Ten opportunities for Europe post-coronavirus: Exploring potential for progress in EU policy-making

Written by Etienne Bassot,

© jirsak / Adobe Stock

The coronavirus pandemic that hit the world from January 2020 onwards, with Europe at its epicentre for some weeks in the spring, has led to a major, multi-dimensional global crisis. Pressure on national health services, a major economic down-turn and new sources of tension on the world stage are just some of the most obvious negative consequences that spring to mind.

Since the beginning of the pandemic, analysts have produced an abundance of new forecasts, with many earlier ones made redundant by the new situation. The focus has mainly been on negative consequences and risks. As important as this approach is to underpin strategic planning and enable policy-makers to prepare for the worst, no analysis of a post-coronavirus world would be complete without a look at the other side of the coin − the opportunities that it may offer too.

Where there is crisis, there is also opportunity

According to the Oxford English Dictionary, in medical Latin, the word crisis refers to ‘the turning point in a disease when an important change takes place, indicating either recovery, or death’. The root of the word is, however, the Ancient Greek verb κρίνειν − to decide −and a crisis can be defined as ‘a time, when a difficult or important decision must be made’. Like every other crisis, the coronavirus crisis is a crossroads at which important decisions have to be made, bringing both the necessity and the opportunity for change.

Taking the best from the crisis

The opportunities arising from a crisis are not immediately obvious and sometimes obscured by difficulties. The pandemic and the resulting confinement have had some immediate positive consequences − such as reduced CO2 emissions and the boost to e-commerce. Other potentially positive consequences are avenues to explore − such as bringing the Member States closer together on health or rejuvenating European industry.

Turning the immediate positive effects into lasting change and seizing the less obvious opportunities requires both reflection and action. Europe’s capacity to nurture the catalytic, but sometimes disruptive, positive effects of the crisis will be the measure of its resilience: the resilience of its liberal political systems, its economy, and its people − individually and as a society.

A critical moment for Europe

In the public discourse, the search for a ‘new normal’ is omnipresent. The Union will not re-create itself. Major shifts can, however, be triggered by particular opportunities, such as the debate on the future financing of the Union and the recovery plan, and the Conference on the Future of Europe. The European Parliament has made – in its resolution on the conclusions of the extraordinary European Council meeting, adopted on 23 July 2020 – a strong case for health, research, digital transformation and innovation. The Conference on the Future of Europe offers a valuable opportunity to engage in a more structured public debate, taking into account the challenges and opportunities brought by the pandemic. The debate should be aimed principally at improving the way the EU works, in terms not only of institutional dynamics, but also of policy design, in order to offer citizens a positive and constructive perspective.

Snapshot of ten opportunities

This paper replicates the formula of the ‘Ten issues to watch’ series produced by EPRS at the beginning of every year. Some of the opportunities described in the following chapters are very specific; others are more about the big picture. The aim is not to cover all possible issues but to highlight a few. The paper can be read in conjunction with a broader body of work, analysis and research being undertaken by EPRS on the longer-term implications of the coronavirus crisis, such as Towards a more resilient Europe post-coronavirus: An initial mapping of structural risks facing the EU, and a set of 20 ‘Ideas Papers’ on EU policy and resilience as the Union emerges from the crisis.


Read the complete ‘in-depth analysis’ on ‘Ten opportunities for Europe post-coronavirus: Exploring potential for progress in EU policy-making‘ in the Think Tank pages of the European Parliament.

Source Article from https://epthinktank.eu/2020/07/30/ten-opportunities-for-europe-post-coronavirus-exploring-potential-for-progress-in-eu-policy-making/

Outcome of EU-China video-summit of 22 June 2020

Written by Suzana Elena Anghel Gavrilescu,

© Adobe Stock

On Monday 22 June 2020, the EU and China held their 22nd summit, which on this occasion was conducted by video-conference. Leaders of the EU and China covered a wide range of issues, some increasingly problematic. Aside from the response to the coronavirus outbreak, topics addressed included trade, climate change, international peace and security, Hong Kong and human rights. No joint statement was agreed, as further progress would require ‘reciprocity and trust’. For the EU, China is seen as both a partner committed to multilateralism, on which it nevertheless pursues its own distinctive path, and a competitor, assertively using different economic and trade tools, such as state subsidies and foreign direct investment, to increase its market share and international leverage.

Background

The EU-China summit, initially planned to take place in Beijing on 30-31 March 2020, but postponed due to the coronavirus outbreak, took place by video-conference on 22 June 2020. The Presidents of the European Council, Charles Michel, and of the European Commission, Ursula von der Leyen, joined by the EU’s High Representative, Josep Borrell, represented the EU, whilst Prime Minister Li Keqiang represented China. As was the case at previous summits held in Beijing, an exchange of views with the President of the People’s Republic of China, Xi Jinping, took place after the summit’s main proceedings, also by video-conference. However, the notable difference with past meetings was that this summit ended without any joint statement. As stressed by President von der Leyen, the summit was ‘only a starting-point’, with further progress requiring greater ‘reciprocity’ and ‘trust’.

Main points discussed

The relationship with China is multifaceted, dependent on the policy area, with China being simultaneously a ‘cooperation partner’ (on climate change), ‘a negotiating partner’ (on trade), ‘a strategic competitor’ (on the economy) and a ‘systemic rival’ (with different values and political systems). All these dimensions were touched upon during the summit, which had a comprehensive agenda that included trade, climate change, international peace and security, the situation in Hong Kong, disinformation and the response to the coronavirus outbreak. President von der Leyen stressed that ‘China’s partnership is crucial, be it in terms of trade, climate, technology, and the defence of multilateralism’. However, President Michel also stressed that the EU and China ‘do not share the same values, political systems, or approach to multilateralism’.

International trade

Trade plays a central role in bilateral relations between the EU and China, with the EU being China’s largest single trading partner, and China being the EU’s second largest trading partner after the US. Given its scale, trade is a big factor in the turbulence currently affecting the bilateral relationship with China, although disinformation, the pandemic and human rights abuses also play an important role. Although an agreement on geographical indications (GIs) is reported to be on track, in the absence of political commitment on the Chinese side, there is no clear indication that negotiations on an investment agreement can be concluded by the end of 2020, as planned. EU relations with China are marked by an asymmetry in market access and the absence of an effective level playing-field able to ensure fair access to the Chinese market for EU companies. These two issues lead to an unbalanced trade relationship. They need to be addressed, including through China’s increased ambition and commitment to curb unfair trading practices by state-owned enterprises, and to act on transparency in subsidies and on forced technology transfers, prior to the conclusion of an investment agreement. Another item discussed as part of the trade debate was the future of the World Trade Organization (WTO), whose reform is one of the areas where the two parties converge on the need to pursue a multilateral approach, although they diverge on specific aspects, including on industrial subsidies.

Climate change

Climate change is an important area where the EU and China are partners and where their support to multilateralism is visible. They are both committed to the implementation of the Paris Agreement, although the EU would wish to see China commit to more ambitious greenhouse gas emission reduction targets and set a target date for achieving climate neutrality as soon as possible after 2050. President von der Leyen stressed that the EU looks ‘forward to seeing decarbonisation play a big a role in China’s next five-year plan, as the European Green Deal plays a big role in our strategic agenda as well.’

International and regional peace and security

Similar to their previous summit in 2019, a wide range of international and regional issues were discussed, including Afghanistan, the situation on the Korean Peninsula, relations with Iran and the implementation of the Joint Comprehensive Plan of Action for Iran (JCPA). The latter is an item which the European Commission considered as having the potential to ‘deepen engagement with China on peace and security’ in its EU-China joint communication of March 2019. The summit also touched upon the situation in the South China Sea, as part of a debate on maritime transport safety.

Hong Kong and human rights

China has launched a new national security law which, if adopted, would endanger Hong Kong’s autonomy and freedoms, and would be in clear contradiction with its Basic Law, including its guiding principle of ‘one country, two systems’. President Michel stressed that the EU had expressed its ‘grave concerns about the proposed national security law for Hong Kong’, whilst President von der Leyen stressed that human rights in general are ‘non-negotiable’, although both statements are likely to have little impact in light of analysts’ perception that such declarations would need to be backed up by sanctions. In this regard, the European Parliament adopted a resolution on the national security law for Hong Kong on 19 June, in which it called on the Council ‘to adopt targeted sanctions and assets freezes against Chinese officials responsible for devising and implementing policies that violate human rights’. More generally, the EU’s Human Rights Dialogue with China will be restarted once pandemic-related restrictions are lifted.

Disinformation and cybersecurity

President von der Leyen pointed to the spike in online disinformation activities and hospital-related cyber-attacks linked to the coronavirus outbreak originating from China. In June 2020, the European Commission published a joint communication on disinformation in which it clearly indicated that China is one of the actors promoting misleading narratives, for example, as regards the EU’s support to third countries.

Cooperation on coronavirus response

EU and Chinese leaders agreed to continue to support research efforts targeted at developing a treatment or producing a vaccine for Covid-19, and to participate in the international independent review on ‘lessons learned from the pandemic’.

The way forward

Due to the pandemic, the incoming German Presidency of the Council of the EU has adjourned to a later date the in-person meeting between the EU Heads of State or Government and the Chinese leadership, initially planned to take place in Leipzig in September 2020. This does not necessarily mean that bilateral EU-China relations in autumn 2020 will be less important, as an intense period of negotiation faces both parties on the investment agreement, which is due to be concluded by the end of 2020. Other issues of concern to the EU, such as the evolution of the situation in Hong Kong or disinformation activities, will most likely continue to attract the attention of both the media and national and European leaders. The coronavirus outbreak led the European Council to postpone its strategic discussion on relations with China, which it had initially planned for March 2020, but it is unlikely that such a discussion can be postponed much longer.


Read this ‘at a glance’ on ‘Outcome of EU-China video-summit of 22 June 2020‘ in the Think Tank pages of the European Parliament.

Source Article from https://epthinktank.eu/2020/07/30/outcome-of-eu-china-video-summit-of-22-june-2020/

EU budget and recovery fund: Is it a done deal? [What Think Tanks are thinking]

Written by Marcin Grajewski,

© elenabsl / Adobe Stock

After nearly five days of tough negotiations, the European Council agreed on the EU’s next seven-year budget, the Multiannual Financial Framework (MFF), worth more than one trillion euros from 2021 to 2027, and crucially, on an additional 750-billion euro fund to help countries recover from the economic downturn caused by the coronavirus pandemic.

Many politicians and analysts have hailed the agreement on the recovery fund in particular as an ‘historic moment’. For the first time, some EU debt will be mutualised and the EU will tap financial markets on a significant scale to secure funds, which will be disbursed in the form of grants and loans. The European Parliament – which must approve these spending plans – welcomed the fund but criticised the lack of parliamentary scrutiny in its implementation as well as some of the cuts leaders made in spending on innovation and the climate as compared to the European Commission’s MFF proposals and the Parliament’s own demands, and regretted the weakened link between budget spending and the rule of law.

This note offers links to first reactions from international think tanks on the budget deal. Earlier publications on financing the EU can be found in a previous item in this series, published by EPRS on 8 June 2020.

The proof of the European Council pudding will be in the eating
European Council on Foreign Relations, July 2020

Next Generation EU standards will boost post-Covid-19 recovery
European Policy Centre, July 2020

With its recovery deal, is the EU finally starting to act like a unifying force?
Deutsche Gesellschaft für Auswärtige Politik, July 2020

Having the cake, but slicing it differently: How is the grand EU recovery fund allocated?
Bruegel, July 2020

Un accord historique à améliorer et à réaliser
Jacques Delors Institute, July 2020

The MFF’s half-empty glass on supporting EU rights and values
German Marshall Fund, July 2020

Europe’s expensive coronavirus summit
Carnegie Europe, July 2020

Is the EU Council agreement aligned with the Green Deal ambitions?
Bruegel, July 2020

Experts react: European leaders reach decisive coronavirus recovery agreement
Atlantic Council, July 2020

Is the European Union finally moving to an economic – not just a monetary – Union?
Trans European Policy Studies Association, July 2020

EU budget battle could undermine its international ambitions
Chatham House, July 2020

Spanish vs Dutch views on the EU recovery fund
Clingendael, July 2020

It is time to reform critical social protection policies in the U.S. and the EU
German Marshall Fund, July 2020

Longue vie au un plan de relance européen
Institut de Recherche et de Communication sur l’Europe, July 2020

Gipfel der Ambivalenz: Historische Ergebnisse, Machtverschiebungen und verpasste Chancen
Konrad Adenauer Stiftung, July 2020

The EU budget as an opportunity in the crisis
Stiftung Wissenschaft und Politik, July 2020

Recovery Fund, il freno di emergenza
Istituto Affari Internazionali, July 2020

European debt mutualisation
Jacques Delors Institute, July 2020


Read this briefing on ‘EU budget and recovery fund: Is it a done deal?‘ in the Think Tank pages of the European Parliament.

Read all EPRS publications on the coronavirus outbreak

Source Article from https://epthinktank.eu/2020/07/29/eu-budget-and-recovery-fund-is-it-a-done-deal-what-think-tanks-are-thinking/

Road and rail transport and coronavirus: Mapping the way out of the crisis

Written by Jaan Soone,

© snedorez / Adobe Stock

In the first weeks of the coronavirus crisis, the lockdown and border closures halted most passenger services in road and rail transport and left road hauliers to face uncertainty and very long waiting times at many border crossings.

With the pandemic easing, some passenger services resumed in certain EU countries from late April onward, and with the introduction of ‘green lanes’ the situation at border crossings stabilised allowing smoother passage for road hauliers. Nonetheless, the initial estimates of the costs to the transport sector are immense and the impact is expected to continue well beyond 2020.

The EU took a number of steps in the early stages of the crisis to alleviate the situation and to provide relief to the transport sector. As the situation progressed, the European Commission introduced further measures to help coordinate the exit from confinement and safely restart transport services. The Commission has also tabled a European recovery plan with a number of new instruments, which will allow the provision of assistance to key sectors, including the transport sector. The European Council reached a political agreement on the recovery fund on 21 July.

To support their economies, EU governments have introduced a number of economy-wide measures, but also sector-specific measures, including for transport and tourism, as well as support for individual transport companies. The Commission has further enabled governments to use State aid to help firms in difficulty by putting in place a temporary framework for State aid.


Read the complete briefing on ‘Road and rail transport and coronavirus: Mapping the way out of the crisis‘ in the Think Tank pages of the European Parliament.

Source Article from https://epthinktank.eu/2020/07/28/road-and-rail-transport-and-coronavirus-mapping-the-way-out-of-the-crisis/

Outcome of the Special European Council meeting of 17-21 July 2020

Written by Ralf Drachenberg,

© Adobe Stock

After almost five days of negotiations, the European Council finally reached a political agreement on the Multiannual Financial Framework (MFF) for 2021 to 2027 and a specific recovery instrument following the coronavirus crisis – Next Generation EU (NGEU) – together totalling €1 824.3 billion. Negotiations seem to have concentrated in particular on the balance between loans and grants for the provision of funding under the NGEU, with a final division of €360 and €390 billion respectively. Despite a significant reduction in the share of grants compared to the €500 billion proposed by the President of the European Council, Charles Michel, in his July 2020 ‘negotiating box’, the mere fact of issuing common debt at EU level represents a substantial step in European integration, expressing EU solidarity in facing the coronavirus crisis. Other notable developments concern the link between EU funding and respect for the rule of law, on which the final wording is more vague than that of earlier proposals. On other controversial issues, notably the size of the MFF, rebates and own resources, the outcome remains close to the negotiating box. Overall, however, the deal remains significantly below Parliament’s expectations. With a lower overall commitments ceiling of €1 074.3 billion, the MFF falls below both the 2014-2020 MFF and the 2020 budget levels. Moreover, significant cuts were made to a series of key programmes, such as Erasmus+ and Digital Europe, areas which the European Council had itself identified as a strategic priority in its 2019-2024 Strategic Agenda. Finally, the increase – rather than the proposed abolition – of the rebates for four countries, together with only a vague commitment to ‘work towards the reform of the system of own resources’, seems unlikely to meet the conditions set by Parliament for giving its consent to the long-term budget. Indeed, the political agreement within the European Council on the MFF and the Recovery Fund is not yet the final deal, but only the starting point for negotiations between Parliament and Council. Before the MFF can enter into force, the Parliament must give its consent, which is also a pre-condition for the adoption, by co-decision, of legislation on the new policy programmes.

1. Reaching a deal at the special European Council meeting

In his invitation letter to the special European Council meeting focused on the EU’s long-term budget, Charles Michel announced that ‘finding agreement will require hard work and political will on the part of all’. It took almost five days and numerous group, bilateral and plenary sessions to reach the political agreement, making this meeting of the European Council the second longest to date.

Altogether, starting from the publication of the original MFF proposal, the discussions on the 2021-2027 MFF within the European Council have taken 26 months – or even 29 months since EU leaders discussed the post-2020 long-term EU budget for the first time at their informal meeting on 23 February 2018. By comparison, the negotiations in the European Council on the 2014-2020 MFF required only 20 months. The European Council thus took longer than all the scenarios outlined by its former President, Donald Tusk, for finding a political agreement on the long-term budget: (1) end of 2019/early 2020, 2) prior to May 2019, or 3) in the course of 2019.

Prior to the meeting, Charles Michel held video-conference discussions with every member of the European Council at least once or twice, to discuss their positions following his circulation of a revised negotiating box on 10 July. In parallel, EU leaders also held many bi- and multilateral discussions amongst themselves. Table 1 gives a non-exhaustive,[i] but telling overview of the interactions (both phone calls and face-to-face meetings) between EU Heads of State or Government. It shows which EU leaders were most active – namely Giuseppe Conte, Mark Rutte, Angela Merkel and Pedro Sanchez – and also highlights positions considered as important for reaching agreement.

Bilateral and group meetings among Member States’ leaders also continued during the European Council meeting itself, with for example a meeting of the Visegrad countries (Czechia, Hungary,Poland and Slovakia) to coordinate their position, and one of the ‘frugals’ (Austria, Denmark, Sweden and the Netherlands) as well as a Baltic coordination meeting.

Table1: EU leaders’ interactions made public prior to the 17-21 July meeting

Source: EPRS.

2. The political agreement

The political agreement set out over 68 pages of the European Council conclusions defines the MFF ceilings and the financial envelopes for all policy sectors for the seven-year MFF period. As was the case for the 2014-2020 MFF, when 48 pages of conclusions detailed the substance of the MFF headings, thus also including elements formally due to be agreed jointly between Parliament and Council (such as programme governance, objectives and sub-envelopes), the current conclusions testify once again to the European Council’s far-reaching involvement in areas of co-decision. Following the 2014-2020 MFF negotiations, the European Parliament identified the impact of the European Council’s involvement in the Parliament’s legislative prerogatives as a matter of particular concern.

Main elements

During previous European Council meetings in 2020 and during the final weeks of negotiations, the most controversial issues were: i) the size of the MFF, ii) the existence and size of rebates, iii) the size of the recovery fund, iv) the balance between grants and loans, v) the allocation criteria for funding, and vi) the governance of the recovery fund, and the role of the various institutions as well as national reforms. The political agreement reached the following compromises on these issues (see also the overview provided in table 3).

  • The overall size of the MFF amounts to €1.074 trillion, which is below both the 2014-2020 MFF and the 2020 budget levels, thus following the position of the ‘frugals’.
  • The existence and size of rebates: The political agreement not only maintains existing rebates or ‘budget correction mechanisms as lump sums’ for Austria, Germany, Denmark, the Netherlands and Sweden, but in four cases, even increased their amount: Austria (€565 million), Denmark (€322 million), The Netherlands (€1 921 million) and Sweden (€1069 million). The German rebate remains at the same level (€3 671 million).
  • The size of the recovery fund remained at a total of €750 billion as proposed by the European Commission.
  • The balance between grants and loans has evolved towards an almost equal balance of €390 billion in grants and €360 billion in loans. This is the most apparent development compared to Charles Michel’s negotiating box (€500 billion in grants) and received the most attention during the European Council meeting. It should however be emphasised that, beyond difficult negotiations on the share of grants and a substantial reduction in their amount, the mere fact of issuing common debt at EU level is a historic step in European integration and a clear expression of solidarity following the coronavirus crisis.
  • The allocation criteria for funding: As indicated in Charles Michel’s negotiating box, the political agreement envisages that 70 % of the grants of the RFF will be committed in 2021 and 2022, according to the Commission’s allocation criteria taking into account Member States’ respective living standards, size and unemployment levels. The remaining 30 % will be committed in 2023, where the current unemployment criterion will be replaced by one based on the drop in GDP in 2020 and 2021.
  • Governance of the Recovery fund: Based on the Commission’s country-specific recommendations, Member States will be required to prepare national recovery and resilience plans for 2021-23, in line with the European Semester. The plans will be reviewed in 2022. The assessment of these plans will be approved by the Council by qualified majority vote (QMV), on a proposal by the Commission – and not by unanimity as was suggested in the course of the negotiations and heavily debated.

The disbursement of grants will take place only if the agreed milestones and targets set out in the recovery and resilience plans are fulfilled. If, exceptionally, one or more Member States consider that there are serious deviations from the satisfactory fulfillment of the targets, they may request that the matter be referred to the next European Council meeting.

Another change from Charles Michel’s negotiating box concerns rule of law conditionality. Albeit with a vaguer formulation than proposed, the principle of ‘rule of law’ conditionality has been accepted. The political agreement states that ‘a general regime of conditionality will be introduced to tackle manifest generalised deficiencies in the good governance of Member State authorities as regards respect for the rule of law when necessary to protect the sound implementation of the EU budget, including NGEU, and the financial interests of the Union’.

Incidently, the revised negotiating box also introduced a new €5 billion ‘Brexit reserve’, which will be established to support those Member States and economic sectors hardest hit by Brexit. This proposal was endorsed with the rest of the package.

Member States’ positions

While the agreement reached in the European Council is a compromise for which every Member State had to drop some of its ‘red lines’, for some Member States it is possible to identify the issues from their original strategy which prevailed in the course of the negotiations, and on which points those Member States had to give ground in order to get their way on their highest priority. An example among the ‘frugals’, for instance is the Netherlands, which managed to ensure itself a higher rebate, but had to give in on reverse QMV in the area of the rule of law and to accept the principle of grants.

Table 2: Main priorities of certain Member States, as indicated by EU leaders on 17 July

Source: EPRS.

Comparing the positions of the different EU institutions

When comparing the positions of the different EU institutions and the final agreement, it can be observed that the final agreement stayed closest to Charles Michel’s negotiating box of 20 July. The main differences relate to the balance between grants and loans within the Recovery and Resilience Facility (RFF), which shifted from a mix of €500 billion in grants and €250 billion in loans to €390 billion in grants and €360 billion in loans as a result of the position of the frugal four (see Table 3).

At the start of the European Council meeting, the President of the European Parliament, David Sassoli, outlined once again the Parliament’s main priorities to EU Heads of State or Government. He underlined in particular that Parliament expected ‘the introduction of a package of own resources with a commitment that they enter into force as soon as possible, and by 2023 at the latest’. As stressed by the EP negotiators on the MFF package, in a joint position following the political agreement in the European Council, ‘new genuine own resources are the solution to repay the common debt, but the plastic-based contribution will not do the trick alone! We recall our strict demand to that respect: a binding commitment for the introduction of additional own resources as soon as 2021, and still in the course of the MFF 2021-2027’.

Parliament also believes that ‘the time has come to eliminate the rebates that some Member States receive, which are unfair and difficult to justify’. Yet, instead of being abolished, rebates will be kept, and even increased for four countries, Austria, Denmark, Sweden and the Netherlands. The EP President also put strong emphasis on ‘adequate democratic control over allocation of resources and the approval of national recovery plans’. As also underlined by the EP negotiators, ‘democratic oversight must be substantially increased: Parliament, as one arm of the budgetary authority will fight to be fully involved in the establishment and implementation of the Recovery Instrument’.

Table 3: Positions and results on the main topics of the MFF and recovery fund negotiations

Main topics Commission 2020 proposal EP position[ii] Negotiating box
10 July 2020
Conclusions
18 July 2020
Position prevailing
MFF €1.1 trillion €1.324 trillion €1.074 trillion €1.074 trillion Negotiating box
NGEU €750 billion €2 trillion €750 billion €750 billion European Commission
Rebates Phase out the current rebates over time Abolition of all rebates and corrections Continuation of the rebates Annual rebates for Austria (€565 million), Germany (€3 671 million), Denmark (€322 million), the Netherlands (€1 921 million) and Sweden (€1 069 million) Negotiating box and rebate beneficiaries
Grants and loans €500 billion in grants; €250 billion in loans €500 billion in grants is the bare minimum €500 billion in grants

€250 billion in loans

€390 billion in grants

€360 billion in loans

Frugals
Allocation criteria for funding for RFF Unemployment 2015-2019;

Inverse GDP per capita;

Population share

N/A 70 % in 2021-2022 based on unemployment 2015-2019;

Inverse GDP per capita; Population share.

 

30 % in 2023 based on overall drop in GDP in 2020 and 2021, observed in 2022; Inverse GDP per capita; Population share.

70 % of RFF grants will be committed in 2021 and 2022, according to the Commission’s allocation criteria, taking into account Member States’ respective living standards, size and unemployment levels.

30 % will be committed in 2023, with the unemployment criterion be replaced by one based on the drop in GDP in 2020 and 2021

Negotiating box
Recovery fund, governance Proposal for a regulation on the protection of the EU budget against generalised deficiencies in the rule of law Member States that do not respect EU values shall be subject to financial consequences Reform and Resilience National Plans adopted by the Council with QMV;

Rule of law conditionality adopted by the Council with QMV; earmark 30 % of funding for climate-related projects

Negotiation box approach + in case of serious deviations, one or more Member States may request that the President of the European Council refers the matter to the next European Council Negotiating box and the Netherlands
Own resources New own resources of some kind at a later stage (2021-27). Parliament would only give its consent to the next MFF if a basket of new own resources were to be introduced Four-phase approach 1. Plastic-waste based levy – 1 January 2021

2. Border carbon adjustment mechanism and digital levy – by 1 January 2023

3. Emission trading system (ETS) (possible extension to aviation and maritime)

4. Work on introducing other new own resources

A new plastic levy in 2021. A carbon adjustment measure and a digital levy, both of which would be introduced by the end of 2022. Then the Commission will revise the proposal for the EU ETS. Other new resources might be a financial transaction tax. The gains from these new own resources will be used for early repayment of NGEU borrowing. Negotiating box with small changes

Source: EPRS.

Policy priorities and cuts to EU programmes

In its 2019-24 Strategic Agenda, the European Council set out the EU’s political priorities for the next five years, organised around four headings: protecting citizens and freedoms; developing a strong and vibrant economic base; building a climate-neutral, green, fair and social Europe; promoting European interests and values on the global stage. However, in the political agreement of the EU Heads of State or Government, some policy areas do not receive the attention and funding to match the degree of priority attached to them in their own long-term objectives. This is the case, for instance, with the Digital Europe programme, for which funding has been cut. Charles Michel explicitly rejected a reinstatement put forward by the Commission in its May 2020 revised MFF proposal; thus funding in this area may be insufficient to meet the EU’s stated ambition of achieving ‘digital sovereignty’. Concerning policy priorities, President Sassoli reiterated Parliament’s support for an MFF with a sufficient level of funding for convergence policies and the appropriate resources needed to meet the fundamental priorities: the Green Deal, digitalisation and resilience.

The political agreement envisages cuts, in comparison to Charles Michel’s first negotiating box, in the additional budgetary funding under NGEU for many long-term EU policy programmes. To name just a few examples, Horizon Europe’s allocation shrinks from €13.5 billion to €5 billion; that for the InvestEU programme is being reduced from €30.3 billion to €2.1 billion, the rural development programme will now receive an allocation of €7.5 billion compared to €15 billion; the Just Transition Fund €10 billion reduced from €30 billion to; and the NDICI just €3.5 billion instead of the initial €15.5 billion. Only the React-EU budget increase for cohesion policy remains substantial, at €47.5 billion, compared to €50 billion at the outset.

Likewise, a total envelop of €8.5 billion was agreed for defence related projects – the European Defence Fund (EDF) and military mobility, which represents 50 % less than the initial proposal made by the European Commission in 2018 (€17.22 billion). In a joint letter, the High Representative, Josep Borrell, and Commissioner Thierry Breton, warned that low funding for defence would jeopardise the EU’s capacity to meet its self-set level of ambition. The European Parliament in a January 2020 resolution supported the initial amount proposed by the European Commission in 2018.

For a detailed comparison of the proposals of the different EU actors (i.e. Parliament, Commission and the European Council President) by policy area (i.e. by heading and selected programmes) see EPRS briefing on Negotiations on the next MFF and the EU recovery instrument.

Next steps

The political agreement reached at the level of the European Council on 21 July does not however conclude the process for the adoption of the EU’s long-term budget for the years 2021 to 2027.[iii] It is only the starting point for negotiations between the two arms of the budgetary authority, Parliament and Council. Indeed, according to Article 312 TFEU, the regulation laying down the MFF is adopted by the Council acting by unanimity, after obtaining the consent of the European Parliament.[iv]

As outlined above, the political agreement falls short on many of Parliament’s main objectives (see table 2). Whilst EP President David Sassoli welcomed ‘the unprecedented agreement between governments to revive the European economy’, he also stressed that Parliament would now work to improve these instruments, in particular aiming at a more ambitious MFF and more clarity on new own resources. Striking the same note, the Parliament’s negotiating team on the MFF and Own Resources welcomed the creation of the NGEU, but indicated that ‘Parliament cannot accept the proposed record low ceilings as they mean renouncing the EU’s long-term objectives and strategic autonomy’. What is needed now is ‘more European solidarity, more European action in public health, in research and digitalisation, youth, and in the historical fight against climate change’.

Intense negotiations between Parliament and Council are therefore to be expected. While the total amount may not be the main issue of contention, Parliament will seek to gain concessions on issues such as the introduction of a mid term review of the MFF, an increase in funding for its priority policy areas, as had been the case during the 2014-2020 MFF negotiations (for example with Erasmus). Parliament’s negotiating team has already indicated that it ‘will strive to secure improvements, including higher amounts, on future-oriented MFF programmes like Horizon, InvestEU, LIFE, Erasmus+.’ Some political group leaders have also already stressed that they would seek ‘changes on MFF, rule of law and own resources’.

The Parliament will debate the results of the European Council in plenary on 23 July, preceded by a meeting of Parliament’s political group leaders on 22 July. President Sassoli has already emphasised that ‘Parliament will only give its consent to the MFF if it meets [Parliament’s] priorities’.

Other topics

Greece and Cyprus raised the question of Turkey’s drilling activities in the eastern Mediterranean, stressing that the EU ‘should respond collectively and decisively in concrete terms’ and asked for ‘tough sanctions’. The Prime Minister of Greece, Kyriakos Mitsotakis, also raised the issue of the conversion of Istanbul’s Hagia Sophia into a mosque.

In a joint statement, France, Germany and Italy expressed concern at the escalating military situation in Libya, called for a cease-fire, and warned the different actors involved of possible sanctions.


Read this briefing on ‘Outcome of the special European Council meeting of 17-21 July 2020‘ in the Think Tank pages of the European Parliament.

Source Article from https://epthinktank.eu/2020/07/23/outcome-of-the-special-european-council-meeting-of-17-21-july-2020/

Future financing of the Union: MFF, Own Resources and Next Generation EU

Written by Alessandro D’Alfonso,

On 21 July, EU Heads of State or Government reached a political agreement on the future design of EU finances. The next step involves negotiations between Parliament, whose consent is required for the adoption of the EU’s multiannual financial framework (MFF), and Council. In an extraordinary part-session two days later, Parliament is expected to vote on a motion for a resolution that confirms Parliament’s readiness to enter immediately into negotiations to improve the deal and sets out conditions for its consent to the MFF.

European Commission proposal

© European Union, 2020

The current MFF, also known as the EU’s long-term budget, comes to an end in December. On 2 May 2018, the European Commission put forward proposals for the 2021-2027 MFF, including a reform of the own resources system that ensures its financing. Proving lengthy, negotiations have recently become intertwined with the debate on the creation of a common EU tool to counter the severe socio-economic impact of the coronavirus pandemic. In May 2020, the Commission tabled revised proposals for a lower MFF worth €1 100 billion (2018 prices) and its financing, together with a proposal for a €750 billion recovery instrument, Next Generation EU (NGEU). Unlike the MFF, the latter would be financed with funds borrowed on the capital markets, and reinforce EU budgetary instruments in the first half of the new financing period.

Outcome of the July 2020 European Council

In the second longest European Council meeting ever (17-21 July 2020), Heads of State or Government reached political agreement on a package worth €1 824.3 billion (see Figure) combining the new MFF (€1 074.3 billion) with the recovery instrument, NGEU (€750 billion). Climate mainstreaming will apply to both components, devoting up to €547 billion to climate-relevant projects (i.e. 30 % of total resources). As regards the protection of the EU’s financial interests and respect for the rule of law, the introduction of a regime of conditionality was announced but the wording may be open to interpretation.

Own resources system

The own resources ceiling, the maximum level of resources that can be called from the Member States annually, will be modified as proposed by the Commission. It will rise permanently from 1.20 % to 1.40 %, of the EU’s total gross national income (GNI) to take account of developments such as the smaller total GNI of the post-Brexit EU and the uncertain economic outlook owing to the pandemic. In addition, a temporary increase in the ceiling, worth a further 0.60 % of EU GNI, will be devoted exclusively to borrowing operations for NGEU and apply until December 2058 at the latest. This temporary increase enables the Commission to borrow on a much larger scale than in the past, and aims to preserve the Union’s AAA credit rating. A new own resource based on non-recycled plastic waste will be introduced as of 2021, which should be a first step in a broader reform. The European Council invites the Commission to make proposals for other new own resources: a border carbon adjustment mechanism and a digital levy, and a revised proposal linked to the EU’s Emissions Trading System (ETS). Contrary to the Commission proposal, the corrections that reduce the contributions of five Member States (Austria, Denmark, Germany, the Netherlands and Sweden) to the EU budget will not be phased out, but maintained and, overall, increased. In addition, the collection costs that Member States retain on customs duties, often deemed a hidden correction, will rise from 20 % to 25 %.

2021-2027 MFF

The €1 074.3 billion for the new MFF represents a decrease in resources when compared to the current MFF (excluding the UK but including the currently off-budget European Development Fund). The new MFF is structured into seven policy areas (‘headings’). As compared to the Commission proposal of May 2020, appropriations for cohesion policy and agriculture have been increased (by 2.2 % and 0.9 %), confirming Member States’ attention to funds with geographically pre-allocated expenditure. ‘Migration and Border Management’ and ‘Security and Defence’, the two headings afflicted by the largest relative cuts, have higher allocations than in 2014-2020, but significantly lower than in the Commission proposals and in Parliament’s position of November 2018. The same applies to programmes considered to be investments in EU common goods such as Horizon Europe (-6.2 % on the revised Commission proposal) and Erasmus (‑13.8 %). Special instruments outside the MFF ceilings to tackle unexpected events amount to €20.1 billion for the entire period, including a €5 billion reserve to counter the impact of Brexit.

Next Generation EU (NGEU)

The total volume of the EU recovery instrument is kept at €750 billion, but the mix of grants (€390 billion, down from €500 billion in the proposal) and loans (€360 billion, up from €250 billion) changes. The time available for commitments is shortened by one year (2021-2023 instead of 2021-2024). While the resources for the Recovery and Resilience Facility (RRF) increase further, the cuts to the grant component reduce reinforcements that NGEU was planned to provide to various EU budgetary instruments (e.g. Horizon Europe and Just Transition Fund) or eliminate such top-ups altogether (e.g. Health programme, development and humanitarian aid). The idea of a Solvency Support Instrument is dropped. The bridging solution to finance some action in 2020 already, through an amendment of the current MFF is dropped, but the RRF and REACT-EU should be able to finance retroactively eligible measures launched as of February 2020. In 2023, the allocation key for the RRF will take account of new data on the impact of the pandemic.

European Council figures for the MFF and NGEU

European Council figures for the MFF and NGEU

Some reactions

The Financial Times has dubbed the deal momentous, arguing that it provides for a large and timely stimulus, thus supporting both the single market and economic and monetary union (EMU). Guntram Wolff, Director of the Bruegel think-tank, finds the deal good and balanced overall, but identifies increased rebates and cuts to the amounts initially proposed for various future-oriented programmes as two downsides. Professor Brigid Laffan argues that the agreement on collective borrowing makes this the most significant budgetary deal in the history of the EU.

European Parliament

Parliament is a strong advocate of a robust MFF and has been ready to negotiate with the Council since November 2018. It confirmed and updated its negotiating mandate in October 2019. In May 2020, Parliament demanded a bold recovery package, including the next MFF, and built on the EU budget. Commenting on the outcome of the July meeting, Parliament’s negotiators on the MFF and own resources welcomed the fact that the European Council eventually reached a common position, as well as the launch of a recovery instrument financed through borrowing. However, they were critical of essential elements of the compromise, such as cuts to the core MFF (long-term investments) and insufficient modernisation of the own resources system, warning that Parliament’s consent should not be taken for granted. They noted that if Parliament’s conditions are not met sufficiently, the recovery instrument could be launched while programmes could be adopted on the basis of the current MFF (with the Treaty providing for an automatic extension of the 2020 ceilings if a new MFF is not adopted). Several political groups have tabled a motion for a resolution confirming Parliament’s readiness to enter into negotiations immediately and setting out the conditions for its consent to the MFF. Elements expected to be at the heart of negotiations include: a firm commitment to introducing a basket of new own resources to repay borrowed funds; a repayment plan that should not reduce other MFF expenditure in the future; a strong mechanism on respect for the rule of law; and a reform of the EU’s Financial Regulation to reconsider the budgetary treatment of external assigned revenue that is expected to finance the EU budget on an unprecedented scale under NGEU.


Read this ‘at a glance’ on ‘Future financing of the Union: MFF, Own Resources and Next Generation EU‘ in the Think Tank pages of the European Parliament.

Source Article from https://epthinktank.eu/2020/07/23/future-financing-of-the-union-mff-own-resources-and-next-generation-eu/

Korean peninsula: State of play – Further uncertainty follows period of hope

Written by Enrico D’Ambrogio with Minjoo Yang ,

© xtock / Adobe Stock

North Korea and South Korea have been on different paths since World War II. The North has remained isolated and poor, its regime inspired by Soviet structures, with a centrally planned economy. The South, meanwhile, after alternating periods of autocratic and democratic rule, made a clear choice at the end of the 1980s in favour of democracy and a market economy, a choice that has led the country to success in several sectors.

North and South Korea are still technically at war, as the military conflict of 1950-1953 ended with an armistice that was never followed by a peace treaty. There are 28 500 US (United States) soldiers stationed in South Korea, which signed a Mutual Defence Treaty with Washington in 1953. There have been frequent tensions over the past 70 years, and North Korea has become a de facto nuclear power since the 2000s, prompting international sanctions.

Early in 2018 a detente raised hopes of peace. North Korean leader Kim Jong-un met with US President Donald Trump and South Korean President Moon Jae-in, but the summits have led neither to the denuclearisation of the Korean peninsula, nor to the easing of sanctions against the North.

Pyongyang’s frustration provoked new tensions in the region in June 2020, when the North, in a symbolic move, destroyed the liaison office in the border area, the de facto embassy of the two Koreas. But Kim’s options seem limited at present, and there is little chance of progress until after the US presidential elections. Meanwhile, Moon Jae-in has invested much political capital in the Korean peace process, and is willing to make further moves before the end of his mandate in 2022.

The EU has traditionally maintained a policy of critical engagement towards North Korea, upholding the international non-proliferation regime and supporting a lasting reduction in tensions on the peninsula. The EU and South Korea are strategic partners. During the 30 June 2020 EU–South Korea summit, the EU reaffirmed its support for Seoul’s efforts to engage with the North to achieve peace and prosperity on the peninsula.


Read the complete briefing on ‘Korean peninsula: State of play – Further uncertainty follows period of hope‘ in the Think Tank pages of the European Parliament.


Source Article from https://epthinktank.eu/2020/07/21/korean-peninsula-state-of-play-further-uncertainty-follows-period-of-hope/

Review of EU Enforcement Regulation for trade disputes [EU Legislation in Progress]

Written by Gisela Grieger,

© Scott Maxwell / Adobe Stock

On 12 December 2019, the European Commission adopted a proposal to amend Regulation (EU) No 654/2014 concerning the exercise of the EU’s rights for the application and enforcement of international trade rules (‘the Enforcement Regulation’) of 15 May 2014. The Enforcement Regulation enables the EU to suspend or withdraw concessions or other obligations under international trade agreements in order to respond to breaches by third countries of international trade rules that affect the EU’s commercial interests.

The proposed amendments would enable the EU to impose counter-measures in situations where EU trade partners violate international trade rules and block the dispute settlement procedures included in multilateral, regional and bilateral trade agreements, thus preventing the EU from obtaining final binding rulings in its favour. The latter are required under the current EU regulation to enforce international trade rules.

As the Council adopted its negotiating position on 8 April 2020 and the Committee on International Trade (INTA) of the European Parliament adopted its negotiating position on 6 July 2020, trilogue negotiations can now be launched as the next step in the legislative process.

Versions

EU Legislation in progress timeline

Source Article from https://epthinktank.eu/2020/07/20/review-of-eu-enforcement-regulation-for-trade-disputes-eu-legislation-in-progress/

Impact of the pandemic on elections around the world: From safety concerns to political crises

Written by Ionel Zamfir with Tessa Fardel,

© Nuthawut / Adobe Stock

The coronavirus has taken a heavy toll on electoral processes around the world, with many elections being postponed because of emergency situations. Ideally, postponing elections should involve a sensible balancing act between the democratic imperative, enshrined in international law and national constitutions, to hold regular elections, and public health requirements restricting large gatherings and minimising close contact between people.

While some countries have decided to go ahead with elections, most countries with elections scheduled since the beginning of March have postponed them. Among those that have held elections during the pandemic, South Korea has emerged as a model for having organised a highly successful electoral process, while protecting the health of its population. Others, such as Burundi, have set a negative standard, ignoring health risks putting both population and politicians in peril.

Postponing elections as part of the policy response to the crisis ideally requires a broad political consensus. However, rescheduling has proven divisive in many cases. Those in power have often been accused by the opposition and other critics of trying to reshape the calendar to their own advantage, either by lifting lockdowns too early to allow for the restart of the electoral process (such as in Serbia − the first European country to hold parliamentary elections after the crisis) or by prolonging transitional situations unnecessarily (such as in Bolivia, which has an interim president).

The crisis provides a unique opportunity for electoral reform. Extending opportunities for early and remote voting has been seen as a way to reduce risk. However, much caution is needed, particularly as regards remote online voting, which involves either limitations of the right to voting secrecy or serious and still unmanageable cyber-risks.


Read the complete briefing on ‘Impact of the pandemic on elections around the world: From safety concerns to political crises‘ in the Think Tank pages of the European Parliament.

Source Article from https://epthinktank.eu/2020/07/20/impact-of-the-pandemic-on-elections-around-the-world-from-safety-concerns-to-political-crises/

Coronavirus: An uncertain future [What Think Tanks are thinking]

Written by Marcin Grajewski,

© mantinov / Adobe Stock

The spread of the coronavirus pandemic is reshaping the world economy and politics. Analysts and politicians argue that the extent of changes will depend of the persistence of the crisis and the ability of global powers to cooperate in efforts to contain and control it. In Europe, where containment rules have already been eased in many countries, governments and citizens fear a second wave of the pandemic, especially given that infection rates are again slowly rising in certain regions. Worldwide, populations in conflict-zones find themselves in an especially precarious situation.

This note offers links to recent commentaries and reports from international think tanks on coronavirus and related issues. Earlier publications on the coronavirus can be found in the previous item in this series, published by EPRS on 10 July.

Germany’s corona presidency: Germany’s leadership role and European partners’ expectations
Deutsche Gesellschaft für Auswärtige Politik, July 2020

From reaction to action: How the EU can step up its role in global pandemics
European Policy Centre, July 2020

The big engine that might: How France and Germany can build a geopolitical Europe
European Council on Foreign Relations, July 2020

In sickness and in health: European cooperation during the coronavirus crisis
European Council on Foreign Relations, July 2020

Trump, the coronavirus, and the world economy
German Marshall Fund, July 2020

Global democracy and Covid-19: Upgrading international support
Carnegie Europe, July 2020

The impact economy: Balancing profit and impact
Bruegel, July 2020

Going beyond the Single Market: Why Europe must become a Single Economic Territory (SET)
European Policy Centre, July 2020

How is Covid-19 affecting House oversight efforts?
Brookings Institution, July 2020

Deutschlands CoronaPräsidentschaft Erwartungen der europäischen Partner an die deutsche Führungsrolle
Deutsche Gesellschaft für Auswärtige Politik, July 2020

Is evaluating Covid-19 about the WHO or country responses?
Chatham House, July 2020

Government-guaranteed bank lending: Beyond the headline numbers
Bruegel, July 2020

The EU budget as an opportunity in the crisis: The EU Commission proposal for a new financial framework and a reconstruction fund
Stiftung Wissenschaft und Politik, July 2020

Economic meltdown in the Middle East: How Europe can soften the impact
European Council on Foreign Relations, July 2020

Credible emerging market central banks could embrace quantitative easing to fight Covid-19
Bruegel, July 2020

ESG resilience during the Covid crisis: Is green the new gold?
Centre for European Policy Studies, July 2020

Next generation EU: Shock absorber or larger, debt-financed EU budget?
Centre for European Policy Studies, July 2020

Instrumental solidarity: Hungary’s management of the coronavirus crisis
European Council on Foreign Relations, July 2020

Did we say ‘new own resources’ for the recovery fund?
Centre for European Policy Studies, July 2020

What does the World Health Organization do?
Council on Foreign Relations, July 2020

Supporting and restructuring the aviation ecosystem
Centre for European Policy Studies, July 2020

How can Europe reconcile privacy with Covid-19 track and tracing systems?
Friends of Europe, July 2020

Rethinking EU institutions’ rules of procedure after Covid-19
Egmont, July 2020

Covid-19: The hidden majority in India’s migration crisis
Chatham House, July 2020

Covid-19 job and income loss leading to more hunger and financial hardship
Brookings Institution, July 2020

Circulation et commercialisation de chloroquine en Afrique de l’Ouest: Une géopolitique du médicament à la lumière du COVID-19
Institut français des relations internationales, July 2020

How has Covid-19 impacted the war in Libya?
Friends of Europe, July 2020

Voting by mail in a pandemic: A state-by-state scorecard
Brookings Institution, July 2020

Key trade data points on the EU-27 pharmaceutical supply chain
European Centre for International Political Economy, July 2020

Czech Republic: Living with coronavirus
Chatham House, July 2020

Greece: Living with coronavirus
Chatham House, July 2020

Start of USMCA brings hope amid Covid-19 economic crisis
Atlantic Council, June 2020

Emergency powers, Covid-19 and the new challenge for human rights
Instituto Affari Internationali, June 2020

Cities on the frontline: Managing the coronavirus crisis
Barcelona Centre for International Affairs, June 2020

How the world has learned to grieve in a pandemic
Council on Foreign Relations, June 2020

Collateral easing with disciplinary dysfunction? On the limitations of the ECB’s Covid-19 response
Foundation for European Progressive Studies, June 2020

Vorschläge für eine effiziente, europäische Bekämpfung von Pandemien: Juristische Aspekte im Gesundheitsbereich
Österreichische Gesellschaft Für Europapolitik

Policy coherence issues emerging from Covid-19 with a focus on healthcare supply chains
European Centre for Development Policy Management, June 2020


Read this briefing on ‘Coronavirus: An uncertain future‘ in the Think Tank pages of the European Parliament.

Read all EPRS publications on the coronavirus outbreak

Source Article from https://epthinktank.eu/2020/07/17/coronavirus-an-uncertain-future-what-think-tanks-are-thinking/