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BRUSSELS — When Britain leaves the European Union at midnight on Friday the bloc loses the second-biggest net contributor to its budget, leaving a 12 billion-euro ($13 billion) hole in its finances.

The United Kingdom will continue making budget contributions this year under an agreed post-Brexit transition period. But from 202, Europe will have to look elsewhere.

This further complicates an already fraught debate between the remaining member states over the EU's 2021-2027 long-term budget, called the Multiannual Financial Framework (MFF).

The European Commission has had a proposed MFF on the table since May 2018, and its new president Ursula von der Leyen is keen to get it approved soon. 

But a so-called "Frugal Five" of wealthy mainly northern countries — Austria, Denmark, Germany, The Netherlands and Sweden — are seeking to limit EU expenditure.

And a rival "Friends of Cohesion" group of 16 eastern and Mediterranean countries wants to defend the budget rules.

Charles Michel, president of the European Council which represents member state governments, has called an MFF summit that will "begin" on February 20 and likely drag on.

Farm subsidies 

under pressure 

According to European Commission estimates, Britain's net contribution — the amount it pays in less EU spending on UK projects — would have been 12 billion euros a year.

Over the period of the upcoming seven years, that would leave an 84 billion-euro shortfall in the Commission's financial plans. 

The previous finance commissioner, Gunther Oettinger, wanted to fill the gap by increasing member state contributions and cutting traditional big spends: cohesion and farm subsidies.

This would allow Europe to switch funds to more "modern" areas, like investing in green technologies, coping with migration and moving into the defence field.

But much of this is very sensitive in EU capitals, and Michel has trekked all over the continent for talks without much sign of a breakthrough.

"We might have hoped that Brexit would be a shock to the system, but I think we'll just go on as before," laments Nicolas-Jean Brehon, of the Robert Schuman Foundation. 

Some of the richest members of the union want to limit contributions to only one per cent of each member state's gross domestic product GDP.

"It's obviously a symbolic threshold. It's also a political threshold that Germany and the British were insisting on," Brehon told AFP, noting that Brexit cost Berlin an ally.

Big spenders 

The European Commission, meanwhile, wants to set the level at 1.114 per cent of EU GDP, which would imply a 1.134 trillion-euro budget at 2018 prices, or 1.279 trillion at current levels.

The European Parliament would like an even higher 1.3 per cent.

Taking into account the British departure, the current multiannual budget represents 1.16 per cent of European Union GDP. 

Another Commission idea is phasing out the "rebates" that late British premier Margaret Thatcher famously demanded, taken up by some of the other bigger spenders.

After Brexit these reductions in budget contributions will only apply to Austria, Denmark, Germany, the Netherlands and Sweden — perhaps not un-coincidentally, the Frugal Five.

For the Commission and the countries that are net recipients of EU funds, it is wrong that — thanks to these rebates — the frugals spend less in per centage terms of their per capita GDP. 

But Germany, for one, has noted that even if spending is reduced and capped at 1 per cent as it demands, it will still end up paying more after Brexit.

The debate will continue and has given new impetus to calls for the European Union to develop its own revenue streams, perhaps by a tax on plastics or on EU carbon trading.

MADRID — Spanish banking giant Banco Santander reported on Wednesday better-than-expected earnings last year despite Brexit uncertainties leading to a massive 1.5 billion euros hit on ($1.65 billion) on its British business, slashing 2019 net profit by 17 per cent.

The bank said net profit for last year came in at 6.5 billion euros — but that beat the consensus analyst forecasts of 6.27 billion euros and allowed it to reaffirm its earnings growth estimates.

Banco Santander shares got a sharp boost as a result, rising some 3.41 per cent in early trade in a broader market up about half a per cent.

The bank said it took charges last year of 1.7 billion euros, with 1.5 billion euros accounted for by its British business.

The rest was due to restructuring in several markets, including in Spain where the bank is shedding 3,200 jobs.

Banco Santander, the largest eurozone bank by market capitalisation, said in September that the charges in Britain “reflected the impact of the uncertainty caused by Brexit” combined with banking sector reforms requiring lenders to separate their retail and investment bank operations.

Earnings in Britain have been on the slide since the country voted in 2016 to quit the EU, contributing only 11 per cent of the total compared with Brazil, now the largest single component, at 28 per cent.

Net banking income — broadly the difference between interest earned on loans and interest paid on deposits — was up 2.7 per cent to 35.3 billion euros last year.

For the fourth quarter to December alone, net profit jumped 35 per cent to 2.8 billion euros, helped by disposal gains of nearly 700 million euros.

DUBAI — A flare-up of a currency war between Yemen's foes has sent the riyal crashing, aggravating a humanitarian crisis that has already driven millions to the brink of famine after five years of conflict.

The confrontation was sparked when the Iran-aligned Houthi rebels, who control the capital Sanaa and most of the north, banned the use of new banknotes printed by the central bank in Aden which is run by the internationally recognised government.

The ban on the notes, which were first issued three years ago, came into effect on January 19 when residents and money changers stopped dealing with them under the threat of a 10-year jail term, according to sources close to the rebels.

The Houthis insist they are safeguarding the people against high inflation, but the move has slashed purchasing power and effectively created two exchange rates — around 682 to the dollar in Aden and 600 in Sanaa and the north.

The currency's value has dropped some 15 per cent in the south in the past five weeks, and about 7 per cent in the north, in a slide that shows no sign of slowing. 

In the marketplaces of Yemen, stalls are piled high with tomatoes, onions and bananas, while nearby shopkeepers offer racks of clothes and consumer goods.

But ordinary people are increasingly distressed at the loss in value of their cash, which has inflicted more misery in a long war that pits the Houthis against the government which is backed by a Saudi-led coalition.

"Prices are extremely expensive, we are not receiving our salaries and the situation is going from bad to worse," said Abdo, a resident of the port city of Aden.

In Sanaa, which has been under rebel control since 2014, residents also hit out at the measure.

"The ban has resulted in massive harm to citizens. Many of us own quantities of the new banknotes but from now on we will not be able to use them to buy our day's food," Abdulaziz Ali told AFP.

A senior UN official warned earlier this month that certain factors that threatened to trigger famine last year in Yemen — including a plunge in the value of the national currency — were once again looming large.

"With a rapidly depreciating riyal and disrupted salary payments, we are again seeing some of the key conditions that brought Yemen to the brink of famine a year ago," Ramesh Rajasingham, who coordinates humanitarian aid in the country, told the UN Security Council.

"We must not let that happen again," he said, adding that even if it escapes famine, Yemen will remain the world's worst humanitarian crisis in 2020.

The Yemeni government moved the central bank from Sanaa to Aden in 2016 in order to have effective control on monetary policy, currency and payment of wages. 

But the central bank's historic home in Sanaa is still operating under the Houthis, who have stewardship over the country's major consumer markets.

The Sana'a Centre for Strategic Studies said in a recent report that the tussle threatened to collapse the riyal-based system and had driven the country towards the use of hard currencies, mostly Saudi riyals and United States dollars.

"A population in which millions already verge on starvation is set to bear increasing costs, further eroded purchasing power and a deterioration in the humanitarian situation resulting from the escalating currency war," it said.

Anthony Biswell, an economic analyst from the Sana'a Centre, said that the north was suffering from a shortage in supply of the old riyals, and that ordinary citizens were turning to the black market to convert their new notes.

"For the south, there will be an excess of the newly printed banknotes in circulation... the expectation is it will lead to inflation," he told AFP.

"The goods are coming in. The major issue is purchasing power and people's ability to go buy commodities that are available in the market," he said.

The government of President Abed Rabbo Mansour Hadi said the rebels' measure was "oppressive and will devastate the economy", accusing the Houthis of "blackmailing the people".

"The prime minister met with ambassadors of the European Union and we called on them to apply pressure," on the Houthis to scrap the ban, Yemen's Planning and International Cooperation Minister Najeeb Al Ouj told AFP.

A majority of Yemen's population of 29 million are living in dire circumstances after five years of war, with at least 11 million struggling to find enough food, according to the UN World Food Programme.

LONDON — Global stock markets and oil prices plunged on Monday as panicked investors bolted into safer assets such as gold after China warned that the spread of a deadly new coronavirus was accelerating.

China extended its traditional Lunar New Year holidays to buy time in the fight against the epidemic, prompting neighbouring Mongolia to close its border after the death toll spiked to 81 despite unprecedented quarantine measures.

Fears of a repeat of the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak, which also began in China, spooked investors who only recently pushed markets to record highs — meaning there was plenty of room for a reverse.

All sectors were hit but luxury goods makers and airlines suffered particularly as Chinese tourist spending is a key factor for them.

Wall Street opened lower, quickly losing nearly 2 per cent as the global sell-off continued, adding to the pressure on Europe. 

In mid-afternoon trade in Europe, London was down some 2.2 per cent, with Paris and Frankfurt doing even worse with losses of some 2.6 per cent each.

Oil prices were down around 2.5 per cent, coming off early lows hit on concerns over demand from the world's top energy consumer China.

 'Major panic' 

"Market participants in Europe have grave concerns about coronavirus," said Ava Trade analyst Naeem Aslam.

"The bottom line is that the virus has become deadly and it has caused a major panic in markets."

Chinese President Xi Jinping warned over the weekend that China was facing a "grave situation" given the "accelerating spread" of the new SARS-like virus that has infected nearly 3,000 people across the country.

Analysts said there were growing fears the crisis could become as bad as the SARS outbreak that hammered markets and the global economy in 2003.

"Coronavirus fears have gripped the markets... as all the major European equity benchmarks are nursing big losses," said analyst David Madden at trading firm CMC Markets UK.

"Stocks that are connected to China are feeling the pain... as traders are afraid the health crisis will curtail economic activity."

The outbreak has led China to lock down the epicentre of the disease, Wuhan — a city of 11 million people — while imposing tight travel restrictions on a number of other cities including Beijing.

The move comes during the Lunar New Year holiday when hundreds of millions of people criss-cross the country and spend billions of dollars.

The government decided late Sunday it would extend the holiday and related school closures beyond the January 30 end date to "reduce population flows", state media said.

Most Asian markets were closed for the Lunar New Year break but Tokyo was open and fell 2 per cent. Bangkok plunged nearly 3 per cent on worries about the Thai travel sector.

The flight to safety saw the yen rally against the dollar, with the unit now up more than 1 per cent from eight-month lows touched earlier this year.

Gold, another go-to asset in times of turmoil and uncertainty, is heading back towards $1,600 per ounce and the six-year peaks touched at the start of January.

While the main focus is on the spread of the virus, traders will also be keeping an eye on the release of earnings this week from top companies including Apple, Facebook and Samsung.

The oil market had already tumbled more than 6 per cent last week owing to concerns about the effects on demand in China, which is the world's number two economy after the United States.

EVERETT, United States — Boeing’s new long-haul 777X airliner made its first flight on Saturday, a step forward for the company whose broader prospects remain clouded by the 737 MAX crisis.

The world’s largest twin-engine aircraft landed at Boeing Field near Seattle after approximately four hours in the air, following months of delays and erratic weather in recent days.

High winds led to the maiden flight’s postponement on Friday, and the company blamed weather for an earlier delay on Thursday, which was rainy.

A few minutes after 10:00am local time (18:00 GMT), the plane took off from the rain-slicked runway at Paine Field in Everett, Washington, home to Boeing’s northwest US manufacturing site.

“Yes!” Boeing spokesman Josh Green shouted as the plane’s wheels finally lifted off the tarmac.

Just minutes earlier, the pilots deployed the plane’s winglets — folding wing tips — designed to improve the craft’s fuel efficiency and make it possible for the plane, with the widest wing span ever from Boeing, to be accommodated at more airports.

The first flight was originally scheduled to take place in mid-2019 but was postponed due to problems with the new engine, manufactured by General Electric, and difficulties with the wings and software. 

Saturday marked the first of what is to be a series of in-flight tests. If they go well, Boeing will officially file for approval from the Federal Aviation Administration (FAA). 

With Boeing facing a crisis over its top-selling 737 MAX following two deadly crashes, the 777X is supposed to compete in the long-haul aircraft market with the A350 made by rival European aircraft manufacturer Airbus. 

The flight was “a demonstration to the world that we know what we are doing. We know how to do aircraft designed safely and instill trust in the public”, said Stanley Deal, president and chief executive of Boeing Commercial Airplanes.

Major airlines including Emirates, Lufthansa, Cathay Pacific, Singapore Airlines and Qatar Airways have placed some 340 orders for the 777X. 

The first deliveries of the new model, with maximum capacity of 384 to 426 passengers depending on the configuration, are not expected before early 2021, instead of mid-2020 as initially planned.

The aircraft encountered significant problems during pressurisation tests in September. 

 Business down 

Boeing’s business has also been weakened by a lack of firm orders from Chinese airlines for its 787 Dreamliner, which is expected to see production cuts.

The 777X has a range of 16,200 to 13,500 kilometres depending on its configuration and the number of passengers aboard, according to the Boeing website. It is also extremely fuel-efficient, an important consideration at a time when passengers are increasingly concerned about carbon emissions. 

Its list price is between $410 million to $442 million, though customers often negotiate discounts.

US air safety regulators could clear the 737 MAX to return to service before mid-year, a person close to the process said on Friday.

The aircraft has been grounded since March following two deadly crashes, in Ethiopia and Indonesia. On Tuesday, Boeing announced that it did not expect to win regulatory approval until mid-2020.

In addition to the crisis of confidence, Boeing is seeking some $10 billion in loans to deal with swelling costs for the MAX.

Boeing suspended production of the MAX this month but Chief Executive David Calhoun said this week the company plans to begin ramping up production of the model in anticipation of winning regulatory approval to restart service.

Calhoun began as CEO earlier in January following the ouster of Dennis Muilenburg, whose tenure was rocked by the MAX crisis which led to deteriorating relations between the company and the FAA.

Calhoun aims to turn the company around, and has highlighted restoring Boeing’s reputation with regulators, customers and other stakeholders as an imperative.

NEW YORK — European stocks rallied on Friday while Wall Street equities tumbled along with oil prices as markets weighed the potential impact of a spreading viral illness in China.

Chinese authorities expanded a massive quarantine effort in response to coronavirus, while the United States confirmed its second case of the SARS-like ailment.

French officials said there had also been two cases found in France, the first in Europe, while Nepal reported south Asia’s first case.

European bourses, which had dropped on Thursday, finished solidly higher on Friday in the first session since the World Health Organisation stopped short of declaring a public health emergency.

“There’s a hope that the coronavirus is contained, particularly in China,” Interactive Investor analyst Richard Hunter told AFP.

“And that’s something of a relief rally — [and] also with the earning season so far so good.”

“So the last few days provided an opportunity to investors to buy on the cheaper side,” Hunter added.

US stocks had also opened higher but fell steadily as the session progressed. 

Adam Sarhan of 50 Park Investments said the virus still appeared to be contained but “if we start getting more cases showing up around the world, that would be a bad sign for global economic growth.”

Sarhan said Friday’s losses also reflected profit taking following a run of Wall Street records in recent weeks.

Tourism-oriented stocks were under pressure amid fears of the virus. United Airlines sank 3.5 per cent, Marriott International lost 2.7 per cent and Wynn Resorts fell 3.1 per cent.

Oil prices also finished solidly lower as traders gird for a potential hit to petroleum demand from China and perhaps other markets. The outbreak has led to the cancelation of Lunar New Year festivities, along with temporary closures of Beijing’s Forbidden City, Shanghai’s Disneyland and a section of the Great Wall.

“With China implementing travel restrictions on more than 30 million residents at a time of peak holiday travel, demand for refined products from the transportation sector is likely to drop well below its usual holiday peaks,” said Robbie Fraser, commodity analyst at Schneider Electric. 

“China is the world’s leading importer of crude, leaving room for significant near-term demand impact.”