIP’s mill.
He could be forgiven for thinking it was a plot to make him look stupid in front of the voters. The E.U. is genuinely worried by Cameron’s promise of a U.K. referendum on leaving if he wins the next election in May. Most in Brussels would far rather the center-left Labour Party, which has (so far) refused to dance to UKIP’s tune, formed the next government.
But the truth is perhaps even more galling: the E.U. routinely recalculates how much member states have to pay into its central budget on the size of their Gross National Income. Because the U.K.’s GNI has actually grown more than initially thought since the base year of 1995, it has to pay more.
“It’s a punishment for success!” the U.K.’s Euroskeptic fringe (or, rather, mainstream) instantly howled.
And so it would seem, if it weren’t for the inconvenient fact that the other countries facing a larger bill include bail-out basket cases Greece and Cyprus, Latvia (whose economy shrank 18% during the crisis), the Netherlands, currently struggling with a nasty hangover from a real estate boom, and that other unstoppable powerhouse of the E.U. economy, Italy.
To complete the somewhat surreal arithmetic, the biggest beneficiaries of the recalculation are France (€1.0 billion) and Germany (€780 million).
The real reason is that the E.U. and its members recently changed the way they count GNI, in a way that gives more weight to the informal sector of the economy, including activities such as prostitution and illegal drug consumption.
Governments didn’t mind that so much when that recalculation was boosting the estimates for nominal gross domestic product, which measures the total goods and services produced and consumed by a country. It allowed Italy to claim that it wasn’t in recession earlier this year, and it let Greece shave a couple of percentage points off those debt-to-GDP ratios that give the International Monetary Fund so many sleepless nights.
But the payback was always baked in to the math. And now politicians from Westminster to Rome are claiming it’s unfair, even though they knew the bill was coming all along.
Cameron himself tweeted that he was “angry at the sudden presentation of a €2 billion bill,” adding: “It’s an appalling way to behave and I won’t be paying it on Dec. 1.”
In one sense, at least, they are right. It is unfair, because one thing is for sure: whatever happens, it won’t be U.K.’s coke dealers and hookers who end up paying that €2.1 billion.
