EU governments were forced to slash its spending plans during marathon talks to negotiate the blocs next seven-year budget and a recovery fund for coronavirus-ravaged economies. Despite reaching an agreement on a 1.8 trillion financial package, leaders were unable to completely fix the shortfalls of Brexit. The recovery fund would see the Commission borrow 750 billion on the international markets.

Eurocrats would then distribute 390 billion as grants and 360 billion as low-cost loans through the blocs 1.074 trillion budget.

To broker the deal they had to agree to a number of projects being cut in size to please the so-called frugal states.

While the package was meant to tackle the fallout of the pandemic, the only mechanism included to support the health sector was scrapped and Horizon Europe, designed to boost innovation, was also subjected to cuts.

Funding for neighbourhood policy and a solvency support tool for private firms were also cut.

A European Commission official said: At the same time we do have to keep in mind with the UK leaving the Union we had a pay gap of about 70 billion.

Weve managed to reduce this gap but its not fill filled, so the overall size of the Multiannual Financial Framework is smaller than the previous one.

Brussels managed to limit the size of its Brexit blackhole to 10 billion, another official added.

The source said: The current MFF included the United Kingdom, which was contributing 10 billion net per year.

So we have 70 billion less from this year onwards with 27 member states, and overall weve only got a reduction of 10 billion.

The official suggested the bloc had done quite well to plug the gap left after Brexit, adding: We had a very difficult situation going into this MFF.

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European Commission President Ursula von der Leyen said the cuts were regrettable but still a big step towards recovery.

But the budget faces a challenge from the European Parliament because of its lack of ambition.

Johan Van Overtveldt, chairman of its budget committee, said: Parliament cannot accept the proposed record low ceilings as they mean renouncing to the EUs long-term objectives and strategic autonomy, while citizens ask for more.

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More European solidarity, more European action in public health, in research and digitalisation, youth, and in the historical fight against climate change. Key programmes to reach these objectives have been considerably shrunk, and lost most of their top-ups under Next Generation EU.

The compromise is also a flagrant missed opportunity when it comes to modernising the revenue side, making it fairer and more transparent, he added, with the support of five other MEPs.

The EU is now allowed to borrow funds but there is no certainty on how the debt will be repaid. Parliament has been clear: the recovery should not reduce investment capacities nor harm the national taxpayer. This is why new genuine own resources are the solution to repay the common debt, but the plastic-based contribution will not do the trick alone!

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Brexit blackhole: EU's seven-year budget still contains gaping hole left by UK exit - Daily Express