Priority 3 - An Economy that Works for People

Prio3_Wirtschaft.jpg
© European Union, 2021

A Deeper and Fairer Economic and Monetary Union

Internal Market

Jobs, Growth and Investment

European Semester

Boosting Jobs

European Commission Work Programme 2022

Ukraine War - Temporary Crisis Framework

AmpelEU.png
© ZEI

Non-legislative Act: On the 24th of March 2022 the European Commission published a Communication regarding Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (press release).

Problem: In the light of the Russian invasion of Ukraine, restrictive measures have been imposed against Russia as well as Belarus, due to its role in facilitating Russia’s military aggression. Following EU sanctions, Russia itself decided to take certain restrictive economic counter measures. Shrinking demand, interruption of existing contracts and projects, with the consequent loss of turn-over, disruptions in supply chains, in particular of raw materials and pre-products, as well as the scarcity of other inputs have been the consequences. Additionally, the displacement of Ukrainian citizens both internally and in neighbouring countries has led to an unprecedented inflow into the EU of refugees, resulting in major humanitarian and economic difficulties.

Objective: Specific criteria are needed for the assessment of the compatibility with the internal market of State aid measures that member states may have to take in order to counter the economic effects of the sanctions imposed by the EU, its international partners as well as Russia’s responsive counter measures. The aim is to introduce coordinated economic response of member states and EU institutions to mitigate the immediate social and economic negative repercussions in the EU, to preserve economic activities and jobs, and to facilitate the structural adjustments needed in response to the new economic situation created by the Russian military aggression against Ukraine.

Subject Matter: The Communication defines the possibilities that member states have under EU State aid rules to ensure liquidity and access to finance for enterprises, especially SMEs, that face economic challenges under the current crisis. Member states are encouraged to make specific social payments to non-commercial energy consumers, which could help them afford their energy bills in the short term, or provide support for energy efficiency improvements, while ensuring effective market functioning. Additionally, tax and/or levy reduction, a reduced rate to the supply of natural gas, electricity or district heating or reduced network costs are suggested. Further, member states are invited to consider, in a non-discriminatory way, setting requirements related to environmental protection or security of supply for granting aid by requiring investments in energy efficiency, reducing the energy consumption relative to economic output e.g. by reduced consumption for production processes, heating, or transportation as well as requiring the beneficiary to meet a certain share of energy consumption needs by renewable energies.

AmpelGelb.png
© ZEI

Proposal: On the 27th of April 2022 the European Commission published a Proposal for a Regulation on temporary trade liberalisation supplementing trade concessions applicable to Ukrainian products under the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part (press release).

Problem: Due to the unprovoked Russian military aggression against Ukraine, Ukraine’s ability to trade with the rest of the world has been affected negatively. Accordingly, upon Ukraine’s appeal, the Union agreed to facilitate as much as possible the trade conditions to enable the country to maintain its trade position with the rest of the world and further deepen its trade relations with the Union.

Objective: Supporting and fostering the existing trade flows from Ukraine to the Union and further establishing conditions for enhanced economic and trade relations leading towards Ukraine's gradual integration in the EU Internal Market are the main objectives.

Subject Matter: Measures shall include facilitating overland logistics and increasing the degree of market liberalisation, thus adding flexibility and certainty for Ukrainian producers. Trade-liberalisation by the temporary suspension of all outstanding for products such as industrial products subject to duty phase out by the end of 2022, fruits and vegetables subject to the entry-price system and agricultural products and processed agricultural products subject to tariff-rate quotas shall be put in place. The Commission additionally proposes the temporary non-collection of anti-dumping duties on imports originating in Ukraine as of the date of entry into force of this Regulation, as well as the temporary suspension of the application of the common rules for imports with respect of imports originating in Ukraine. Lastly, in order to reflect on the success of the trade-liberalising measures, the Commission’s annual report on the implementation of the Deep and Comprehensive Free Trade Area shall include a detailed assessment of the implementation of the measures provided for in this Regulation as well as an assessment of the social impact of those measures in Ukraine and in the Union.

AmpelGelb.png
© ZEI

Proposal: On the 13th of April 2022 the European Commission published a Proposal for a Regulation amending and correcting Regulation (EU) No 508/2014 as regards specific measures to alleviate the consequences of the military aggression of Russia against Ukraine on fishing activities and to mitigate the effects of the market disruption caused by that military aggression on the supply chain of fishery and aquaculture products (press release).

Problem: Trade flows of key commodities for EU’s fishery and aquaculture sector have been disrupted due to the Russian military invasion of Ukraine, increasing prices of key inputs such as energy and raw materials. Additionally, the unavailability of transport as well as low supply of grain, vegetable oils and white fish from Ukraine and Russia, are likely to lead to a significant market disruption, caused by substantial cost increases, and trade disruptions, requiring effective and efficient action.

Objective: The proposal introduces measures that shall alleviate the consequences of the military aggression of Russia against Ukraine on fishing activities and mitigate the effects of the market disruption on the supply chain of fishery and aquaculture products.

Subject Matter: The European Maritime and Fisheries Fund (EMFF) is to support specific measures to mitigate the effects of the market disruption by enabling financial compensation to recognised producer organisations and associations of producer organisations which store fishery or aquaculture as well as to operators of the fishery and aquaculture sector for their income forgone, and for additional costs they incurred due to the market disruption. Similarly, a temporary cessation of fishing activities with a maximum co‐financing rate of 75 per cent of eligible public expenditure is proposed. Finally, member states are advised to ensure that relevant calculations for aid on the basis of additional costs or income forgone are adequate, accurate, and established in advance on the basis of a fair, equitable and verifiable calculation.

Protection of Workers

AmpelRot2.png
© ZEI

Legislative, incl. impact assessment, Article 153(2) TFEU, Q3 2022

Small and Medium Sized Enterprises

AmpelRot2.png
© ZEI

Legislative, incl. impact assessment, Article 114 TFEU, Q3 2022.

Instant Payments

AmpelRot2.png
© ZEI

Legislative or non-legislative, Q2 2022.

Deepening the Capital Markets Union

AmpelRot2.png
© ZEI

Legislative or non-legislative, Q3 2022.

Fair Taxation

AmpelRot2.png
© ZEI

Legislative, Article 115 TFEU.

Minimum Income

AmpelRot2.png
© ZEI

Non-legislative, Q3 2022.

Outermost Regions

AmpelEU.png
© ZEI

Non-legislative Act: On the 3rd of May 2022 the Commission put forward a Communication on a renewed strategic Partnership with the outermost regions (press release).

Problem: The COVID-19-crisis has hit the ORs particularly hard. Furthermore, while the EU's outermost regions, such as the Atlantic, the Caribbean, and the Caribbean Basin, have important resources, they face constant obstacles to development. In order to realise the potential of the territories, it is necessary to ensure that basic needs are met, thus ensuring both the quality of life and the achievement of the Sustainable Development Goals.

Objective: The EU's priority actions with and for these areas, will focus on the people of the areas on the road to sustainable recovery and growth after the COVID-19-crisis. The specificities of the outermost regions will be considered in specific EU legislation, funds, and programmes. In light of this, the Commission calls on the affected Member States and the outermost regions to improve their resilience across sectors and supply chains. Access to adequate housing, water, internet, affordable transport and energy will also be ensured by the Commission and Member States. In the area of health care, the development of the health care system and access to health care are to be promoted. To improve opportunities for young people, education, and training will be promoted, as well as entrepreneurship and employment in general.

Subject Matter: The REACT-EU programme is to be used to its full extent for the designated areas and to accelerate the increase in resilience. In addition, the Commission will pay particular attention to the territories in the relevant country reports in the context of the European Semester, as well as address supply chain resilience in the territories through adequate crisis preparedness and management under the Single Market Emergency Instrument. With a view to sustainable and inclusive recovery and growth, the Commission calls on the member states concerned and the outermost regions to, i.a., set targets for the implementation of the European Pillar of Social Rights; take action to reduce poverty through national strategies; and ensure the implementation of the Youth and Child Guarantee. In order to implement the measures, advantages are to be used, restrictions are to be removed and the focus is to be placed on key sectors. Fields of work such as research and innovation, mobility and transport, biodiversity, blue economy, as well as agriculture and rural development require specific measures in this respect. To promote the green and digital transformation, research on climate change should be promoted, as well as research in the areas of smart grids, energy storage, ocean energy and renewable energies. Furthermore, action plans for the circular economy will be developed and implemented; opportunities for financing digital infrastructure and connectivity will be exploited; and the exchange of information and best practices will be promoted. The Communication aims at cooperation with other European regions, neighbouring and wider countries, e.g. in the field of trade and migration. Partnership, dialogue, and support will be strengthened, i.a., through the development of joint regional development plans for each area.

European Commission Work Programme 2021

Follow-up Economic Governance

AmpelEU.png
© ZEI

Legislative procedure completed: On the 18th of February 2021 the Regulation of the European Parliament and of the Council establishing the Recovery and Resilience Facility entered into force (press release). As a result, member states can now officially submit their national recovery and resilience plans, which will then be assessed by the Commission and adopted by the Council. Once the plans are approved, member states are to receive 13 per cent of the total amount allocated to them as pre-financing. At least 37 per cent of the planned expenditure in the national recovery and resilience plans will be allocated to investments and reforms to achieve the climate change targets, and 20 per cent to the digital transformation.  

Proposal: On the 28th of May 2020 the Commission put forward a Proposal on establishing a Recovery and Resilience Facility.

Problem: The outbreak of the COVID-19 pandemic in early 2020 has changed the economic, social and budgetary outlook in the Union and globally. The crisis has shown that building sound, sustainable and resilient economies, financial and social systems based on strong economic and social structures helps member states respond more effectively and recover more quickly from shocks in an equitable and inclusive way

Objective: In view of the COVID-19 crisis, it is necessary to strengthen the support framework currently provided to member states and to offer direct financial support to member states through an innovative instrument. For this purpose, a Recovery and Resilience Facility is to be established. The Facility will provide financial support for the achievement of the milestones and targets set out in the member state-specific Recovery and Resilience Plans. The corresponding reforms and investments will be made available to achieve the general objective of promoting the economic, territorial and social cohesion of the Union.

Subject matter: The reforms and investments with a view to the Facility are intended to help make the Union more resilient and less dependent. Support for actions in specific policy areas of European importance is intended to generate recovery and strengthen the resilience of the Union and its member states. These policy areas are grouped into six pillars: (1) environmental change, (2) digital transformation, (3) smart growth and economic cohesion and a well-functioning internal market, (4) social and territorial cohesion, (5) health and economic, social and institutional resilience, and (6) actions for the next generation such as education. Regarding to environmental change, the aim is to strengthen reforms and investments in green technologies and capacities and to contribute to the Union's climate goals. With regard to the digital transformation, reforms and investments in digital technologies are to be implemented in order to improve the competitiveness of the Union on a global level. Diversification of key supply chains should help the Union become more resilient, innovative and independent. In the area of smart growth and strengthening economic cooperation, the aim is to increase the growth potential and enable a sustainable recovery of the Union's economy. The fourth pillar of social and territorial cohesion aims to combat poverty and unemployment. Investments and reforms in this area should, among other things, create jobs, integrate disadvantaged groups and strengthen social dialogue. The COVID-19 pandemic has highlighted the importance of investing in the fifth pillar of health and economic, social and institutional resilience to increase crisis preparedness and response capacity. Finally, it is important to invest in the next generation to promote education and skills and not continue to widening the generation gap.

Deepening the Capital Markets Union

AmpelEU.png
© ZEI

Non-legislative Act: On 25th of November 2021, the European Commission published a Communication6 to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions about the Capital Markets Union (press release7).

Problem: Capital markets play a key role in providing funding for EU companies to invest and expand. Additionally they are important as the EU economy is gradually recovering from the COVID-19 crisis. To enhance the companies’ ability to raise capital across the EU, the EU capital markets must not be fragmented. An integrated EU capital market would contribute significantly to a sustained recovery, sustainable growth and cost-efficient green and digital transitions.

Objective: The Communication aims to underline the importance and the opportunities provided by the Capital Markets Union (CMU). One year after the adoption of the 2020 CMU actin plan, the European Commission is now delivering on its commitments, putting forward a set of four legislative proposals to contribute to achieving the CMU objectives.

Subject matter: The political importance of the CMU is composed by the economic recovery from the COVID-19 crisis, the green and the digital transition and the open strategic autonomy. The EU’s leadership in the area of green transition offers a unique opportunity to build a truly integrated capital green market, which can give a stronger impetus to the integration of EU capital markets more broadly. To realize the digital transition an integrated and efficient market for capital is essential to generate investment. Additionally the EU capital markets must remain open to global financial markets and be underpinned by competitive and cost-efficient market infrastructures, such as central counterparties, to play a key role in reducing the EU’s overreliance on third-country providers for critical financial services. Together with the Banking Union, the CMU, will enhance the EU’s open strategic autonomy and global economic role and strengthen confidence in the euro. The three core CMU objectives are to make the financing more accessible to EU companies (1), to make the EU an even safer place for individuals to save and invest long-term (2) and to integrate national capital markets into a genuine single market (3). The legislative proposals adopted together with this communication help achieve the core CMU objectives. The legislative measures firstly include the set-up of a European Single Access Point (ESAP) to create more funding and business opportunities for companies. Secondly the Promotion of long-term investments through European Long-Term Investment Funds (ELTIF’s). At third place funding should be more diversified for companies by reviewing the Alternative Investment Fund Managers Directive (AIFMD). The revised rules will also give investors better protection. Finally the market transparency should be enhanced by reviewing the Markets in Financial Instruments Regulation (MiFIR). Furthermore the communication names the Commissions’ deliverables for 2022 including the listing review to help companies raise funds on public markets. Additionally the Commissions aims to implement an open finance framework to support capital markets and add value for consumers and companies. A good level of financial literacy should be achieved. The Commission will propose an initiative by Q3 2022 that will seek to harmonize targeted aspects of the corporate insolvency framework and procedures.

AmpelGelb.png
© ZEI

Proposal: On 25th of November 2021 the European Commission published a Proposal8 for a regulation of the European Parliament and of the Council for establishing a European single access point providing centralized access to publicly available information of relevance to financial services, capital markets and sustainability (press release7).

Problem: For capital markets to function efficiently, it is essential to have a regular flow of relevant, complete, reliable, timely and comparable company information towards market participants and other stakeholders. The easy access to data is important in order for decision markers in the economy and society to make sound decisions that serve the efficient functioning of the market. The Commission proposes to improve public access to entities’ financial and non-financial information by building a European Single Access Point.

Objective: The proposal aims to realize the establishment of a European Single Access Point (ESAP), which will contribute to the achievement of the CMU’s objectives by providing EU-wide access to information activities and products of the various categories of entities that are required to disclose such information. ESAP shall contribute to further integrating the financial services and capital markets in the single market, to allocating capital markets and economies more efficiently across the EU and promoting the development of smaller national capital markets and economies by giving them greater visibility.

Subject matter: The ESAP should be built and governed by the European Securities and Markets Authority (ESMA). It should provide the public with an easy centralized access to information about entities and their products that is made public in relation to financial services, capital markets and sustainability. This information to be made publicly accessible should be collected by collection bodies designated for the purpose of collecting the information that the entities are under an obligation to make public. A list of the collection bodies is to be published and updated on the ESMA’s website. The collection bodies shall collect and store the information submitted by the entities and perform automated validations on the information submitted to verify that the information complies with certain requirements. It is the ESMA’s task to implement appropriate and proportionate policies to ensure that ESAP protect the information processed and functions as needed. Additionally the ESMA should ensure that ESAP offers a set of functionalities, including a search function, machine translation and possibilities to extract the information. The access to information of the ESAP should be provided for free and without discrimination and should make it possible for those users to search, access and download the information through ESAP. To protect the ESMA from an excessive financial burden in relation to costs incurred for serving the needs of intensive users, the ESMA should generally have the ability to generate revenues. While users should have access to past information, the ESMA should ensure that no personal date are made accessible for longer than necessary. Furthermore the ESMA, in close cooperation with the European Banking authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA), shall monitor the functioning of ESAP and shall publish an annual report about the functioning of ESAP.

AmpelGelb.png
© ZEI

Proposal: On 25th of November 2021 the European Commission published a Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2015/760 as regard the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules and as regard requirements pertaining to the authorization, investment policies and operating conditions of European long-term investments funds (press release).

Problem: Based on the evaluation of the functioning of the European long-term investment funds (ELTIFs) legal framework and stakeholder feedback, the advantages of ELTIFs are diminished by the restrictive fund rules and barriers to entry for retail investors, the combined effect of which reduce the utility, effectiveness and attractiveness of the ELTIF legal framework for managers and investors.

Objective: This proposal aims to increase the uptake of ELTIFs across the EU for the benefit of the European economy and investors, to further support the continued development of the Capital Markets Union. The ELTIF structure should be made more attractive by easing selected fund rules for ELTIFs distributed solely to professional investors.

Subject matter: To make the ELTIF more appealing, the proposal will make targeted changes in the fund rules. This means broadening the scope of eligible assets and investments, allowing more flexible fun rules that include the facilitation of fun-of-fund strategies, and reducing the unjustified barriers preventing retail investors from accessing ELTIFs, in particular the EUR 10 000 initial investment requirement and the maximum 10% aggregate threshold requirement for those retail investors whose financial portfolios are below EUR 500 000. The specific provisions of the proposal include for example the assurance that the information on authorizations granted or withdrawn and any changes to the information about the ELTIFs is communicated by the competent authorities to the European Securities and Market Authoritiy (ESMA) on a monthly basis, rather than on a quarterly basis. Additionally there are a few changes made, that facilitate the authorization of the ELTIF and streamline the separation of those provisions that address the authorization of the ELTIF and that of the alternative investment funds (AIFs) manager (AIFM). The redemption-related rules are amended to allow ESMA to develop draft regulatory technical standards which would further specify the circumstances for redemptions under limited circumstance. The conditions of the new review of the ELTIF regulatory framework are expanded.

AmpelGelb.png
© ZEI

Proposal: On 25th of November 2021 the European Commission published a Proposal for a directive of the European Parliament and of the council amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds (press release).

Problem: The Alternative Investment Funds Manager Directive (AIFMD – Directive 2011/61/EU) was adopted in 2011 as part of the policy response to the global financial crisis. It has become a significant pillar of the Capital Markets Union (“CMU”). However its requirements are not specific enough to fully capture the specificities of managing direct lending activities by alternative investment funds (AIFs) and to address the potential micro and macro risks. Furthermore the market data submitted to the supervisory authorities has gaps or lacks to requisite detail thus impairing the authorities’ ability to identify the build-up and spill over of risks to the broader financial system.

Objective: The legislative proposal aims to improve the relevant data collection and remove inefficient reporting duplications that may exist under other pieces of the European and national legislation in line with the wider strategy on supervisory data, as announced in the Digital Finance Strategy. The Commission concluded that there is a need to harmonize rules for the managers of alternative investment funds (AIFMs) managing loan-originating AIFs, to clarify standards applicable to AIFMs that delegate their functions to third parties, to ensure equal treatment of custodians, to improve cross-border access to depositary services, to optimize supervisory data collections and to facilitate the use of liquidity management tools (LMTs) across the Union. A robust delegation regime, an equal treatment of custodians, coherence of supervisory reporting and a harmonized approach to the use of LMTs are equally necessary for the management of undertakings for collective investment in transferable securities (UCITS). Therefore it is appropriate to also amend Directive 2009/65/EC.

Subject matter: There are certain amendments made to Directive 2011/61/EU and Directive 2009/65/EC. Concerning Directive 2011/61/EU the amendments include various points e. g. the clarification that AIFMs should have technical and human resources envisaged when applying for an AIFM authorization, that AIFMS managing AIFs, which grant loans, implement effective policies, procedures and processes for the granting of loans and that central securities depositories (CSDs) are brought into the custody chain when they are providing competing custody services. Furthermore the European Securities and Markets Authoritiy (ESMA) is required to regularly conduct a peer review of supervisory practices in applying rules on delegation with particular focus on preventing the creation of letter-box entities. A review clause is inserted mandating the Commission to initiate review of the provisions relating to delegation, depository services and the use of LMTs. Concerning Directive 2009/65/EC the amendments include the empowerment of the Commission to adopt a delegated act specifying further the conditions for delegation and the conditions under which the management company of UCITS is to be deemed a letter-box entity and therefore no longer considered the manager of the UCITS thus aligning the rules of Directives 2011/61/EU and 2009/65/EC in this area. Furthermore it is to ensure that ESMA receives consistent information on the delegation arrangements.

AmpelGelb.png
© ZEI

Proposal: On 25th of November 2021 the European Commission published a Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments (press release).

Problem: To maintain a well-balanced trading landscape, the transparency rules that govern trading on exchanges as well as on the alternative platforms or through systematic internalisers need certain adjustments. The use of certain exemptions from the transparency rules are seen as being transparent venues. The current regulation already contains rules to curb the use of the most commonly used transparency waivers. The established provisions have proven to be rigid and collectively introduce unnecessary complexity in the operation of equity markets, so that the review plans to streamline the complex interplay between transparency waivers and the double volume cap.

Objective: The proposal aims to empower investors by enabling them to access market data necessary to invest in shares or bonds more easily and by making EU market infrastructures more robust.

Subject Matter: The proposal contains certain deletions or replacements of provisions in MiFID II that will become superfluous as a result of the proposed amendments to markets in financial instruments (MiFIR) in this package. Additionally the licensing requirement for persons dealing on own account on a trading venue by means of direct electronic access (DEA) to the extent that they do not provide or perform any other investment services. Member states are required to oblige investment firms and market operators operating a multilateral trading facility (MTF) or organized trading facility (OTF) to have arrangements in place to ensure they meet the data quality standards now enacted in MiFIR. Furthermore member states are obliged regulated markets to have arrangements in place to ensure the data quality standards now enacted in MiFIR. Member states must provide for sanctions for infringements of certain new provisions in MiFIR in relation to the reviewed volume cap mechanism, to mandatory contributions to consolidated tape providers, to the quality of data reported to consolidated tape providers as well as to payments for order flow.

AmpelRot2.png
© ZEI

Legislative, incl. impact assessment, Articles 53(1), 62 and 114 TFEU, Q3 2021.

Completing the Banking Union

AmpelEU.png
© ZEI

Non-legislative Act: On 25th of November 2021, the European Commission published a Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions about the Capital Markets Union (press release).

Problem: Capital markets play a key role in providing funding for EU companies to invest and expand. Additionally they are important as the EU economy is gradually recovering from the COVID-19 crisis. To enhance the companies’ ability to raise capital across the EU, the EU capital markets must not be fragmented. An integrated EU capital market would contribute significantly to a sustained recovery, sustainable growth and cost-efficient green and digital transitions.

Objective: The Communication aims to underline the importance and the opportunities provided by the Capital Markets Union (CMU). One year after the adoption of the 2020 CMU actin plan, the European Commission is now delivering on its commitments, putting forward a set of four legislative proposals to contribute to achieving the CMU objectives.

Subject matter: The political importance of the CMU is composed by the economic recovery from the COVID-19 crisis, the green and the digital transition and the open strategic autonomy. The EU’s leadership in the area of green transition offers a unique opportunity to build a truly integrated capital green market, which can give a stronger impetus to the integration of EU capital markets more broadly. To realize the digital transition an integrated and efficient market for capital is essential to generate investment. Additionally the EU capital markets must remain open to global financial markets and be underpinned by competitive and cost-efficient market infrastructures, such as central counterparties, to play a key role in reducing the EU’s overreliance on third-country providers for critical financial services. Together with the Banking Union, the CMU, will enhance the EU’s open strategic autonomy and global economic role and strengthen confidence in the euro. The three core CMU objectives are to make the financing more accessible to EU companies (1), to make the EU an even safer place for individuals to save and invest long-term (2) and to integrate national capital markets into a genuine single market (3). The legislative proposals adopted together with this communication help achieve the core CMU objectives. The legislative measures firstly include the set-up of a European Single Access Point (ESAP) to create more funding and business opportunities for companies. Secondly the Promotion of long-term investments through European Long-Term Investment Funds (ELTIF’s). At third place funding should be more diversified for companies by reviewing the Alternative Investment Fund Managers Directive (AIFMD). The revised rules will also give investors better protection. Finally the market transparency should be enhanced by reviewing the Markets in Financial Instruments Regulation (MiFIR). Furthermore the communication names the Commissions’ deliverables for 2022 including the listing review to help companies raise funds on public markets. Additionally the Commissions aims to implement an open finance framework to support capital markets and add value for consumers and companies. A good level of financial literacy should be achieved. The Commission will propose an initiative by Q3 2022 that will seek to harmonize targeted aspects of the corporate insolvency framework and procedures.


6

AmpelGelb.png
© ZEI

Proposal: On 27th of October 2021 the European Commission published a Proposal13 for a directive of the European Parliament and of the Council amending Directive 2013/36/EU as regard supervisory powers, sanctions, third-country branches, and environmental, social and governance risks, and amending Directive 2014/59/EU (press release14).

Problem: Supervisors often lack the information and powers that they need to properly address increased financial stability risks for the EU. The absence of common prudential, governance and detailed supervisory reporting requirements, as well as the insufficient exchange of information between the authorities in charge of supervising different entities/activities of a third country leaves blind spots. These shortcomings create various risks concerning the financial stability and market integrity of the EU.

Objective: The review of Directive 2013/36/EU (the Capital Requirements Directive or CRD) aims at finalizing the Basel III reform implementation in the EU introducing measures that are needed to further strengthen resilience of the banking sector. The CRD should be amended as regard supervisory powers, sanctions, third-country branches and environmental, social and governance risks. Additionally, Directive 2014/59/EU is to be amended.

Subject matter: The specific provisions of the proposal include the independence of competent authorities (1), the convergence of supervisory practices (2), the harmonization of the fit-and-proper framework (3), the clarification of the interplay between the failing or likely to fail declaration (FOLTF) and the withdrawal of authorization (4), the facing of environmental, social and governance (ESG) risks (5) and the direct provision of banking services in the EU by third country undertakings (6). To guarantee the independence of competent authorities (1), member states must ensure that the competent authorities, including their staff and governance bodies, act independently and objectively. The European Banking Authority (EBA) should issue guidelines addressed to the prevention of conflicts of interest, based on international best practices. To increase the efficiency of the Banking Union, the convergence of supervisory practices (2) must be guaranteed. The current discrepancies between Member States need to be fixed. Therefore the Commission’s proposal expands the list of supervisory powers available in the CRD to competent authorities to cover operations such as acquisitions by a credit institution of a material holding in a financial or non-financial entity, the material transfer of assets or liabilities and the merger or divisions. To ensure a more consistent, efficient and effective supervision of members of the management body and of key function holders, amendments to the CRD are necessary (3). Therefore, in addition to the fit-and-proper criteria in Article 91, Articles 91a und 91b are introduced to clarify the role of banks and competent authorities for checking the compliance of board members. In order to clarify, that where a credit institution is declared failing or likely to fail by the competent authority or by the resolution authority, the competent authority is empowered to withdraw the banking authorization, article 18 is amended (4). New adjustments are made and provisions introduced to several Articles in the CRD and in the CRR in order to address the significant risks that credit institutions will face due to climate chance and the profound economic transitions that are needed to manage this and other ESG risks (5). Short, medium and long-term horizons of ESG risks require to be included in credit institutions’ strategies and processes for evaluating internal capital needs as well as adequate internal governance. In terms of the direct provision of banking services in the EU by third country undertakings (6), the proposal clarifies that the provision of banking services in the Union requires having a physical presence in a member state through a branch or a legal person. In terms of third country branches (TCBs) the proposal aims to create an ad hoc set of minimum-harmonizing requirements that builds on existing national frameworks of Member States currently in force and ensures minimum standard and consistent requirements throughout the Union. Additionally TCBs currently operating in the EU will need to be reauthorized.

AmpelGelb.png
© ZEI

Proposal: On 27th of October 2021 the European Commission published a Proposal1515 for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor (press release1616).

Problem: Regulation (EU) No 575/2013 enables institutions to calculate their capital requirements either by using standardized approaches, or by using internal model approaches. Based on an analysis carried out in the wake of the financial crisis of 2008-2009, which revealed that internal models tend to underestimate the risk that institutions are exposed to, the Basel Committee decided to introduce an aggregate output floor.

Objective: This proposal aims for the implementation of the outstanding elements of the Basel III reform, which is necessary to provide institutions with the essential regulatory certainty, completing a decade-long reform of the prudential framework. The amendment of Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor aims at limiting the unwarranted variability in the regulatory capital requirements produced by internal models and the excessive reduction in capital that an institution using internal models can derive relative to an institution using the revised standardized approaches.

Subject matter: The proposal provides a variety of amendments in regard of different frameworks. An output floor (OF) to the risk-based capital requirements is introduced through amendments to the CRR and the CRD. It aims to reduce the excessive variability of institutions’ own funds requirements calculated using internal models, and thereby enhance the comparability of institutions’ capital ratios. In terms of the credit risk framework, the current standardized approach for credit risk (SA-CR), used by the majority of institutions across the EU to calculate the own funds requirements for their credit risk exposures, has been found to be insufficiently risk-sensitive in a number or areas. The SA-CR is to be revised to increase the risk sensitivity of this approach in relation to several key aspects. Additionally, the scope of internal rating-based approaches is to be reduced. Concerning credit risk mitigation techniques, the proposal amends Articles 224 to 230 to implement the Basel III rules and methods for taking into account collateral and guarantees under both the SA-CR and the foundation internal ratings-based (F-IRB) approach. Furthermore, a number of amendments are made to the CRR concerning the credit valuation adjustment (CVA) risk framework. For example, Article 382a is inserted to set out the new approaches’ institutions should use to calculate their own funs requirements for CVA risk, as well as the conditions for using a combination of those approaches. Further amendments include the introduction of a mandate for European Banking Authority (EBA) to report, in close cooperation with European Securities and Market Authority (ESMA), to the Commission on the appropriateness of implementing in the Union the minimum haircut floors framework, applicable to Securities financing transitions (SFTs). On the basis of this report, the Commission will, if appropriate, submit a legislative proposal to the European Parliament and to the Council. The proposal introduces a new standardized approach to replace all existing approaches for operational risk. The new standardized approach combines an indicator that relies on the size of the business of an institution with an indicator that takes into account the loss history of that institution. Since institutions play an instrumental role in the ambition of the Union to promote a long-term transition to sustainable development in general, it is important to promote an adequate understanding and management of the sustainability risks (the environmental, social and governance risks or ESG risks). Another key aspect of the reforms is the enhanced transparency and proportionality in disclosure requirements.

AmpelGelb.png
© ZEI

Proposal: On 27th of October 2021 the European Commission published a Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 and Directive 2014/59/EU as regards the prudential treatment of global systemically important institution groups with a multiple point of entry resolution strategy and a methodology for the indirect subscription of instruments eligible for meeting the minimum requirement for own funds and eligible liabilities (press release).

Problem: To implement the international Total Loss-absorbing Capacity (TLAC) Term Sheet in the Union for global systemically important banks and to enhance the application of the minimum requirement for own fund and eligible liabilities (MREL) for all banks, new Directives and Regulations amended the Union bank resolution framework through amendments to Directive 2014/59/EU, Regulation (EU) No 806/2014 and Regulation (EU) No 575/2013.

Objective: The revised framework should better ensure that institutions’ loss absorption and recapitalization occurs through private means once those institutions get into financial difficulties and are subsequently placed in resolution. Furthermore, the proposal aims to fully harmonize the prudential treatment of global systematically important institution groups with a multiple point of entry resolution strategy and a methodology for the indirect subscription of instruments eligible for meeting the minimum requirement for own funds and eligible liabilities.

Subject matter: Regulation (EU) No 575/2013 and Directive 2014/59/EU should be amended in various points. To give an example concerning the amendments of Regulation (EU) No 575/2013 the global systemically important institution (G-SII) groups with a resolution strategy under which more than one group entity might be resolved are to calculate their risk-based requirement for own funds and eligible liabilities under the theoretical assumption that all third-country entities belonging to a G-SII that would be resolution entities were they established in the Union. Furthermore, the sum of the actual requirements for own funds and eligible liabilities of a G-SII group with a Multiple Point of Entry (MPE) resolution strategy must not be lower than that group’s theoretical requirement under an SPE resolution strategy. Since the objectives of this Regulation cannot be sufficiently achieved by the member states and can therefore be better achieved at the Union level, the Union may adopt measures in accordance with the principle of subsidiarity to achieve those objectives. Concerning Directive 2014/59/EU paragraph 6 in Article 45f, which envisaged that the deducted exposures should receive a 0% risk weight for the calculation of the total risk exposure amount and be excluded from the calculation of the total exposure measure, is deleted.

Sustainable Corporate Governance

AmpelEU.png
© ZEI

Legislative procedure completed: On the 21st of June 2022 the European Parliament and the Council reached an agreement on the proposal for a directive on corporate sustainability reporting (CSRD) (press release). The new directive will introduce binding European standards for sustainability reporting, which are currently being developed by the European Financial Reporting Advisory Group (EFRAG). The new rules ensure that investors and other stakeholders have access to the information they need to assess investment risks due to climate change and other sustainability issues.

Proposal: On the 23rd of February 2022 the Commission put forward a Proposal for a Directive on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937 (press release).

Problem: Many EU companies may encounter difficulties to identify and mitigate risks in their value chains linked to respect of human rights or environmental impacts. Certain EU companies have even been associated with adverse human rights and environmental impacts, including in their value chains.

Objective: Since the behaviour of companies across all sectors of the economy is key to succeed in the Union’s transition to a climate-neutral and green economy, the EU wants to advance respect for human rights and environmental protection. The Directive aims to set out a horizontal framework to foster the contribution of business operating in the single market to the respect of the human rights and environment in their own operations and through their value chain. With this directive, the EU intends to improve corporate governance practices (1), avoid fragmentation of due diligence requirements in the single market and create legal certainty for businesses and stakeholders (2), increase corporate accountability for adverse impacts and ensure coherence for companies (3), improve access to remedies for the affected ones (4) and being a horizontal instrument focusing on business processes to complement other measures in force or proposed (5).

Subject matter: In taking appropriate action, consideration should be given to the specifics of the company's value chain, the sector or geographic area in which the value chain partners operate, the company's ability to influence its direct and indirect business relationships, and whether the company could increase its ability to influence. Additionally, the due diligence process should cover six steps defined by the OECD Due Diligence Guidance for Responsible Business Conduct. The steps include (1) integrating due diligence into policies and management systems, (2) identifying and assessing adverse human rights and environmental impacts, (3) preventing, ceasing or minimising actual and potential adverse human rights, and environmental impacts, (4) assessing the effectiveness of measures, (5) communicating, and (6) providing remediation. For the purpose of due diligence, the member states shall ensure that companies are entitled to share resources and information within the respective groups of companies and with other legal entities in compliance with applicable competition law. Furthermore, the companies shall update their due diligence policy annually. Besides, companies shall take appropriate measures to identify actual and potential adverse impacts. Potential adverse impacts should be prevented, actual adverse impact should be brought to an end. Member states shall also ensure that companies provide the possibility for persons and organisations to submit complaints to them in case of legitimate concerns regarding actual or potential adverse impacts. Additionally, the companies should carry out periodic assessments of their own operations and measures. One or more supervisory authorities shall be designated by each member states to supervise compliance with these obligations. To facilitate the cooperation of the supervisory authorities and the coordination and alignment of regulatory, investigate, sanctioning and supervisory practices of the supervisory authorities, the Commission shall set up a European Network of supervisory authorities, composed of representatives of the supervisory authorities.

EU Green Bond Standard

AmpelGelb.png
© ZEI

Proposal: On the 6th of July 2021 the Commission published a Proposal for a Regulation of the European Parliament and of the Council on European green bonds (press release).

Problem: Environmentally sustainable bonds represent one of the most important instruments for financing investments in low-carbon technologies, energy and resource efficiency, etc. However, there is a lack of uniform definition of environmentally sustainable economic activities among the various existing initiatives for environmentally sustainable bonds. On the issuer side, the lack of uniform definitions of environmentally sustainable economic activities introduces uncertainty as to which economic activities are legitimately classified as green. This can affect the profitability of projects with significant climate and environmental impacts. The supply of such investment opportunities will be diminished, making it more difficult to achieve the Union's environmental objectives.

Objective: The proposal aims to overcome these barriers by setting a standard for high quality green bonds. This is to better exploit the potential of the Single Market and the Capital Markets Union to achieve the Union's climate and environmental goals under the 2016 Paris Climate Agreement and under the European Green Deal.

Subject matter: The green bond standard should (1) improve the ability of investors to identify and trust high-quality green bonds, (2) facilitate the issuance of these high-quality green bonds by clarifying the definitions of green economic activity and reducing the potential reputational risk for issuers in transition sectors, and (3) standardize the external evaluation process. Trust in external evaluators should be improved by introducing a voluntary registration and oversight system. In order for investors to be able to identify and trust green bonds, the transparency of bonds needs to be increased. To this end, specific and standardized disclosure requirements should be established, among other things, that make transparent how the issuer intends to use the bond proceeds for eligible assets, expenses and financial assets, and how the proceeds were actually used. To increase the comparability of European green bonds, as well as to make it easier to find the relevant information, model disclosures of such information should be established. Furthermore, conditions for the use of the designation "European green bond" or "EuGB" are established. These include that the bond so designated may use its proceeds only for specified purposes. The use of the proceeds in accordance with the taxonomy must be ensured. In order to standardize the procedure of external valuation, certain conditions must be fulfilled for the commencement of activities as an external valuer of European green bonds. Among others, the registration of the external valuers with ESMA is to be mentioned here. Supervision by competent authorities and ESMA must be guaranteed.

Anti-Money Laundering Package

AmpelGelb.png
© ZEI

Proposal: On the 20th of July 2021 the EU Commission published a Proposal for a Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (Press release).

Problem: The previous regulations on combating money laundering and terrorist financing must be reformed, as the previously presented Regulation No. 2015/847 had deficiencies in direct applicability and depth of detail, which led to inconsistent application along national guidelines and different interpretations within the member states.

Objective: The proposal aims to ensure the effective handling of cross-border situations in order to adequately protect EU’s internal market and further reduce additional costs and burdens for providers of cross-border services. Coherence with the already existing Directives 2015/849 and 2018/843 as well as with the general policy of the Union, i.e. EU legislation in the areas of financial services and criminal law, is to be ensured when harmonizing the rules against money laundering and terrorist financing. Targeted measures for obliged entities are advocated as a way to prevent money laundering and terrorist financing with the intention of curbing the misuse of bearer instruments, as well as simulating new requirements for beneficial ownership transparency for entities and legal arrangements.

Subject Matter: In order to support the consistent application of rules across the internal market, clear requirements regarding internal policies, controls and procedures will be defined. Third country requirements will further be revised in order to apply enhanced due diligence requirements for countries that could potentially pose a threat to the Union's financial system. In addition to introducing new requirements in relation to agents and foreign entities, existing beneficial ownership measures will be streamlined with the aim to reduce the risks of criminals hiding behind intermediary layers as well as a way to ensure an appropriate level of transparency within the EU. To better guide the reporting of suspicious transactions, alerts on suspicious cases will be further clarified and new requirements for the processing of certain categories of personal data will be developed. To ensure full consistency with EU data protection rules, the storage of personal data will be accelerated. The optimization of measures that mitigate the misuse of bearer instruments by putting limitations on the use of cash for large transactions has also been planned. Finally, the list of obliged entities will be extended to include, among others, crypto service providers, but also other sectors such as crowdfunding platforms and migration providers. It is crucial to note the companies addressed by the regulation as obliged parties are i.e. credit institutions, financial institutions, natural or legal persons in the exercise of their professional activity (e.g. auditors, notaries, real estate or business operators, etc.).

AmpelGelb.png
© ZEI

Proposal: On the 20th of July 2021 the European Commission published a Proposal for a Regulation of the European Parliament and of the Council establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism and amending Regulations (EU) No 1093/2010, (EU) 1094/2010, (EU) 1095/2010 (Press release).

Problem: Currently, anti-money laundering and counter-terrorist financing in the EU is supervised at the member state level. Significant differences in resources and practices across member states, result in inconsistent quality and effectiveness of supervision. These differences hinder cross-border cooperation, thereby limiting the ability to detect money laundering and terrorist financing early and effectively.

Objective: The Regulation aims to establish a support and cooperation mechanism for the Financial Intelligence Units ("FIUs") and introduces the new Anti-Money Laundering and Countering the Financing of Terrorism Authority ("AMLA"). The new Authority is critical to addressing the current deficiencies in anti-money laundering and counter-terrorist financing oversight in the Union.

Subject Matter: The Anti-Money Laundering and Counter-Terrorist Financing Authority (hereinafter "AMLA" or "the Authority") shall be established on January 1, 2023. It is intended to become the core of an integrated anti-money laundering and counter-terrorist financing supervision system. It will be complemented by the national authorities charged with the supervision of anti-money laundering and counter-terrorist financing. The AMLA will be composed of two collegial governing bodies: 1) a Management Committee with five independent full-time members and the Chairman of the Authority, and 2) a Management Board composed of representatives of the member states. The role of the Authority is to assist national authorities and to promote supervisory convergence, including in the non-financial sector. Furthermore, the Authority deals with the direct supervision of certain selected obligated parties in the financial sector and provides a coordination and support mechanism for the EU financial intelligence (FIUs). The Authority will also manage two existing infrastructures: 1) the anti-money laundering and counter-terrorist financing database, and 2) the secure communications network for FIUs FIU.net. With respect to financial regulators, the Authority conducts periodic reviews to ensure that all financial regulators have adequate resources and authority. With respect to non-financial supervisors and self-regulatory entities, the Authority coordinates comparative analyses of supervisory standards and practices and requests non-financial supervisors to investigate possible violations of requirements applicable to obligated entities and consider imposing sanctions. The Authority is empowered to develop regulatory and implementing technical standards, guidelines and recommendations within the scope of its functions, and to provide advice and input to the Commission and legislative bodies on combating money laundering and terrorist financing. In addition, a central database for combating terrorist financing and money laundering is to be established with the help of information from the supervisory authorities.

AmpelGelb.png
© ZEI

Proposal: On 20th of July 2021 the European Commission published a recast of a Proposal for a Regulation of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets (press release).

Problem: As transfers of virtual assets have so far fallen outside the scope of the Union's financial services legislation, crypto holders have been exposed to risks related to money laundering and terrorist financing. As transfers of virtual assets pose similar risks to electronic transfers of funds in terms of money laundering and terrorist financing, they must be subject to similar requirements.

Objective: The proposal aims at the recast of the Regulation to expand traceability requirements to crypto-assets. Given that virtual assets transfers are subject to similar money laundering and terrorist financing risks as wire funds transfers, it is important to address these common risks through a single legal instrument.

Subject matter: The Proposal extends the current scope of Regulation to include transfers of crypto-assets made by Crypto-asset Service Providers (CASPs). There are new information obligations for the originator and beneficiary CASPs at the two ends of a cryto-assets transfer. This Regulation shall apply to transfers of funds or crypto-assets which are sent or received by a payment service provider, a crypto-asset service provider or an intermediary payment service provider established in the Union. The obligations of the payment service provider include the transmission of payment-related personal data of the parties to the transfer. In addition, the obligations on the payment service provider of the payee include the detection of missing information on the payer or the payee and the implementation of effective risk-based procedures for determining how to deal with incomplete transfers and which measures must be taken. Both the failure and the steps taken must be reported to the Financial Intelligence Unit (FIU). Crypto value transfers in excess of €1000 must additionally be verified using documents, data or information from a reliable and independent source. In case of missing or incomplete information of transfers of crypto-assets, the CASP of the beneficiary shall report that failure. Member states shall ensure that the obligations are obeyed. Sanctions and measures can be, subject to national law, applied in case of breaches of the provisions of this Regulation. Furthermore member states should establish effective mechanisms to encourage the reporting to competent authorities of breaches of this Regulation. There are agreements with countries and territories which do not form part of the territory of the Union.

AmpelGelb.png
© ZEI

Proposal: On 20th of July the European Commission published a Proposal for a directive of the European Parliament and of the council on the mechanisms to be put in place by the member states for the prevention of the use of the financial system for the purpose of money laundering or terrorist financing and repealing Directive (press release)

Problem: The lack of consistent approaches to supervision of obliged entities, the uneven access to information by FIUs and the lack of common tools limited the detection of cross-border ML/TF cases. Due to a lack of a legal basis it has not been possible so far to interconnect bank account registers and data retrieval systems, key tools for FIUs and competent authorities.

Objective: This proposal aims for a Directive establishing the mechanisms that member states should put in place to prevent the use of the financial system for ML/TF purposes and repealing Directive (EU) 2015/849. In order to bring about a greater level of convergence in the practices of supervisors and FIUs and in relation to cooperation among competent authorities, a number of changes of substances are made.

Subject matter: This proposal repeals the existing Directive (EU) 2015/849 and replaces it with Directive (EU) 2018/843. It sets out regulatory requirements that member states must implement in national law in selected sectors. In particular, currency exchange and cheque cashing offices, and trust or company service providers must be suject to either licensing or registration requirements. Providers of gambling services must be regulated. The existing obligation for member states to establish and maintain registers of beneficial ownership information for legal entities and legal structures will be maintained. Member states are also required to establish mechanisms, such as a central register or an electronic data retrieval system, to enable the identification of bank accounts and safe deposit boxes. In addition, independently operating FIUs must be established at the national level with the power to take immediate action. The new directive provides for the establishment of an anti-money laundering and counter-terrorist financing supervisory college for credit and financial institutions operating across borders. The networking of the various reporting offices is of central importance in order to strengthen their effectiveness. Cooperation mechanisms must be developed for this purpose. The exchange of information between the FIUs of the Member States is to be ensured by the FIU.net system. Effective supervision of all obliged entities by impartial AML/CFT supervision is necessary to protect the integrity of the Union financial system and the internal market. The requirement in the current AML/CFT framework for the Commission to conduct a periodic risk assessment is maintained. However, the frequency of the assessment is extended to four years. In doing so, the European Commission is to name recommendations for appropriate measures to counter the identified risks for the member states. In addition, the member states are called upon to carry out a national risk assessment with a minimum frequency of four years.

Fair Economy Package

AmpelEU.png
© ZEI

Non-legislative Act: On the 4th of March 2021 the European Commission put forward a Communication about the European Pillar of Social Rights Action Plan (press release).

Problem: The European social and economic model should bring opportunities for all European citizens, irrespective of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation. But especially in these times of deep transformations through global challenges such as climate change, digitalization, globalization and the COVID-19 pandemic our social fabric is put to the test.

Objective: The Action Plan aims to improve and adapt social EU’s rulebook to promote a social economy and social progress. The transition to climate-neutrality, digitalization and demographic change must be socially fair and just. Concretely the Commission proposes three EU-headline targets to be achieved by 2030: 1) at least 78% of the population aged 20 to 64 should be in employment, 2) at least 60% of all adults should participate in training every year and 3) the number of people at risk of poverty or social exclusion should be reduced by at least 15 million.

Subject Matter: The Action Plan comprises a variety of concrete measures. Steps to achieve the objective of preserving and creating new and better jobs are for example an updated Industrial strategy for Europe and an Action Plan on the Social Economy. Having in mind the consequences of the COVID-19 crisis, the European Commission presents, together with this Action Plan a Recommendation for Effective Active Support to Employment (EASE). This Recommendation should provide guidance on the combination of policy measures and available funding to promote job creation. Furthermore, the Commission will present a legislative proposal on the working conditions of platform workers, propose an EU regulation on Artificial Intelligence for the use in the EU economy and in the workplace and present a new Occupational Safety and Health Strategic Framework 2021-2027. The Investment in skills and education should unlock new opportunities for all. It comprises different measures such as a Transformation Agenda for Higher Education and an initiative on Individual Learning Accounts to overcome barriers to access to training and to empower adults to manage career transitions. To build a Union of equality a legislation to combat gender-based violence against women should be proposed. Member states are being encouraged to conclude a horizontal Equal treatment Directive. Companies should put in place mechanisms to combat discriminatory practices in recruitment, selection and promotion. The social protection and inclusion should be guaranteed by i.e. the “Affordable Housing Initiative”, a Council Recommendation on minimum income and an EU Strategy on the Rights of the Child. Member States should invest in health and care workforce and boost the digitalization of their health systems.
The Social Summit in Porto on 7-8 May 2021 will be an opportunity to further advance the implementation of the Social Pillar. Progress on the Action Plan will be reviewed by the Commission in 2025.

AmpelEU.png
© ZEI

Non-legislative Act: On the 24th of March 2021 the European Council put forward a Recommendation about establishing a European Child Guarantee (press release).

Problem: In most EU-27 countries, the rate of people at risks of poverty or social exclusion is higher among children than among the population as a whole. The COVID-19 crisis has exacerbated already existing inequalities and could lead to a further increase in poverty and social exclusion. Because poverty and social exclusion of children prevent social progress and sustainable development, the supporting them is critical to building a sustainable, inclusive, equal and competitive knowledge economy and a fair society.

Objective: The European Child Guarantee aims to prevent and combat social exclusion by guaranteeing the access of children in need to a set of key services such as early childhood education and care. An inclusive and truly universal access should be guaranteed to ensure equal opportunities for all children.

Subject Matter: The guarantee refers to "children in need" under the age of 18. The focus in the identification of these children by the Member States is to take into account specific forms of disadvantage: 1) homeless children, 2) children with a disability, 3) children with a migrant background, 4) children with a minority racial or ethnic background (particularly Roma), 5) children in alternative care and 6) children in precarious family situations. To achieve this objective, the Commission proposes to support children in need in various areas. The member states must guarantee a free access to early childhood education and care, education, a healthy meal each school day and healthcare. Additionally the effective access to healthy nutrition and adequate housing must be guaranteed. The implementation provides monitoring and evaluation arrangements. The Member States are requested to uphold a political commitment to advance on equal opportunities for all children and to minimize the socio-economic impacts of the COVID-19 pandemic. To support these measures and the implementation of the European Child Guarantee Union funds are available. It is proposed that the Member States nominate a national Child Guantantee Coordinator, who should coordinate and monitor the implementation of the Recommendation and acts as a contact person for the Commission. After the initial period of this implementation, the Commission will take stock of progress and report to the Council by five years after the adoption.

AmpelEU.png
© ZEI

Non-legislative Act: On the 28th of June 2021 the European Commission put forward a Communication about the EU strategic framework on health and safety at work 2021-2027 (Press release).

Problem: Guaranteeing the health and safety of workers is an essential aspect of an EU economy at a service of people. It is a precondition for a healthy and productive workforce and represents central to the competitiveness and sustainability of the EU economy. Even though occupational health and security standards have already improved across the EU, there are challenges remain that need to be addressed. In addition, health risks were further aggravate by the COVID-19 pandemic.

Objective: The EU focuses on anticipating and managing the digital and green change in the new world of work, improving the prevention of workplace accidents and illnesses and on preparing for any potential future health crises.

Subject Matter: To guarantee the realization of the main objectives, action is needed at EU level, at national, sectoral and company level. The objectives should be realized through an intense social dialog, a strengthened evidence base, mobilized funding, improved enforcement and awareness raising.
Anticipation and management of the green and digital transformation will be enabled through modernization and simplification of EU work regulations, occupational exposure limits of hazardous substances like lead and cobalt, and EU-wide initiatives on mental health at work.
The prevention of workplace accidents and illnesses should be guaranteed by promoting a “Vision-Zero” approach to work-related deaths. To minimize health risks at work, the update of EU rules on hazardous substances and guidelines on hazardous medicinal products are necessary.
The preparation for any potential future health crisis includes the development of emergency procedures and guidance for any upcoming health crisis.
The 2023 OSH summit should allow taking stock of the progresses in this matter.

AmpelEU.png
© ZEI

Non-legislative act: On the 9th of December 2021 the Commission put forward a Communication on an action plan for the social economy (press release ).

Problem: The social economy and its institutions have the opportunity to contribute to solutions to the main challenges we face. However, there remains a large untapped economic and employment potential for this sector. In order to fully exploit the potential of the social economy in the internal market and to introduce more people to it, more support should be given to social enterprises.

Objective: The Action Plan aims to promote social innovation, support the development of the social economy and strengthen its social and economic transformational power through a series of measures for the period 2021-2030.

Subject matter: In order to promote the social economy, it is essential to create a "more favourable environment" for it. The Commission intends to provide guidance and assistance to member states in developing a coherent framework for the social economy, i.a. by publishing guidelines on the relevant tax framework for social economy entities, as well as clarifying existing rules on the tax treatment of cross-border donations. In parallel with the implementation of these measures, the Commission will propose a Council Recommendation on the development of the social economy framework in 2023. Also, of crucial importance for the development of the social economy is the supply of goods or services to and cooperation with public authorities and traditional businesses. In this area, the Commission will, among other things, promote the use of social clauses in the Commission's own tendering procedures and launch a new initiative in 2022 under the Single Market Programme to support the creation of local and regional partnerships between social economy organisations and traditional businesses. The Commission also encourages member states and other competent authorities to promote and monitor the introduction of socially responsible public procurement on their territory in cooperation with social economy actors. The social economy also needs to be promoted at local and regional level. To this end, the Commission will, among other things, promote the networking of rural enterprises and support member states and stakeholders in promoting the social economy through the future EU Common Agricultural Policy Network. Member states will also set up local contact points for the social economy. Building on existing initiatives, the social economy will also be further promoted at international level. To boost the development of social economy institutions, the Union will provide business and capacity building support. This will include promoting the expansion and internationalisation of the social economy and facilitating the establishment of a skills partnership. With a view to broader capacity building, the development of representative networks of the social economy will be supported by the Commission. The attractiveness of entrepreneurship, especially for young people, should also be increased. Improved access to finance is also key to promoting the development of social economy institutions. To this end, the Commission intends to introduce new financial products to mobilise private funding, among other things, in 2022 within the framework of the "InvestEU" programme. The social economy has a crucial role to play in the green and digital transformation. This includes developing a code of conduct for data use, and management in the social economy and working with cities to develop local green deals or green citizenship actions. There is also a need to promote social innovation and improve the recognition of the social economy and its potential. The Commission will take stock of the implementation of the Action Plan in 2025.

Generalised Scheme of Preferences

AmpelGelb.png
© ZEI

Proposal: On the 22th of September 2021 the Commission put forward a Proposal for a Regulation on applying a generalised scheme of tariff preferences and repealing Regulation (EU) No 978/2012 of the European Parliament and of the Council.

Problem: The scheme of generalised tariff preferences (GSP) forms part of the EU's common trade policy and has granted trade preferences to developing countries since 1971. The current scheme is due to expire on 31 December 2023, so it is intended to extend the scheme beyond that date and improve its efficiency and effectiveness.

Objective: The revised GSP regulation aims to maintain the essential features of the current regulation, such as eradicating poverty and promoting sustainable development and good governance, but without compromising EU interests. At the same time, it aims to improve the efficiency and effectiveness of the GSP in order to adapt the scheme to future challenges. Specifically, the revised scheme aims to facilitate access to the GSP+ scheme for the increasing number of the least developed countries that lose EBA status due to graduation; adjust the thresholds for graduation of products to better focus preferences on less competitive products and countries and reflect changing priorities, such as those of the European Green Deal, among others. Furthermore, the list of international conventions should be updated in a targeted and controllable manner; the procedure for withdrawing preferences in urgent cases should be accelerated; and the monitoring and implementation of GSP+ commitments should be improved, e.g. through more transparency.

Subject matter: The GSP comprises three schemes: (1) the standard GSP; (2) the GSP+; and (3) the EBA (Everything But Arms). Thus, the structure of the last ten years is maintained. The standard GSP scheme should be granted to all developing countries that have common development needs and are at a similar stage of economic development. With regard to the standard GSP scheme, it should be noted that trade, financing, and development needs may change. It should therefore be ensured that the scheme remains open to countries as their situation changes. The special incentive arrangement for sustainable development and good governance (GSP+) should grant the envisaged additional tariff preferences to developing countries that are economically vulnerable due to a lack of diversification and have ratified basic international conventions on human rights, environmental and climate protection, etc., and ensure their implementation. The third arrangement, the special arrangement for least developed countries (LDCs), should continue to grant duty-free access to the Union market for products originating in countries recognised and classified by the United Nations as least developed. Temporary withdrawal of the arrangements under the scheme can be justified by systematic and serious violations of the principles laid down in international conventions on fundamental human rights or similar.

Detering and Counteracting Coercive Actions by Third Countries

AmpelGelb.png
© ZEI

Proposal: On the 8th of October 2021, the Commission published a Proposal for a Regulation of the European Parliament and of the Council on the protection of the Union and its member states from economic coercion by third countries (press release).

Problem: The problem of the increasing and significant use of economic coercion by third countries that threatens to undermine the rights and interests of the Union and member states asks for a response of the European Union. As none of the existing legal instruments of the Union addresses the issue of economic coercion, there is a legislative gap in addressing the evolving issue of economic coercion.

Objective: The proposal aims to protect the interests of the Union and its member states by enabling the Union to respond to economic coercion. The Union should be able to adequately respond to and stop economic coercion by third countries. Therefore, the proposal aims to fill existing legal gaps.

Subject Matter: The effective protection of the Union and its Member States against certain measures taken by third countries should be achieved through deterrence or countermeasures. The Union response measures should be defined by taking into account the need to avoid or minimize collateral effects, administrative burdens and costs imposed in Union economic operators. To decide whether a third-country measure is coercive, the Commission should examine if the measures were taken on its own initiative or following information received from any source. The Regulation applies where a third country interferes in the legitimate sovereign choices of the Union or a member state by seeking to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a member state by applying or threatening to apply measures affecting trade or investment. The Commission should communicate any affirmative determination to the third country together with a request that the economic coercion cease and a request, where appropriate, that any injury be repaired. Countermeasures should only be imposed when other means such as negotiations, mediation or adjudication do not lead to the prompt and effective cessation of the economic coercion and to reparation of the injury it has caused. The response measures should be selected and designed on the basis of objective criteria. Different criteria should be taken into account: the effectiveness of the measures, their potential to provide relief, the aim of avoiding or minimizing negative economic and other effects on the Union, etc. After adopting the response measures, the Commission should continuously assess the situation in relation to the third-country measures of economic coercion, the effectiveness of the Union response measures and their effects. An effective communication and exchange of views and information between the Commission on the one hand and the European Parliament and the Council on the other is to be guaranteed.

Performance Framework 2021-2027

AmpelEU.png
© ZEI

Non-legislative Act: On the 8th of June 2021, the Commission published a Communication about the Performance Framework  of the EU budget between 2021 and 2027 (Press release).

Problem: The Multiannual Financial Framework is at the heart of the EU's economic coordination and is a key determinant of the EU's response to the COVID 19 pandemic. The EU budget is intended to help overcome the ongoing crisis and provide economic recovery. It also aims to strengthen the areas of sustainability, digitalization and resilience. To this end, enormous amounts will be made available from the EU budget over the next few years. Together with the NextGenerationEU-Program, the budget amounts to more than 1.8 trillion EUR. These funds must now be used in a targeted and efficient manner.

Objectiv: The performance framework of the EU budget is designed to ensure effective budget execution. The framework includes all the necessary tools and procedures to set the objectives of the various EU programs and to monitor and measure them. In general, it aims to demonstrate the value of the EU budget and improve transparency and accountability. Through high-quality performance information, it is intended to show what is being achieved with the EU budget and where there is a need for improvement.

Subject Matter: The first step is to identify challenges that can best be addressed at the EU level. This is followed by the establishment of clear and transparent targets to be achieved with the help of the measures from the respective spending programs. A system of performance indicators has been created to measure progress toward the goals, which must be monitored. The total number of indicators for the period 2021-2027 is 700 in total, which is a decrease from the previous period. Data must be collected on the indicators on a regular basis, and the source of information is explained transparently by the Commission. In all programs, the indicators have been included in the respective legal texts. Particularly important in the monitoring process is the Commission's annual management and performance review, which reports on the performance of the EU budget.

Excise Duties Package

AmpelRot2.png
© ZEI

Legislative, incl. impact assessment, Article 113 TFEU, Q3 2021.

AmpelRot2.png
© ZEI

Legislative, incl. impact assessment, Article 113 TFEU, Q4 2021.

European Commission Work Programme 2020

Economic Governance

AmpelEU.png
© ZEI

Non-legislative Act: On the 27th of May 2020 the Commission published a Communication on repairing and preparing for the Next Generation (press release).

Problem: The COVID-19-pandemic poses enormous challenges for Europe and the world, testing both our health and social systems, as well as our societies, economies, and ways of living together. The impact and potential for recovery diverge widely across member states. A common European response to this crisis is needed to prevent an unbalanced recovery and increasing inequalities.

Objective: To repair the damage caused by the crisis and to open up new perspectives for the next generation, a new building instrument called "Next Generation EU" will be introduced. The massive investments under "Next Generation EU" are intended to create a more sustainable, resilient and fairer Europe for the next generation and to use the rebuilding process to significantly accelerate the double green and digital turnaround.

Subject Matter: The impact of the crisis and the potential for recovery depend, among other things, on the population and economic structure of each country. This could increase divergences and inequalities among member states and, if left to individual countries, reconstruction would be incomplete, uneven, and inequitable. To ensure cohesion, convergence and solidarity in crisis management, the "Next Generation EU" program is to draw on the EU budget. The money for this will be provided by temporarily raising the own resources ceiling to 2 per cent of EU GNI. In addition, the Commission will propose a number of new own resources. The money will be invested in three pillars: support to member states for investment and for reforms to address the crisis (1), kick-starting the EU economy by stimulating private investment (2), and learning lessons from the crisis (3). The first pillar includes a new Recovery and Resilience Facility and the new REACT-EU initiative to increase cohesion support to Member States. Under the second pillar, the creation of a new solvency support instrument and the upgrading of InvestEU are foreseen. In order to draw lessons from the crisis, an independent EU4Health program is to be established. In addition, global partners are also to be better supported. The EU Green Deal must be taken into account and prioritized in all investments. In this way, the European Green Deal can become a driver for job creation. With a view to the digital turnaround, the single market is to be deepened and given a stronger digital character, among other things. The Commission also wants to ensure a fair and inclusive recovery, for example through a European Child Guarantee and support for youth employment. The resilience of the Union and the Single Market is to be strengthened by, among other things, ensuring open strategic autonomy and efficient value chains. In the area of public health, stronger coordination is to be ensured, as well as improved crisis management. In addition, the EU maintains that post-crisis reconstruction must be based on the foundation of fundamental rights and full respect for the rule of law. The challenges also require international cooperation and joint solutions.

AmpelEU.png
© ZEI

Legislative procedure completed: On 14 December 2020, the Regulation establishing a European Union Instrument for Reconstruction to support recovery from the COVID-19 crisis entered into force.

Problem: The measures taken by member states in response to the COVID-19 pandemic have led to significant disruptions in economic viability. There has been a significant deterioration in the financial situation of many businesses in relation to the measures taken. There is a risk that divergences between national economies will increase.

Objective: In order to prevent a deterioration of the economic and employment situation and social cohesion and to promote a sustainable and robust recovery of economic activity, a coordinated programme of economic and social support will be established.

Subject matter: The support of the instrument created by the Regulation shall focus on measures aimed at restoring labour markets, social protection and health systems and supporting the transition to a green and digital economy. In order to ensure a stable and sustainable recovery across the Union and to facilitate the implementation of economic support, the existing mechanisms for expenditure under Union programmes shall be used in accordance with the Multiannual Financial Framework. Support under these programmes is partly in the form of non-repayable grants. The Instrument covers a budget of about 800 billion euro in 2021 prices and shall help repair the immediate economic and social damage caused by the coronavirus pandemic and make the EU fit for the future. 421.1 billion euro will be available mainly for grants (under the Reconstruction and Resilience Facility and other programmes of the EU budget). The remainder, about 385.8 billion euro, will be used to provide loans from the EU to individual member states on favourable conditions, which will be repaid by those member states. In addition, NextGenerationEU will reinforce several existing EU programmes and policies, as follows: the Cohesion policy, the Just Transition fund, the European Agricultural Fund for rural Development, InvestEU, rescEU and Horizon Europe with EUR 83.1 billion in total. The Commission will submit a report to the Council by October 31, 2022 on the progress made in implementing the instrument and the use of the funds.

AmpelEU.png
© ZEI

Non-legislative act: On the 19th of October 2021 the Commission put forward a Communication on the EU economy after COVID-19 and the implications for economic governance (press release).

Problem: Even before the COVID-19-crisis, the EU economy faced several long-term structural challenges such as climate change and demographic change. The COVID-19-crisis has made these challenges more evident and urgent.

Objective: This Communication assesses the impact of the changed circumstances following the COVID-19-crisis on economic governance and aims to reopen the public debate on the review of the framework.

Subject matter: Looking at the impact of the crisis, we find that while the COVID-19-pandemic led to a severe economic downturn, it was followed by an unexpectedly strong, albeit uneven, recovery. With regard to the labour market, strong effects were cushioned by policy support measures. Nevertheless, certain regions and sectors across the EU continue to experience significant employment gaps compared to the pre-crisis period, while elsewhere labour shortages are again being faced. Appropriate labour market policies are urgently needed to facilitate adjustments. Likewise, the pandemic has further exacerbated already existing economic, social and territorial disparities, making the achievement of the sustainability goals an even greater challenge. As a result of the fiscal measures required, fiscal disparities between member states have increased. Against this backdrop, the measures in the Recovery and Resilience Plans to raise growth potential should help improve the sustainability of public finances. Furthermore, there is an urgent need for investment to, a.o. things, strengthen the EU's economic and social resilience and to further expand and strengthen areas such as digitalisation, healthcare, etc.. With regard to EU budgetary rules, it can be noted that it will be crucial to reduce heterogeneous debt ratios in a sustainable and growth-friendly manner. The stabilising function of a coordinated discretionary fiscal policy has proved to be an important instrument in the crisis. This has helped to address immediate challenges of a significant economic shock, strengthen confidence and reduce the risk of negative long-term consequences. It remains essential that the overarching goals of simplification, increased national ownership and better enforcement are achieved. In the macroeconomic imbalance procedure, one of the key issues is the return to a convergence path. This improves the ability of member states to respond to shocks. The implementation of the Build-up and Resilience Facility can be strengthened through a transparent evaluation and monitoring framework. With a view to relaunching the public debate on the review of the framework, the eleven key questions included in the updated online survey are adapted. The Commission invites the other institutions and all stakeholders to participate in the public debate on the review of economic governance.

Social Europe

AmpelEU.png
© ZEI

Non-legislative Act: On the 14th of January 2020 the Commission published a Communication on a strong social Europe for just transitions (press release).

Problem: Social justice represents the foundation of the European social market economy and the very essence of the European Union. While the number of unemployed within the EU has continued to fall in recent years, inequalities persist and not everyone benefits from these positive developments. This inequality acts as a brake on growth and threatens social cohesion within the EU.

Objective: In order to guarantee a fair, green and prosperous future for future generations and to ensure intergenerational justice, a new social strategy must be developed that guarantees that the transformation in terms of climate neutrality, digitalization and demographic change is socially acceptable and fair. The communication aims to list the initiatives at EU level that support the implementation of the European Pillar of Social Rights.

Subject matter: The rights and principles enshrined in the Pillar include guaranteeing equal opportunities and jobs for all (1), ensuring fair working conditions (2), social protection and inclusion (3), promoting European values in the world (4) and joint elaboration (5). With a view to equal opportunities and job creation for all, the EU aims to empower people through quality education, training and skills. In order to identify which competences are important, it is important to work with employers, employees, teachers and trainers. In this context, the Commission also wants to further develop the objectives of the European Education Area and create a new framework for cooperation in the field of education and training with the member states. With the help of the Digital Europe program, the development of advanced digital skills is to be promoted. To do more to combat youth unemployment, the Commission will present its proposals in the second quarter of 2020 to strengthen the Youth Guarantee, which will provide support for young people to develop their skills and gain work experience. Furthermore, it aims to support job mobility and economic transition in the spirit of green change. New jobs are to be created through a specific strategy for small and medium-sized enterprises. In the area of equal opportunities, it is also important to promote gender equality, and to strengthen the commitment to people with disabilities. With regard to the goal of fair working conditions, fair minimum wages for employees are to be guaranteed. In this context, social dialogue and collective bargaining are to be promoted. To ensure a high level of social protection, a European unemployment insurance system is to be proposed, among other things. Poverty and exclusion are also to be limited in this course. The promotion of European values in the world is to be guaranteed by Europe's political and economic influence. Finally, it is crucial to initiate a comprehensive discussion with all EU countries and regions, as well as with all partners. The goal is to jointly elaborate an action plan that will incorporate all contributions and will be recommended for approval at the highest political level.

AmpelEU.png
© ZEI

Legislative procedure completed: The Commission, the European Parliament and the EU member states reached political agreement on the following proposal on 7th of June 2022 (press release).
According to the agreement, clear criteria for setting minimum wages, such as purchasing power and cost of living, wage level, wage distribution, wage growth rate and national productivity, will apply. Furthermore, minimum wages are to be updated at least every two years, with the effective participation of the social partners. In addition, the minimum wage regulations also stipulate that EU countries must define action plans to increase collective bargaining coverage if its rate is below 80 per cent.

Proposal: On the 28th of October 2020 the Commission put forward a proposal for a Directive on adequate minimum wages in the European Union (press release).

Problem: In recent years, the gap between low wages and other wages has widened in many member states. Structural trends such as globalisation and digitalisation are increasingly polarising labour markets, which in turn has led to a growing share of low-wage occupations. This has allowed poverty to rise despite employment and wage equality. However, decent wages are essential to ensure good working and living conditions within the Union. To guarantee greater fairness in the EU labour market, convergence among member states in this area is crucial.

Objective: The directive is intended to ensure that employees in the Union are protected by adequate minimum wages. Thus, they are to be enabled to enjoy a decent standard of living in the place where they work. These objectives are to be achieved taking into account the specifics of national systems.

Subject matter: To achieve these goals, collective bargaining on wages is to be promoted in all member states. In countries where a statutory minimum wage has already been introduced, it is to be ensured that the member states create the conditions for statutory minimum wages to be set at an appropriate level. At the same time, socio-economic conditions as well as regional and sectoral differences are to be taken into account. In addition, the directive aims to further improve the adequacy of statutory minimum wages by minimizing the application of variations in statutory minimum wages for certain groups of workers or the application of deductions from pay. It needs to be guaranteed that applicable collective agreements or national legislation are respected so that workers benefit from effective access to minimum wage protection and businesses are protected from unfair competition. Against a backdrop of declining collective bargaining coverage, it is essential that member states promote collective bargaining to improve workers' access to collectively guaranteed minimum wage protection. Member states that do not achieve this level of coverage should, on the basis of consultation and/or agreement with the social partners, establish or develop a framework of support mechanisms and institutional arrangements, thus creating the conditions for collective bargaining. An effective enforcement system, including on-site checks and inspections, is needed to ensure that national statutory minimum wage frameworks are working well.

AmpelEU.png
© ZEI

Non-legislative Act: On the 30th of October 2020 the Council published a Recommendation on a Bridge to Jobs – Reinforcing the Youth Guarantee and replacing the Council Recommendation of 22 April 2013 on establishing a Youth Guarantee (press release).

Problem: The COVID-19-pandemic is expected to increase again both the youth unemployment rate and the rate of young people not in employment, education or training ("NEETs"). As a result, the Union's economy could shrink significantly in 2020. Both young people, who were already facing a precarious situation on the labour market before the start of the pandemic, and those entering the workforce are likely to find it more difficult to get a job in the coming period. Against this background, the Youth Guarantee urgently needs to be strengthened.

Objective: A strengthened youth guarantee will help create employment opportunities for young people, promote young entrepreneurship and take advantage of the opportunities arising from the digital and green transformation. The aim is to ensure that all young people are offered good quality training, apprenticeships or internships within four months of completing their formal education or becoming unemployed.

Subject matter: The Youth Guarantee Program shall be guided by the following guidelines, which are assigned to four phases: Mapping (1), Outreach (2), Preparation (3) and Offer (4). In the mapping phase, the target group, available services, and skill needs are to be identified. It also aims to strengthen the capacity of early warning and tracking systems to identify young people at risk of becoming NEET, while contributing to the prevention of early school and training dropouts. The second phase of outreach provides for awareness raising and targeted communication through modern and youth-friendly information channels and programs, among others. It also aims to establish better targeting of disadvantaged groups. In third place, the preparation phase takes place. Here, profiling tools are to be used to create individual action plans. The preparation phase is to be intensified and individualized through individual counseling, support and supervision. The preparation phase also includes the improvement of digital competencies through preparatory training as well as the assessment, improvement and validation of other important competencies. Lastly, the offer phase envisages the creation of effective employment incentives and effective incentives for business start-ups. In this regard, the offer is to be aligned with existing standards in terms of quality and equity. To extend post-placement support, the implementation of feedback is to be ensured. This will prevent young people from falling back into NEET status.

AmpelRot2.png
© ZEI

Aufklapp-Text

Deepening the Capital Markets Union

AmpelEU.png
© ZEI

Non-legislative Act: On the 24th of September 2020 the Commission put forward a Communication on a new action plan for the Capital Markets Union for people and business (press release).

Problem: The Capital Markets Union (CMU) is necessary for the achievement of all key EU economic policy objectives. Against the backdrop of the crisis triggered by the COVID-19 pandemic, the Capital Markets Union has become even more important. It is crucial for supporting a resilient and inclusive economic recovery, as well as the green and digital transformation.

Objective: The new Action Plan and the measures it contains are intended to lead to further adjustments in the EU financial system and to help address the political and economic challenges ahead. The three main objectives include (1) supporting a green digital, inclusive and resilient economic recovery through better access to finance for European businesses; (2) making the EU an even safer place for people to save and invest for the long term; and (3) integrating national capital markets into a true single market.

Subject matter: In the area of the ecological turnaround and digital transformation, the Capital Markets Union should be able to mobilise investments and steer them in the right direction. The CMU is relevant for shaping a more inclusive economy, as it can increase the inclusion and resilience of the economy and society. In view of the EU's global competitiveness and open strategic autonomy, the CMU can help smaller capital markets to catch up with larger, more developed capital markets and thus help local companies to become global players. The Capital Markets Union is a prerequisite for a stronger international role for the euro and for Europe's open strategic autonomy. To this end, the new action plan includes 16 measures. Regarding the first objective (1), it proposes, among other things, the establishment of an EU-wide platform to provide investors with seamless access to financial and sustainability-related company information, as well as the simplification of listing rules for public markets to promote access to finance for small and innovative companies. The second main objective (2) is to be secured through a feasibility study carried out by the Commission on the development of a European financial education framework. In addition, "pension dashboards" are to be developed by the Commission in order to facilitate monitoring about the adequacy of pension provision in the member states. With regard to the third objective (3) of integrating national capital markets into a genuine single market, one of the aims is to reduce the burden of tax difficulties on cross-border investments by suggesting a common and standardised EU-wide system of withholding tax relief at source. Other measures in this area include, for example, the proposal to establish an effective and comprehensive consolidated post-trade data ticker for equity and quasi-equity instruments, and the strengthening of the framework for the protection and facilitation of investments in the EU. A general prerequisite for achieving the objectives set is the support of the European Parliament and the member states at the highest level, as well as of experts in the authorities.

AmpelGelb.png
© ZEI

Aufklapp-Text

AmpelGelb.png
© ZEI

Aufklapp-Text

Completing the Banking Union

AmpelEU.png
© ZEI

Non-legislative act: On the 7th of May, the Commission put forward a Communication on an Action Plan for a comprehensive Union policy on preventing money laundering and terrorist financing (press release).

Problem: The fight against money laundering and terrorist financing is being tackled by the Commission, both in the EU and globally. In the context of the COVID-19-pandemic, there has been an increase in criminal activity, demonstrating once again that the EU's determined fight against this type of crime is of significant relevance.

Objective: The Commission aims to implement a comprehensive anti-money laundering and counter-terrorist financing policy that addresses the specific threats, risks, and vulnerabilities currently facing the EU. This should be designed in such a way that it can be developed efficiently in the light of ongoing innovation. This should also further promote the integrity of the EU financial system, thereby enabling the completion of the Banking Union and the Economic and Monetary Union. The objective of the Action Plan is based on six pillars: (1) ensuring the effective implementation of the existing EU anti-money laundering and counter-terrorist financing framework; (2) establishing a single EU anti-money laundering and counter-terrorist financing framework; (3) establishing EU-level anti-money laundering and counter-terrorist financing supervision; (4) establishing a support and cooperation mechanism for the FIU; (5) enforcement of criminal law provisions and exchange of information at Union level; and (6) strengthening the international dimension of the EU anti-money laundering and counter-terrorist financing framework.

Subject matter: With regard to the first pillar, it is important to ensure the effective implementation and application of the Money Laundering Directive. In addition, the capacities of the member states for the prevention of money laundering and the fight against terrorist financing must be kept in view through monitoring. The competences of the European Banking Authority (EBA) are to be further expanded, for example by setting up an EU-wide database to record risks and supervisory measures. With regard to the second pillar, the Commission will present legislative proposals for a uniform set of rules in the area of combating money laundering and terrorist financing in the first quarter of 2021 on the basis of a thorough impact assessment. The third pillar will be realised through Commission proposals in the first quarter of 2021 to establish an EU supervisory authority responsible for combating money laundering and terrorist financing. These are to be based on a thorough impact assessment of the options regarding the functions, scope, and structure of such supervision. The establishment of a support and cooperation mechanism for the FIU (4th pillar) is to be realised in the first quarter of 2021 through Commission proposals. In the fourth quarter of 2020, the Commission will also take over the management of the EU system for the exchange of information between FIUs, FIU.net. With regard to pillar five, the Commission envisages issuing guidelines on public-private partnerships (PPPs) by the first quarter of 2021. Finally, Pillar Six aims to strengthen the international dimension of the anti-money laundering and counter-terrorist financing framework. A new methodology for the assessment of high-risk third countries will be published together with this Action Plan.

AmpelGelb.png
© ZEI

Proposal: On 27th of October the European Commission published a Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor (press release).

Problem: Regulation (EU) No 575/2013 enables institutions to calculate their capital requirements either by using standardized approaches, or by using internal model approaches. Based on an analysis carried out in the wake of the financial crisis of 2008-2009, which revealed that internal models tend to underestimate the risk that institutions are exposed to, the Basel Committee decided to introduce an aggregate output floor.

Objective: This proposal aims for the implementation of the outstanding elements of the Basel III reform, which is necessary to provide institutions with the essential regulatory certainty, completing a decade-long reform of the prudential framework. The amendment of Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor aims at limiting the unwarranted variability in the regulatory capital requirements produced by internal models and the excessive reduction in capital that an institution using internal models can derive relative to an institution using the revised standardized approaches.

Subject matter: The proposal provides a variety of amendments in regard of different frameworks. An output floor (OF) to the risk-based capital requirements is introduced through amendments to the CRR and the CRD. It aims to reduce the excessive variability of institutions’ own funds requirements calculated using internal models, and thereby enhance the comparability of institutions’ capital ratios. In terms of the credit risk framework, the current standardized approach for credit risk (SA-CR), used by the majority of institutions across the EU to calculate the own funds requirements for their credit risk exposures, has been found to be insufficiently risk-sensitive in a number or areas. The SA-CR is to be revised to increase the risk sensitivity of this approach in relation to several key aspects. Additionally, the scope of internal rating-based approaches is to be reduced. Concerning credit risk mitigation techniques, the proposal amends Articles 224 to 230 to implement the Basel III rules and methods for taking into account collateral and guarantees under both the SA-CR and the foundation internal ratings-based (F-IRB) approach. Furthermore, a number of amendments are made to the CRR concerning the credit valuation adjustment (CVA) risk framework. For example, Article 382a is inserted to set out the new approaches’ institutions should use to calculate their own funs requirements for CVA risk, as well as the conditions for using a combination of those approaches. Further amendments include the introduction of a mandate for European Banking Authority (EBA) to report, in close cooperation with European Securities and Market Authority (ESMA), to the Commission on the appropriateness of implementing in the Union the minimum haircut floors framework, applicable to Securities financing transitions (SFTs). On the basis of this report, the Commission will, if appropriate, submit a legislative proposal to the European Parliament and to the Council. The proposal introduces a new standardized approach to replace all existing approaches for operational risk. The new standardized approach combines an indicator that relies on the size of the business of an institution with an indicator that takes into account the loss history of that institution. Since institutions play an instrumental role in the ambition of the Union to promote a long-term transition to sustainable development in general, it is important to promote an adequate understanding and management of the sustainability risks (the environmental, social and governance risks or ESG risks). Another key aspect of the reforms is the enhanced transparency and proportionality in disclosure requirements.

Effective Taxation

AmpelEU.png
© ZEI

Non-legislative Act: On the 18th of May 2021 the Commission put forward a Communication on Business Taxation for the 21st Century (press release).

Problem: The context of EU corporate taxation policy has changed fundamentally in recent years. In addition to the COVID-19-pandemic, trends such as climate change, globalisation and digitalisation are having a significant impact on the existing tax bases. It is therefore necessary to reflect the design of efficient, sustainable and fair tax frameworks for the future, taking into account the overall tax mix. The measures taken so far to combat tax avoidance and tax evasion have been successful in solving individual issues, but on the other hand the complexity of the systems has increased.

Objective: Against this background, the EU aims to create a stable, efficient and equitable tax framework that meets public finance needs while supporting recovery and environmental and digital transformation by providing favourable conditions for equitable and sustainable growth.

Subject matter: The EU's tax policy agenda includes promoting fair and sustainable growth by supporting overarching EU strategies such as the European Green Deal and the Commission's Digital Agenda. It also aims to ensure effective taxation. This is crucial for the financing of high-quality public services and a prerequisite for the fair distribution of the tax burden among taxpayers. It also helps to create a level playing field for businesses and improves the EU's competitiveness. Company taxation is designed to ensure that the tax burden is shared fairly between companies and that taxable revenues are allocated equitably between different tax jurisdictions. To ensure fair and effective taxation, public transparency of taxes paid by economic operators shall be guaranteed, inter alia, through a legislative proposal to combat the abusive use of letterbox companies for tax purposes. In addition, productive investment and entrepreneurship are to be promoted, e.g. through the adoption of a recommendation on the tax treatment of losses. Progress at the EU level in this area is to be complemented by supporting national measures in areas. Also, on the agenda is the reform of the international framework for corporate taxation. Ongoing discussions on behalf of the G20 aim to reach a global consensus on reforming the international framework for corporate taxation. These discussions focus on two major areas of work: (1) partial reallocation of taxing rights and (2) effective minimum taxation of multinational companies' profits. With an agreement reached in a multilateral convention, participating countries will be obliged to apply Pillar 1. The second area of work will mainly be implemented through an EU Directive, which will replicate the OECD Model Rules with the necessary adaptations. While an agreement at the global level is an administrative burden due to the different economic profiles, a strongly integrated Union with its internal market can go further than a global agreement. The new framework for corporate taxation in Europe should, among other things, create a common set of rules for groups of companies and remove obstacles to cross-border investment, cut red tape and reduce compliance costs in the Single Market, combat tax avoidance and support job, growth and investment creation, make the allocation of taxing rights among Member States simpler and fairer, and guarantee Member States reliable and predictable corporate tax revenues.

AmpelEU.png
© ZEI

Non-legislative Act: On the 15th of July 2020 the Commission put forward a Communication on an action plan for fair and simple taxation supporting the recovery strategy (press release).

Problem: The EU, its institutions and member states, as well as citizens and businesses, face enormous implications of the COVID-19-crisis in times of fundamental change. Nevertheless, in order to be able to achieve the Union's objectives in the transition to a greener and more digitalised world, compatible with the principles of our social market economy, fair, efficient and sustainable taxation is key. This will continue to grow in importance as the EU and the global community seek to recover from the consequences of the COVID-19-crisis.

Objective: The Commission aims to fight tax fraud and other unfair practices even more vigorously to ensure that the recovery is marked by solidarity and fairness. This will enable member states to raise the tax revenues they need to meet the major challenges of the current crisis. This goal is to be achieved with the help of the 25-measure action plan.

Subject matter: The Action Plan is a key element of a comprehensive and ambitious EU agenda for the coming years. It includes measures to reduce tax obstacles for companies in the Internal Market to increase business competitiveness and economic growth, as well as initiatives that will help member states enforce existing tax rules and improve tax honesty. Despite a wide range of tools to detect and combat abusive behaviour, tax fraud and tax evasion remain a threat to sound public finances. Particularly with regard to the digital economy, it is clear that further action is needed at EU level to strengthen the fight against tax evasion and to help tax administrations keep pace with an economy in constant change. The EU has also made progress in simplifying tax systems, but. Tax compliance costs remain high in the EU. The new action plan puts the taxpayer at the centre. The steps of registration, reporting, payment and verification need to be developed and improved over time. Taxation is based on voluntary compliance and should be based on a cooperative and harmonious relationship between taxpayers and tax administrations. Disputes should be prevented, for example, through the Directive on Procedures for the Settlement of Tax Disputes. Measures and regulations are to be simplified in favour of taxpayers. Measures such as a charter of rights for taxpayers, a conference on data analysis and digital solutions, and greener taxation of passenger transport, to name but a few will contribute to this.

AmpelEU.png
© ZEI

Non-legislative Act: On the 15th of July 2020 the Commission put forward a Communication on Tax Good Governance in the EU and beyond (press release).

Problem: Fair taxation is essential to achieve some of the EU's core objectives, such as a just society and a level playing field. Addressing and recovering from the socio-economic consequences of the COVID-19-pandemic also requires a fair taxation agenda. The foundation for fair taxation is good governance in the tax sphere. While the Commission has championed an ambitious agenda to improve good governance in the tax area through numerous initiatives, new challenges are constantly emerging and the EU's instruments to regulate fair tax competition must keep pace with them.

Objective: The EU's tax good governance agenda needs to be further developed to avoid revenue losses for national and EU budgets and to ensure that EU citizens and businesses can continue to rely on fair and effective taxation.

Subject matter: The Communication is part of a tax package for fair and simple taxation to support the EU's economic recovery. The first task under this Communication is to reform the Code of Conduct for business taxation. Despite many of the Code's achievements, it needs to be revised and modernised in the light of significant changes in the nature and form of tax competition. In addition to carefully selecting the timing of the reform for maximum impact, the scope and criteria of the Code need to be reviewed. This includes updating the Code to ensure that all cases of very low taxation are examined, both within and outside the EU. The reform should also consider how to apply the Code more transparently and effectively. As a further measure to improve tax good governance in the EU and beyond, the EU list of non-cooperative countries and territories should be reviewed. This is an effective tool to promote good governance in the tax area at international level and has contributed to the global fight against tax avoidance and evasion. The review of the list includes reviewing the geographical scope of the EU list, reviewing the criteria for inclusion in the EU list, increasing transparency and accountability, as well as strengthening good governance in the tax area through agreements with third countries and expanding dialogue with third countries on environmental taxation. Inclusion of a country or territory on the EU list should be considered as a last resort for countries that refuse to adequately acknowledge or address the EU's concerns about their tax systems. Countermeasures against included countries and territories include promoting the principles of good governance in the tax area through EU funds, as well as strengthening defensive measures against non-cooperative countries and territories. In addition, the EU aims to support partner countries in good governance in the tax area, for example by strengthening partnerships and international cooperation, engaging developing countries in the international tax framework and broadening the policy agenda.

AmpelRot2.png
© ZEI

Legislative, Articles 113 and 115 TFEU, Q3 2020.

Customs Union Package

AmpelEU.png
© ZEI

Non-legislative Act: On the 28th of September 2020 the Commission published a Communication on taking the Customs Union to the Next Level (press release).

Problem: Within the last few years, it has become apparent that the customs authorities of the Member States are increasingly experiencing difficulties in managing their tasks within the Customs Union. Despite a modernization of EU customs legislation in 2016, problems such as undervaluation of goods, imbalance between member states in customs controls, etc. persist. In addition, the UK's exit from the Customs Union has significantly increased the workload of EU customs authorities. Also, in the light of the COVID-19-pandemic, increasing the efficiency of the Customs Union and the Member States' customs authorities became even more urgent.

Objective: The aim of the Communication is to ensure uniform compliance and a balance between controls and facilitation of international trade and global supply chains. It also aims to ensure better availability and use of data and data analytics for customs purposes and to move towards smart, risk-based monitoring of supply chains.

Subject Matter: Measures include risk management, e-commerce management, compliance promotion, and customs authorities acting as one. The risk management category is intended to enable more effective controls. Starting in 2020, work will be done to develop tools within the EU electronic system for customs surveillance. Regarding the new Customs Import Control electronic system (ICS2), the proposed ICS2 analytical tool is to be endorsed by Member States and fully implemented by the end of 2024. Furthermore, a new risk management strategy is to be prepared in 2021 in the form of a Commission Communication. To manage e-commerce, VAT data is to be used for customs purposes and direct customs access to Eurofisc, the EU's hub for tax information, will be established. Also, to be reviewed are the roles and obligations of e-commerce players, particularly platforms. In the area of strengthening and facilitating compliance, the ongoing Authorized Economic Operators (AEO) program is to be expanded. The program's guidelines are also to be updated. In addition, a legislative proposal for a single window environment for customs is to be presented, among other things, and an interim evaluation of the Union Customs Code is to be carried out. Finally, in the area of unified action by customs authorities, cooperation between customs, security, and border management authorities is to be expanded and synergies between the respective information systems are to be strengthened. In addition, Member States should be better equipped with modern and reliable customs equipment, and cooperation mechanisms under the Customs program should be introduced and deepened. Member states are crucial in the implementation of the Action Plan, as they are responsible for providing the necessary resources at the national level.

AmpelGelb.png
© ZEI

Proposal: On the 28th of October 2020 the Commission put forward a Proposal for a Regulation establishing the European Union Single Window Environment for Customs and amending Regulation (EU) No 952/2013 (press release).

Problem: International trade is subject to both customs and Union non-customs legislation. The Union's non-customs formalities authorities and customs authorities operate independently of each other, resulting in inefficient clearance procedures that are prone to error and fraud, as well as complex and burdensome reporting obligations for traders.

Objective: In order to improve the patchy interoperability between customs authorities and competent partner authorities in the management of goods clearance procedures and to coordinate actions in this area, the Commission has developed, together with the Member States, a Single Window Initiative for Goods Clearance. This aims to remove existing digital barriers, reduce administrative burdens, improve the quality of interactions between national administrations and simplify and digitise reporting procedures for international trade in goods.

Subject matter: Single Window allows customs authorities to automatically verify compliance with a certain number of non-customs formalities by exchanging information between the customs systems of the participating Member States and the respective non-customs systems of the EU. The establishment of the European Union single window environment for customs includes the European Union single window system for the exchange of certificates in the customs area, the national single window environments for customs and the non-customs systems of the Union. The establishment of the European Union Single Window Electronic System for the Exchange of Certificates in Customs Matters (EU CSW-CERTEX) shall link national customs single window environments with non-customs Union systems. The establishment of national single window environments for customs will enable the exchange of information and cooperation between customs authorities, partner competent authorities and economic operators by electronic means. For non-customs Union formalities, EU CSW-CERTEX shall enable the exchange of information between national customs single window environments and the relevant non-customs Union systems. The designation of national coordinators for the EU Single Window environment for customs shall promote cooperation between customs authorities and national competent partner authorities at national level. The national coordinator shall also act as the national contact point for the Commission for all matters relating to the implementation of this Regulation.

ZEI Related Publications

Bailouts in the euro crisis: Implications for the aftermath of the COVID-19 pandemic

Christoph Bierbrauer

ZEI Discussion Paper C 262 / 2020

Der Beitrag fasst die nationalen Entwicklungen zusammen, die dazu führten, dass Griechenland, Irland und Portugal zunächst finanzielle Unterstützung der EU nachsuchten und damit schließlich die Eurokrise auslösten. Schwachstellen und Lücken in der ursprünglichen Architektur der Eurozone erleichterten den Aufbau beträchtlicher Ungleichgewichte innerhalb der Währungsunion. Die Große Rezession löste die Eurokrise zwar aus, verursachte sie aber nicht. Bis heute hat sich die Währungsunion nicht vollständig von der Eurokrise erholt, und die wirtschaftlichen Auswirkungen der COVID-19-Pandemie könnten zu einem wiederaufflammen der Krise führen, wenn die Mitgliedstaaten die Reform der Architektur der Eurozone nicht rasch abschließen, um sie krisensicherer zu machen.

National Representation in Supranational Institutions: The Case of the European Central Bank

Volker Nitsch / Harald Badinger

In: Christian Koenig / Ludger Kühnhardt (Hrsg.): Governance and Regulation in the European Union. A Reader (Schriftenreihe des Zentrum für Europäische Integrationsforschung, Bd. 77), Nomos: Baden-Baden 2017, S. 59-97, ISBN: 978-3-8487-4462-6

Der Reader "Governance and Regulation in the EU" spiegelt den Schwerpunkt des Zentrums für Europäische Integrationsforschung (ZEI) in Forschung und Lehre. „Regieren und Regulieren in der EU“ vereint die beiden Aspekte, deren Zusammenspiel die EU in ihren Auswirkungen auf das Leben der Bürger und auf ihre Rolle weltweit maßgeblich prägt. Regieren legitimiert Regulieren und Regulieren ist notwendig, um das Funktionieren des EU-Binnenmarktes sicherzustellen. Das Werk eröffnet interdisziplinäre Perspektiven auf die Union und bietet tiefere Einblicke in den zunehmend komplexen Prozess der europäischen Integration. Zu den Autoren gehören renommierte Wissenschaftler und Sachgebietsexperten, die im „Master of European Studies – Governance and Regulation“, dem Postgraduierten-Studiengang des ZEI, lehren.

Priority 5: A Deeper and Fairer Economic and Monetary Union

Christoph Bierbrauer

In: Stüwe, Robert / Panayotopoulos, Thomas (Hrsg.): The Juncker Commission. Politicizing EU Policies (Schriftenreihe des Zentrum für Europäische Integrationsforschung, Bd. 79), Nomos: Baden-Baden 2020, S. 131-143. ISBN 978-3-8487-5597-4.

Das primäre Erkenntnisinteresse des Buches besteht darin, Strategien der Europäischen Kommission beim Umgang mit dem Phänomen der Politisierung in der EU‐Gesetzgebung zu erforschen. In einer Fallstudie zur Amtszeit von Präsident Jean‐Claude Juncker analysieren die Autoren des Sammelbandes, wie die EU‐Kommission zwischen 2014 und 2019 bestimmte politische Schwerpunkte gesetzt hat, um ihre Agenda voranzutreiben. Gegenstand der Analyse sind die zehn politischen Prioritäten der Juncker‐Kommission aus den jährlichen Arbeitsprogrammen seit 2014. Ausgangspunkt der Studie ist das von Juncker proklamierte Selbstverständnis als „politischer Kommission“. Die Bewertung der „Politisierung“ integrationspolitischer Vorhaben fällt dabei ambivalent aus: Auf der einen Seite hat die Juncker Kommission politisierte Themen gezielt aufgegriffen und als Gelegenheiten zur politischen Führung sowie zur Schärfung des eigenen institutionellen Profils genutzt. Auf der anderen Seite sah sich die EU‐Kommission zuweilen gezwungen, bei Krisen und Kontroversen Schadensbegrenzung zu betreiben.

What is to be Done to Reactivate the Economy on Both Sides of the Med?

Dmytro Nikitin

In: Robert Stüwe / Sally Brammer (Hrsg.): ZEI-MEDAC Future of Europe Observer. Post Pandemic Prospects in the Euro-Mediterranean Region, Jg. 8 Nr. 3 November 2020, S. 5-6.

Welche politischen Auswirkungen hat die Covid-19-Pandemie in der Europa-Mittelmeer-Region? Diese Frage beleuchten Master Fellows "Class of 2020" und Wissenschaftler der Mediterranean Academy of Diplomatic Studies (MEDAC) aus Malta und des Zentrums für Europäische Integrationsforschung (ZEI) in der jüngsten Gemeinschaftsausgabe des ZEI-MEDAC Future of Europe Observer. Das aktuelle Heft beleuchtet sowohl wirtschafts- als auch sicherheitspolitische Herausforderungen in der Region und analysiert verschiedene Facetten der Rechtsstaatsproblematik am Nord- und Südufer des Mittelmeeres mit Hilfe von Fallstudien. Die Publikation ist das jüngste Ergebnis der langjährigen Zusammenarbeit zwischen beiden Institutionen.

Archive

Further publications can be found in the ZEI archive

Wird geladen