Newsletter 6/2023
Dear Readers,

There is an open wound in the heart of Europe; a wound caused by nationalism, ethnic struggles, religious fanaticism and a lack of direction. Out of ignorance and disinterest, the European Union above all has sleepwalked into a crisis which once again sees in the Balkans ablaze. Bloody proof of this may have been provided by the recent unrest in Kosovo, where fighting between the Albanian majority and Serbian minority left many people injured and seriously wounded, as well as evoking some bad memories.

Bosnia-Herzegovina, Montenegro, Serbia, Northern Macedonia, Albania and Kosovo have been striving for membership of the EU for years. Brussels has always assured these states that it wants to admit them, only to put them off again and play for time. Too much corruption, too little rule of law, too little political remorse for past atrocities, they said - and rightly so. But this procrastination is now coming home to roost.

You only need to take a glance at the map to see the geopolitical importance of these countries. Between the successor states of the former Yugoslavia and Russia lies only war-torn Ukraine, a destabilised Moldova and the poorhouse of Europe, Romania. Moscow has long excelled at exploiting the EU's Achilles' heel to build a pro-Russian axis all the way down to the Mediterranean. The Kremlin is advancing with relish into this vacuum in the Balkans that the West is tolerating.

Despite all the justified criticism of the political inadequacies in the region, which has been plagued by crises for centuries, Brussels has no choice but to bind these countries to itself as quickly as possible. The heads of government of the candidate countries need to be at the table when important decisions are being made for the common future. And that means now. They can no longer be left on the side lines. The European project has often proven to be more attractive than nationalistic vanities and that it can integrate and pacify. It is time that the Balkans too had a taste of this sweet fruit.

I wish you an enjoyable read.

Stay tuned!

Yours
Dr. Jörg Köpke 
On 29 May, bloody clashes broke out in Kosovo between the Serb minority and Albanian majority.
 
Latest EU Proposals in focus
Trade
Security: economic security strategy

The EU Commission plans to publish a European economic security strategy on 20 June. The strategy aims to ensure that European companies' capital and know-how are not used to strengthen the military and intelligence capabilities of systemic rivals of the EU, first and foremost China. This danger exists especially in the case of foreign investments by European companies. The strategy should therefore include an instrument for foreign investment.

Taxation: double taxation and tax fraud

On 28 June, the EU Commission intends to publish a proposal for a directive to introduce a common EU-wide system for withholding tax on dividends or interest payments. Currently, the EU's withholding tax refund/exemption procedures do not always allow non-resident investors to fully benefit from their right to apply a reduced rate of withholding tax or an exemption from withholding tax. Part of the proposal is also a system for the exchange of information and cooperation among tax authorities. The system is intended to help prevent tax fraud in the area of withholding tax and at the same time to process applications for withholding tax refunds and/or procedures for withholding tax exemption quickly.
 
Digital Economy
GDPR: selective changes to improve cross-border enforcement

The extent to which disagreement among EU data protection authorities delays the enforcement of the General Data Protection Regulation (GDPR) was once again demonstrated by the decision of the Irish data protection commission in the Meta case in May. In order for the cooperation and dispute resolution mechanism between authorities regulated in the GDPR to function more smoothly in the future, the Commission wants to harmonise individual aspects of the administrative procedure used by national data protection authorities in cross-border cases. The Commission is expected to present its proposal in June. Among other things, the Commission wants to set deadlines for cooperation, clarify questions regarding the exchange of information and facilitate consensus building. However, there will be no comprehensive reform of the GDPR.
 
Climate
Climate change: EU sees security and defence capability at risk
 
On 28 June the Commission and the High Representative of the Union for Foreign Affairs and Security Policy plan to publish a Joint Communication on climate change, environmental degradation, security and defence. Already in its "European Green Deal" [COM(2019) 640], the Commission noted that climate and environmental problems were causing instability worldwide, for example through droughts and floods. Therefore, the impact of climate policy should be increasingly taken into account in foreign and security policy. For example, the CO2 emissions of the military should be reduced and its energy efficiency increased. In addition, military equipment should also be operational under extreme weather conditions.
 
Financial Markets
ESG ratings: regulations for a rapidly growing market segment

On 13 June 2023 the Commission intends to present a proposal for a regulation on environmental, social and governance (ESG) ratings. These ratings are now offered by a large number of companies and are primarily used to assess the sustainability of issuers and financial products. They thus also complement pure credit ratings, as they are traditionally carried out by rating agencies. Within the framework of the proposal, the Commission now wants to first establish a uniform definition of ESG ratings in the EU. In addition, the providers of ESG ratings are to be obliged to be more transparent with regard to their business practices and the methods they use for sustainability assessment. Regulations to avoid conflicts of interest among providers should also be created and the providers should be supervised more strictly. The European Securities and Markets Authority (ESMA) could play an important role here. Among other things, the new requirements should improve the comparability and reliability of ESG ratings, prevent greenwashing and strengthen confidence in this growing market.

Open Finance: Commission seeks new legal framework

The Commission intends to present a legal framework for Open Finance on 28 June 2023. The lynchpin of this initiative is extended access by third-party providers to the data of customers of financial service providers, which goes beyond the access rights to payment account data that have already existed for several years. These access rights were already introduced by the 2nd Payment Services Directive [(EU) 2015/2366, see cepPolicyBrief No. 11/2014]. Extended access to financial data could be made possible, for example, in the area of securities and savings accounts as well as insurance contracts. The Commission's aim is to facilitate third party access to and re-use of data in the financial sector. The interoperability of financial data is also to be improved. The draft law also aims to regulate the manner of consent to third party access to data and the associated liability. According to the Commission, existing data-related horizontal EU legislation - in particular the General Data Protection Regulation (see cepPolicyBrief No. 36/2012), the Data Governance Act (see cepPolicyBrief No. 6/2021), the Digital Markets Act (see cepPolicyBrief No. 14/2021 and 15/2021) and the Data Act (see cepPolicyBrief No. 11/2022) - is not sufficient to create open finance.
New rules in payment transactions: First step towards the third Payment Services Directive (PSD III)
The Commission intends to publish a draft for a third Payment Services Directive (PSD III) on 28 June 2023. Due to rapid market developments in payments, some provisions of the second Payment Services Directive adopted in 2015 [PSD II, (EU) 2015/2366, see cepPolicyBrief No. 11/2014] are considered outdated. The proposal aims primarily to redefine the scope of market participants to which the directive should apply. FinTech companies are increasingly offering innovative services such as digital wallets and are thus changing the market environment. In order to continue to ensure fair conditions of competition, the Commission therefore wants to make targeted adjustments to the scope of application of the directives, to the exceptions to the scope of application and to the definitions. In addition, the introduction of new preventive mechanisms against payment fraud is to be expected. In addition, the regulations for international payment transactions are to be adapted.

Digital Euro: EU Commission sets framework for introduction

On 28 June 2023, the Commission will submit the first legislative measures to accompany the possible introduction of a digital euro. Although the European Central Bank (ECB) has sole competence regarding the issuance and technical design of a digital euro, the Commission needs to regulate some key aspects before the digital euro can become a reality.

In particular, the Commission will propose that the digital euro can also be used as a form of central bank money. So far, central bank money has been limited to (physical) euro banknotes and coins. In addition, the initiative will define the main (design) features of the digital euro. Thus, for example, it will be determined that the digital euro will be circulated by private payment service providers and that they will receive compensation for this. Furthermore, the idea that the digital euro will become a large store of value, which could endanger the role of banks as intermediaries, is to be ruled out. The provisions will also aim to ensure that, on the one hand, the privacy of users of the digital euro is preserved, and on the other hand, that no new money laundering risks arise. Furthermore, the Commission is likely to propose that the digital euro be granted legal tender status and, for the first time, expressly state in EU legislation that this also applies to euro banknotes and coins. The Commission could also propose revising other EU rules, for example on dealing with digital currencies issued outside the euro area.

The European Central Bank (ECB) launched an investigation phase on the design of a digital euro as early as July 2021. In October 2023, it will present the results of this investigation. Thereafter, a test and development phase ("implementation phase") will start, lasting approximately three-years. Only when this phase has been successfully completed, i.e. probably in 2026, can the digital euro become a reality.
 
Health
Mental health: Commission wants to curb mental illnesses
 
Back in September 2022, Commission President Ursula von der Leyen announced a new mental health initiative in her State of the Union address. It had become clear that even before the pandemic, one in six people in the EU suffered from a mental illness. For their part, the pandemic and recent crises have added further burdens with long-term consequences. The direct and indirect costs resulting from poor mental health are estimated at more than 4% of GDP in EU countries. The EU Mental Health Strategy aims to promote a prevention-oriented approach to mental health and to mainstream the issue into all EU policies. Actions are expected to promote good mental health, prevent mental health problems, provide early detection and address psychosocial risks in the workplace.
 
Trilogue Agreements
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.
Internal Market
Trilogue agreement on geographical indications for artisanal and industrial products
 
On 2 May 2023, a preliminary political agreement was reached on the protection of geographical indications for artisanal and industrial products [COM(2022) 174]. So far, such protection exists for food and beverages, such as Parma ham or champagne. The protection is now to be extended to other products whose characteristics are essentially linked to the area of production, such as Solingen knives, Meissen porcelain or Murano glass.
 
Transport
Trilogue Agreement on Alternative Fuels Infrastructure (AFIR)

On 28 March, a preliminary political agreement was reached on a new regulation on refuelling and charging infrastructure for alternative fuels [AFIR, see cepPolicyBrief 6/2022]. According to the regulation, EU member states must provide sufficient e-charging stations and hydrogen filling stations along the main routes of the trans-European transport network (TEN-T core network). For example, from 2026 there must be a charging station with at least 400 kW power every 60 km for e-cars and e-vans, and from 2028 with 600 kW. For e-trucks, there must be a charging station (1,400-2,800 kW) every 120 km. In addition, all secured truck parking areas must have at least two charging stations. From 2031, there must be a hydrogen filling station every 200 km.
 
Financial Markets
Crypto assets: Strengthening cooperation between national tax authorities

On 16 May 2023, the Council reached an agreement on a revision of the Directive on administrative cooperation in the field of taxation. The Commission had already initiated the revision in December 2022, particularly against the background of the increasing use of crypto assets such as cryptocurrencies, stablecoins or e-money tokens. These are increasingly used as payment or investment instruments. Due to their nature, however, it is difficult for the tax authorities to check whether the relevant tax regulations are being complied with. In order to reduce the risk of tax avoidance and tax evasion, the revised directive aims to improve the exchange of relevant information between national tax authorities. As the European Parliament does not have a say in this legislative procedure, the Council agreement is already a significant pointer to the final outcome of the legislative process.

ESAP: Agreement on central EU access point to financial and sustainability information

On 23 May 2023, the Council and the European Parliament reached a preliminary political agreement on the establishment of a single point of access to public financial and sustainability information on companies and investment products (European Single Access Point, ESAP). The EU Commission had already presented proposals for the creation of such a single access point in November 2021 [COM(2021) 723, COM(2021) 724 and COM(2021) 725]. With ESAP, a uniform, free and digital access point to financial and sustainability information is to be created, which, among other things, is to facilitate the decision-making of investors. In particular, ESAP is intended to bundle all the information that companies already have to publish due to a multitude of existing European financial market regulations.

 
The ESAP platform is to be available by summer 2027 and then gradually incorporate financial and sustainability information in three phases. First, ESAP will include information to be published under Regulation (EU) No 236/2012 on short selling, the Prospectus Regulation [(EU) 2017/1129, see cepPolicyBrief] and the Transparency Directive 2004/109/EC. Subsequently, information pursuant to the Regulation on sustainability-related disclosures in the financial services sector [(EU) 2019/2088, s. cepAdhoc] the Regulation on credit rating agencies [(EC) No 1060/2009, see cepPolicyBrief] and the Benchmark Regulation (EU) 2016/1011 shall be integrated. Finally, information from around 20 other legal acts will follow, including the Capital Requirements Regulation [(EU) No 575/2013, see cepPolicyBrief] and the Markets in Financial Instruments Regulation [(EU) No 600/2014, see cepPolicyBrief].

The European Parliament and the Council still have to officially approve the preliminary political agreement now reached. This is expected in the coming months.
 
Financial Markets |Consumer
Consumer credit: Trilogue agreement also confirmed by IMCO Committee

In June 2021 already, the Commission had presented a proposal for a new Consumer Credit Directive [COM(2021) 347, see cepPolicyBrief 4/2022]. The reform was initiated against the background that the consumer credit market has changed noticeably, especially due to digitalisation. The representatives of the European Parliament, the Council and the Commission had agreed in principle in December 2022. Subsequently, however, there were further negotiations. In terms of content, the trilogue agreement provides in particular that, for example, loans of less than 200 euros fall within the scope of the directive, but that member states can exempt such loans from certain information requirements. With regard to a "perpetual" right of withdrawal, it has been agreed that this right should now expire twelve months and 14 days after conclusion of the contract. Finally, the prohibition of discrimination has remained in the text of the Directive and has been restricted only in a very rudimentary way with regard to the original Commission proposal. According to this, different conditions can be offered if this is justified according to so-called objective criteria. The Council has already signalled its approval of the trilogue agreement. After the IMCO Committee confirmed the agreement in May, the formal approval of the plenary of the European Parliament and the formal approval of the Council, which is necessary from a procedural point of view, are now required before the new Consumer Credit Directive can enter into force. The European Parliament will probably deliberate and take a decision in its September session.
 
Consultations
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:
Environment
Hazardous chemicals: ban on production and export
 
According to the Chemicals Strategy for Sustainability [COM(2020) 667], chemicals should be produced and used in an inherently safe and sustainable way to protect human health and the environment. The Commission complains that chemicals that are banned within the EU because of their risks to human health and the environment can still be produced and exported in the EU. It wants to ban this and seek opinions.
 
The submission period for opinions ends on 31 July 2023.
Go to Consultation
 
Pollution: applying the polluter pays principle

The Commission is currently developing recommendations to better implement the polluter pays principle to ensure that polluters pay for pollution. Through the consultation, it aims to gather information on the extent to which the polluter pays principle is already being applied and how it can best be implemented.
 
The submission period for opinions ends on 4 August 2023.
Go to Consultation
 
Health
Reform of the general pharmaceutical legislation: Commission proposal published
 
The Commission presented a comprehensive reform of the pharmaceutical regulations at the end of April. The proposal aims to create a single market for medicines and strengthen Europe as a business location. In view of the current supply shortages of important medicines, the Commission wants to guarantee security of supply and ensure access to affordable medicines in all Member States. In addition, incentives are to be created for the development of new medicines for rare diseases and new antibiotics (see cepInput 2/2023). Stakeholders can give their opinion on the Commission proposal.

The submission period for opinions ends on 19 July 2023.
Go to Consultation

Supplementary protection certificates: Commission proposal published

 
At the end of April, the Commission presented a comprehensive reform of patent law. Among other things, this also includes a reform of the so-called Supplementary Protection Certificates (SPC). As more than eight years often pass between patent application and market authorisation of a medicinal product (see cepPolicyBrief 35/2018), SPCs are intended to provide additional protection of the intellectual property of patent holders. SPCs are thus intended to create incentives to research new medicines and bring them to market. As SPCs are granted by national patent offices and are currently handled differently, the Commission proposal aims to reduce this fragmentation. Stakeholders can give their opinion on the specific Commission proposal.

The submission period for opinions ends on 19 July 2023.
Go to Consultation
 
Internal Market| Consumer
Standard essential patents: Commission proposal published

At the end of April, the Commission presented a comprehensive reform of patent law. Among other things, it includes a proposal on so-called standard-essential patents. This covers patents that protect technologies that are necessary for a standard. In the mobile phone industry, these are currently 4G or 5G standards. Standard-essential patents are of particular importance because companies need the right to use the technology protected by the patent in order to meet a standard. Stakeholders can give their opinion on the specific Commission proposal.

The submission period for opinions ends on 19 July 2023.
Go to Consultation
 
Dates
12-13 June 2023
Luxembourg

Meeting of the Council of Employment, Social Policy, Health and Consumer Affairs Council. This concerns among other things working conditions of platform workers.

12-15 June 2023
Strasbourg

Session of the European Parliament. This will concern among other things the European Artificial Intelligence Act as well as the water crisis in the EU.
 
15 June 2023
Luxembourg

Meeting of the Eurogroup. *
 
16 June 2023
Brussels

Meeting of the Economic and Financial Affairs Council. This concerns the retail investment strategy (see cepStudy), the reform of the economic governance framework and the EU package on VAT in the digital age.
 
19-20 June 2023
Stockholm

Meeting of experts. This concerns global health.
 
27 June 2023
Luxembourg

Meeting of the General Affairs Council. *
 
29-30 June 2023
Brussels

Meeting of the European Council. *
 
*The agenda was not yet available at the time of going to press.  
 
Selected cepPublications
cepInput: Empowering EU Voters
In a year from now, Europe will go to the polls. But how legitimate and democratic is an election in which turnout is low, no uniform binding rules apply and Spitzenkandidaten (the party nominees for President) play only a minor role? The Centres for European Policy Network (cep) calls for uniform procedures, issues and campaigns to strengthen the Parliament, and for a lowering of the voting age to 16 across the EU.

Go to cepInput 6/2023
 
cepInput: Market Instruments for a Climate-neutral -industry
Revolution with risks: Rapidly decoupling Europe's energy-intensive economy from fossil resources without sacrificing industrial value added is technologically and regulatory tricky. The Centrum für Europäische Politik (cep) suggests Carbon Contracts for Differences (CCfDs) and green lead markets as appropriate regulatory tools. According to cep calculations, the costs of decarbonizing steel production via CCfDs alone amount to up to 12 billion euros per year across the EU.

Go to cepInput 7/2023
 
cepAnalyse: Listing Act - Multiple-vote-shares
Google, Apple, Meta: The US, Asia and the EU are seeing an increase in so-called multiple-vote shares. These are supposed to make it more appealing for small family businesses, start-ups and founders to go public, and to protect them from the dangers of hostile takeovers. The EU wants to permit multiple-vote shares on a uniform basis, subject to certain conditions. The Centrum für Europäische Politik (cep) sees more advantages than disadvantages in this plan.

Go to cepPolicyBrief 7/2023
 
Common Ground of Europe
The new international website "Common Ground of Europe" is an initiative of the Centres for European Policy Network (cep). On the commongroundeurope.eu website, cep collects mainly English-language contributions, articles and interviews from decision-makers and experts in politics, business and science. We cordially invite you to take a look through our window on Europe. Here are some examples from the past month.
 
Green Industry: From Zero to Hero

Lithium batteries, PV modules, fuel cells: The industrial world turns into green. Europe has to find its own way. Although it has to be a way of cooperation with strategic partners and smart diversification, it's as good a chance of becoming strategically autonomous.
 
 
Ticking Time Bomb Cybersecurity

Cyberattacks mark one of the most dangerous risks for EU’s economy. Brussels wants to protect its key industries by improving the low cybersecurity level. Why it’s crucial to establish an effective system of legislation.

Go to article
 
Smart, Green and Clean: This is the Innovation that the EU Economy Needs

The Net Zero Industry Act is the European answer to the block’s need to boost long-term social and economic progress by reinventing its approach to innovation and to investments in the strategic cleantech industry sector. It is time for Member States to take up the challenge and deliver.

Go to article
 
In conclusion
Dear Readers,

At the Berlin Balkan Conference in 1878, Imperial Chancellor Otto von Bismarck said that to him the Balkans were not worth the healthy bones of a single Pomeranian grenadier. Today, the price that Europe would have to pay to bring peace and integration to the Balkans would be much less bloody.

Yours
Dr. Jörg Köpke
 
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