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Dear Readers,
The Federal Constitutional Court has passed an historic judgement. In essence, it concerns (wait for it!) - honest financial management. The call from Karlsruhe will reverberate loudly around the Bundestag and the Federal Government: No more hiding debts away, or reallocating them, or re-labelling them. No more shadow budgets, emergency special funds and other accounting tricks to comply with the “debt brake”. And quite right too.
Housekeepers are nothing if not inventive. The Roman Emperor Vespasian had a tax levied on public toilets. His justification, that money doesn't smell, has become a well-known saying.
But now the Constitutional Court has kicked up a real stink by declaring a reallocation of loans totalling 60 billion euros in the 2021 budget null and void. The plan was to use Corona funds for climate protection and modernising the economy. The Climate and Transformation Fund (CTF) will lose billions. And they are probably not the only ones.
29 special federal funds have been identified, the oldest is the trust fund for miners' housing and dates from 1953. In most cases, the risk that they are not legally compliant is probably low. But not in all cases.
Special funds set up on the basis of an emergency situation are problematic. And that applies to, of all things, the financially strong Economic Stabilisation Fund (ESF). The ESF 2022, which has at least € 200 billion to cushion the impact of the coronavirus pandemic, better known as Chancellor Olaf Scholz's "double whammy", is in danger of falling victim to the Karlsruhe judgement.
Loans like this must be set off against the debt brake in the year in which they are taken out and spent. This could mean that the budget for 2023 will be more than € 30 billion short, as the state has already squandered this amount from the ESF on cheaper energy and electricity prices. Too bad.
So, honesty really is the best policy. Which also applies to all the other tricks, thought up by numerous highly imaginative federal governments over the decades, as a means to dress up unpleasant truths which then end up as rotten eggs on the doorstep of future generations. Just think of radioactive waste from nuclear power plants, pensions, education, bad banks, the Bundestag's secret protection agency as well as all the sleight of hand and whitewashing which surrounds climate protection. Karlsruhe still has a lot to do.
Stay tuned!
Yours
Dr. Jörg Köpke
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A clip round the ear from Karlsruhe: Justice disapproves of government tricks.
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Latest EU Proposals in Focus
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European Citizenship: Commission Presents Package
On 6 December, the Commission will submit a package for Union citizens. The package will consist of three parts. The first part is the report on European Citizenship 2023. Every person who is a national of an EU Member State is automatically a citizen of the EU. This brings with it numerous rights, such as the right not to be discriminated against on grounds of nationality, the right to move freely within the EU and the right to consular protection. The report takes stock of the application of these rights and identifies where progress has been made and where there are gaps in implementation. The second part of the package comprises a review of EU rules on consular protection. The third part contains revised guidelines on freedom of movement.
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Measure to Address Shortages: Commission Submits List of Critical Medicines
At the end of the month, the Commission will submit a list of between 100 and 350 so-called critical medicines. This is part of a series of measures announced by the Commission to avoid medicine shortages [see COM(2023) 672]. Critical medicines are those for which there are no suitable alternatives and which give rise to major risks for patients if they are not available. The aim is to analyse their supply chains and propose specific measures to combat shortages by April 2024. In addition, the Commission will launch a study regarding a possible EU law on critical medicines by the end of this month [see also cepInput 12/2023] in order to prepare an Impact Assessment, which represents the first formal step towards a possible Commission proposal.
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The Commission, the Council and the European Parliament regularly negotiate in the so-called trilogue on EU legislative proposals in order to find a common position. We have put together a summary of the most important trilogue decisions since the last Newsletter.
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Trilogue Agreement on Environmental Criminal Law
On 16 November 2023, a provisional political agreement was reached on amending the Directive on environmental criminal law [2008/99/EC]. As an alternative to fines based on turnover, maximum fines of at least € 40 million for serious environmental offences and € 24 million for other environmental offences may be imposed on legal entities. In addition, tougher penalties will apply to intentional offences leading to destruction or widespread and substantial damage. In essence, this refers to irreversible or long-lasting damage to an ecosystem of considerable size or environmental value, or to a habitat within a protected area, or to the quality of air, soil or water.
Trilogue Agreement on Waste Shipments
On 17 November 2023, a provisional political agreement was reached on the Regulation on waste shipments [(EC) No. 1013/2006]. It was decided to ban the export of non-hazardous plastic waste to non-OECD countries. A non-OECD country that fulfils strict waste management standards can apply for the ban to be lifted no earlier than five years after the Regulation comes into force. In addition, waste that is exported to countries outside the EU for recovery must be treated there in an environmentally sound manner.
Trilogue Agreement on Industrial Emissions
On 29 November 2023, a provisional political agreement was reached on the Industrial Emissions Directive [2010/75/EU; see cepPolicyBrief 18/2022]. It is intended to provide comprehensive protection for the environment and health by reducing the emission of pollutants into the air, water and soil, as well as the amount of waste produced, by large industrial installations including livestock farms for poultry and pigs. In future, the Directive will also apply to the mining of iron, copper, gold, nickel and platinum. In addition, "environmental performance limit values" will be introduced. These will be set by the authorities in the permit authorising the establishment and operation of installations.
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Trilogue Agreement on Methane Emissions in the Energy Sector
On 15 November 2023, a provisional political agreement was reached on reducing methane emissions in the energy sector. The Regulation introduces new requirements for the oil, gas and coal sectors to measure, report and verify methane emissions. Measures must also be taken to minimise these emissions, including measures to detect and repair methane leaks and to limit venting and flaring.
Trilogue Agreement on the Internal Gas Market
On 28 November 2023, a provisional political agreement was reached on a new Directive on common rules for the internal markets in renewable and natural gases and in hydrogen (H2). This means that in future there will be a split between Transmission System Operators (TSOs) and Distribution System Operators (DSOs) for H2. Only TSOs are required to unbundle the operation of gas and H2 grids under company law. This means that owners of distribution grids, such as public utility companies, can set up their own H2 distribution systems and only need to ensure that the accounting is unbundled. Overall , "sectors that are difficult to decarbonise” will be given priority for H2 supply.
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Trilogue Agreement to Protect Workers from Lead and Diisocyanates
On 14 November, a provisional political agreement was reached regarding a Directive on limit values for lead and diisocyanates. Minimum standards for health and safety in the work place are intended to protect workers who are exposed to these harmful substances. There are currently regulations limiting exposure to lead, but no limit values for diisocyanates. These are now being established for the first time. Diisocyanates are a group of chemicals that are widely used in industry, particularly in the production of polyurethanes and as hardeners in industrial paints, adhesives, varnishes and resins. Among other things, the agreement also provides for certain transitional periods, such as the one for new lead limits which runs until the end of 2028, so that production processes can be adapted and necessary preventive and protective measures can be implemented.
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Trilogue Agreement on Instant Payments: Transfers within Ten Seconds and around the Clock
On 7 November 2023, the Council and the European Parliament agreed on a legal framework for real-time credit transfers. The Commission submitted a proposal to amend the Regulation for the Euro Payments Area (SEPA) in October 2022 [COM(2022) 546; see cepPolicyBrief 4/2023].
The provisions aim to modernise payment transactions in the EU and make them more attractive. All payment service providers in the EU that offer standard credit transfers in euros, particularly banks, will be obliged to enable credit transfers in euro to be made around the clock in real time (instant payments). The fees charged for the instant service must not exceed fees charged for conventional euro transfers. In addition, payment service providers must comply with certain obligations to prevent fraud and money laundering. Payment and e-money institutions will also be given access to payment systems and thus, after a transitional period, they will also have to offer the sending and receiving of instant payments. The negotiators also agreed in the trilogue that Member States whose national currency is not the euro will be given more time to implement the provisions than those within the eurozone.
The political agreement now reached in the trilogue still has to be formally adopted by the European Parliament and the Council. The final legislative texts are expected to be adopted at the beginning of 2024.
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Trilogue Agreement on the Digital Wallet
On 8 November 2023, the Council and the European Parliament provisionally agreed on a revision of the Regulation on electronic identification and trust services for electronic transactions in the internal market [eIDAS Regulation, (EU) No 910/2014]. The Commission initiated a revision of the Directive in June 2021 [COM(2022) 204, see cepPolicyBrief 25/2021].
The central element of the revised Regulation is the obligation for Member States to issue their citizens and companies with a digital wallet, a so-called European digital identity wallet. In future, users of the new digital wallets will be able to identify themselves more easily to public institutions and private service providers across Europe. Very large online platforms will be obliged to accept digital wallets as a means of authenticating their users and for users to log into their services. This also applies to other service providers where user authentication is required by law. The storage of national digital identities in a digital wallet will also allow users to open bank accounts promptly, initiate payments (in future probably also with a possible digital euro) and store documentation, such as driving licences, doctor's prescriptions, certificates or travel documents, all in digital form.
The provisional agreement now reached in the trilogue still has to be formally adopted by the European Parliament and the Council. It will be several years before the new digital wallets are available. Firstly, the Commission must define the technical specifications for digital wallets by means of implementing acts. The Member States then have two years to make the wallets available.
Trilogue Agreement on a so-Called Interoperable Europe
On 13 November 2023, the Council and the European Parliament provisionally agreed on a Regulation regarding measures for a high level of public sector interoperability across the Union (Interoperable Europe Act). The Commission had already presented a proposal to establish the Regulation in November 2022 [COM(2022) 720]. The new Regulation contains measures to promote the cross-border interoperability of network and information systems used by the public sectors of the Member States to provide digital public services. It aims, most notably, to set up a framework for more efficient co-operation between public administrations and ensure the seamless provision of public services between Member States. The provisional agreement still has to be formally adopted by the European Parliament and the Council.
Cyber Resilience: Strengthening the Cybersecurity of Hardware and Software Products
On 30 November 2023, the Council and the European Parliament provisionally agreed on the establishment of a Regulation on horizontal cybersecurity requirements for products with digital elements ("Cyber Resilience Act"). The Commission had already presented its proposal for this law in September 2022 [COM(2022) 454, see cepPolicyBrief 1/2023].
The law aims to establish the first EU-wide standardised cybersecurity provisions for manufacturers, importers and retailers of hardware and software products with digital elements, e.g. refrigerators, TVs, webcams, smart cards, operating systems. In particular, it will establish cybersecurity requirements for the design, development and manufacture of products as well as for placing them on the market. It also sets out requirements for dealing with and remedying vulnerabilities and obliges product manufacturers to provide security updates. It also obliges manufacturers to report actively exploited vulnerabilities or security incidents that affect their products. In addition, transparency regarding the security properties of products will be increased.
The provisional agreement reached in the trilogue must now be finalised at the technical level before it can be formally adopted by the European Parliament and the Council. Once the Cyber Resilience Act comes into force, the new requirements will apply after three years.
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Trilogue Agreement on Critical Raw Materials
On 13 November, a provisional political agreement was reached on the Critical Raw Materials Act. Among other things, it was decided to add aluminium to the list of strategic raw materials proposed by the Commission, bringing to 17 the total number of different raw materials included. In addition, the target applicable to the build-up of EU recycling capacities for critical raw materials by 2030 has been increased to 25% of EU raw material consumption. At the same time, the utilisation of raw materials in waste is to be significantly improved. In addition, projects producing innovative materials to serve as substitutes for strategic raw materials can also be recognised as strategic projects. Regarding the duration of the permit procedure for strategic projects, there will be a maximum limit of 27 months in the case of mining projects, and 15 months in the case of projects in the area of raw materials processing and recycling.
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The EU Commission asks decision-makers and interested parties from civil society for their opinion on European policy proposals. Here is our short-list of the most important consultations:
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Out-of-court Dispute Resolution for Digital Markets
Alternative dispute resolution (ADR) aims to ensure redress for consumers without them having to go to court. The Commission wants to adapt the relevant provisions because digital markets require fast and simple redress mechanisms. On 17 October, it published a proposal for a Directive aimed at improving the use of ADR in cross-border disputes and simplifying ADR procedures by reducing reporting obligations [see COM(2023) 649]. Stakeholders can now give their opinion on the Commission's proposal.
The submission period for opinions ends on 29 December 2023.
Go to Consultation
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5 December 2023
Brussels
Meeting of the Council of the EU (Telecommunications). Among other things, this will include establishing a general approach to the Commission's proposal for an EU Regulation on measures to reduce the cost of deploying gigabit networks ("Gigabit Infrastructure Act") and presenting a progress report on the Commission's proposal for a Cyber Solidarity Act.
5 December 2023
Luxembourg
In Case C-807/21 (Deutsche Wohnen), the European Court of Justice (CJEU) is to issue a landmark judgement on the imposition of fines for GDPR violations. The judgement could have a significant impact on the way fines are imposed on companies in Germany The issue centres on the question of which of two opposing liability concepts applies in the event of GDPR infringements by companies. In Germany, due to the so-called legal entity principle under Section 30 of the German Administrative Offences Act (OWiG), a fine can only be imposed on a company if the GDPR offence has first been attributed to a (natural) manager and can therefore imputed to the company. This may also be the case if the manager has not adequately supervised subordinate employees. Opponents of this view argue that the German provision is not applicable because the overriding GDPR provision is based on the so-called functional concept. As in EU antitrust law, fines could therefore be imposed on companies where it is established that at least one employee has committed an infringement of the GDPR, without this employee having to be identified or having to be a manager. In the opinion of the EU Advocate General, a GDPR infringement is also attributable to a company and subject to a fine where the infringement is committed by an employee in the broader sense, without being a manager. If, as expected, the CJEU agrees with this view, the number of fines imposed on German companies could increase significantly in future because it will be easier to impose fines. However, the matter must first be decided on by the Court of Appeal in Berlin.
A second question referred to the Court concerns whether the imposition of a fine requires that the GDPR infringement was committed intentionally or negligently or whether companies are liable regardless of fault. The EU Advocate General has rejected strict liability for companies.
7 December 2023
Brussels
Meeting of the Eurogroup. Among other things, it will deal with the assessment of the draft budgets of the euro countries as well as the budgetary situation and prospects of the euro area.
7 December 2023
Luxembourg
In Case C-634/21, the CJEU is to rule on the admissibility of scoring by private credit information agencies such as SCHUFA. Article 22 of the GDPR protects natural persons from legally unfavourable decisions based solely on the automated processing of their data. This includes profiling and, as a sub-form, scoring, in which a person's data is used to assess personal aspects in order to predict their creditworthiness, for example. In the opinion of the EU Advocate General, which the CJEU often follows, the automatic creation of a score value by a private credit information agency does not merely prepare the final decision of, for example, a bank on the granting of credit, but is itself to be regarded as an automated individual decision due to the key role of this score value for the bank's decision.
In addition, on 7 December, the CJEU will pass another judgement on private credit information agencies in the joined cases C-26/22 and C-64/22). This concerns the question of the extent to which SCHUFA and Co. are allowed to store data from public registers, such as information on discharging residual debt, in private parallel databases for a longer period of time without cause in order to make this information available to their customers. The EU Advocate General considers this to be unlawful. The CJEU must also clarify whether national courts can carry out a full judicial review of the content of decisions made by national data protection authorities. The EU Advocate General takes the view that they can.
7-8 December 2023
Beijing
EU-China summit.
7-8 December 2023
Brussels
Meeting of the Competitiveness Council.
8 December 2023
Brussels
Meeting of the Economic and Financial Affairs Council (Ecofin). This includes the presentation of a progress report on the legislative steps towards the possible introduction of a digital euro. In addition, a general approach on the proposed reform of the economic governance framework will be adopted if possible.
11-14 December 2023
Strasbourg
Session of the European Parliament. Topics include the European Health Data Space (EHDS) (see cepPolicyBrief 13/2022), the fees of the European Medicines Agency (EMA) and a strategy for the protection of mental health.
13 December 2023
Brussels
EU-Western Balkans summit.
13-15 December 2023
Brussels
European Council.
14-15 December 2023
Brussels
Meeting of the European Council.
21 December 2023
Luxembourg
The CJEU is to rule on the interpretation of the GDPR in a case in which an employee's health data was processed in order to assess his ability to work (Case C-667/21 - Krankenversicherung Nordrhein). The German Federal Labour Court (BAG) referred various questions to the Court of Justice regarding the relationship between the general requirements of the GDPR and the special provisions for the processing of sensitive data under Art. 9 GDPR and regarding the calculation of damages. Specifically, this concerns, among other things, the question of when there must also be a legal basis for the processing of sensitive data in accordance with Art. 6 GDPR, whether companies are liable for damages under the GDPR regardless of fault and whether contributory negligence on the part of the data subject reduces the claim for damages. The CJEU's assessment of these important questions is of significance beyond the judgement in the specific case.
On 21 December, almost three decades after the Bosman ruling, the CJEU is to issue another important ruling on sports law. In Case C-333/21, the Court will decide whether FIFA and UEFA can prohibit the European Super League (ESL), a new annual pan-European club competition. The plaintiff, a Spanish company whose shareholders are well-known European football clubs, wants to introduce the ESL in parallel or as an alternative to the competitions organised by FIFA and UEFA. According to their statutes, FIFA and UEFA have a monopoly on the organisation of international professional football competitions in Europe and the approval of new competitions is dependent on their authorisation. Both associations have also publicly refused to authorise the ESL in 2021 and warned that any players or clubs participating in this competition would be excluded from certain major European and global competitions. The CJEU must now clarify whether FIFA and UEFA are in breach of (1) EU competition law and (2) EU fundamental freedoms due to the authorisation requirements in their statutes and the threat of tournament exclusions and other sanctions. Specifically, the issue is whether FIFA and UEFA are abusing a dominant market position within the meaning of Art. 102 TFEU, violating the ban on cartels under Art. 101 TFEU and/or unlawfully restricting the free movement of workers, freedom to provide services and freedom of establishment or the free movement of capital and payments. In the view of the EU Advocate General, issued last December, which the CJEU often follows, they are not doing any of these things because the restrictions are justified by the legitimate objectives of FIFA and UEFA. The judgement of the CJEU will have a significant impact on the future of European football.
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cepInput: United We Transform, Divided We Fall!
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Energy transition, security challenges, polycrisis: In turbulent times, traditional economic models reach their limits. The rigid lines between state industrial policy and market-based ordoliberal policy are becoming increasingly blurred. Against this backdrop, the Centre for European Policy (cep) proposes a Europe-wide discussion on a new system of common conceptual thinking.
Go to cepInput
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cepStudy: Weaponizing Social Media in Geopolitics
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Lithium, cobalt, rare earths: The energy transition has sparked a global battle for critical raw materials. This war now also threatens to be fought on social media platforms such as Twitter (X). Possible weapons: Disinformation, fake news, and propaganda. This is the result of a study by the Centre for European Policy. Go to cepStudy |
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cepInput: Climate Dividend
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Pricing CO2 emissions is considered by economists to be the key to decarbonising the transport and building sectors. In order to mitigate social hardship, the Centre for European Policy is calling for a lump sum, income-independent climate dividend - co-financed by EU revenues from 2027. The judgement of the German Constitutional Court on the German Climate Transformation Fund makes this more necessary.
Go to cepInput
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The international website "Common Ground of Europe" is an initiative of the Centres for European Policy Network. On commongroundeurope.eu, the cep collects mainly English-language contributions, articles and interviews from decision-makers and experts from politics, business and academia. We invite you to look at Europe through our shop window. Below you will find examples from the past month.
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Digital Bridges: How AI is Driving European Integration
Through the use of digital technologies, such as AI-based simultaneous translation, the entire society of the European Union could be transformed into a shared space of experience.
Go to article
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On the Wrong Path
Berlin Call to Order or reflecting on politics in times of fragile orders.
Go to article
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The cep team wishes you and your families a Merry Christmas and all the best for 2024.
Yours
Dr. Jörg Köpke
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