The High-Level Expert Group on Sustainable Finance, established by the Commission, has published its first report setting out concrete steps to create a financial system that supports sustainable investments. The Commission will explore some key early recommendations to take further steps towards a low carbon, more resource-efficient and sustainable economy. The report is part of broader efforts to map out an EU strategy on sustainable finance, a priority action of the Capital Markets Union (CMU) Action Plan. The first wave of EU reforms focused on making the financial system more stable and resilient. The Commission is now driving forward efforts to reorient the financial system so that it can support long-term, sustainable growth. The financial sector has a vital role to play in reaching the climate change goals of the Paris Agreement and the EU’s 2030 Agenda for sustainable development. It is also vital that more private capital is mobilised towards green and sustainable investment so as to enable the transition to a low-carbon economy. Today’s interim report by High-Level Group maps out the challenges and opportunities that the EU faces in developing a sustainable finance policy agenda, identifying possible areas of reform in financial policy. It also presents a first set of early recommendations to the Commission. The expert group will further explore other policy areas to provide further recommendations in the final report, due at the end of 2017. For more information please see the press release and the report.
EU INSTITUTIONS NEWS
How should sustainable development be addressed in the trade agreements negotiated by the EU? The European Commission published a document – referred to as a “non-paper” – intended to contribute to an open and inclusive debate aimed at improving the EU’s approach in this field. It builds up on the Commission’s recent reflection paper on harnessing globalisation, which underlined the EU’s commitment to a fair, international, rules-based order based on high standards, cooperation and strengthening of multilateral institutions. The document, sent to the European Parliament and the Council, asks several questions on whether the current Trade and Sustainable Development chapters are meeting expectations, and what could be done to improve them. Also, whether a more assertive partnership should be pursued, and whether a sanctions-based approach would address shortcomings. The Commission has been negotiating Trade and Sustainable Development (TSD) chapters in all its recent trade agreements (see example of measures foreseen most recently with Japan), as part of the EU’s value-based trade agenda, in line with ‘Trade for All‘ strategy of 2015. More on EU trade and sustainable development initiatives.
The 2017 Western Balkans Summit took place yesterday in Trieste, Italy. Heads of Government, Foreign Ministers, Ministers of Economy and Ministers of Transport of the Western Balkans together with their counterparts from several EU Member States and high EU officials – High Representative/Vice President Federica Mogherini and Commissioners Johannes Hahn and Violeta Bulc – discussed key areas of regional cooperation, and set out concrete measures to better connect the region’s infrastructures, economies and people. At the end of the Summit Federica Mogherini said: “[…] we confirmed the perspective of the European Union integration of the Western Balkans. All the 6 partners in the Western Balkans clearly want to be more integrated in the EU, once the right reforms are passed. Many new practical projects were confirmed and a Transport Community Treaty was signed, opening new connections.” Her full remarks are available here.Johannes Hahn, Commissioner for European Neighbourhood Policy and Enlargement Negotiations participated in many events including the signing ceremony of the “letter of intent” for new assistance under the Western Balkans Enterprise Development & Innovation, the Business Forum, the Civil Society Forum, the Youth Forum and the meeting with the Ministers of Foreign Affairs. Violeta Bulc, Commissioner for Transport met with the Ministers of Energy and Ministers of Transport focussing in particular on the finalisation of the Transport Community Treaty and on road safety. At the signature of the Transport Community Treaty also Federica Mogherini and Johannes Hahn were present. The full press release following the Summit is available online as well as the Q&A: Western Balkans: Regional Economic Area and the Factsheet on the Transport Community
n 12 July 2017, the EU ambassadors agreed the Council’s position on the 2018 EU draft budget, ahead of the negotiations with the European Parliament starting in October.
The Council’s position for 2018 amounts to €158.9 billion in commitments and €144.4 billion in payments, up by 0.6% and 7.4% respectively compared to the 2017 EU budget. Payments increase significantly because the implementation of the 2014-2020 programmes is expected to reach cruising speed following the initial start-up period. The Council’s position strongly focuses on measures to stimulate jobs and growth, strengthen security and tackle migration. It also keeps sufficient margins under the EU’s multi-annual financial framework 2014-2020 in case unexpected needs arise.
“I believe the Council’s position provides a solid basis on which to achieve a 2018 EU budget that would take the EU forward. The Council proposes, in line with its generally frugal approach to the budget, to focus resources on those areas with the highest added value. The Council’s position also helps the EU to act swiftly in case new challenges arise”, said Märt Kivine, the Estonian Deputy Finance Minister and the Presidency’s Special Representative for the EU budget. “Timely agreement on the 2018 budget is a test of the EU’s credibility and a presidency priority”, he added.
2017: solidarity with young unemployed persons and Italy
The Council’s Permanent Representatives Committee on 12 July 2017 also approved two Commission proposals that reinforce the EU’s support to young unemployed persons in their job search and help the Italian regions hit by earthquakes in 2016 in their task of reconstruction. Draft amending budget no 3 increases the 2017 EU budget by €500 million in commitments for the youth employment initiative. Draft amending budget no 4 mobilises €1.2 billion under the EU’s solidarity fund following the earthquakes in Abruzzo, Lazio, Marche and Umbria.
2018: focus on jobs, growth, security and migration
Sustaining growth and job creation remains one of the Council’s most important priorities. In 2018, the Council wants to support smart and inclusive growth with €76.5 billion in commitments and €66.4 billion in payments, up by 2.1% and 17.5% respectively compared to 2017.
Actions financed under this heading include notably
- the EU’s research and innovation programme Horizon 2020 with €10.6 billion in commitments and €10.8 billion in payments, which is an increase by 2.6% and 5.8% respectively compared to the 2017 EU budget
- the connecting Europe facility to support trans-European networks in transport, energy and communication sectors, with €4.3 billion in commitments and €2.1 billion in payments (+3.9% and +31.7%) including contributions from the cohesion fund
- Erasmus+, with €2.3 billion in commitments (+9.5%) and €2.1 billion in payments (+13.1%)
- the new European solidarity corps, with €72.8 million in commitments and €55.7 million in payments
- European aid for the most deprived, with €556.9 million in commitments and €401.4 million in payments
- the youth employment initiative, with €233.3 million in commitments and €600.0 million in payments
To ensure a high level of security the Council backed the amounts proposed by the Commission. This means that €720.0 million in commitments and €481.2 million in payments could be spent under the internal security fund to enhance border protection, fight against cross-border crime, establish an entry/exit system and set up a European travel information and authorisation system.
The Council also approved the €719.2 million in commitments and €594.4 million in payments proposed by the Commission for the asylum, migration and integration fund to address the migration pressure. The money will help member states to address migration flows, integrate persons who have the right to stay and return those who don’t. The Council’s position also contains €200.0 million in commitments and €220.6 million in payments for the EU emergency support mechanism within the EU. It enables the EU to help member states confronted with a natural or man-made disaster, such as the sudden and massive inflow of refugees and migrants.
With regard to administrative expenditure the Council acknowledged the efforts made to reach the 5% staff reduction target. It underlined the importance of keeping under continuous monitoring the level of staff in all EU institutions in order to ensure that the savings achieved are lasting.
A summary of the draft Council’s position is set out in the table below:
in € billion
|Draft budget 2018||Council position on DB 2018||Difference|
|1||Smart and inclusive growth||77.2||66.8||76.5||66.4||-0.8||-0.4|
|1a||Competitiveness for growth and jobs||21.8||20.1||21.1||19.9||-0.8||-0.2|
|1b||Economic, social and territorial cohesion||55.4||46.8||55.4||46.5||0||-0.2|
|2||Sustainable growth: natural resources||59.6||56.4||59.3||56.1||-0.3||-0,3|
|3||Security and citizenship||3.5||3.0||3.4||2.9||-0.03||-0.02|
|Emergency aid reserve||0.3||0.3||0.3||0.3||0||0|
|European globalisation adjustment fund||0.2||0.03||0.2||0.03||0||0|
|European Union solidarity fund||0.6||0.3||0.05||0.05||-0.5||-0.2|
c/a: commitments, p/a: payments
The Council is expected to formally adopt its position early September. It will serve as a mandate to the Estonian presidency to negotiate the 2018 EU budget with the European Parliament.
Commitments are legal promises to spend money on activities whose implementation extends over several financial years. Payments cover expenditure arising from commitments entered into the EU budget during current and preceding financial years.
On 11 July 2017, the Council adopted conclusions on the Commission’s review of the EU’s capital markets union action plan.
The Council renewed its commitment to the action plan, which is aimed at securing a fully-fledged capital markets union by the end of 2019. It supported a number of priority initiatives set out by the Commission.
The conclusions highlight good progress made on the plan so far, with nearly two thirds of actions already delivered. However a number of challenges have emerged since it was launched in September 2015, and with them comes a need to strengthen the plan.
“The European economy is steadily improving. What we now need most of all is more investment. That’s why the capital markets union is top of the Estonian agenda”, Mr Tõniste said. “To ensure sustainable economic growth in the longer term, it is essential to broaden the range of sources available for financing, in particular for young and innovative companies.”
The Council reconfirmed the plan’s priorities, which are to:
– strengthen capital markets so as to attract more investment, including foreign investment, for European companies and infrastructure projects;
– improve access to finance in particular for European SMEs and start-ups, and especially in innovative industries.
Nearly two years into the plan, economic recovery in the EU is gaining momentum. However investment rates are still below pre-crisis levels, and this continues to drag on growth in the longer term.
The Commission outlines the mid-term review in a communication issued on 8 June 2017.
It puts a specific focus on actions related to sustainable finance and financial technology. The communication sets out three categories of actions to be pursued:
– actions announced in 2015 and not yet delivered;
– the follow-up to actions completed under the 2015 action plan;
– new priority actions.
The conclusions were adopted at a meeting of the Economic and Financial Affairs Council.
- Green light to review of EU fund for stability and peace projects
- Military capacity building excluded unless in exceptional circumstances
- Support to build hospitals, not to buy arms
The review of a key EU external assistance fund that has contributed to more than 260 stability and peace-building projects in 68 countries got the support of committee MEPs on Tuesday
Foreign affairs committee MEPs agreed to raise the EUR 2.3 bn budget of the Instrument contributing to Stability and Peace by EUR 100 mln by the end of 2020, so as to allow for exceptional circumstances in which the fund could help build the capacity of the military in partner countries.
The review aims to strengthen the link between security and development in third countries. The European Union already has several instruments to support civilian security forces (police) and the judiciary by financing equipment such as vehicles or radios. Support for the military had always been excluded, although in some cases it is the only one capable of restoring security and reinstating public administration and basic services.
Training, mentoring and advising military forces in third countries, as well as the provision of non-lethal equipment or infrastructure, such as IT systems or hospitals, could now be eligible in exceptional cases for EU support, the draft rules say. Under no circumstances can EU support be given to building up foreign armies, buying weapons or training in combat techniques.
“European missions and operations on the ground have called for this indispensable tool for years. It is imperative to give the possibility to finance “civilian” actions of the armed forces in fragile countries. This is the missing link of the Common Security and Defence Policy,” said EP rapporteur Arnaud Danjean (EPP, FR).
The draft rules were backed by 47 votes to 14, with 4 abstentions. MEPs also decided to enter into the inter-institutional negotiations.
Council agreed its negotiating position in December 2016 so Parliament can start talks on the review of the fund if there is no objection at the September plenary session in Strasbourg.
The Instrument contributing to Peace and Stability is the EU’s main tool to support security initiatives, peace-building activities and crisis response, preparedness and prevention in partner countries. Projects funded under the instrument include a sea water desalination plant in the Gaza strip, the training of civilian experts for crisis management missions and the deradicalization of young people in Bangladesh.
The fund started out in 2014 with a budget of EUR 2.3 billion for 2014-2020, replacing the Instrument for Stability (IfS) and several other instruments that focused on drugs, landmines, uprooted people, crisis management, rehabilitation and reconstruction.
On 11 July 2017, the Council agreed an action plan to address the problem of non-performing loans in the banking sector.
It outlined a mix of policy actions to help reduce stocks of non-performing loans (NPLs), which remain at high levels within the EU, and to prevent their future emergence.
“Non-performing loans are a problem for the banking industry for which solutions have until now been mainly defined at the national level”, said Toomas Tõniste, minister for finance of Estonia, which currently holds the Council presidency. “We need to free up these resources, make our financial system more resilient and prevent the re-emergence of NPL issues in the future”.
NPLs are bank loans that are subject to late repayment or unlikely to be repaid without requiring the sale of collateral.
The financial crisis and ensuing recessions have left banks in some member states with particularly high levels of NPLs. These can generate negative cross-border spill-overs and can affect market perception of the EU banking sector. High NPL levels can drag heavily on investment, and hence on the economy.
Resolving NPLs, on the other hand, can help reduce financial fragmentation and facilitate capital flows within the single market.
On the basis of an expert report, the Council highlighted the need for action as regards:
- bank supervision;
- the reform of insolvency and debt recovery frameworks;
- the development of secondary markets for NPLs (‘distressed assets’);
- restructuring of the banking industry.
According to the report, prepared by a sub-group of the Council’s financial services committee, NPLs amounted to nearly €1 trillion at the end of 2016. That is the equivalent of roughly 6.7% of the EU’s GDP and 5.1% of total bank loans.
But there are large variations within the EU, where ratios range from 1% to 46%. In some countries NPLs are concentrated in real estate, whilst in others they are scattered across the economy.
Persistently high NPL levels pose a problem, as they:
- are a drag on bank profitability due to administrative costs and higher funding costs for banks. Provisioning needs deplete banks’ capital base;
- pose a risk for the viability of high-NPL banks;
- lock up capital to back unproductive assets, thus weighing down on monetary policy transmission and on the financing of the economy.
Banks are primarily responsible for restructuring their business models and resolving their NPL issues. However, given their current magnitude, NPL stocks in some member states may not decline at a sufficient pace, despite the economic recovery.he Council agreed that measures to address the issue would be beneficial for the EU as a whole. Incentives for banks to deal with NPLs proactively should be enhanced, whilst avoiding the disruptive effects of fire sales. Measures should both address existing stocks of NPLs and prevent a further accumulation of NPLs in the future.
The conclusions were adopted at a meeting of the Economic and Financial Affairs Council.
The Council agreed to revert to the issue regularly, to take stock of the evolution of NPLs in Europe and of actions taken.
Vice-President Andrus Ansip, Vice-President Jyrki Katainen and Commissioner Cecilia Malmström spoke this morning at the EU-Japan Business Roundtable – a yearly gathering of businesses and policy makers, alternating between Japan and Brussels. The roundtable was the first opportunity to present to European and Japan business leaders last week’s Economic Partnership Agreement reached with Japan. Vice-President for the Digital Single Market Ansip accentuated in his speech that the EU and Japan can bring their digital cooperation to the next level with free flow of personal data based on converging data protection laws, while Trade Commissioner Malmström noted in her speech the new opportunities the companies will be able to enjoy after the Economic Partnership Agreement removes 99 per cent of customs duties and reduces unnecessary red tape. This afternoon, Climate Action and Energy Commissioner Miguel Arias Cañete will meet Japan’s Minister of Economy, Trade and Industry Hiroshige Seko to sign a joint Memorandum of Cooperation on Liquefied Natural Gas (LNG) and to exchange views on the state of the EU-Japan energy dialogue. Vice-President Jyrki Katainen will also meet Minister Seko to discuss international trade and investment issues. Later in the day, Minister Seko will additionally meet Vice-President Ansip and Commissioner for Justice, Consumers and Gender Equality Vĕra Jourová to discuss data protection, adequacy decisions and data flows between Japan and the EU. The EU and Japan have been in a dialogue to promote high data protection standards since January 2017. Last week Commissioner Jourová took stock of progress in this dialogue with Japanese data protection Commissioner Haruhi Kumazawa. Additionally, President Juncker and Prime Minister Abe issued last Thursday a joint declaration, reaffirming the importance of ensuring a high level of privacy and security of personal data as a fundamental right and as a central factor of consumer trust in the digital economy. The aim is to strengthen EU-Japan industrial and digital cooperation in various digital fields, including also topics such as the Internet of Things and eGovernment.
Climate change/Land use. An obligation for each EU member state to compensate emissions generated by land use, e.g. in agriculture and forestry, is up for a vote by the Environment Committee. The emissions must be compensated by an equivalent removal of CO₂ from the atmosphere. The measures contribute to the implementation of the Paris Agreement on climate change (Tuesday)
Fertilisers. Plans to boost the use of organic and waste-based fertilisers will be voted by the Internal Market Committee. The rules would impose limits on heavy metals, such as cadmium, in these products, including imports. The aim is to reduce the environmental impact, waste and energy consumption. (Tuesday)
Migration/Italy and Greece. Italian authorities, EU agencies and organisations active in the Cetral Mediterranean will discuss search and rescue with the Civil Liberties Committee and cooperation with Libyan authorities. Later in the morning, Greece’s Immigration Minister Ioannis Mouzalas and an UNHCR representative will discuss with Civil Liberties and Development Committee MEPs EU support for Greece in the reception and integration of refugees. (Wednesday)
Media pluralism and freedom in the EU. The Civil Liberties Committee holds a hearing on media pluralism with the director of the Centre for Media Pluralism and Media Freedom, Pier Luigi Parcu, and the director of the European Federation of Journalists, Renate Schroeder. MEPs will discuss a comparative analysis commissioned by the committee of the media landscape in Bulgaria, France, Greece, Hungary, Italy, Poland and Romania. (Tuesday)
Brexit and aviation. The impact of Brexit on the aviation sector and the tourism industry will be discussed by the Transport and Tourism Committee with CEOs of a number of EU airports, including Heathrow, as well as Michael O’Leary of Ryanair, the CEO of IAG and others. (Tuesday)
Taxation. Finance Ministers Wolfgang Schäuble (Germany), Paschal Donohoe (Ireland), Pier Carlo Padoan (Italy) and Jeroen Dijsselbloem (The Netherlands) will appear before the Inquiry Committee on Money Laundering and Tax Evasion (PANA) to look into measures adopted in the follow-up to the Panama Papers’ revelations and action undertaken by the Commission in this field. (Tuesday)
EU fund for stability and peace around the world. Foreign affairs MEPs will vote on a review of a key EU external assistance instrument, designed to fund projects for responding to crises around the world. Until now, the fund contributed to 267 projects in 68 countries. (Tuesday)
EP composition/Brexit. Constitutional MEPs will look at a proposal for the redistribution of Parliament’s seats as the current arrangement will lapse in 2019 and also in view of the future withdrawal by the UK from the EU. (Wednesday)
Estonian Presidency. Ministers from the Estonian Government, which holds the rotating EU Council Presidency for the next six months, will present their priorities in different policy fields to the committees concerned. (Monday to Thursday)
President’s diary. EP President Antonio Tajani will meet President of Cape Verde, Mr. Jorge Carlos de Almeida Fonseca, on Tuesday. Later that day, he has a meeting with the Prime Minister of Romania, Mr. Mihai Tudose.
Press briefing. The EP Press Service will hold a press briefing on the week’s activities at 11.00 on Monday, in the “Anna Politkovskaya” EP press conference room.
At their meeting in Hamburg, Germany, on 7 and 8 July 2017, G20 leaders adopted a declaration focusing on sharing the benefits of globalisation, building resilience, improving sustainable livelihood and assuming responsibility