Priority 3 - An Economy that Works for People

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A Deeper and Fairer Economic and Monetary Union

Internal Market

Jobs, Growth and Investment

European Semester

Boosting Jobs

Subheadline

Biotech and Biomanufacturing

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Non-legislative Act: On the 20th of March 2024, the European Commission published a Communication on Building the future with nature: Boosting Biotechnology and Biomanufacturing in the EU (press release).

Problem: The principal issue lies in the escalating societal and environmental challenges confronting the EU, such as climate mitigation and adaptation, sustainable use of natural resources, restoration of ecosystems, food security, and human health. Biotechnology and biomanufacturing hold substantial potential for addressing these concerns, enhancing the competitiveness and modernisation of the EU's economy, and bolstering its strategic autonomy and resilience. However, the EU's biotechnology sector faces hurdles, including regulatory complexities and a lack of sufficient financing opportunities, which impede its growth and ability to contribute effectively to the European Green Deal objectives and the European Health Union.

Objective: The Communication aims to navigate these challenges by proposing a suite of actions designed to stimulate the biotechnology and biomanufacturing sectors. It seeks to create a conducive environment for these sectors to flourish by simplifying regulatory pathways, enhancing access to finance, leveraging research and innovation, and fostering international cooperation. Moreover, it emphasises the need for a coordinated approach to biotechnology policies across regulatory, industrial, economic, and social dimensions. Correspondingly, the document outlines strategic actions to accelerate market access for biotech innovations, streamline regulations, and encourage private and public investment, thereby reinforcing the EU's competitiveness, sustainability, and resilience.

Subject Matter: A key aspect of the proposed measures involves simplifying the regulatory framework to facilitate quicker market access for biotechnological innovations. The Communication acknowledges the critical need for a supportive regulatory environment that can adapt to the rapid advancements in biotechnology. Moreover, it highlights the necessity of streamlining permitting and authorisation procedures, particularly for biorefineries and biotech health products, to reduce the time and complexity involved in bringing innovations to market. Furthermore, the Communication emphasises the importance of leveraging research and boosting innovation within the biotech sector. It suggests a more integrated approach to technology transfer, highlighting the role of technology centres in accelerating the commercialisation of biotech research. The Communication also outlines measures to stimulate market demand for bio-based products. It proposes assessing the feasibility of introducing bio-based content requirements for specific product categories and public procurement, which could potentially drive the demand and market uptake of bio-manufactured products. Additionally, it discusses the role of labelling and certification in providing consumers with transparent information regarding the bio-based content and sustainability of products. The Communication proposes actions to encourage private investment and highlights the role of the European Investment Bank and the Strategic Technologies for Europe Platform in supporting biotech innovations. It also acknowledges the potential of tax credits to incentivise investment in biotechnology research and development. Moreover, the document recognises the need for addressing skills gaps within the biotech sector. It suggests the formation of large-scale skills partnerships and the development of high-level skills and competences required by the biotech industry, facilitated by collaborations between industry, education, and training providers.

Social Dialogue

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Non-legislative Act: On the 20th of March 2024, the European Commission published a Communication on Labour and skills shortages in the EU: an action plan (press release ).

Problem: An escalating labour and skills shortages across all member states is a trend that has been intensifying for almost a decade. Despite temporary disruptions by the COVID-19 pandemic, the economic recovery, shifts in skills demand, demographic changes, and the consequences of geopolitical shifts have led to a steep increase in these shortages. This situation is exacerbated by the EU’s ambition towards open strategic autonomy, with 42 occupations identified as EU-wide shortage occupations. The shortages present both economic and social challenges, risking the EU's capacity for innovation, attractiveness for investments, weakening its competitiveness, and potentially exacerbating inequalities and societal cohesion issues.

Objective: To address these labour and skills shortages the Commission outlines a comprehensive action plan. This plan is built upon existing initiatives and aims to operationalise concrete steps, particularly at the sectoral level, for member states and social partners to tackle the identified challenges. Moreover, it seeks to prepare the groundwork for future actions or initiatives. Through targeted measures aimed at activating underrepresented groups in the labour market, supporting skills training and education, improving working conditions, enhancing fair intra-EU mobility, and attracting talent from outside the EU, the Communication sets out to bolster the EU’s resilience, competitiveness, and strategic autonomy.

Subject Matter: A central aspect of the Commission's strategy involves the activation of underrepresented groups within the labour market. Recognising the untapped potential among women, older workers, and those with low skills or educational attainment, the plan advocates for policies tailored to each group's specific barriers to employment. For instance, the Communication cites initiatives aimed at increasing childcare provision to facilitate women's entry into the workforce and reforming retirement and pension systems to encourage older workers to remain active in the labour market. Moreover, it underscores the significance of skills training and education, urging member states to implement the European Skills Agenda and support adult learning to ensure at least 60 per cent of adults partake in training annually by 2030. Improving working conditions emerges as another pivotal theme, by highlighting the link between job quality and labour shortages. It suggests that enhancing wages, health and safety standards, and work-life balance could make certain sectors more attractive to potential employees. The Communication also advocates for fair intra-EU mobility, suggesting that smoothing the path for workers and learners to move across borders could alleviate regional disparities in labour supply and demand. To this end, it encourages cooperation with the European Labour Authority and the implementation of the European Social Security Pass to simplify social security coordination for mobile EU citizens. Furthermore, attracting talent from outside the EU is identified as a critical measure for addressing labour shortages, particularly in sectors where demand far exceeds the supply of local workers. The Commission proposes the establishment of the EU Talent Pool, a novel initiative designed to streamline the process for non-EU nationals to seek employment within the Union, thereby facilitating the recruitment of international talent into shortage occupations.

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Non-legislative, Q1 2021.

Green and Digital Transition, Open Strategic Autonomy

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Non-legislative Act: On the 27th of February 2024, the European Commission published a Communication on Advanced Materials for Industrial Leadership (press release).

Problem: There is fragmentation and underinvestment within the EU's ecosystem for advanced materials, which are pivotal for industrial leadership and competitiveness. Despite the EU's notable achievements in materials science, the lack of a coordinated strategy and sufficient private investment has resulted in fragmented research and innovation efforts that fail to fully capitalise on advanced materials' potential. Moreover, the EU faces a critical challenge in accelerating the development, scale-up, and industrial uptake of advanced materials, essential for the twin green and digital transition and for achieving EU resilience and open strategic autonomy. Additionally, there is a significant gap in skills and a lack of harmonised standards, further impeding the rapid advancement and deployment of advanced materials.

Objective: The challenges are addressed by establishing a robust and inclusive ecosystem for advanced materials in Europe, ensuring leadership in research while fast-tracking innovations to the single market. It proposes to enhance coordination among EU, national, and regional priorities on research and innovation for advanced materials, significantly boost private investments, and support innovators and small and medium-sized enterprises in developing materials with superior performance. Furthermore, it seeks to catalyse the larger-scale and more rapid deployment of advanced materials, acting as market catalysts for the twin transition and enhancing EU resilience and economic security.

Subject Matter: A key aspect of the proposed measures is the emphasis on fostering a coordinated approach to research and innovation across the EU, aiming to streamline and magnify efforts in advanced materials research. The Communication proposes the establishment of common objectives and priorities for research and innovation investments, urging member states and industry stakeholders to collaborate more closely. This approach is expected to reduce the fragmentation currently seen in the ecosystem, ensuring that investments are strategically aligned with the EU's broader objectives for economic security and the twin transition. Furthermore, the Communication highlights the critical need to increase both public and private investments in advanced materials. It identifies a gap in investment, especially when compared to global competitors, and suggests exploring innovative funding mechanisms that can bring together public and private resources. The introduction of a co-programmed public-private partnership named ‘Innovative Materials for EU’ under Horizon Europe is a notable initiative, aimed at unlocking significant private capital to match EU funding, thereby accelerating the deployment of advanced materials. Another significant proposal is the creation of a European digital infrastructure for advanced materials research and innovation, termed the ‘materials commons’. This digital infrastructure aims to leverage artificial intelligence and other digital tools to speed up the discovery and development of new materials, facilitating a more efficient transition from research to market-ready innovations. The Communication also stresses the importance of bridging the gap between innovative research and industrial application. It calls for better access to testing and experimentation facilities for startups and SMEs, enabling them to validate and optimise new technologies before commercialisation. Moreover, it recognises the need for harmonised standards to build investor and consumer trust in new solutions and to support the digital transition. In addressing the skills gap, the Communication underlines the necessity of developing a skilled workforce capable of supporting the innovation and production of advanced materials. It advocates for the integration of new curricula and vocational training programmes to upskill current and future workers in this rapidly evolving field.

European Works Council

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Legislative or non-legislative, incl. impact assessment, Q1 2024.

European Commission Work Programme 2023

Multiannual Financial Framework

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Non-legislative Act: On the 20th of June 2023, the European Commission published a Communication on the Mid-term revision of the Multiannual Financial Framework 2021 – 2027 (press release).

Problem: The Union has faced a series of unprecedented and unexpected challenges since 2020, including the COVID-19 pandemic, Russia's war of aggression against Ukraine, an ensuing energy crisis, and a related spike in inflation and interest rates. Additionally, migration has increased post-pandemic, straining member states' reception and integration capacities. Moreover, the Union is grappling with increasing geopolitical instability, crises and natural disasters. These challenges have pushed the resources of the EU budget to the brink of exhaustion.

Objective: The Communication outlines the adjustments to the Multiannual Financial Framework 2021 – 2027, in order to address these challenges. The revision aims to meet the legal duties of EU institutions, equip the EU budget with flexibility and ensure the sustainability of the payments ceiling.

Subject Matter: Firstly, the Communication proposes an increase in the ceiling of Administrative Expenditure by 1.9 billion euro. This adjustment is necessary to meet the Institutions’ legal duties and handle the additional responsibilities assigned to the Commission. This measure is a direct response to the additional tasks given to EU institutions since the start of the MFF, coupled with high inflation, which are putting the EU administration under strain. Secondly, the Communication emphasises the need for additional financial support to manage migration effectively and maintain partnerships with third countries. The Communication proposes additional financial support to address the root causes of migration, improve border management, and maintain effective migration partnerships with third countries. Furthermore, the Communication highlights the need for significant investment to foster long-term competitiveness and to accelerate Europe's twin transition. This includes smart public and private investment in strategic sectors, while preserving a level playing field in the single market and thereby cohesion. This is particularly important in the context of current strategic dependencies, demographic changes, and the need to ensure affordable access to energy. Moreover, the Communication proposes an increase in the Flexibility Instrument by 3 billion euro to respond to unforeseen needs that may arise. Given the exhaustion of the 2021 – 2027 margins and the volatile environment, the Flexibility Instrument is the only possibility to support any type of additional needs or crises irrespective of their nature. Lastly, to ensure the sustainability of the payments ceiling, the Communication proposes an increase in the MFF payments ceiling. Subsequently, the payments ceiling for 2026 should be increased by 7.7 billion euro and for 2027 by 2.8 billion euro, equal to 50 per cent of the proposal to increase the ceiling for commitments in 2018 prices. All of the outlined measures shall be implemented through several legal acts that are published alongside the Communication, including a proposal laying down the MFF for the years 2021 to 2027, a proposal establishing the Ukraine Facility, and a proposal establishing the Strategic Technologies for Europe Platform (STEP). The Commission calls on the European Parliament and Council to ensure that this package is in force on 1 January 2024, given the urgent budgetary constraints, which will already materialise in 2024.

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Legislative procedure completed: On the 1st of February 2024, the revision of the Multiannual Financial Framework's ceilings was adopted (press release). The historic agreement, covering 80 per cent of requested funding, allows the EU to implement shared priorities, including crucial support for Ukraine, measures addressing migration and external challenges, and strengthening sovereignty and competitiveness. The financing involves a combination of new funds and reallocations within the EU budget to minimize impacts on national budgets while focusing on pressing priorities.

Proposal: On the 20th of June 2023, the European Commission published a Proposal for a Regulation amending Regulation (EU, Euratom) 2020/2093 laying down the multiannual financial framework for the years 2021 to 2027 (press release).

Problem: The Union has faced a series of unprecedented and unexpected challenges since 2020, including the COVID-19 pandemic, Russia's war of aggression against Ukraine, an ensuing energy crisis, and a related spike in inflation and interest rates. These challenges, which were unforeseen at the time of the agreement on the Multiannual Financial Framework (MFF), have nearly exhausted the limited budgetary flexibilities embedded in the MFF, thereby hindering the EU budget's capacity to address even the most urgent challenges.

Objective: The Regulation aims to address these problems by revising the MFF and provide the Union with the necessary policy responses to emerging challenges and to meet legal obligations which cannot be accommodated within existing ceilings nor by exhausted flexibility. Therefore, the annual amounts of existing instruments as well as the expenditure ceilings for the years 2024 to 2027 shall be increased, in addition to the introduction of new instruments.

Subject Matter: Firstly, the Proposal aims to enhance the Union budget's capacity to respond to crises and unforeseen developments. It suggests increasing the annual amount of the Solidarity and Emergency Aid Reserve (SEAR), a thematic special instrument which helps tackle emergencies in member states and non-EU countries. Additionally, the Regulation provides for an increase of the Flexibility Instrument to ensure that the EU budget can respond to unforeseen needs that may arise. Furthermore, the Regulation introduces new special instruments, namely the 'EURI Instrument' and 'Ukraine Reserve'. The EURI Instrument shall be used to cover the funding costs of NextGenerationEU borrowing for non-repayable and repayable support through financial instruments. To this end, the mobilisation of the EURI Instrument should take place when the costs of NextGenerationEU borrowing in a given year are in excess of the amounts planned in December 2020. On the other hand, the Ukraine Reserve is introduced to provide for the expenditure for non-repayable support and provisioning of budgetary guarantees for Ukraine under the proposed 'Ukraine Facility', to facilitate the required flexibility to match Ukraine’s evolving needs. Thereby, the mobilisation of the Ukraine Reserve should take place annually in the framework of the annual budgetary procedure, considering the best needs estimates given war developments, Ukraine's macro-financial performance, absorption capacity, and debt sustainability. In total, the revised MFF requires an increase of the expenditure ceilings for the years 2024 to 2027. The total increase in commitment appropriations ranges from 4,683 million euro in 2024 to 5,855 million euro in 2027. The proposal also requires an increase of the ceiling of the MFF in payment appropriations in 2026 and 2027.

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Legislative procedure completed: On the 7th of February 2024, the Proposal for a Regulation establishing the Strategic Technologies for Europe Platform (‘STEP’) and amending Directive 2003/87/EC, Regulations (EU) 2021/1058, (EU) 2021/1056, (EU) 2021/1057, (EU) No 1303/2013, (EU) No 223/2014, (EU) 2021/1060, (EU) 2021/523, (EU) 2021/695, (EU) 2021/697 and (EU) 2021/241 was adopted (press release). The establishment of the Strategic Technologies for Europe Platform (STEP) with an estimated 50 billion euro investment aims to boost EU competitiveness and sovereignty in critical sectors. This marks the conclusion of negotiations on the Mid-Term Revision of the long-term EU budget, following the recent provisional agreement on the Ukraine Facility. The Commission is now tasked with making STEP operational, emphasizing member states' role and introducing a Sovereignty Portal for consolidated information on EU funding in strategic sectors.

Proposal: On the 20th of June 2023, the European Commission published a Proposal for a Regulation establishing the Strategic Technologies for Europe Platform (‘STEP’) and amending Directive 2003/87/EC, Regulations (EU) 2021/1058, (EU) 2021/1056, (EU) 2021/1057, (EU) No 1303/2013, (EU) No 223/2014, (EU) 2021/1060, (EU) 2021/523, (EU) 2021/695, (EU) 2021/697 and (EU) 2021/241 (press release).

Problem: The Union has faced a series of unprecedented and unexpected challenges since 2020, including the COVID-19 pandemic, Russia's war of aggression against Ukraine, an ensuing energy crisis, and a related spike in inflation and interest rates. Therefore, European sovereignty needs to be strengthened, the Union's green and digital transitions accelerated, its competitiveness enhanced, and its strategic dependencies reduced.

Objective: In light of these challenges, the Regulation aims to establish the Strategic Technologies for Europe Platform (STEP). The platform is aimed at supporting critical and emerging strategic technologies to enhance the development or manufacturing throughout the Union and safeguard the respective value chains of critical technologies. Moreover, it seeks to address shortages of labour and skills critical to all kinds of quality jobs.

Subject Matter: The Regulation establishes the Strategic Technologies for Europe Platform (STEP), a mechanism designed to support critical and emerging strategic technologies. STEP shall create the necessary conditions for a more effective, efficient, and targeted use of existing EU funds. Thus, it is intended to direct existing funding towards relevant projects and speed up implementation in areas identified as crucial for Europe’s leadership. The Platform is designed to provide flexibility, reinforce the firepower, and create synergies among existing instruments. Firstly, the Regulation thus provides for details of the platform. Thereby, the Regulation sets out that the technologies supported by STEP shall be deemed critical if they bring an innovative, cutting-edge element with significant economic potential to the Single Market, or contribute to reducing or preventing strategic dependencies of the Union. Moreover, financial support for the implementation of the Platform shall be provided through a Union guarantee, financial envelopes, and other resources. Furthermore, a Sovereignty Seal shall be introduced as a quality label awarded to any action contributing to any of the Platform objectives. The Seal shall be used for receiving support for the action under another Union fund or programme, or financing the action through cumulative or combined funding with another Union instrument. To this end, the Regulation also establishes a Sovereignty portal, which is designed to display information about the implementation of the Platform and Union budget expenditure. The portal shall showcase projects that have been awarded the Sovereignty Seal quality label and projects identified as strategic under the Net-Zero Industry Act and the Critical Raw Materials Act. Member states shall be required to designate a national competent authority to act as the main point of contact for the implementation of the Platform at the national level. With regards to monitoring, the Commission will be required to provide an annual report to the European Parliament and the Council on the implementation of the Platform. This report will include consolidated information on the progress made in implementing the Platform objectives, overall expenditure and the performance of the STEP based on indicators defined under the respective programmes. The Regulation is proposed to enter into force on the day following that of its publication and is directly applicable in all member states.

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Legislative procedure completed: On the 6th of February 2024, the Proposal for a Regulation on establishing the Ukraine Facility was adopted (press release). The Ukraine Facility, with a total allocation of 50 billion euros for 2024-2027, provides stable financing to aid Ukraine's recovery and reforms, composed of 17 billion euros in grants and 33 billion euros in loans. Its structure encompasses direct budgetary support, investment frameworks, and technical assistance to bolster Ukraine's modernization efforts. The agreement also includes 'exceptional bridge financing' to provide immediate aid while finalizing other Facility components, with disbursements expected as early as March. Financing mechanisms involve issuing EU Bonds and utilizing the "Ukraine Reserve" within the EU's annual budget, ensuring ongoing support aligned with progress and evolving needs.

Proposal: On the 20th of June 2023, the European Commission published a Proposal for a Regulation on establishing the Ukraine Facility (press release).

Problem: Particularly in the aftermath of war, the socio-economic and environmental challenges faced by Ukraine are immense. These challenges include the need for reconstruction, recovery, and modernisation, as well as the need to foster resilience and progressive integration into the Union and global economy and markets. Furthermore, there are key challenges in strengthening the rule of law, fighting corruption, and enhancing transparency and good governance.

Objective: The Regulation aims to address these problems by introducing the Ukraine Facility as a legislative initiative to provide an integrated, medium-term policy response to Ukraine's recovery, reconstruction, and modernisation needs, while also supporting Ukraine's path towards EU accession. Specifically, it seeks to enhance Ukraine's communication capacities, ensure clear monitoring and evaluation mechanisms, and support Ukraine's progressive alignment to Union 'acquis' with a view to future Union membership. Moreover, the Regulation aims to strengthen the rule of law, democracy, respect for human rights, and the effectiveness of public administration. Subsequently, it also seeks to support transparency, structural reforms, sectoral policies, and good governance at all levels.

Subject Matter: The Ukraine Facility is structured into three pillars: financial support for the delivery of reforms and investments, a specific Ukraine Investment Framework to support investments and provide access to finance, and technical assistance to foster Ukraine’s administrative capacity and implement EU accession-related reforms. Therefore, one of the most significant provisions is the establishment of a financial guarantee for Ukraine which is set to be constituted until 31 December 2027. The provisioning rate shall be reviewed at least every year from the entry into force of this Regulation. Furthermore, the Commission is empowered to amend the provisioning rate and, where relevant, to increase or decrease the maximum amount of guarantee by up to 30 per cent. In addition, the Regulation also addresses the Union accession assistance and support measures. Specifically, this assistance aims to support Ukraine’s progressive alignment to Union ‘acquis’ with a view to future Union membership, thereby contributing to mutual stability, security, peace, and prosperity. Moreover, the Facility shall provide for the strengthening of stakeholders, including social partners, civil society organisations, and local authorities. It also supports confidence-building measures and processes that promote justice, truth-seeking, reparations, as well as the collection of evidence of crimes committed during the war. Lastly, the Regulation addresses the eligibility rules for Union funding. To this end, funding may be provided in various forms, including grants, prizes, procurement, budget support or financial instruments. Thereby, the forms of funding are selected considering factors such as control costs, administrative burdens, and the expected risk of non-compliance. The Regulation also provides for the conclusion of a Framework agreement with Ukraine to set up the principles of financial cooperation, including necessary mechanisms to control and audit expenditures. Furthermore, it stipulates that funding shall only be granted to Ukraine after the Framework agreement and the applicable financing and loan agreements have entered into force.

Economic Governance

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Legislative procedure completed: On the 10th of February 2024, the Proposal for a Regulation on the effective coordination of economic policies and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 was formally adopted (press release). The European Commission plans to send each member state whose public debt or deficit exceeds the reference values an individual technical target path for multi-annual net expenditure. This path is intended to ensure that the debt level falls and the deficit falls below the reference value. The Council allows for longer adjustment paths if member states commit to favourable reforms and investments. Safeguards on debt sustainability and deficit resilience as well as the monitoring of net expenditure paths are intended to ensure the effectiveness of this framework.

Proposal: On the 22nd of April 2023, the European Commission published a Proposal for a Regulation on the effective coordination of economic policies and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (press release).

Problem: In the context of the Commission's most recent review of the EU economic governance framework, some shortcomings were highlighted. On the one hand, it proves to be increasingly complex, on the other hand, the debt of heavily indebted countries needs to be reduced more effectively. Furthermore, instruments and procedures of the framework need to be updated and modernised.

Objective: In general, the package aims to address these shortcomings. In line with the Commission’s guidelines for reforming the EU's economic governance framework of November 2022, the effectiveness and transparency of the framework shall be increased. The three proposals of the package aim to give member states more national responsibilities, reduce debt levels and promote sustainable growth. Specifically, this proposal sets out detailed rules for national medium-term fiscal-structural plans.

Subject Matter: The Regulation provides for several provisions. First, the fiscal framework shall be included in the surveillance cycle of the European Semester. To this end, member states shall be obliged to comply with the Council's fiscal guidelines. Secondly, the Regulation empowers the Commission to issue a technical trajectory of net expenditure for member states with a government debt above 60 per cent of GDP or a government deficit above 3 per cent of GDP. Thirdly, defines details of the procedures for medium-term structural fiscal plans. This regards the technical dialogue between the Commission and the respective member state. Moreover, this concerns the specific content and requirements of the fiscal plans. Meanwhile, states of the Eurozone which are subject to a macroeconomic adjustment programme, are exempt from submitting fiscal plans. Fourth, the Regulation sets out the procedure for monitoring the fiscal plans. To this end, member states are required to submit annual progress reports. Lastly, the Regulation also sets out specific courses of action if there is a significant risk of deviation from the net expenditure path.

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Legislative procedure completed: On the 10th of February 2024, the Proposal for a Regulation amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure was formally adopted (press release). The Council and the Commission have agreed that a debt-based excessive deficit procedure will be initiated if the government debt-to-GDP ratio exceeds the reference value or if the overall deficit is not close to balance. Compliance is assessed on the basis of various factors, including the debt level, the deviation, progress on reforms and investments and possible increases in government defence spending. In the event of non-compliance, a fine of up to 0.05 per cent of GDP can be accumulated every six months until effective measures are implemented.

Proposal: On the 26th of April 2023, the European Commission published a Proposal for a Regulation amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (press release).

Problem: In the context of the Commission's most recent review of the EU economic governance framework, some shortcomings were highlighted. On the one hand, it proves to be increasingly complex, on the other hand, the debt of heavily indebted countries needs to be reduced more effectively. Furthermore, instruments and procedures of the framework need to be updated and modernised.

Objective: In general, the package aims to address these shortcomings. In line with the Commission’s guidelines for reforming the EU's economic governance framework of November 2022, the effectiveness and transparency of the framework shall be increased. The three proposals of the package aim to give member states more national responsibilities, reduce debt levels and promote sustainable growth. Specifically, this proposal aims to modernise the debt reduction procedure of the Stability and Growth Pact (by focusing on sovereign debt sustainability and differentiating more between individual countries.

Subject Matter: The main focus of the Regulation consists of changing the reference value for government debt. Accordingly, the extent of the challenges posed by a member state's debt will be determined as the decisive factor for initiating an excessive deficit procedure (EDP). Instead of the so-called "1/20 rule", i.e. state debt exceeding 60 per cent of GDP, the focus shall be on compliance with the net expenditure path set by the Council. The latter states that net expenditure must be brought or kept below 3 per cent of GDP and that the debt level must be brought onto a plausibly declining path. In cases where the general government deficit exceeds the 3 per cent of GDP reference value, a minimum annual adjustment of at least 0.5 per cent of GDP shall be made. In the event of a severe economic downturn, changes to the correction deadlines can be made by the Council. The changes of the Regulation are intended to enable necessary investments in the green and digital transformation by indebted states. In addition, the EDP shall be adapted to accommodate exceptional circumstances, such as the massive contraction of debts during the COVID-19 pandemic.

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Legislative procedure completed: On the 10th of February 2024, the Proposal for a Directive amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States was formally adopted (press release). The reform creates a differentiated approach for member states by taking into account individual budgetary situations, debt levels and economic challenges. The new framework allows for multi-annual country-specific fiscal trajectories while ensuring effective multilateral surveillance and the principle of equal treatment. Each member state must draw up a medium-term structural fiscal plan for four or five years that ensures gradual debt reduction and sustainable and inclusive growth through fiscal targets, public investment and reforms.

Proposal: On the 26th of April 2023, the European Commission published a Proposal for a Directive amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States (press release).

Problem: In the context of the Commission's most recent review of the EU economic governance framework, some shortcomings were highlighted. On the one hand, it proves to be increasingly complex, on the other hand, the debt of heavily indebted countries needs to be reduced more effectively. Furthermore, instruments and procedures of the framework need to be updated and modernised. With regard to the budgetary framework, shortcomings in medium-term budget planning were also revealed.

Objective: In general, the package aims to address these shortcomings. In line with the Commission’s guidelines for reforming the EU's economic governance framework of November 2022, the effectiveness and transparency of the framework shall be increased. The three proposals of the package aim to give member states more national responsibilities, reduce debt levels and promote sustainable growth. Specifically, this proposal aims to strengthen national ownership and the medium-term orientation of budget planning.

Subject Matter: The Directive on requirements for budgetary framework shall be updated in several areas. First, the existing legislation shall be simplified. To this end, monthly cash-based fiscal data shall no longer be submitted, as they do not contribute to strengthening national budgetary frameworks. Additionally, obsolete articles shall be removed. Secondly, ambiguities in some specific provisions shall be removed. Thirdly, member states shall be given more national ownership. To this end, requirements for independent fiscal institutions will be expanded and clarified. This includes additional tasks such as the preparation of budget forecasts, the assessment of sustainability analyses or the impact assessment of policies. Fourthly, in order to strengthen the medium-term orientation of the budget frameworks, the multi-year budget dimension shall be specified more systematically in forecasts. At the same time, the link between the annual budget and medium-term planning should be considered more specifically. Fifth and finally, the quality of public finances shall be improved. To this end, the accountability of public budgets should be strengthened. In addition, budgetary risks caused by climate change should be considered and discussed more transparently.

Own Resources

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Non-legislative Act: On the 20th of June 2023, the European Commission published Communication on an adjusted package for the next generation of own resources (press release).

Problem: The central problem is the need to introduce new own resources for the EU budget, ensuring that the expenditure related to the repayment of the European Union Recovery Instrument does not unduly reduce programme expenditure or investment instruments under the Multiannual Financial Framework (MFF). Additionally, it aims to mitigate increases in the Gross National Income (GNI)-based own resource for Member States, necessitating new revenue streams to cover the expected expenditure related to the repayment.

Objective: The Commission seeks to introduce and adjust a basket of new own resources for the EU budget. Initially, in December 2021, the Commission proposed three new sources of revenue. However, due to limited progress in legislative discussions, the Commission now proposes to adjust this first basket of new own resources in light of the Fit For 55 agreement and recent developments, including the addition of a new statistical-based own resource. This aims to provide member states with the necessary elements to progress on their negotiations within the agreed roadmap and calls on the Council to accelerate these negotiations.

Subject Matter: The Communication presents a comprehensive strategy for the introduction of new own resources for the European Union budget. The document outlines several key measures and adjustments to existing proposals, focusing on three main areas: Firstly, The Commission proposes significant modifications to the own resources derived from the ETS and CBAM. One of the key changes is the postponement of the introduction of the own resource from the new ETS, which will be established in 2027, to 2028. This delay is in response to the agreement reached on the revised ETS Directive. For the existing ETS, the own resource can already be introduced. Furthermore, member states applying national carbon taxes may opt to exempt relevant emissions from the new ETS, with a corresponding cancellation of allowances. This adjustment is proposed to be included in the valuation mechanism, allowing the valuation of allowances that are not auctioned. Secondly, since July 2021, there has been a significant increase in carbon prices. The carbon price in the existing ETS has risen to EUR 80, considerably higher than the initial assumption of EUR 55 per tonne of CO2 for the period 2026-2030. This increase has led to a doubling of member states’ annual revenue from auctioning allowances. In response to these developments, the Commission proposes a higher call rate for the ETS-based own resource. It is proposed that 30% of all revenues generated by EU emissions trading will accrue to the EU budget, with total revenues from the ETS own resource expected to reach around 19 billion euros per year from 2028 onwards. Thirdly, in addition to the adjustments to the ETS and CBAM own resources, the Commission proposes a new statistical own resource based on company profits. This resource is not a tax on companies but a national contribution calculated using statistics from national accounts under the European system of accounts (ESA). The calculation is based on a harmonised indicator – the gross operating surplus – which approximates company profits. The expected revenues from this source are estimated to be around 16 billion euros per year on average. Lastly, the Commission emphasises the need for member states to accelerate negotiations on these new own resources. The adjusted Proposal is expected to deliver annual revenues of up to 36 billion euros on average over the 2028-2030 period. The inclusion of the Proposal for a temporary statistical-based own resource on company profits is intended to provide member states with all necessary elements to proceed towards a quick agreement. The adjusted package, expected to deliver annual revenues of up to 36 billion euros on average over the 2028-2030 period, is seen as crucial for ensuring the EU's financial stability and supporting its strategic objectives.

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Proposal: On the 20th of June 2023, the European Commission published a Amended Proposal for a Regulation amending Regulation (EU, Euratom) 2021/768 of 30 April 2021 as regards implementing measures for new own resources of the European Union (press release).

Problem: There is a need for the introduction of new sources of revenue for the EU budget, as proposed by the Commission in December 2021. These new revenue sources include contributions from the Emission Trading System (ETS), the Carbon Border Adjustment Mechanism (CBAM), and an own resource based on a share of residual profits from multinationals, reallocated to EU Member States under the OECD/G20 agreement ("Pillar One"). Furthermore, more than a year later, the Commission added a new own resource based on statistical company profits, and the co-legislators adopted the CBAM Regulation, vesting the Commission with additional control and inspection powers.

Objective: The Commission amends its own resource Proposal and the Council Regulation amending Regulation (EU Euratom) 2021/768 to include implementing measures for these new own resources of the European Union. It aims to lay down the necessary control and inspection powers for the Commission to implement these new resources effectively. The document also seeks to adjust the IMSOR to accommodate the centralised governance introduced by the CBAM Regulation and ensure that the Commission has proportionate control and supervision powers for the correct implementation of the new resource based on statistical company profits.

Subject Matter: A significant part of the Proposal involves the calculation of member states' contributions based on statistical company profits. These profits are established under the European System of Accounts 2010 (ESA 2010) in application of Regulation (EU) No 549/2013. To ensure accuracy and comparability in the data used by National Statistical Institutes to compile these aggregates, the Commission, specifically Eurostat, is tasked with verifying the data sources and the methodologies used for compiling the data. This verification process includes an enlargement of the scope of existing Gross National Income (GNI) verifications, requiring the Commission to be empowered within the regulation to perform these necessary verifications. Additionally, the Proposal reviews the need for control powers in relation to the Carbon Border Adjustment Mechanism (CBAM) own resource. According to Articles 15 and 19 of the CBAM Regulation, the Commission is expected to carry out risk-based controls and review the content of CBAM declarations. The Commission is authorized to conduct risk-based controls on the data and transactions recorded in the CBAM registry. This step is crucial to ensure that there are no irregularities in the various stages of handling CBAM certificates, including their purchase, holding, surrender, re-purchase, and cancellation.
Given the controls already embedded in the sectorial legislation, the Proposal concludes that no additional on-the-spot checks and inspections are necessary for the CBAM own resource. This decision is made in line with the principle of establishing an efficient and effective framework for these new control mechanisms. As a result, the Proposal is amended to reflect these considerations. In essence, the document represents a pivotal step in the EU's efforts to modernize and streamline its financial systems, particularly in terms of integrating new revenue sources into the EU budget.

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Proposal: On the 20th of June 2023, the European Commission published a Amended Proposal for a Council Decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the European Union (press release).

Problem: The central problem addressed is the need for new sources of revenue for the EU budget, particularly in the context of the NextGenerationEU initiative. This initiative was agreed upon in 2020 by the European Parliament, the Council, and the Commission, with the aim of ensuring that expenditure from the Union budget related to the repayment of the European Union Recovery Instrument does not unduly reduce programme expenditure or investment instruments under the Multiannual Financial Framework (MFF).

Objective: The Proposal aims to introduce new sources of revenue for the EU budget to support the repayment of NextGenerationEU borrowing. In December 2021, the Commission proposed three new sources of revenue: contributions from the Emissions Trading System (ETS), the EU Carbon Border Adjustment Mechanism (CBAM), and a share of the residual profits of the largest multinational enterprises reallocated to the EU under the OECD/G20 Pillar 1 agreement. Additionally, the Commission committed to proposing further new own resources by the end of 2023, including a contribution linked to the corporate sector, with a new own resource based on statistics on company profits.

Subject Matter: The Proposal presents a detailed framework for implementing new own resources for the EU budget, as part of the broader strategy to support the repayment of NextGenerationEU borrowing. The key aspects of the Proposal are as follows: Firstly, the Proposal includes adjustments to the own resource derived from the new Emissions Trading System (ETS) which encompasses buildings, road transport, and additional sectors. Initially, the Social Climate Fund will be financed with external assigned revenues starting from 2026, leading to a postponement of the introduction of this own resource from 2027. Additionally, the Proposal allows member states applying a national carbon tax to opt out of the new ETS for relevant emissions. The market value of ETS allowances has increased significantly since the initial proposals, prompting the Commission to propose a higher call rate for the ETS-generated revenues. It is proposed that 30% of these revenues will accrue to the EU Budget, ensuring higher revenues for both member states and the EU budget compared to initial expectations. Secondly, the Proposal for an own resource based on the CBAM remains largely unchanged from the December 2021 Proposal. However, it includes limited adaptations to reflect the recent entry into force of the CBAM Regulation. This mechanism is crucial in complementing the EU Emissions Trading System and ensuring the effectiveness of the Union's climate policy. Thirdly, with the OECD/G20 Pillar 1 agreement yet to be fully implemented, the Commission proposes a statistical own resource based on national accounts statistics prepared under the European System of Accounts (ESA). This resource will be defined by applying a call rate of 0.5 per cent to the sum of the gross operating surplus recorded for the sectors of non-financial and financial corporations in national accounts. The ESA provides a harmonised framework of statistics, and the introduction of this statistical own resource aims to enhance the comparability of data across member states.

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Proposal: On the 20th of June 2023, the European Commission published a Amended Proposal for a Regulation on the methods and procedure for making available the own resources based on the Emissions Trading System, the Carbon Border Adjustment Mechanism, reallocated profits and the statistical own resource based on company profits and on the measures to meet cash requirements (press release).

Problem: The Proposal addresses the issue of financing the European Union's budget, necessitating new sources of revenue. In December 2021, the Commission proposed three new sources of revenue. Over a year later, the Commission recognised the need to amend its initial proposal, considering the changes agreed upon in the revised ETS Directive and introducing a new statistical own resource based on company profits.

Objective: The goal is to adjust the methods and procedures for making available these proposed own resources, in light of the recent developments and agreements. The adjustments involve revising the ETS own resource and the CBAM own resource, reflecting the agreement reached on the revised ETS Directive. Furthermore, the Commission proposes the introduction of a new statistical own resource based on company profits, necessitating an update in the methods and procedures for their implementation and management within the EU budget framework.

Subject Matter: The Proposal outlines several key points: Firstly, The Commission proposes adjustments to the own resources derived from the ETS and CBAM. This adjustment is in response to the agreement reached on the revised ETS Directive. The revised ETS Directive likely includes new stipulations or changes that impact how revenue from the ETS should be allocated or calculated, necessitating adjustments to align with these new directives. Secondly, significant addition in the amended proposal is the introduction of a new statistical own resource based on company profits. This resource represents a novel approach to generating revenue for the EU budget. It likely involves applying a specific rate to the aggregate profits of companies within the EU, calculated based on harmonized statistical measures. This measure aims to tap into the financial success of corporations operating within the EU to support the Union's budget. Thirdly, the Proposal ensures that these new sources of revenue are in alignment with existing EU legislative frameworks. This involves integrating the new revenue streams into the current system of EU finances, ensuring that they are compatible with other EU laws and regulations, and that they contribute effectively to the EU budget. Fourthly, it fits into the broader context of the EU's financial strategy, particularly in the post-COVID-19 landscape. The introduction of new revenue streams is a strategic move to enhance the financial resilience of the EU and ensure that it has adequate resources to meet its obligations and support its initiatives, particularly the NextGenerationEU recovery plan.

Corporate Taxation

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Proposal: On the 12th of September 2023, the European Commission published a Proposal for a Council Directive on a Framework for Income Taxation (BEFIT) (press release).

Problem: Even after 30 years with an internal market, there are no common rules that allow a calculation of taxable income of businesses operation in the European Union. Accordingly, businesses have to adhere to 27 national tax systems, which poses difficulties and costs for companies to engage across the Union. Due to the complexity and discrepancies, the different tax systems increase tax uncertainty and compliance costs, creating an uneven field for businesses operating in more than one member state. Hence, cross-border investments are discouraged. Additionally, the arm’s length principle used to value transactions between associated enterprises in transfer pricing results in long disputes, higher costs and relies on comparable transactions to be available. This affects especially the accuracy for transactions related to intangible assets like patents, trademarks, or goodwill. member states’ tax base is instable, and businesses risk arbitrary valuation.

Objective: The design of “Business in Europa: Framework for Income Taxation”, short BEFIT, builds on analyses and negotiations of earlier proposals which it will replace. Moreover, it builds on the achievements of the OECD/G20 Inclusive Framework Two Pillar Approach and the international tax agreement on a global minimum level of taxation. The new framework aims to simplify the internal market’s tax environment, replacing the 27 different determinations of taxable bases, developing a common corporate tax framework supporting the internal market. A level playing field will be created that enhances legal as well as tax certainty while reducing compliance costs and encouraging businesses to operate cross-border, especially for SMEs.

Subject Matter: Fist, BEFIT aims to reduce compliance costs by providing a simplified set of tax rules, which takes businesses less resources to comply with. Secondly, cross-border expansion (especially from SMEs) is encouraged. The proposal will further reduce distortions that influence the internal market by providing fair competition for companies, establishing a uniform set of corporate tax rules. Finally, BEFIT aims to reduce the risk of double and/or over-taxation, as well as tax disputes. The European Commission will develop and operate a collaborative tool, which will facilitate the operation and communication of BEFIT teams. The new rules will be mandatory for groups operating in the EU with an annual combined revenue of at least 750 million euros, and where the ultimate parent entity holds at least 75 per cent of the ownership rights or of the rights giving entitlement to profitThe DG TAXUD will monitor and measure the developments of BEFIT regarding the effectiveness and efficiency. Member states on the other hand will create the appropriate domestic infrastructure to enable to communication. The proposal offers several BEFIT Versions. The “Comprehensive”, the “Light” and the “Composite” one, which is an in-between version that combines mandatory harmonisation and gradual application. They differ in their scope, tax base computation, tax base allocation, transfer pricing risk assessment and administration. The “Composite” version is the preferred policy package, as it proves effective in achieving specific objectives of the initiative while demonstrating efficiency, as it is limited in its mandatory scope, including only those groups who can benefit from common rules the most and can afford the transition.

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Proposal: On the 19th of June 2023, the European Commission published a Proposal for a Council Directive on Faster and Safer Relief of Excess Withholding Taxes (press release).

Problem: Generally, investors in the EU are required to pay tax twice on income they receive from holding securities: withholding tax (WHT) and income tax. To avoid this double taxation, many member states have agreed to share taxing rights through double tax treaties (DTTs). However, WHT procedures have proven to be burdensome, costly, and lengthy and diverging across member states, which discourages cross-border investments within the EU. Moreover, WHT procedures are still prone to risk of tax fraud and abuse, namely through so-called Cum/Cum and Cum/Ex cases.

Objective: In light of these challenges, the Directive is aimed at establishing a common framework for the relief of WHT on cross-border income within the EU. The Proposal intends to facilitate the process of claiming WHT relief more efficiently, and prevent abusive and fraudulent tax practices, particularly those related to Cum/Ex and Cum/Cum schemes.

Subject Matter: The first key area of measures is the introduction of an electronic tax residency certificate (eTRC) that will serve as proof of tax residence for individuals or entities claiming WHT relief. The eTRC shall be issued by the tax authorities of member states and will have a minimum validity period of one year. Member states are encouraged to adopt a fully automated system for issuing eTRCs within one day, with provisions for exceptional circumstances. The eTRC shall be secured using electronic seals in accordance with relevant regulations. Secondly, to access WHT relief procedures, financial intermediaries need to be certified as Certified Financial Intermediaries (CFIs). Large institutions and Central Securities Depositories providing withholding tax agent services should be required to register, while other entities, including those based in third countries, may register voluntarily in national registers established by member states. Non-compliant CFIs may face penalties or removal from the registers. Furthermore, the Directive emphasizes the importance of common reporting to combat tax fraud and abuse. To this end, CFIs registered in national registers shall be obligated to report relevant information to the tax authorities, enabling them to verify WHT rates and detect potential abuse. The reporting obligations should apply regardless of the CFI's country of residence. CFIs are expected to report information related to the securities payment chain, allowing tax administrations to identify the final investor and assess their eligibility for reduced WHT rates. The reporting timeline is set at 25 days from the record date, with provisions for settlement instructions. As another key area, the Proposal addresses Cum/Ex and Cum/Cum schemes. Thereby, additional reporting requirements related to holding periods of underlying securities and financial arrangements linked to securities are introduced. The reporting obligations exclude very low amounts of dividends but allow member states to apply appropriate consequences for identified abuse. Moreover, in cases where relief at source or quick refund systems do not apply, a standard refund procedure is available, allowing taxpayers or their representatives to directly request a refund from tax authorities. Lastly, the proposal includes general provisions related to implementing acts, evaluation and monitoring, data protection rules, transposition into national law, and the expected timeline for implementation. Once adopted, member states are thus required to transpose the Directive into their national law by 31 December 2026, and it is expected to come into effect two years after the adoption of the implementing acts, likely by 1 January 2027.

Data Access in Financial Services

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Proposal: On the 28th of June 2023, the European Commission published a Proposal for a Regulation on a framework for Financial Data Access and amending Regulations (EU) No 1093/2010, (EU) No 1094/2010, (EU) No 1095/2010 and (EU) 2022/255 (press release).

Problem: Within the Union, there is a lack of a unified framework to manage digital operational resilience in the financial sector. This gap has led to inconsistencies and potential vulnerabilities in the sector, which could pose significant risks to financial stability, market integrity, and the protection of consumers and investors.

Objective: To address this problem, the Proposal aims to establish a comprehensive legal framework to enhance the digital operational resilience of the financial sector. This shall be achieved by setting out specific requirements for financial entities, empowering competent authorities, encouraging collaboration among authorities, and providing for specific legal procedures.

Subject Matter: Firstly, the Regulation sets out specific requirements for financial entities to have robust digital resilience capabilities. For instance, it mandates the implementation of testing and incident reporting mechanisms. Furthermore, competent authorities shall be empowered to investigate potential breaches of the Regulation and impose administrative penalties. These measures are designed to be proportionate and comply with Union and national law, including applicable procedural safeguards and the principles of the Charter of Fundamental Rights of the European Union. Secondly, the Regulation encourages collaboration among authorities for effective enforcement. It allows competent authorities to exercise their powers in several ways: directly, in collaboration with other authorities, by delegating powers to other authorities or bodies, or by having recourse to the competent judicial authorities of a member state. In addition to these measures, the Regulation also provides for settlement agreements and expedited enforcement procedures. To this end, member states may lay down rules enabling their competent authorities to close an investigation concerning an alleged breach of this Regulation, following a settlement agreement, or through an expedited enforcement procedure. This is aimed at achieving a swift adoption of a decision imposing an administrative sanction or administrative measure. Moreover, the Regulation emphasises the importance of professional secrecy. All persons who work or who have worked for the competent authorities, as well as experts acting on behalf of the competent authorities, are bound by the obligation of professional secrecy. This obligation extends to the information exchanged between competent authorities. Furthermore, the Regulation also provides for the right of appeal. Decisions taken by the competent authorities pursuant to this Regulation may be contested before the courts. This right of appeal also applies in respect of a failure to act. Finally, the Regulation mandates the publication of decisions of competent authorities. All decisions imposing an administrative penalty or administrative measure on legal and natural persons, for breaches of this Regulation, and where applicable, all settlement agreements, are to be published on the website of the competent authorities.

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Proposal: On the 28th of June 2023, the European Commission published a Proposal for a Regulation on payment services in the internal market and amending Regulation (EU) No 1093/2010 (press release).

Problem: In recent years, there have been significant changes in the retail payment services market, largely related to the increasing use of cards and digital means of payment, the decreasing use of cash, and the growing presence of new players and services. Furthermore, the Covid-19 pandemic has amplified the importance of secure and efficient payments. While previous EU legislation has already addressed the barriers to new types of payment services, its objectives in certain areas have not been fully met, necessitating improvements to the current regulatory framework.

Objective: The legislative package aims to enhance the functioning of the Union’s legal framework for retail payments in the EU. Therefore, the Regulation sets out amendments to the current legal framework, as laid down by the first and second Payment Services Directive (PSD1 and PSD2). This Proposal is therefore complementary to the Proposal for a Directive on payment services and e-money services, which amends other areas of the PSD1 and PSD2 framework.

Subject Matter: The Regulation aims to address several key areas. Firstly, it establishes robust enforcement rules for 'open banking', ensuring that national competent authorities proactively and rigorously ensure the respect of the Union 'open banking' regulated framework. This includes the particulars of the relevant supervisory authorities and the register of authorisation of the payment service provider. Secondly, it introduces measures to increase the security of credit transfers, which is fundamental for increasing the confidence of payment service users. This includes a description of the main characteristics of the payment service to be provided, a specification of the information or unique identifier that has to be provided by the payment service user for a payment order to be properly placed or executed, and the form of and procedure for placing a payment order or giving permission to execute a payment transaction and withdrawal of such permission. Furthermore, the Regulation sets up procedures for payment service users and other interested parties to submit complaints regarding alleged infringements of the Regulation's provisions. It also mandates member states to provide for effective, proportionate, and dissuasive administrative sanctions and measures in relation to infringements of provisions from this Regulation. Moreover, the Regulation addresses charges, interest, and exchange rates. It outlines all charges payable by the payment service user to the payment service provider, including those connected to the manner in and frequency with which information under this Regulation is provided or made available. It also details all charges for domestic, automated teller machines (ATMs) withdrawals payable by payment service users to their payment service provider at an ATM. The Regulation also includes provisions for the right of appeal. The decisions taken by the competent authorities pursuant to this Regulation shall be contestable before the courts. This applies also in respect of failure to act. Lastly, the Regulation mandates the publication of administrative sanctions and administrative measures. Competent authorities are required to publish on their website all decisions imposing an administrative sanction or administrative measure on legal and natural persons, for breaches of this Regulation, and where applicable, all settlement agreements.

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Proposal: On the 28th of June 2023, the European Commission published a Proposal for a Directive on payment services and electronic money services in the Internal Market amending Directive 98/26/EC and repealing Directives 2015/2366/EU and 2009/110/EC (press release).

Problem: In recent years, there have been significant changes in the retail payment services market, largely related to the increasing use of cards and digital means of payment, the decreasing use of cash, and the growing presence of new players and services. Furthermore, the Covid-19 pandemic has amplified the importance of secure and efficient payments. While previous EU legislation has already addressed the barriers to new types of payment services, its objectives in certain areas have not been fully met, necessitating improvements to the current regulatory framework.

Objective: The legislative package aims to enhance the functioning of the Union’s legal framework for retail payments in the EU. Therefore, the Directive sets out amendments to the current legal framework, as laid down by the first and second Payment Services Directive (PSD1 and PSD2). The Directive specifically addresses payment services and electronic money services, focussing on licensing and supervision of payment institutions. It is complemented by the Proposal for a Regulation on payment services in the internal market, which amends other areas of the PSD1 and PSD2 framework.

Subject Matter: The Directive is primarily aimed at ensuring the safe, efficient, and uniform provision of payment services, thereby protecting the interests of consumers and fostering innovation and competition in the payment services market. To this end, one of the key provisions of the Directive is the establishment of a regulatory framework for payment service providers. This includes the registration and supervision of these providers to ensure compliance with the established regulatory standards. Therefore, member states must ensure that the controls exercised by the competent authorities are proportionate, adequate, and responsive to the risks to which payment institutions are exposed. The authorities are entitled to require information, carry out on-site inspections, issue recommendations, guidelines, and binding administrative provisions, and suspend or withdraw authorisation. Moreover, the Directive provides for the appointment of a central contact point in member states to facilitate communication and information reporting on compliance with the relevant provisions. This requirement is proportionate to achieving the aim of adequate communication and information reporting in the host member state. Moreover, the Directive addresses the issue of entities providing payment services that are unable to meet the full range of conditions for authorisation as payment institutions. It requires the registration of the identity and whereabouts of all persons providing payment services, including such entities. Entities benefiting from an exemption from authorisation should not enjoy the right of establishment or freedom to provide services and should not indirectly exercise those rights while being a participant in a payment system. Furthermore, the Directive includes provisions for emergency situations, allowing competent authorities of the host member state to take precautionary measures to address a serious threat to the collective interests of payment service users, including large-scale fraud. Finally, the Commission shall be required to submit a report on the application and impact of the Directive five years after its entry into force. This report should assess the appropriateness of the Directive's scope and its impact on the safeguarding of customer funds by payment institutions.

Strengthening the Role of the Euro

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Proposal: On the 28th of June 2023, the European Commission published a Proposal for a Regulation on the establishment of the digital euro (press release).

Problem: Increasing digitalisation of the European economy and the subsequent shift in payment habits towards private digital means threatens the balance between central bank money and private digital means of payment. Thus, this trend potentially undermines trust in commercial bank money and the euro itself. Moreover, the emergence of third-country central bank digital currencies and private firm-issued stablecoins could challenge the role of the euro in payments.

Objective: The document addresses these trends by proposing the establishment of a retail Central Bank Digital Currency (CBDC) – the digital euro. This digital euro would serve as a public digital means of payment, complementing cash and adapting the official forms of the currency to technological developments. Furthermore, it aims to support a stronger, more competitive, efficient, and innovative European retail payments market and digital finance sector. The digital euro would facilitate the development of pan-European and interoperable retail payment solutions, enhancing the resilience of the European retail payments market.

Subject Matter: The Regulation seeks to establish a framework for the digital euro, defining its nature, the roles of various stakeholders, and the compliance and reporting requirements associated with its use. Firstly, the Regulation introduces fundamental definitions of multiple concepts connected to the digital euro. Hence, the digital euro shall be made available to natural and legal persons for the purpose of retail payments. Moreover, the Regulation sets out that the issuance of the digital euro should lie with the European Central Bank. Secondly, the Regulation stipulates that member states shall designate one or more competent authorities to ensure compliance with the Regulation. In particular, these authorities shall be tasked with implementing rules on penalties applicable to infringements the provisions on the distribution and use of the digital euro as well as on fees of digital euro payment services, ensuring that these rules are effective, proportionate, and dissuasive. Thirdly, the Regulation sets out the granted legal tender status which entails the mandatory acceptance of the digital euro by payees. However, the Proposal does provide for several exceptions for microenterprises or natural persons acting on purely personal activity. Fourthly, existing EU laws shall apply to digital euro payment transactions. For instance, The Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and the Regulation on information accompanying transfers of funds shall apply to digital euro payment transactions. Fifthly, the Regulation also addresses the access and use of the digital euro outside the euro area, which shall be made possible for member states or third countries who commit to a number of conditions and enter an arrangement with the European Central Bank. Sixthly, some technical features of the digital euro are defined, with regards to its accessibility and usability. Lastly, the Regulation mandates the Commission to present to the European Parliament and to the Council a report on the application of this Regulation one year from the first issuance of the digital euro, and every three years thereafter. To this end, the Commission shall also be required to present a report on the developments of retail central bank digital currencies in member states whose currency is not the euro and the impact of this Regulation on the internal market.

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Proposal: On the 28th of June 2023, the European Commission published a Proposal for a Regulation on the provision of digital euro services by payment services providers incorporated in Member States whose currency is not the euro and amending Regulation (EU) 2021/1230 of the European Parliament and the Council (press release).

Problem: The introduction of the digital euro requires a harmonised approach to the provision of digital euro services by payment service providers incorporated in member states whose currency is not the euro. Without such a Regulation, there could be fragmentation within the internal market, potentially leading to inconsistencies in the provision of these services.

Objective: To avoid this fragmentation, the Regulation proposes provisions that will apply to these payment service providers, ensuring that digital euro services are adequately supervised by competent authorities of the member states whose currency is not the euro. Furthermore, the Regulation aims to maintain a high level of competition across payment service providers, irrespective of where they have been licensed, thereby fostering innovation in payments, finance, and commerce. This proposal complements the Regulation establishing the digital euro, which is addressed to member states whose currency is the euro.

Subject Matter: Primarily, the proposal lays down specific obligations that will apply to payment service providers incorporated in member states whose currency is not the euro. Furthermore, the proposal also outlines the supervision and enforcement of these obligations by the member states whose currency is not the euro. Generally, it is emphasised that the digital euro would act as a catalyst for innovation in payments, finance, and commerce in the context of ongoing efforts to reduce the fragmentation of the EU retail payments market. Thus, payment service providers should be able to offer residents of the euro area digital euro payment services together with other payment or banking services. Subsequently, these payment services providers, wherever incorporated in the Union, should be subject to similar regulations and be able to distribute digital euro services so that a high level of competition across payment services providers is ensured. The provisions of these Regulations are consistent with the Digital Finance and Retail Payment Strategies of the Commission.

Retail Investment Package

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Proposal: On the 24th of May 2023, the European Commission published a Proposal for a Directive amending Directives (EU) 2009/65/EC, 2009/138/EC, 2011/61/EU, 2014/65/EU and (EU) 2016/97 as regards the Union retail investor protection rules (press release).

Problem: The current inadequacy of the EU's capital markets jeopardize the long-term financial needs of its citizens, who predominantly rely on low-yield savings. Retail investors face significant challenges in accessing clear and comparable information on investment products, impeding their ability to make well-informed investment decisions. Moreover, the level of retail investor participation in EU capital markets varies greatly across member states, influenced by diverse historical and socio-economic conditions. This disparity in participation is primarily due to a lack of trust in capital markets and a need for more transparent, fair, and protective investment conditions.

Objective: The EU retail investment strategy is designed to fortify the legislative framework, ensuring that retail investors are both empowered to make more informed investment decisions and are adequately protected within the single market. This strategy aims to align retail investors' investment decisions more closely with their personal needs and objectives, thereby enhancing their trust and participation in EU capital markets. The overarching goal is to create a more equitable and transparent investment environment across the EU, addressing the existing disparities and fostering a culture where investing in capital markets is both desirable and accompanied by well-defined and acceptable risks.

Subject Matter: The Proposal outlines an EU strategy focused on enhancing the framework for retail investments. This initiative is part of a broader effort to integrate European capital markets and finance economic activities, especially for small and medium-sized enterprises (SMEs). The strategy addresses disparities in retail investor participation across member states and aims to increase transparency and trust in capital markets. Key measures include simplifying access to investment product information and fostering financial literacy. This educational aspect is crucial in changing investment culture and making capital markets more attractive and less intimidating to potential investors. Client categorisation is another focal point, aimed at tailoring investment advice and product offerings to the specific needs and risk profiles of individual investors. This approach is expected to lead to better investment outcomes for retail participants. Furthermore, the regulation of marketing and disclosure rules is a significant aspect of this strategy. The Proposal emphasises the need for modernising and harmonising the retail investment framework across different sectors, considering the increasing digitalisation of financial services.

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Proposal: On the 24th of May 2023, the European Commission published a Proposal for a Regulation amending Regulation (EU) No 1286/2014 as regards the modernisation of the key information document (press release).

Problem: In line with the European Commission's objective of creating 'an economy that works for people’, the modernization of the key information document, is part of the Commission's 2023 work programme, which aims to ensure that legal frameworks support investors' participation in capital markets effectively and efficiently. As of January 2023, PRIIPs started to apply to investment funds under the scope of Directive 2009/65/EC on undertakings for collective investment in transferable securities (the UCITS directive), as the previous exemption had ceased to apply. This has further increased the consistency of disclosures across retail investment products.

Objective: The document implements a strategy for retail investments in Europe, as outlined in the European Commission’s Capital Markets Union action plan of September 2020. This strategy aims to enable retail investors to fully leverage the benefits of capital markets, supported by rules that are coherent across all relevant legal instruments. A core goal of the Capital Markets Union is to ensure that consumers can fully benefit from the investment opportunities offered by capital markets.

Subject Matter: The Regulation primarily deals with the modernization of the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs). The focus is on enhancing the accessibility and comprehensibility of information for retail investors, particularly within the digital environment. The proposed amendments to the PRIIPs legal framework aim to adapt disclosures to digital formats and evolving investor needs, emphasizing clarity regarding the scope of PRIIPs in relation to specific financial products. A notable addition is the introduction of a section dedicated to sustainability, aligning the document with various EU policies like the European Green Deal and digital strategy. The revisions proposed in the document are designed to augment investor protection and market transparency, offering tools for cost comparison and decision-making. Additionally, the document suggests measures for product oversight and governance, aiming to ensure value for money and cost efficiency in investment products. This has made it easier for investors to understand key features of a full range of investment products and to compare different products including those of different product type (such as insurance-based investment products, investment funds or structured deposits).

Social economy package

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Non-legislative Act: On the 25th of January 2023 the European Commission published a Communication on strengthening social dialogue in the European Union: harnessing its full potential for managing fair transitions (press release).

Problem: Social dialogue and collective bargaining are fundamental ways of improving living and working conditions. They are especially relevant in light of the rapid changes to the world in recent years through climate change, digitalisation and demographic trends, and therefore require to be reinforced constantly.

Objective: As one of the key principles of the European Pillar for Social Rights, the Communication sets out a number of measures to further strengthen the EU social dialogue. Thus, in order to improve the support of collective bargaining coverage and building the capacity, encouraging the involvement and safeguarding the autonomy of social partners.

Subject Matter: On a national level, the Commission proposed several measures in a Council Recommendation, i.e. creating an enabling environment for tripartite and bipartite social dialogue, promoting strong employers’ organisations with strengthened capacity, ensuring access to relevant information needed to participate and adapting to the digital age and the transition towards climate neutrality. Furthermore, the Commission shall assess the process of the implementation of the proposed measures by member states in consultation with the relevant social partners on a regular basis. On a union level, the Commission shall organise regular as well as extraordinary tripartite exchanges on relevant topics with the participation of European and national social partners. On a sectoral level, the Commission shall modernise the legal framework for Sectoral Social Dialogue Committees, facilitate synergies between existing committees, promote the inclusion of new segments of economic sectors and adjust the approach for conducting representativeness studies in cooperation with Eurofound. Moreover, the Commission calls on social partners to continue efforts and assess the need for further actions in the respective social dialogues in order to improve the membership and representativeness of trade unions and employers’ organisations. On the topic of social partner agreements, the Commission shall provide European social partners with administrative support and legal advice at their request and during negotiations on social partner agreements whose implementation through Union law is envisaged. To this end, European social partners are called upon to negotiate and conclude more social partner agreements. The Communication also takes scope at strengthening social partners’ involvement in EU policy-making, and shall therefore assign the role of Social Dialogue Coordinator in each Commission service and gather the views of the European cross-industry social partners on policy priorities ahead of the Commission work Programme. This would require the respective social partners to provide more joint outcome positions ahead of the relevant Commission proposals. In addition, the Communication aims to improve the effectiveness of the financial and technical support by setting up a research network for analysing and promoting EU social dialogue. Lastly, the Commission shall promote social dialogue internationally by continuing to call on member states to ratify and implement ILO Conventions as well as by launching a project to support social partners in Sectoral Social Dialogue Committees in conducting activities on responsible supply chains.

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Legislative procedure completed: On the 27th of November 2023, the Proposal for a Council Recommendation on developing social economy framework conditions was adopted. It aims to enhance social inclusion and access to the labor market through the social economy, emphasizing the sector's potential for creating quality jobs, promoting social and environmental objectives, and fostering democratic governance. The document encourages member states to support social economy entities by integrating them into active labor market policies, facilitating access to finance, and leveraging the social economy for sustainable development. It also highlights the importance of international cooperation and public and private support to strengthen the social economy's role in achieving broader socio-economic and environmental goals.

Proposal: On the 13th of June 2023, the European Commission published a Proposal for a Council Recommendation on developing social economy framework conditions (press release).

Problem: To fully tap the significant potential of the social economy in improving access to the labour market and social inclusion, there is a need for adapted legal frameworks, targeted policies, and administrative structures.

Objective: The Recommendation aims to provide guidance to member states on how to promote the social economy across policy fields and legal frameworks. It seeks to improve access to the labour market and social inclusion by supporting the social economy and creating a favourable environment for the sector. The Proposal also aims to stimulate sustainable economic and industrial development, contribute to territorial cohesion, and support social innovation.

Subject Matter: The Recommendation outlines several key points and provisions. Firstly, it recommends that member states shall put in place measures that foster access to the labour market and social inclusion through the social economy. This includes labour market policies to support employees in social enterprises and their reintegration into the labour market, promoting social entrepreneurship, enabling more people with disabilities to join the labour market, and promoting social dialogue and collective bargaining to ensure fair working conditions. Furthermore, it suggests that member states acknowledge and support the contribution of social economy entities to social inclusion and include them in the design and delivery of social and care services, housing, education, and activities for children and young people. It also recommends that member states support training and skills development for the social economy by building skills intelligence related to market needs, facilitating training for employees, and creating national or transnational competence centres on the social economy in cooperation with vocational education and training providers. Moreover, the Proposal suggests that member states should reinforce the role of social economy entities to support social innovation and in key sectors of local development and employment. It also proposes that member states should develop enabling frameworks for the social economy by designing and implementing comprehensive strategies for the sector. Lastly, the document provides recommendations to member states on strategies and policies that recognise, support, and build on the contributions that the social economy makes to help people access the labour market and social inclusion. To this end, an even development of the social economy across the EU shall be developed and on innovative approaches to employment in collaboration with the sector shall be promoted. Specifically, the Proposal suggests putting in place mechanisms for consultation and dialogue between public authorities and organisations representing the social economy.

Fostering better Traineeships

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Proposal: On the 20th of March 2024, the European Commission published a Proposal for a Recommendation on a reinforced Quality Framework for Traineeships (press release).

Problem: Youth unemployment remains a persistent and pressing issue within the European Union, with the youth unemployment rate more than twice as high as the overall unemployment rate. A significant challenge lies in activating young people who are not in employment, education, or training (NEETs), as they face specific barriers that hinder their integration into the labour market. Moreover, the quality of traineeships, which are crucial for gaining practical and professional experience, varies significantly, with many lacking fair and transparent working conditions and adequate learning content. This variability undermines the potential of traineeships to serve as a valuable stepping stone into the workforce, particularly for those in vulnerable situations.

Objective: In order to elevate the quality of traineeships across the EU a reinforced Quality Framework for Traineeships s introduced. It seeks to ensure that traineeships offer substantial learning and training content alongside fair and transparent working conditions, thereby enhancing their value for both trainees and employers. Furthermore, by promoting inclusivity, it aims to extend opportunities for traineeships to all young people, including those in vulnerable situations, thereby supporting their transition from education, unemployment, or inactivity to work. The Proposal also underscores the importance of cross-border traineeships in fostering labour mobility within the EU, enhancing the trainees’ skill sets and employability on a broader scale.

Subject Matter: At the heart of the proposed measures is the establishment of a solid framework to ensure traineeships across the EU provide meaningful learning and training experiences, fair working conditions, and a clear pathway towards employment. To achieve these ends, the framework proposes several key interventions. For instance, it mandates that all traineeships are based on a written agreement, outlining specific learning objectives, working conditions, mentorship arrangements, tasks to be performed, and details on social protection coverage. This measure aims to bring clarity and transparency to the expectations and responsibilities of both the trainee and the traineeship provider. Moreover, the framework emphasises the importance of fair compensation for trainees, suggesting that pay should reflect the tasks and responsibilities undertaken by the trainee, along with the intensity of the work and the significance of the learning component. This move seeks to ensure that traineeships are not only educational but also economically viable for participants, thereby broadening their appeal and accessibility. The Proposal also addresses the need for trainees to be afforded the same rights and working conditions as regular employees under EU and national law, including health and safety regulations, limits on working hours, and minimum rest periods. Furthermore, it highlights the necessity of assigning both a supervisor, to guide the trainee through their assigned tasks, and a mentor, to offer additional support and advice, enhancing the learning experience and integration of the trainee into the workplace. Recognising the diversity of traineeships across member states and sectors, the framework proposes extending its scope beyond open-market traineeships and those part of active labour market policies to also include traineeships that are mandatory components of formal education and training curricula, as well as those necessary to access specific professions. This comprehensive approach ensures the framework's applicability across a wide array of traineeship formats, enhancing its potential to improve quality and accessibility EU-wide. In addition to these measures, the Proposal advocates for inclusivity, recommending strategies to improve outreach to and the accessibility of traineeships for individuals in vulnerable situations. It calls for the use of inclusive language in traineeship advertisements and the adaptation of traineeship programmes to meet the individual needs of trainees, especially those with disabilities. Finally, the framework underlines the value of cross-border traineeships in promoting labour mobility within the EU. It suggests leveraging the EURES network to facilitate these opportunities, providing practical guidance and information to both trainees and providers on navigating the complexities of cross-border placements.

Follow-up: Deepening the Capital Markets Union

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Proposal: On the 24th of May 2023, the European Commission published a Proposal for a Directive amending Directives (EU) 2009/65/EC, 2009/138/EC, 2011/61/EU, 2014/65/EU and (EU) 2016/97 as regards the Union retail investor protection rules.

Problem: In a general economic context, the EU market for retail investments remains to be low in comparison to international competitors. This is due to a lack of financial literacy in the Union, as well as a number of challenges that diminish the ability of retail investors to take advantage of capital markets. These include difficulties for retail investors to access relevant and comparable product information and a growing exposure to unrealistic marketing information through digital channels.

Objective: Against this background, the legislative package containing this Directive aims to establish a comprehensive framework that safeguards retail investors, ensuring transparency, fair treatment, and sufficient risk disclosure. Thereby, trust and confidence of citizens in the capital markets as well as retail investor participation shall be enhanced. It is in line with the Capital Markets Union action plan that was put forward by the Commission in 2020.

Subject Matter: The Proposal focuses on enhancing investor protection in the realm of financial instruments, investment services, and insurance-based investment products. Therefore, investment firms, insurance undertakings, and intermediaries should assess the suitability or appropriateness of investment products based on accurate and complete information obtained from clients, accompanied by standardized warnings stressing the importance of accuracy. Firstly, the Proposal addresses transparency and disclosure requirements. To this end, retail investors should receive clear and standardized information regarding costs, charges, third-party payments, and the performance of their investments. Annual statements should provide an overview of held products, associated costs, payments received, and performance, with additional elements for insurance-based investment products used for retirement purposes. Furthermore, to eliminate legal uncertainty and reduce costs, disclosure requirements shall be consolidated into a single legal act, streamlining regulations for insurance undertakings and intermediaries. Secondly, the Proposal contains provisions for the regulation of marketing communications and practices. Thus, requirements for fair, clear, and non-misleading communication are necessary, with a focus on balanced risk and benefit presentation and suitability for the intended audience. Financial educational materials should therefore be distinguished from marketing. Thirdly, the identification of particularly risky investment products is seen crucial. To this end, guidelines and technical standards should be developed to aid investment firms, insurance undertakings, and intermediaries in identifying and providing warnings for such products. Fourthly, the Directive addresses financial literacy. Thereby, member states shall promote formal and informal learning measures to enhance the financial literacy of retail clients, customers, and prospective investors. Hence, the material should be tailored to different age groups, education levels, and technological capabilities. Additionally, special attention is given to retail clients and customers who access financial instruments, investment services, and insurance-based investment products for the first time, as well as those utilizing digital tools. Lastly, the Proposal focuses on appropriate professional client classification criteria.To this end, experience, knowledge, expertise, certified training, shall be considered while avoiding discrimination based on residence or wealth.

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Proposal: On the 24th of May 2023, the European Commission published a Proposal for a Regulation amending Regulation (EU) No 1286/2014 as regards the modernisation of the key information document.

Problem: In a general economic context, the EU market for retail investments remains to be low in comparison to international competitors. Amongst others, this is due to a lack of financial literacy in the Union. While the Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs) has improved the accessibility and comparability of information for retail investors, some adaptations are needed in order to facilitate the digital environment.

Objective: Against this background, the legislative package containing this Regulation generally aims to establish a comprehensive framework that safeguards retail investors, ensuring transparency, fair treatment, and sufficient risk disclosure. Specifically, this proposal is intended to improve the key information document for PRIIPs, in order to enhance understanding among retail investors. It is in line with the Capital Markets Union action plan that was put forward by the Commission in 2020.

Subject Matter: Mainly, the Regulation seeks to reduce visual overload and introduce flexibility in the use of electronic formats. Therefore, the key information document, typically three pages long, should be available on the manufacturer's website but should be personalized for investors while ensuring they can download the complete document. Regulatory technical standards shall be developed by the European Securities and Markets Authority (ESMA) and other relevant authorities. These standards shall cover the document's content, including a summarized dashboard with information on type, risk, costs, recommended holding period, and insurance benefits. Furthermore, the document should be kept up to date to provide accurate and timely information to investors. Additionally, the scope of PRIIPs shall be expanded to include securities, pension products, and annuities focused on providing retirement income. Thus, additional information should be required for PRIIPs with sustainability considerations, including details on environmental sustainability and greenhouse gas emissions intensity. Personalization and formatting adaptations should be allowed, and an interactive tool could be used for customization and cost simulation. Lastly, retail investors have the right to receive the key information document in electronic format, with the option for a paper copy if requested. To this end, retail investors should be informed about the document's location on the manufacturer's website.

Follow-up: Completing the Banking Union

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Non-legislative Act: On the 18th of April 2023, the European Commission published a Communication on the review of the crisis management and deposit insurance framework contributing to completing the Banking Union (press release).

Problem: Since its establishment in 2014, the Banking Union has been a key stability factor for the EU in economic crises. Two pillars of the Banking Union, namely a Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM), are already fully operational. Nonetheless, it has not yet been possible for the European legislators to reach agreement on the third pillar, i.e. a common deposit guarantee scheme. However, the latter is seen as crucial for the completion of the Banking Union and the efficient management of bank failures.

Objective: The legislative package aims to strengthen the common framework for bank crisis management and for deposit insurance (CMDI), in order to improve the Union's handling of bank failures. To this end, the following legal frameworks are to be reformed: The Bank Recovery and Resolution Directive; the Single Resolution Mechanism Regulation; and the Deposit Guarantee Scheme Directive. This Communication presents the underlying objectives of the proposed reforms in a bundled manner.

Subject Matter: The primary purpose of the CMDI framework is to ensure that losses to depositors from a bank failure are absorbed as best as possible. This is intended to maintain depositor confidence and protect taxpayers from bank failures. However, practice has shown that the implementation of the CMDI framework faces obstacles, especially in cases of smaller and medium-sized banks. On the one hand, this is due to the inconsistent handling of the instruments between member states. On the other hand, national resolution authorities have had wide scope for decision-making in dealing with bank failures, which possibly further contributes to market fragmentation. Thus, the proposed reforms to the CMDI framework aim to address the aforementioned limitations. A first key element of the reforms is to extend the given crisis resolution tools uniformly to smaller and medium-sized banks. Second, funds from the Deposit Guarantee Scheme (DGS) shall be used for the financing of crisis management instruments in a more simplified manner. However, this use of funds from the DGS in the resolution of small and medium-sized banks is subject to some restrictions. Namely, the funding should only be possible if it is necessary for maintaining financial stability and protecting taxpayers' money; and if it avoids depositors having to cover losses. Other elements of the proposed reforms aim to make the framework more efficient and predictable. Last, the Communication emphasises the need to increase efforts to finally adopt a common deposit insurance scheme in the Union.

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Proposal: On the 18th of April 2023, the European Commission published a Proposal on amending Directive 2014/59/EU as regards early intervention measures, conditions for resolution and financing of resolution action (press release).

Problem: Since its establishment in 2014, the Banking Union has been a key stability factor for the EU in economic crises. Two pillars of the Banking Union, namely a Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM), are already fully operational. Nonetheless, it has not yet been possible for the European legislators to reach agreement on the third pillar, i.e. a common deposit guarantee scheme. However, the latter is seen as crucial for the completion of the Banking Union and the efficient management of bank failures.

Objective: The legislative package aims to strengthen the common framework for bank crisis management and for deposit insurance (CMDI), in order to improve the Union's handling of bank failures. Specifically, this Proposal concerns the EU framework for recovery and resolution for institutions and entities. The proposed amendments are intended to improve the effectiveness and efficiency of the framework, promote depositor protection, enhance the resolvability of institutions, and ensure a level playing field across the European Union.

Subject Matter: Firstly, the Proposal emphasizes the importance of harmonising the ranking of deposits and introducing a general depositor preference. This single-tiered approach should grant all deposits a higher priority ranking over ordinary unsecured claims without differentiation between types of deposits. This approach shall boost depositor confidence, prevent bank runs, and improve the resolvability of institutions. Additionally, the Proposal highlights the role of deposit guarantee schemes (DGS) in supporting resolution actions. To this end, DGS shall be used to support transfer transactions involving deposits, even beyond the coverage level provided by the DGS, under certain conditions. The DGS's contribution should cover the shortfall in the value of transferred assets compared to the transferred deposits. Moreover, to prevent disruptions to the economy and protect depositors, certain liabilities, including bail-inable liabilities and deposits, may be excluded from transfers to buyers or bridge institutions in resolution. The DGS may provide support in covering the shortfall between transferred assets and liabilities, subject to limits. However, the contribution of the DGS should not exceed what it would bear in insolvency, and its support should primarily focus on avoiding losses on deposits. Lastly, the European Banking Authority (EBA) shall monitor and report on the design and implementation of resolvability assessments, actions of resolution authorities, and measures adopted by member states to protect retail investors. EBA should also oversee crisis simulation exercises, ensuring coordination and cooperation between competent authorities, resolution authorities, and DGSs. To this end, the importance of high-quality impact assessment for evidence-based legislative proposals is also emphasized, with resolution authorities and other relevant entities providing necessary information to the Commission.

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Proposal: On the 18th of April 2023, the European Commission published a Proposal for a Regulation on amending Regulation (EU) No 806/2014 as regards early intervention measures, conditions for resolution and funding of resolution action (press release).

Problem: Since its establishment in 2014, the Banking Union has been a key stability factor for the EU in economic crises. Two pillars of the Banking Union, namely a Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM), are already fully operational. Nonetheless, it has not yet been possible for the European legislators to reach agreement on the third pillar, i.e. a common deposit guarantee scheme. However, the latter is seen as crucial for the completion of the Banking Union and the efficient management of bank failures.

Objective: The legislative package aims to strengthen the common framework for bank crisis management and for deposit insurance (CMDI), in order to improve the Union's handling of bank failures. While other documents within the package address the introduction of a common Deposit Guarantee Scheme, this Proposal is intended to enhance the effectiveness and efficiency of the Single Resolution Mechanism.

Subject Matter: First of all, the Proposal emphasizes the importance of the bail-in tool in resolution processes and the need to ensure legal certainty. Therefore, provisions and contingent liabilities are distinguished, with provisions being treated as bail-inable liabilities unless they meet specific exclusion criteria. Moreover, the valuation of contingent liabilities is highlighted, and the potential value is taken into account when determining the amount by which bail-inable liabilities should be written down or converted. Secondly, the Proposal stresses the importance of timely access to relevant information for the resolution authority. The Single Resolution Board (SRB) should thus have access to statistical information collected by the European Central Bank (ECB) and cooperate with public institutions and authorities, including the European System of Central Banks, the European Supervisory Authorities, and the European Stability Mechanism. To this end, the protection and transmission of confidential statistical information are addressed, including the handling of information from centralised automated mechanisms related to customer data. Thirdly, Provisions are made for consultation with the Board before initiating normal insolvency proceedings for institutions under its direct responsibility. Specifically, the selection criteria, voting rights, and term limits for the Chair, Vice-Chair, and full-time members of the Board are specified, allowing for institutional continuity and expertise. Additionally, the budgetary process shall be extended to allow for a preliminary assessment by the Board. Fourthly, with regards to the Single Resolution Fund, provisions are made for deferring the collection of ex ante contributions to ensure proportionality to the cost of collection. The circumstances for calling irrevocable payment commitments and determining the share of such commitments in the total contributions are clarified. The maximum amount of extraordinary ex post contributions should be adjusted to maintain the capacity of the Fund for action. Fifthly, the Proposal addresses the claims of the Board against residual institutions or entities and their priority ranking in insolvency proceedings. It distinguishes such claims from compensations paid to shareholders and creditors from the Single Resolution Fund. Finally, the Regulation should be applied simultaneously with the amendments to the Bank Resolution and Recovery Directive, with certain provisions taking effect earlier to ensure consistency and the functioning of the Single Resolution Mechanism.

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Proposal: On the 18th of April 2023, the European Commission published a Proposal for a Directive amending Directive 2014/49/EU as regards the scope of deposit protection, use of deposit guarantee schemes funds, cross-border cooperation, and transparency (press release).

Problem: Since its establishment in 2014, the Banking Union has been a key stability factor for the EU in economic crises. Two pillars of the Banking Union, namely a Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM), are already fully operational. Nonetheless, it has not yet been possible for the European legislators to reach agreement on the third pillar, i.e. a common deposit guarantee scheme. However, the latter is seen as crucial for the completion of the Banking Union and the efficient management of bank failures.

Objective: The legislative package aims to strengthen the common framework for bank crisis management and for deposit insurance (CMDI), in order to improve the Union's handling of bank failures. Specifically, this Proposal is intended to strengthen and harmonise deposit protection across the EU, improve the operational efficiency of Deposit Guarantee Schemes (DGS), enhance depositor information, and promote the stability and integrity of the European banking system.

Subject Matter: One of the key amendments is the introduction of credit transfers for reimbursing depositors in amounts exceeding a certain threshold. This measure aims to improve the speed and efficiency of payouts to depositors, as well as to harmonise the treatment of funds held by financial institutions on behalf of their clients. Secondly, the Proposal also highlights the importance of cooperation between financial supervisors and resolution authorities in implementing customer due diligence measures. This cooperation shall facilitate the exchange of information and promote the effectiveness of anti-money laundering and counter-terrorist financing measures. Thirdly, the Proposal addresses DGS funding. To this end, it is specified that the DGS should have a claim against the residual institution or entity in subsequent winding-up proceedings, ensuring that shareholders and creditors bear the losses rather than depositors. Fourthly, the amendments also focus on the calculation and eligibility of funds to fulfil the target level, excluding funds collected via loans. They should harmonise the period during in which depositors can make claims against the DGS and provide flexibility for DGSs to use alternative funding arrangements before resorting to extraordinary contributions. Fifthly, to enhance depositor protection, the distinction between preventive and alternative measures by DGSs is clarified. Subsequently, conditions for marketing bank assets in alternative measures are introduced. Sixthly, the Proposal also includes provisions for the methodology of the least cost test. The test determines the maximum amount a DGS may contribute outside payout for preventive, resolution, and alternative measures. Other provisions include specifying the role of DGSs in reimbursing depositors in different member states, requiring branches of credit institutions in third countries to join an EU DGS. The last set of amendments shall establish rules on reporting and information exchange between credit institutions, DGSs, designated authorities, and the European Banking Authority (EBA). Thereby, effective operation, oversight, and financial integrity of the European banking system shall be ensured. Lastly, member states are required to transpose these amendments into national legislation within two years after the entry into force of the amending Directive. However, considering the complexity of certain provisions and the specificities of some institutions recognized as DGSs, the implementation period may be extended further.

Competitive and Efficient Use of Airport Capacity

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Legislative, incl. impact assessment, Article 100(2) TFEU, Q3 2023.

European Commission Work Programme 2022

Economic Governance Framework

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Non-legislative Act: On the 9th of November 2022, the European Commission published a Communication on orientations for a reform of the EU economic governance framework (press release).

Problem: The review of the EU economic governance framework by the EU institutions and all key stakeholders led to the conclusion that the economic challenges of today and tomorrow require reforms of the framework. Discussions in the Council (ECOFIN), the Eurogroup, the Economic and Financial Committee and the Economic Policy Committee have allowed member states to reflect on and express their views on the main objectives of the governance framework, its functioning and the new challenges that need to be addressed. It is time to move from discussions to decisions, effectively addressing the key economic and policy issues that will shape the EU’s economic policy coordination and surveillance over the next decade.

Objective: The aim is to strengthen debt sustainability and promote sustainable and inclusive growth in all member states by introducing prudent fiscal strategies and investments as well as mutually reinforcing reforms. By optimising the framework, the Union will be able to address the current challenges and contribute to making Europe more resilient. The Commission emphasises the strengthening of national ownership, simplification of the framework and a stronger medium-term focus combined with stronger and more coherent enforcement of it. The overarching goal of the reform is to facilitate effective economic policy surveillance while ensuring equal treatment and multilateral policy coordination. The legal framework must be robust to changing economic conditions and uncertainties. To effectively prevent and correct macroeconomic imbalances, emerging risks need to be better identified and reform momentum maintained. At the same time, more emphasis shall be placed on euro area developments and policy implementation.

Subject Matter: In addition to revising the EU fiscal framework and the multi-annual indicative programme, the Commission's guidelines call for the creation of a new EU instrument to enforce reform and investment. This instrument would ensure the enforcement of member states' reform and investment commitments and support a gradual budgetary adjustment. The Commission proposes the establishment of national medium-term fiscal plans that bring together the fiscal, reform, and investment commitments of individual member states within a common EU framework. In addition, member states shall commit to reforms and investments that would help bring debt onto a sustainable path and thus support a longer adjustment period and a more gradual adjustment path. A single operational indicator, guided by debt sustainability, would serve as the basis for defining the fiscal adjustment path and annual budgetary surveillance, greatly simplifying the fiscal framework and increasing its transparency. Additionally, the submission of an annual progress report by the member states will facilitate effective monitoring of the implementation of the medium-term fiscal structural plans, whereas the creation of a new instrument will ensure the implementation of reform and investment commitments. To increase ownership and transparency at the national level, independent financial institutions will play a role in monitoring compliance with national medium-term fiscal structural plans in support of national governments. Most importantly, rapid agreement is needed on the revision of EU fiscal rules and other elements of the economic governance framework.

Protection of Workers

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Proposal: On the 14th of September 2022 the European Commission published a Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/148/EC on the protection of workers from the risks related to exposure to asbestos at work (press release).

Problem: Occupational cancer is the most common cause of work-related deaths in the EU, with a large proportion caused by exposure to carcinogens, particularly asbestos. Although all extraction, manufacturing and processing of asbestos has been banned in the EU since 2005, the EU faces a legacy problem: Many older buildings, as part of the European Green Deal renovation wave strategy, will be renovated, adapted or demolished over the upcoming years, resulting in a significant exposure to asbestos for workers in the construction industry.

Objective: Based on the latest available scientific evidence and recent in-depth evaluations of EU-Directives regarding occupational health and safety, the proposed Directive aims to revise existing Regulation regarding the limiting of exposure to asbestos in the workplace. A revision of the occupational exposure limit value for asbestos shall lead to greater harmonisation of limit values between member states and create fairer conditions for posted, cross-border and mobile workers. In doing so, the Directive shall contribute to the fulfilment of the commitments to reduce workers' exposure to asbestos as set out in the action plan on the European Pillar of Social Rights and the EU strategic framework on health and safety at work for 2021-2027.

Subject Matter: The proposed Directive looks to amend and strengthen the Directive 2009/148/EC on the protection of workers from the risks related to exposure to asbestos at work, which is currently in force. Mainly, the occupational exposure limit value for asbestos will be reduced by a factor of ten (from 0.1 fibres to 0.01 fibres per cm³, calculated as a weighted average over a reference period of 8 hours) based on recent scientific evaluations. The exposure of workers to asbestos shall thus be minimised as far as possible. In addition, more modern and sensitive methods based on electron microscopy shall be preferred for fibre counting, wherever possible. Furthermore, the proposed directive adds measures for the prevention and follow-up of asbestos exposure for workers. To this end, employers carrying out demolition or maintenance work are obliged to determine the quantity of materials likely to contain asbestos as best they can, using all available sources and prior to beginning work. In addition, employers must ensure the continuation of health surveillance of workers after the end of exposure by entering important information into a register. The regulation is to be implemented within two years of its entry into force.

Small and Medium Sized Enterprises

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Proposal: On the 7th of December 2022, the European Commission published a Proposal for a Directive amending Directive 2014/65/EU to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises and repealing Directive 2001/34/EC (press release).

Problem: Listed companies, especially SMEs, need to make themselves known to potential investors: Currently, due to the low level of investment research on such issuers, there is low visibility and interest from investors, further limiting the liquidity of already listed companies. Despite some research introduced under MiFID II and the Commission Delegated Directive (EU) 2017/593, which led to the establishment of conditions for the admission of issuers, the liquidity of already-listed companies is limited. These regulations, also known as "unbundling rules," have not contributed to the growth of independent providers of financial research. On the contrary, after the introduction of the unbundling rules, independent research became unsustainable due to the low prices charged by some of the larger research providers. The general availability of research, especially for small- and mid-capitalization companies, was affected. This led to a shrinking market research infrastructure, which is detrimental to a competitive and diversified analyst market. Current surveys indicate that coverage of SMEs has declined significantly or even disappeared altogether, resulting in a reduction in the diversity and scope of research offerings. Unbundling has not allowed independent pricing of financial research, nor has it opened this market to independent (non-brokerage) providers. It has not prevented the negative trend in the coverage of small and mid-cap companies, and has not led to the emergence of independent research providers targeting SMEs. Despite the changes made, the objective of supporting the production of the study of small and medium capitalisation companies was not fully achieved.

Objective: This proposal amends the unbundling regime for financial analysis and makes some changes to the regulatory framework for the SME Growth Market, a category of MTF created under MiFID II to improve the visibility and profile of SMEs. The overall objective is to introduce targeted adjustments to the EU regulatory framework to increase the visibility of listed companies, in particular SMEs, and to streamline the listing process and increase legal clarity. The Commission is committed to facilitating the development and provision of financial analysis to companies, particularly those with small and medium market capitalizations, and to further enhancing the attractiveness of the SME Growth Market Scheme. The main idea is to make it easier for small and medium-sized companies to access the capital markets. The current threshold of 1 billion euro is to be raised to 10 billion euro in order to cover a broader range of companies with small and medium-sized capitalisation, and in particular more mid-sized companies that would benefit from re-bundling. In addition, the exemption from the unbundling rule is expected to remove barriers to accessing more financial research on small and mid-cap companies, which should stimulate the market for financial research overall. Finally, this proposal attempts to promote the harmonisation and coherence of the listing rules in the EU, in order to make the regulatory framework fit for purpose.

Subject Matter: Member states shall require that the prospective market capitalisation of the shares for which admission to trading is sought be at least 1 000 000 euro or an equivalent amount in a national currency other than the euro. They shall additionally require regulated markets to ensure that at least 10 per cent of the subscribed capital of the class of shares for which admission to trading is sought is held by the public at any time. Where this is not the case, member states will have to ensure that regulated markets require that a sufficient number of shares are distributed to the public. The Commission will be empowered to adopt delegated acts to amend this Directive by modifying the thresholds where the current thresholds affect liquidity on public markets, taking into account financial developments. Member states shall adopt and publish the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

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Proposal: On the 7th of December 2022, the European Commission published a Proposal for a Directive on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market (press release).

Problem: Despite the first CMU action plan in 2015, which has made it easier and cheaper for companies, especially SMEs, to access public markets, stakeholders continue to argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers. One of the main issues preventing founders and families from choosing to go public is the fear of losing control of their business once it is listed. In particular, smaller family businesses, start-ups and companies with long-term projects that require significant upfront costs run the risk of being overly exposed to fluctuations in public markets or the threat of a hostile takeover. In addition, smaller companies are more reliant on diversified financing due to their typically riskier profile, lower visibility to potential investors, inability to go public abroad, and in some cases, the need to scale up. As a result of the fragmentation within the Union with regard to share structures with multiple-vote share structures, EU companies currently have unequal opportunities: Entrepreneurs and companies from member states that prohibit multiple-vote share structures are at a disadvantage with companies from member states that permit such structures.

Objective: As part of the Listing Act package, this proposal aims to make public capital markets more attractive for EU companies and to facilitate access to capital for small and medium-sized enterprises (SMEs). To achieve this, disclosure requirements for primary and secondary markets must be streamlined and clarified, while maintaining an appropriate level of investor protection and market integrity. The low level of investment research for SMEs shall be addressed. As access to public markets is important for smaller and fast-growing companies, the Proposal refers to companies listed on SME growth markets. It seeks to achieve a minimum harmonisation of national legislation on multiple-vote share structures of companies, while allowing member states sufficient flexibility for implementation. There is a possibility to introduce multiple-vote share structures for all companies seeking admission to trading of their shares on an SME growth market. To ensure the protection of minority shareholders and the interests of the company, a list of protective measures is presented.

Subject Matter: With this Proposal, the Commission introduces common rules for multiple-vote share structures in companies that apply for admission of their shares to trading on an SME growth market in one or more member states and whose shares are not yet admitted to trading on a trading venue. Member states must ensure that any decision to introduce a share structure with a multiple-vote share structure or to change that structure in a way that affects voting rights is taken by qualified majority at the general meeting. Limitations on the voting weight of shares with multiple voting rights shall be implemented through restrictions either on the design of the multiple-vote share structure or on the exercise of voting rights attached to multiple vote shares for the adoption of certain decisions. These safeguards shall be similar to those already in place in the legal systems of member states with well-functioning multiple voting rights structures. Member states shall ensure that a company's decision to introduce a multiple-vote share structure, and any subsequent decision to change such structure that affects voting rights is taken by the general meeting of that company and approved by the qualified majority provided for in national law. Member states may provide for further safeguards. A provision may be introduced that prevents the extended voting rights attached to multiple voting shares from continuing after a certain period of time. Additionally, the transfer of those rights to a third person after the death of a shareholder can be prohibited.

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Proposal: On the 7th of December 2022, the European Commission published a Proposal for a Regulation amending Regulations (EU) 2017/1129, (EU) No 596/2014 and (EU) No 600/2014 to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises (press release).

Problem: Feedback from the market shows that the initial and ongoing costs of establishing a stock corporation have increased significantly in recent decades, especially for SMEs. In addition, stakeholders argue that the obligation to prepare a prospectus (a document containing information about a company) remains burdensome. Given the current rules, prospectuses tend to be excessively long. Neither the standard prospectus nor the EU Growth prospectus strike an appropriate balance between effective investor protection and the appropriate administrative burden on issuers, particularly SMEs. Moreover, current rules contribute to the wide divergence of prospectuses across the Union. Finally, the current provisions of the Market Abuse Regulation (MAR) create a disproportionate system of sanctions for breaches of the disclosure obligation, especially for SMEs.

Objective: The overall objective of this initiative is to introduce technical adjustments to the EU regulatory framework in order to reduce regulatory and compliance costs for companies seeking a listing or companies that are already listed. It is further crucial to streamline the listing process and improve legal clarity, while ensuring an appropriate level of investor protection and market integrity. This, in turn, will help diversify sources of financing for EU companies and increase investment, economic growth, job creation and innovation in the EU. The Prospectus Regulation is being amended to make it easier and cheaper for issuers to produce a prospectus, while enabling investors to make the right investment decision. These changes are intended to noticeably reduce the cost and burden on issuers while ensuring that investors can benefit from a document that is easier to read and navigate and facilitates comparison of financial instruments and issuers. SMEs shall be able to raise funds in public markets more easily. This will be allowed through the reduction of costs for SMEs and making disclosure more tailored to the needs of investors.

Subject Matter: The proposal aligns the scope of disclosure of the standard prospectus with that currently required under the EU Growth Prospectus regime, introduces a fixed order of disclosure, and makes incorporation by reference a legal requirement. The proposal also requires issuers to be able to produce the prospectus only in the English language commonly used in international finance (except for the executive summary, which in practice is the only document most retail investors consult) and to publish it only in electronic form. A limit on the number of pages (300 pages) avoids excessively long prospectuses for companies that do not have a complex financial history. Several other amendments are proposed by the Commission that address each of the articles of the Regulation (EU) 2017/1129 in order to adjust to the objectives of the Proposal. These will be binding in their entirety and directly applicable in all member states.

Instant Payments

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Proposal: On the 26th of October 2022 the European Commission published a Proposal for a Regulation amending Regulations (EU) No 260/2012 and (EU) 2021/1230 as regards instant credit transfers in euro (press release).

Problem: Due to low adoption within the Union, the significant benefits and network effects of instant payments for consumers and businesses in the EU have not yet been realised since their introduction in 2017. Furthermore, individual national regulations may risk fragmenting the single market, increasing compliance costs and making cross-border instant payments more difficult to execute.

Objective: The proposed Regulation aims to promote instant credit transfers in euro by updating and modernising the Single Euro Payments Area (SEPA) in order to contribute to the definition and effective implementation of an independent, efficient, well-functioning, open and autonomous payments area.

Subject Matter: The Regulation aims to adapt existing Union legislation with regard to instant credit transfers. These amendments would require payment service providers to offer the sending or receiving of instant credit transfers in Euro as a service. There should be no differences in the interfaces through which payment service users can execute instant credit transfers or other types of credit transfers. In addition, levied charges by the payment service provider on payers and payees for instant credit transfers should not be higher than for corresponding other types of credit transfers. Payment service users should nevertheless be able to opt out of the use of instant credit transfers at any time during their contractual relationship. Since the time for checking the transfer by the payment service provider is eliminated with instant transfers, specifications are also made to guarantee an immediate checking of transfers. On the one hand, this concerns incorrect transfers due to false data stated by the payer. The payment service provider should therefore check and, if necessary, inform within a few seconds whether and to what extent the customer identifier of the payee deviates from the name given. On the other hand, these amendments concern the prevention of transfers to persons, institutions, or organisations against which sanctions have been imposed. Since a transaction-based verification is no longer possible due to the nature of instant credit transfers, payment service providers shall instead verify at least on a daily basis whether the users of their payment services are listed persons or organisations. Due to the complexity, the introduction of the amendments to these regulations shall be step-based. Firstly, payment service providers shall be obliged to accept instant credit transfers, which at the same time presupposes the daily checking of users for listed persons and organisations. Only in the second step are payment service providers to be obliged to send instant transfers, which includes the systems for notifying false information. Payment service providers in non-euro countries will be given more time to implement these requirements.

Deepening the Capital Markets Union

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Proposal: On the 7th of December 2022 the European Commission published a Proposal for a Directive harmonising certain aspects of insolvency law (press release).

Problem: Discrepancies of insolvency regimes have long been seen as one of the major obstacles to the freedom of capital movement and to greater integration of the EU’s capital markets. Different degrees of efficiency accompanied by legal uncertainty restrict cross-border flow of capital and investment, thus limiting the depth of the EU capital markets.

Objective: The Proposal aims to address and reduce the fragmentation of insolvency regimes within the Union, thus further integrating the EU single market and strengthening the Capital Markets Union (CMU).

Subject Matter: The Directive lays down common rules for a number of areas of insolvency policy. It thereby addresses avoidance actions, concerning the timeframe, within which any legal acts benefitting a creditor can be declared void. To this end, those legal acts can be declared void if they were perfected within three months but no more than a year prior to the submission; or after the submission of the request for the opening of insolvency proceedings. It addresses the tracing of assets belonging to the insolvency estate, which regulates the access to bank account information by designated courts, access by insolvency practitioners to beneficial ownership information and national asset registers. Moreover, harmonising rules are set for pre-pack proceedings, by laying down two consecutive phases of preparation and liquidation. With regards to the process of opening of insolvency proceedings, the directors of the respective legal entity shall submit a request for the opening of an insolvency proceeding no later than 3 months after they can reasonably be expected to have been aware that the legal entity is insolvent. Another area of the Directive is concerned with the simplification of winding-up proceedings for microenterprises. To this end, the Member States shall ensure that the conditions of the simplified insolvency process are clear, simple, and easily ascertainable by the microenterprise concerned. Furthermore, the Directive also addresses regulation of the establishment and responsibilities of creditors’ committees. Lastly, the Directive introduces measures enhancing transparency of national insolvency laws by requiring member states to draw-up a key information factsheet on certain elements of their national law on insolvency proceedings. These include, among others, the conditions for the opening of insolvency proceedings and the average reported length of insolvency proceedings.

EU Clearing System

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Non-legislative Act: On the 7th of December 2022 the European Commission published a Communication on a path towards a stronger EU clearing system (press release).

Problem: An efficient, robust and safe EU clearing ecosystem is an important factor for the well-functioning of the Capital Markets Union. Even though rules for clearing are set out in existing EU-Regulation, new challenges for the functioning of the CMU have arisen which require further strengthening of the regulatory frameworks regarding the EU clearing systems.

Objective: The Communication lays out key actions on addressing the challenges for the CMU with regards to clearing, in order to guarantee a competitive and modern EU clearing system.

Subject Matter: Firstly, supervisory approval procedures for Central Counterparties (CCPs) will be shortened and simplified, to reduce the time it takes CCPs to bring a product to market or make a substantial model change. To ensure high security in the EU clearing ecosystem, CCPs shall be subject to supervision on a national as well as Union level. To this end, the EU supervisory framework shall be strengthened by establishing joint supervisory teams and by facilitating the monitoring of cross-border risks to the EU throughout the clearing chain. Furthermore, recent spikes and extreme volatility in energy derivative market have revealed the need for structural improvements of the European Market Infrastructure Regulation (EMIR) framework. Therefore, the package accompanied by the Communication include amendments to the EMIR framework to enable firms to get a better understanding of potential liquidity needs when clearing centrally. In light of further developing the Union’s open strategic autonomy, the clearing capacity within the EU shall be improved, in order to reduce the excessive exposures of EU market participants on third-country CCPs. Lastly, the Communication addresses the role of public authorities both at national and Union level in the development of a competitive clearing ecosystem. The Commission thus encourages public authorities within the EU to clear at EU CCPs, invites national authorities to amend national accounting rules and remove obstacles to transferring exposures and calls for central banks and CCPs to engage with the Eurosystem on the topics of the European payment systems.

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Proposal: On the 7th of December 2022 the European Commission published a Proposal for a Directive amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk towards central counterparties and the counterparty risk on centrally cleared derivative transactions (press release).

Problem: An efficient, robust and safe EU clearing ecosystem is an important factor for the well-functioning of the Capital Markets Union. New challenges for the functioning of the CMU have arisen, which require further strengthening of the regulatory frameworks regarding the EU clearing systems.

Objective: While the key legislative measures of the package ensuring an efficient EU clearing ecosystem lies within the amendments to the European Market Infrastructure Regulation (EMIR), this Proposal complements these efforts by ensuring its coherence. The two proposals should therefore be read in conjunction.

Subject Matter: The intended amendments of this Directive are designed to complement the amendments to the EMIR framework by the other Proposal of the clearing package in order to ensure consistency. Therefore, the scope of the Directive on undertakings for collective investment in transferable securities (UCITS) from 2009 is widened to the distinction between transactions which have been cleared centrally by a Central Counterparty (CCP) that is authorised or recognised under the amended EMIR framework, and transaction which have not been cleared centrally. Additionally, Directives on prudential supervision of credit institutions and investment firms from 2013 and 2019 respectively shall be amended to encourage these institutions to adapt their business model to ensure consistency with the modified EMIR framework.

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Proposal: On the 7th of December 2022 the European Commission published a Proposal for a Regulation amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets (press release).

Problem: An efficient, robust and safe EU clearing ecosystem is an important factor for the well-functioning of the Capital Markets Union. New challenges for the functioning of the CMU have arisen, which require further strengthening of the regulatory frameworks regarding the EU clearing systems.

Objective: By taking previous versions of European Market Infrastructure (EMIR) into account, the Proposal aims to modify EMIR in order to ensure the stability and efficiency of the EU clearing ecosystem. The two proposals of this package take scope at different legislation for the same aforementioned purpose, and should therefore be read in conjunction.

Subject Matter: EMIR requires that derivatives transactions are reported to ensure market transparency so that their risks are mitigated through central clearing or by exchanging collateral in bilateral transactions. It got introduced in response to the 2008/2009 financial crisis to promote financial stability and to make markets more transparent and standardised. Considering amendments in 2017 to recalibrate some of the requirements, it has established a stable framework for central clearing. However, certain areas of the framework have proven to be overly complex, which can harm the attraction for businesses, both within the EU and internationally. The Proposals of this package thus mainly focus on a simplification of the framework for central clearing by amendments to the EMIR framework. The proposed amendments regard Regulations on over-the-counter (OTC) derivatives, Central Counterparties (CCP) and trade repositories; on prudential requirements for credit institutions and investment firms; and on money market funds. In summary, the amendments aim to enable firms to better predict the liquidity needs associated with central clearing. To this end, the current supervisory system shall be strengthened to ensure a robust and joined-up supervision. In addition, to address concerns of the risks to the Union’s financial stability arising from the excessive concentration of clearing in some third-country CCPs, the amendments shall increase the proportionality of the EMIR framework to better tailor cooperation with foreign supervisors on the one hand, and build up the Union’s central clearing capacity on the other.

Fair Taxation

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Legislative procedure completed: On the 14th of December 2022, the Council Directive on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union was adopted (press release). It enters into force on 1st January 2024. The Directive introduces the Income Inclusion Rule (IIR) and the Undertaxed Profit Rule (UTPR), together referred to as the 'GloBE rules.' These rules are designed to apply a 'top-up tax' whenever the effective tax rate of a multinational enterprise (MNE) in a given jurisdiction falls below 15 per cent.

Proposal: On the 25th of December 2021, the European Commission published a Proposal for a Directive on ensuring a global minimum level of taxation for multinational groups in the Union (press release).

Problem: Challenges arising from Base Erosion and Profit Shifting (BEPS) and the tax implications of the digitalisation of the economy include ensuring that corporations pay a fair share of tax on profits generated by their activities in the EU. The Proposal acknowledges the twin challenges of BEPS and the need to address excessive tax competition between jurisdictions, especially in the context of increasing globalisation and digitalisation.

Objective: The Directive aims to implement rules ensuring a minimum level of effective corporate taxation for large multinational and large-scale purely domestic groups operating in the Single Market. This is in line with the agreement reached by the OECD/G20 Inclusive Framework and the OECD Model Rules. The objective is to address tax challenges through two work streams.

Subject Matter: The Proposal introduces a two-pillar solution to tackle the tax challenges. Pillar 1 focuses on the reallocation of taxing rights towards market jurisdictions, suggesting a partial redistribution of taxation powers across countries where economic activities occur, and profits are generated. Pillar 2 proposes the introduction of a global minimum corporate tax rate, aiming to put a floor on tax competition between jurisdictions and ensure that multinational companies contribute their fair share wherever they operate. A critical component of Pillar 2 is the set of rules known as the Global anti-Base Erosion (GloBE) rules, comprising the Income Inclusion Rule (IIR) and the Under Taxed Payments Rule (UTPR). The IIR aims to impose a minimum level of tax on income of multinational entities, while the UTPR serves as a backstop to the IIR, allocating the right to tax additional income where other jurisdictions have not exercised their primary taxing rights. These rules are designed to be introduced into national domestic tax laws and are complemented by the Subject to Tax Rule (STTR), a treaty-based rule allowing source jurisdictions to impose limited taxation on certain payments that are subject to tax below the minimum rate. The Proposal extends the scope of these rules to large multinational groups and large-scale purely domestic groups operating within the EU Single Market. It outlines a comprehensive architecture for the GloBE rules, detailing the application of the IIR and UTPR, the calculation of the Effective Tax Rate (ETR), and the conditions for applying the top-up tax. The Proposal also includes specific provisions for large-scale domestic groups, ensuring that they are subject to similar rules as multinational enterprises.

Minimum Income

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Legislative procedure completed: On the 30th of January 2023, the Council Recommendation on adequate minimum income ensuring active inclusion was adopted (press release). Minimum income support is an effective means of combating poverty and social exclusion and of achieving a high level of employment. The Council therefore recommends that Member States provide and, where necessary, reinforce robust social safety nets by combining adequate income support through minimum income support and other related cash and in-kind benefits and by providing access to supportive and essential services. The exact amount is left to the Member States.

Proposal: On the 28th of September 2022 the Commission published a Proposal for a Council Recommendation on adequate minimum income ensuring active inclusion (Press release).

Problem: Despite efforts to combat poverty and some improvements over the last decade, the poverty risk for people living in (quasi) jobless households has increased in many member states over the last decade, adding up to over 95.4 million Europeans affected by the risk of poverty or social exclusion in 2021. This trend is mostly due to the economic shock by the COVID-19 pandemic which disproportionately affected women and people in vulnerable situations, and will likely worsen because of a sharp increase in energy prices and hiking inflation following Russia’s aggression against Ukraine.

Objective: This Recommendation aims to combat poverty and social exclusion by promoting adequate income support, effective access to essential services for persons lacking sufficient resources as well fostering labour market integration of those who can work, in line with the active inclusion approach. The proposed measurements thus contribute to meet the headline targets by the European Council in the areas of poverty, employment, and skills: As adopted by the member states in June 2022, the ambition hereby is to reduce of the number of people at risk of poverty or social exclusion to 15 million as well as reaching an employment rate of at least 78 per cent of people aged 20 to 64 by 2030.

Subject Matter: The Recommendation focusses on strengthening social safety nets for ‘persons lacking sufficient resources’, meaning persons living in households with insufficient, irregular or uncertain monetary and material resources, which are indispensable for their health and well-being and for participating in the economic and social life. Although all member states have social safety nets in place, the proposed measurements aim to even out accessibility and adequateness throughout the Union, which has varied across member states. The focus lies on minimum income because it can act as an automatic stabiliser in times of economic crisis, thus constituting a key element of strategies to exit poverty and exclusion. Thereby, age, the length of legal residence for non-nationals, accessibility of digital tools or the lack of a permanent address should not form a barrier to access minimum income. The Recommendation aims to establish a robust and transparent methodology for setting and adjusting income support at regular intervals, informed by relevant indicators to ensure adequacy of the overall income support. Its measures focus on individual members of the household to address gender inequality and enable tailored measures for the social and economic integration. Moreover, it gives particular attention to the youth and young adults and to the needs of persons with disabilities. Furthermore, the Recommendation proposes sufficient simplicity of the application procedures, administrative support to the potential claimants, regular reviews of incentives and disincentives resulting from tax and benefit systems or a gradual phasing out of income support upon taking up employment to guarantee sustainable income through labour, reducing in-work poverty and incentivising formal employment. Minimum income shall be accompanied by in-kind benefits to provide targeted support for persons lacking sufficient resources to facilitate their access to specific services such as early childhood education and care, healthcare and long-term care, social housing, employment, and training. Lastly, the Recommendation emphasises effective governance mechanisms by data exchange and closer co-operation across different levels of governance and services, as well as an analytical exchange of best practices at a Union level. In terms of funding, investments in social infrastructure can therefore be drawn from the European Regional Development Fund and InvestEU. Moreover, each member states should allocate at least 25 per cent of the European Social Fund Plus to combat social exclusion, though an implementation of this Recommendation should not significantly affect the financial equilibrium of member states’ social protection systems to guarantee an overall sustainability of public finances.

Decent Work Worldwide

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Non-legislative act: On the 23rd of February the European Commission published a Communication to the European Parliament, the Council and the European Economic and Social Committee on decent work worldwide for a global just transition and sustainable recovery (press release).

Problem: Despite the international community's commitment through the Sustainable Development Goals to promote decent work, the latest estimates indicate that 160 million children in the world are victims of child labour and 25 million people are employed in forced labour. The COVID-19 pandemic has exacerbated these trends, as well as inequalities in working conditions and income. At the same time, the globalised world of work is undergoing rapid change, which on the one hand offers enormous potential, but on the other hand may further contribute to lowering labour standards in some cases.

Objective: The Communication sets out the Union's strategies to respond to these challenges by placing the promotion of decent work at the heart of a just transition and the recovery from the pandemic. In doing so, the EU seeks to live up to its responsibilities as a global economic actor, and to meet its commitments under the 2030 Agenda and the 2021 Action Plan on the European Pillar of Social Rights.

Subject Matter: The elimination of child labour constitutes a high priority In the context of creating decent work worldwide. Measures to achieve this includes supporting and enforcing effective legislation against child labour, promoting social welfare programmes for high-risk households, improving access to education or providing protection services for children in conflict or crisis situations. In concrete terms, due diligence requirements shall be introduced for sufficiently large companies and in sectors of relevance in order to identify and prevent negative impacts and violations of human rights along the global supply chain. In addition, the Union commits to action on sustainable finance to channel investment flows towards sustainable and decent economic activities. The reduction of pollution and waste and incentives for product innovation will also be ensured in the Circular Economy Action Plan. With regard to consumer policy, better and more reliable information for the sustainability of goods and services is to be introduced. Specific actions in this sector include initiatives such as "From Farm to Fork" and the International Maritime Policy Agenda and Common Fisheries Policy in the area of food and agriculture, the Raw Materials Initiative and the Critical Raw Materials Action Plan in the area of raw materials supply. Moreover, increased efforts shall be made to combat forced labour and child labour. In addition to the ILO's fundamental conventions on forced labour and child labour which all member states ratified, the Commission is examining the possibility of EU-minimum legislation that would criminalise the use of services by victims of human trafficking, as only inconsistent legal provisions exist in within the Union up to now. Socially responsible public procurement is seen as another effective instrument, as it provides strong incentives to introduce socially responsible management practices. Additionally, an Initiative by the Commission aims to introduce an effective ban on products made with forced labour in the internal market. Furthermore, an increased focus on decent work and the prohibition of forced and child labour shall be emphasised in international trade and partnership policies, as well as in the EU enlargement policy. The Union should also become more active on decent work issues in international and multilateral fora. Finally, in the strategic framework outlined, the Union also commits to strengthen cooperation with stakeholders and in global partnerships in the issues at hand, such as the EU Sectoral Social Dialogue Committees, civil society organisations or multi-stakeholder initiatives.

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Proposal: On the 14th of September 2022 the European Commission published a Proposal for a Regulation of the European Parliament and of the Council on prohibiting products made with forced labour on the Union market (press release).

Problem: Despite the commitments of the United Nations to eradicate forced labour by 2030 its use remains widespread: The International Labour Organisation has estimated the global number of people in forced labour at 27.6 million.

Objective: The proposal aims to effectively prohibit the placing and making available on the EU market and the export from the EU of products made with forced labour through creating and supporting competent authorities within the member states to address and enforce forced labour issues. To avoid obstacles to the free movement of goods and distortions of competition in the internal market that would result from divergences in national laws regarding forced labour, the implementation must be uniform across the EU. Building on international standards, the proposal complements existing horizontal and sectoral EU initiatives, in particular corporate sustainability due diligence and reporting requirements, and establishes a ban backed by a robust, risk-based enforcement framework.

Subject Matter: The proposal attempts to establish a system within company law and corporate governance to address human rights and environmental abuses in companies, including their subsidiaries’ and their value chains. It aims to establish a network of relevant authorities; enforcement powers therefore lie with the member states and focus on larger economic operators at early stages of the EU value chain. Competent authorities shall follow a risk-based approach in investigating products and economic operators concerned, based on relevant information such as submissions my individuals, risk indicators and a shared database of forced labour risk areas or products, which will be set up for this purpose. In case of a violation, competent authorities will be able to prohibit the availability and exportation of the product in concern, withdraw the respective economic operators and dispose their remaining products from the Union market. A control of products entering or leaving the Union market will be enforced. Additionally, an interconnection to enable the automated communication of decisions will be developed by the Commission and a Union Network Against Forced Labour Products (“the Network”) is established to create a platform for structured coordination and cooperation between the competent authorities of the member states and the Commission. In addition, within 18 months of the entry into force of this Regulation, the Commission will publish guidelines providing guidance on due diligence on forced labour and information on forced labour risk indicators.

Outermost Regions

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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.

Promoting Research, Development and Innovation

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Non-legislative act: On the 19th of October 2022 the European Commission published a Communication on a Framework for State aid for research and development and innovation (press release).

Problem: In Principle, state subsidies are prohibited under the Treaty on the Functioning of the European Union (“the Treaty”) in order to avoid distortions of competition in the internal market or affect trade between member states. However, State Aid may in certain cases be compatible with the internal market to promote innovation within an industry.

Objective: The Framework aims to provide guidance, based on a recent compatibility assessment conducted by the Commission, regarding aid to support research, development, and innovation ("R&D&I") and its compatibility with the Treaty. The aim is to promote positive effects of State Aid for R&D&I towards the Union's objectives and strategies, such as the Green Deal, the Digital Strategy or the Next-Generation EU.

Subject Matter: The Framework generally applies to all technologies, industries, and sectors in order to keep the direction of research open towards innovative solutions for products, processes, and services. State intervention in markets must be carried out when market participants do not otherwise take broader positive effects for the European economy into account or consider the risk of not achieving a positive economic outcome to be too high. In this respect, State Aid may be necessary to promote R&D&I and to develop certain economic sectors if the market does not produce an efficient outcome. Specific aid measures include aid for research and development projects with a focus on basic and applied research; feasibility studies construction and upgrade of testing and experimentation structures; innovation activities; process or organisational innovation and innovation clusters. Any aid granted by member states is subject to notification requirements to the Union. State aid is generally not passed on if a research institution conducts research by contract for which it receives an appropriate fee, if several research institutions work together on joint cooperation projects, or if the respective companies conduct research on the basis of public tender procedures. Fundamentally, on the basis of the Treaty, two conditions must be met for aid measures. First, the aid must facilitate the development of an economic activity. To this end, it should be comprehensively examined to what extent the aid leads the companies concerned to change their behaviour and take up additional activities. Second, the aid must not unduly affect trading conditions to an extent contrary to the common interest. For this to be the case, the aid measure in question must bring about a substantial improvement that the market cannot bring about itself, while being an appropriate and proportionate instrument for this matter. The hoped-for effects relate to possible knowledge spill-over effects, coordination, and networking failures or the counteracting of imperfect and asymmetric information caused by a high degree of uncertainty in R&D&I activities. In addition, transparency of the aid towards member states, the Commission, economic operators and the public must be maintained. Finally, market analyses by the Commission should constantly verify to what extent specific negative effects of R&D&I aid on competition and trading conditions are minimised or avoided. These identified effects shall then be examined and weighed against the hoped-for positive effects. Finally, the aid schemes will be subject to ex-post evaluation in order to minimise distortions of Union competition and trade.

European Commission Work Programme 2021

Follow-up Economic Governance

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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

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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.

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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.

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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.

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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.

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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.

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Proposal: On the 22nd of September 2021 the European Commission published a Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of insurance and reinsurance undertakings and amending Directives 2002/47/EC, 2004/25/EC, 2009/138/EC, (EU) 2017/1132 and Regulations (EU) No 1094/2010 and (EU) No 648/2012 (press release).

Problem: The activities, services, or operations performed by insurance and reinsurance undertakings are considered to be critical functions, as they are hardly substitutable for beneficiaries or injured parties within a reasonable period of time. Despite adopting the Solvency-II-Directive in response to the financial crisis of 2009, which helped to reduce the probability of default and improve the resilience of the European insurance industry, there is currently no harmonised procedure for the resolution of insurance undertakings at European level. This leads to significant differences of content and procedure between legal and administrative provisions on the failure of insurance undertakings in the member states. Though a disorderly failure of insurance undertakings can have a significant impact on policyholders, beneficiaries of insurance benefits, injured parties or affected companies.

Objective: The proposal focuses on preventing failures of the services of these undertakings and minimising negative impacts by preserving the continuity of these critical functions in case of failures. Based on the preparatory work of the European Insurance and Occupational Pensions Authority (EIOPA), measures of the Proposal shall provide authorities with a credible set of resolution tools that will allow them to intervene at early stages in the event of the failure of an insurance undertaking.

Subject Matter: The content of the proposal is to strengthen coordination and cooperation between cross-border authorities in preparing for and managing emergencies or failures, which is currently not harmonised at Union level. In detail, this means that each member state will appoint a competent resolution authority as well as a group resolution authority. These will draw up a (group) resolution plan for sufficiently large insurance and reinsurance undertakings or for groups of undertakings with corresponding measures in the event of a failure. Member states are also required to draw up and annually update a preventive recovery plan for setting out the measures to be taken in the event of a significant deterioration of the financial situation of undertakings at risk. The recovery plans shall be reviewed and controlled by the competent supervisory authorities and subsequently submitted to the resolution authority. Preventive group recovery plans must be prepared by parent companies at the head of individual subsidiaries. The objectives of resolution consist of protecting policyholders, beneficiaries and claimants, preserving financial stability, ensuring continuity of critical functions and protecting public funds by minimising the use of extraordinary public financial support. Specific resolution tools include the solvent run-off, sale of business, bridge undertaking, asset and liability separation as well as the write-down or conversion tool. Particular attention is paid to measures that may have an impact on other member states, such as the establishment of resolution colleges and the intensification of the exchange of information between competent authorities. In order to ensure consistency with existing Union legislation, the proposal refers to the Solvency-II-Directive (2009/138/EC) by an amendment of the latter and other Directives of relevance. The necessary laws, regulations and administrative provisions shall be adopted by the member states no later than 18 months after the entry into force of the Directive.

Completing the Banking Union

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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

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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.

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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.

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Legislative procedure completed: On the 19th of October 2022 the revised bank resolution framework was adopted by the European Parliament and the Council. The Regulation is intended to ensure that the loss absorption and recapitalisation of banks will be covered through private means, in order to strengthen the prudential regulatory framework for credit institutions within the Union (press release).

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

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Legislative procedure completed: On the 14th of December 2023, the Proposal for a Directive on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937 was adopted (press release). In order to comply with the corporate risk-based due diligence duty, companies need to take measures to identify, asses and priritise actual or potential adverse impacts and prevent or mitigate potential impacts. Companies that do not comply with these rules will face sanctions from national administrative authorities. Victims will have the opportunity to seek legal redress for damages that they suffer as a result of the failure to conduct appropriate due diligence.

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.

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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 21st of April 2021, the European Commission published a Proposal for a Directive amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting (press release).

Problem: The need for the Directive is rooted in the limitations of the Non-Financial Reporting Directive (NFRD) adopted in 2014, which requires companies to report on how sustainability issues influence their performance and their impact on people and the environment. It has been observed that the quality of information disclosed by companies under the NFRD remains insufficient.

Objective: Sustainability reporting should become more cost-efficient and utilize the potential of the European Single Market. This improvement aims to support the transition to a fully sustainable and inclusive economic and financial system, in line with the European Green Deal and the UN Sustainable Development Goals.

Subject Matter: The scope of sustainability reporting requirements is extended to a broader range of companies, including all large companies and those listed on EU regulated markets, except for micro-companies. This expansion aims to address gaps in the current reporting framework, which has been deemed insufficient in meeting the needs of various stakeholders. To ensure the quality and reliability of reported sustainability information, the proposal introduces a requirement for companies to adhere to mandatory EU sustainability reporting standards. This standardisation is intended to make sustainability information more comparable to financial information, aiding in risk reduction and capital allocation to companies focusing on social, health, and environmental issues. The proposal is digital-ready, requiring companies to digitally tag reported sustainability information, which will aid in the digitalisation and enforcement of sustainability reporting. To monitor the implementation and effectiveness of the directive, the Commission will conduct periodic surveys and report on the implementation of assurance requirements.

EU Green Bond Standard

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Legislative procedure completed (provisional agreement): On the 1st of March 2023, the European Parliament and the Council reached a provisional agreement on the creation of European green bonds (EuGB). The Regulation establishes normed requirements for bond issuers that provide environmentally sustainable bonds. The Regulation is intended to increase investor confidence and comparability of sustainable investments while simultaneously countering greenwashing. To enter into force, the provisional agreement must now be formally adopted by the Council and the Parliament. (press release).

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

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Legislative procedure completed: On the 18th of January 2024, the Proposal for a Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing was adopted (press release). This agreement introduces a unified AML/CFT rulebook, forming the basis for the Anti-Money Laundering Authority's (AMLA) future operations. The new rules establish consistent checks across the Single Market, enhance cross-border cooperation, and improve transparency in ownership structures. These measures, part of the July 2021 AML legislative package, also focus on real estate and crypto-assets, aiming to combat financial crimes more effectively.

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.).

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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.

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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.

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Legislative procedure completed: On the 18th of January 2024, the Proposal for a Directive on the mechanisms to be put in place by the member states for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and repealing Directive (EU) 2015/849 was adopted (press release). This agreement introduces a unified AML/CFT rulebook, forming the basis for the Anti-Money Laundering Authority's (AMLA) future operations. The new rules establish consistent checks across the Single Market, enhance cross-border cooperation, and improve transparency in ownership structures. These measures, part of the July 2021 AML legislative package, also focus on real estate and crypto-assets, aiming to combat financial crimes more effectively.

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

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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.

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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.

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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.

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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

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Proposal: On the 22th of September 2021 the Commission put forward a Proposall 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

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Legislative procedure completed (final agreement): On the 6th of June 2023, the European Parliament and the Council reached a final agreement on the Anti-Coercion Instrument. The instrument aims to improve the EU's ability to defend its interests by providing several countermeasures in the event of economic coercion by third countries. To enter into force, the Parliament and the Council will now have to complete the procedures of approval (press release).

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

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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

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

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

European Commission Work Programme 2020

Economic Governance

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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.

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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.

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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

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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.

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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.

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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.

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Deepening the Capital Markets Union

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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.

Completing the Banking Union

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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.

Effective Taxation

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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.

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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.

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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.

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Legislative procedure completed: On the 1st of December 2020, the member states reached an agreement on the new tax transparency rules. Among other provisions, the new framework enables member states to exchange information on income of sellers on digital platforms. The Directive was formally adopted on the 22nd of March 2021 (press release).

Proposal: On the 15th of July 2020, the European Commission published a Proposal for a Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (press release).

Problem: To finance the economic measures taken in the wake of the COVID-19 pandemic, member states require adequate tax revenues. It is therefore essential to effectively prevent tax fraud, tax evasion and tax avoidance. Thus, strengthening administrative cooperation is essential to achieve tax justice.

Objective: Although improvements have already been made in recent years, there is still a need to optimise the exchange of information in the area of taxation. Therefore, the Directive aims to introduce tools for improved cooperation in several areas of information exchange.

Subject Matter: The Directive focuses on four specific areas of information exchange. First, it sets out provisions on the exchange of information upon request. It defines a standard of foreseeable relevance that applies to these requests. Secondly, the Directive contains provisions on the automatic exchange of information. It defines the scope and types of income that are subject to the mandatory automatic exchange of information between member states. To this end, a key provision of the Directive regards the extension of the automatic information exchange to digital platforms. Thirdly, cooperation between administrative authorities shall be strengthened. In particular, rules and procedures for simultaneous and joint controls are introduced for this purpose. Finally, the legal framework provides for several other provisions. These include, for example, the mandatory annual transmission of evaluation results by member states to the Commission, or the possible suspension of the exchange in certain cases for the protection of personal data.

Customs Union Package

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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.

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Legislative procedure completed: On the 19th of May 2022 the Proposal for a Single Window Environment for Customs was adopted by the European Parliament and the Council. By coming into force in 2025, businesses will thereby no longer be required to submit necessary documents to several authorities through different portals, which will speed up the process of good clearance significantly (press release).

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.

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