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New ACP-EU Partnership after 2020

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What is the Cotonou Partnership Agreement between the EU and African, Caribbean and Pacific countries?

The Cotonou Partnership Agreement is the legal framework ruling relations between the EU and 79 countries in Africa, the Caribbean and the Pacific (ACP). It is one of the oldest and most comprehensive frameworks of cooperation between the EU and third countries. Signed in 2000 for a period of 20 years, the Agreement unites more than one hundred countries (EU member states + 79 ACP countries) and represents over 1.5 billion people.

The EU-ACP partnership focuses on the eradication of poverty and inclusive sustainable development for ACP and EU countries. It is divided into three key action areas: development co-operation, political dialogue and trade.

Why does it need to be modernised and why is this important?

The world has changed considerably since the Cotonou Agreement was adopted almost two decades ago. Global and regional contexts (in Europe, Africa, the Caribbean and the Pacific) have evolved significantly – and so have the common global challenges to be addressed and opportunities to be grasped. Thus, the core objectives of the partnership have to be reviewed to adapt to the new realities. The EU is therefore seeking a comprehensive political agreement, setting a modern agenda framed by the internationally agreed sustainable development roadmaps (the UN 2030 Agenda – SDGs, the Addis Ababa Action Agenda, the Paris Agreement, the New EU Consensus on Development, the Global Strategy on EU Foreign and Security Policy, etc.). The coming months will be crucial, as we are about to enter a new era in our relationship with ACP countries. The negotiations will pave the way for new dynamics and cooperation going beyond the traditional development dimension.

What are the potential benefits? What kind of change will a new era of EU-ACP relations bring for people?

Building on the lessons learned during our 44 years of cooperation and making the most of the new context, the future agreement can bring unprecedented opportunities. By setting up a powerful political alliance, the EU and its partners will be in a position to develop solutions to the challenges faced in each region. These include growth and job creation, human development and peace, migration and security issues. Many of today’s challenges of a global dimension require a concerted, multilateral approach, in order to achieve tangible results. In 2015 we set up a successful coalition that ultimately led to the conclusion of the Paris Agreement on climate change. This shows that the ACP-EU partnership has the power to provide valuable responses to global challenges. If we join forces, we can form a majority worldwide, as the EU and ACP countries represent more than half of the UN membership. Together, we can make a difference and set a global agenda in international forums. Under the negotiating directives, the EU’s strategic priorities include:

–       speeding up progress towards meeting the goals of UN 2030 Agenda for Sustainable Development and eradicating poverty in all its dimensions;

–       moving inclusive, sustainable and economic development forward;

–       building stronger states and societies (through peace, security, justice and fighting against terrorism);

–       supporting private sector development and enhancing regional integration;

–       promoting and upholding human rights, fundamental freedoms, democracy, the rule of law and good governance;

–       managing mobility and migration issues;

–       supporting the transition to low greenhouse gas emissions and developing climate resilient economies;

–       ensuring environmental sustainability and sustainable management of natural resources.

How do EU and ACP countries intend to achieve these objectives?

Through a new structure better adapted to each region’s needs. Our new partnership can act as a powerful tool to strengthen our relations with the countries as a group, as well as with each “region” (namely Africa, the Caribbean and the Pacific), and to focus on key tailored priorities. This will also allow for the further development of our “continent-to-continent” relationship with Africa.

The proposed new structure consists of a combination of:

–  a common foundation agreement (containing values & principles common to the EU and Africa, the Caribbean, and the Pacific, and the overarching objectives) at EU-ACP level;

–  three strengthened regional partnerships (EU-Africa, EU-Caribbean, EU-Pacific), in the form of specific protocols. These three strong, action-oriented pillars will enable the relevant actors to participate in the negotiation, governance and implementation of the future partnership while respecting the subsidiarity principle.

These three “regions” will manage the flexible regional partnerships themselves, providing for a greater role for the relevant regional organisations in the establishment and management of the future regional partnerships.

What are the specific priorities proposed towards the African region?

The priorities proposed by the European Union for the EU Africa partnership are to focus on achieving peace and stability, managing migration and mobility, consolidating democracy and good governance, unleashing economic opportunities, reaching human development standards, and addressing climate change. The proposal is fully in line with the outcome of the African Union-European Union Summit held in November 2017 in Abidjan.

What is the link between the future ACP-EU Partnership and the new Africa-Europe Alliance for Sustainable Investment and Jobs announced by President Juncker?

The new Africa-Europe Alliance for Sustainable Investment and Jobs aims to bring our continents closer together by promoting a substantial increase in private investment from both Europeans and Africans, helping improve the business environment, boosting trade and job creation, while supporting education and skills that will benefit European and African people alike.

It will therefore contribute to the economic agenda of the African regional pillar of the future ACP-EU Partnership will be developed.

Increasing responsible investment in Africa, especially in sectors where the European Union has a value added, is among the EU’s key priorities. The new Africa-Europe Alliance for Sustainable Investment and Jobs is not a stand-alone initiative. It is part of the wider set of strategic frameworks and a crucial element to deliver on the AU-EU Abidjan Summit Declaration.

What are the specific priorities proposed for the Caribbean region?

The key areas of cooperation for the regional partnership with the Caribbean include addressing climate change, vulnerability, citizen security, good governance, human rights, human development and social cohesion. In the same way, fostering inclusive growth, deepening regional integration and ocean governance as well as reducing natural disasters effects are also high on the agenda.

What are the specific priorities proposed for the Pacific region?

The large number of island nations and their huge maritime territories make the Pacific countries an important player for the EU in tackling global challenges, particularly with respect to their vulnerability to natural disasters and climate change. Other priorities should focus on maritime security, sustainable management of natural resources, good governance, human rights, especially gender equality, and inclusive sustainable growth.

Will regional organisations have a role in the post-2020 partnership?

The growth of regional bodies has been a significant trend since the 1990s. Across the ACP countries, numerous regional organisations have emerged. Some have become key actors in international relations. The African Union, the Pacific Islands Forum and Cariforum especially have strengthened their respective roles, as have sub-regional organisations in Africa, including ECOWAS and SADC. The EU and the ACP countries will continue to rely on a multi-level system of governance that allows taking action at the most appropriate level (national, regional, continental or ACP), in line with the principles of subsidiarity and complementarity.

Will non-state actors have a role in the agreement?

The EU values structured dialogue and is in favour of a multi-stakeholder approach that includes non-state actors – the private sector, civil society, and local authorities. These partners should be able to work in an enabling environment and have the opportunity to make a meaningful contribution to national, regional and global decision making.

Observer status

The Agreement should include a provision establishing that third parties that subscribe to the values and principles underpinning the Agreement and have an added value in fostering the specific objectives and priorities of the Partnership may be granted observer status.

Who is the EU’s chief negotiator?

The EU chief negotiator is Commissioner for International Cooperation and Development, Neven Mimica. Negotiations are carried out in close collaboration with the High Representative of the Union for Foreign Affairs and Security Policy, Federica Mogherini.

Who is negotiating on behalf of the ACP group of states?

The central negotiating group is composed of representatives from the three regions (Africa, the Caribbean and the Pacific) and is led by the Hon. Robert Dussey, Minister for Foreign Affairs, Cooperation and African Integration of Togo.

Where are the negotiations taking place?

In the EU and ACP countries.

How long should the negotiations last?

The Cotonou Agreement is due to expire on 29 February 2020. Therefore, the new agreement needs to be both finalised and approved by then.

How long will the new agreement last?

It will be proposed that the future EU-ACP partnership would be concluded for an initial period of 20 years. Three years before its expiry, a process should be initiated to re-examine what provisions should govern future relations. Unless a decision on terminating or extending the agreement is taken by the Parties, the agreement will be tacitly renewed for a maximum period of 5 years, until new provisions or adaptations have been agreed upon by all Parties. The agreement should also include a “rendez-vous” clause for a comprehensive revision of the strategic priorities, after the expiration of the UN 2030 Agenda.

EU Politics

Commission approves 2022-2027 regional aid map for Greece

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The European Commission has approved under EU State aid rules Greece’s map for granting regional aid from 1 January 2022 to 31 December 2027 within the framework of the revised Regional aid Guidelines (‘RAG’).

The revised RAG, adopted by the Commission on 19 April 2021 and entering into force on 1 January 2022, enable Member States to support the least favoured European regions in catching up and to reduce disparities in terms of economic well-being, income and unemployment – cohesion objectives that are at the heart of the Union. They also provide increased possibilities for Member States to support regions facing transition or structural challenges such as depopulation, to contribute fully to the green and digital transitions.

At the same time, the revised RAG maintain strong safeguards to prevent Member States from using public money to trigger the relocation of jobs from one EU Member State to another, which is essential for fair competition in the Single Market.

Greece’s regional map defines the Greek regions eligible for regional investment aid. The map also establishes the maximum aid intensities in the eligible regions. The aid intensity is the maximum amount of State aid that can be granted per beneficiary, expressed as a percentage of eligible investment costs.

Under the revised RAG, regions covering 82.34% of the population of Greece will be eligible for regional investment aid:

Twelve regions (Βόρειο Αιγαίο / Voreio Aigaio, Νότιο Αιγαίο / Notio Aigaio, Κρήτη / Kriti, Aνατολική Μακεδονία, Θράκη / Anatoliki Makedonia, Thraki, Κεντρική Μακεδονία / Kentriki Makedonia, Δυτική Μακεδονία / Dytiki Makedonia, Ήπειρος / Ipeiros, Θεσσαλία / Thessalia, Ιόνια Νησιά / Ionia Nisia, Δυτική Ελλάδα / Dytiki Elláda, Στερεά Ελλάδα / Sterea Elláda and Πελοπόννησος / Peloponnisos) are among the most disadvantaged regions in the EU, with a GDP per capita below 75% of EU average. These regions are eligible for aid under Article 107(3)(a) TFEU (so-called ‘a’ areas), with maximum aid intensities for large enterprises between 30% and 50%, depending on the GDP per capita of the respective ‘a’ area. The region Ευρυτανία / Evrytania, which is part of Στερεά Ελλάδα / Sterea Elláda, also qualifies as a sparsely populated area having fewer than 12,5 inhabitants per km². In sparsely populated areas, Member States can use operating aid schemes to prevent or reduce depopulation.

In order to address regional disparities, Greece has designated as so-called non-predefined ‘c’ areas the regions of Δυτικός Τομέας Αθηνών / Dytikos Tomeas Athinon, Ανατολική Αττική / Anatoliki Attiki, Δυτική Αττική / Dytiki Attiki and Πειραιάς, Νήσοι / Peiraias, Nisoi. The maximum aid intensities for large enterprises in Δυτικός Τομέας Αθηνών / Dytikos Tomeas Athinon is 15%. The other ‘c’ areas mentioned above border with ‘a’ areas. For this reason, the aid intensity in these regions has been increased to 25%, so that the difference in aid intensity with the bordering ‘a’ areas is limited to 15 percentage points.

Greece has the possibility to designate further so-called non-predefined ‘c’ areas (up to a maximum of 1.16% of the national population). The specific designation of these areas can take place in the future and would result in one or more amendments to the regional aid map approved today.

In all the above areas, the maximum aid intensities can be increased by 10 percentage points for investments made by medium-sized enterprises and by 20 percentage points for investments made by small enterprises, for their initial investments with eligible costs up to €50 million.

Once a future territorial Just Transition plan in the context of the Just Transition Fund Regulation will be in place, Greece has the possibility to notify the Commission an amendment to the regional aid map approved today, in order to apply a potential increase of the maximum aid intensity in the future Just Transition areas, as specified in the revised RAG for ‘a’ areas.

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EU Politics

20 years of the euro in your pocket

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Twenty years ago, on 1 January 2002, twelve EU countries changed their national currency banknotes and coins for the euro in the largest currency changeover in history. In these two decades, the euro has contributed to the stability, competitiveness and prosperity of European economies. Most importantly, it has improved the lives of citizens and made it easier to do business across Europe and beyond. With the euro in your pocket, saving, investing, travelling and doing business became much easier.

The euro is a symbol of EU integration and identity. Today, more than 340 million people use it across 19 EU countries, with 27.6 billion euro banknotes in circulation for a value of about €1.5 trillion. The euro is currently the second most widely used currency in the world behind the US dollar.

As it celebrates this 20th anniversary, the EU continues the work to strengthen the international role of the euro and adapt it to new challenges, including the rapid digitalisation of the economy and the development of virtual currencies. As a complement to cash, a digital euro would support a well-integrated payments sector and would offer greater choice to consumers and businesses.

Ursula von der Leyen, President of the European Commission, said: “It is now twenty years that we, European people, can carry Europe in our pockets. The euro is not just one of the most powerful currencies in the world. It is, first and foremost, a symbol of European unity. Euro banknotes have bridges on one side and a door on the other – because this is what the euro stands for. The euro is also the currency of the future, and in the coming years it will become a digital currency too. The euro also reflects our values. The world we want to live in. It is the global currency for sustainable investments. We can all be proud of that.”

David Sassoli, President of the European Parliament, said: “The euro is the embodiment of an ambitious political project to promote peace and integration within the European Union. But the euro is also a condition for protecting and relaunching the European economic, social, and political model in the face of the transformations of our time. The euro is a symbol, the coming to fruition of a historic political vision, an ancient vision of a united continent with a single currency for a single market.”

Charles Michel, President of the European Council, said: “The euro has come a long way — it’s a true European achievement. I would even say the euro has become part of who we are. And how we see ourselves as Europeans. Part of our mind-set. And part of our European spirit. The euro belongs to all of us all European citizens. But it isn’t just a success within our EU borders. It has also anchored itself on the international stage. Despite the crises, the euro has proven to be resilient — a symbol of European unity and stability. And never has that been truer than during COVID-19. The euro has served as a bedrock of stability. A stable asset for the Union. The euro also fuels our recovery. Unlocking the full potential of sustainable development, quality jobs, and innovation.”

Christine Lagarde, President of the European Central Bank, said: “The euros we hold in our hands have become a beacon of stability and solidity around the world. Hundreds of millions of Europeans trust it and transact with it every day. It is the second most international currency in the world. As European Central Bank President, I commit we will continue to work hard to make sure that we maintain price stability. And I also pledge that we will renew the face of those banknotes and that we will give them the digital dimension as well.”

Paschal Donohoe, President of the Eurogroup, said: “The euro has proven its mettle in dealing with great economic challenges. In particular, our response to the COVID 19 pandemic demonstrated that by sharing the euro we can achieve more collectively than we can individually. The euro has strengthened its foundations over the last 20 years. Now, we need to build on those foundations to make the euro the global currency for transitioning to a lower carbon future.”

A long journey

The euro has come a long way from the early discussions on an Economic and Monetary Union in the late 1960s. Specific steps towards a single currency were first approached in 1988 by the Delors Committee. In 1992, the Maastricht Treaty marked a decisive moment in the move towards the euro, as political leaders signed on the criteria that Member States had to meet to adopt the single currency. Two years later, the European Monetary Institute (EMI) started its preparatory work in Frankfurt for the European Central Bank (ECB) to assume its responsibility for monetary policy in the euro area. As a result, on 1 June 1998, the ECB became operational.

In 1999, the euro was launched in 11 Member States as an accounting currency on financial markets and used for electronic payments. It was finally on 1 January 2002 when Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain swapped their national notes and coins for euros. Slovenia joined the euro area in 2007, followed by Cyprus and Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014) and Lithuania (2015). Currently, Croatia is taking the preparatory steps to join the euro area, which it plans to do on 1 January 2023, provided it fulfils all the convergence criteria.

Twenty years of benefits for citizens and businesses

The euro has brought many benefits to Europe, especially to its citizens and businesses. The single currency has helped to keep prices stable and protected the euro area economies from exchange rate volatility. This has made it easier for European home buyers, businesses and governments to borrow money and has encouraged trade within Europe and beyond. The euro has also eliminated the need for currency exchange and has lowered the costs of transferring money, making travelling and moving to another country to work, study or retire simpler.

A large majority of Europeans support the single currency. According to the latest Eurobarometer, 78% of citizens across the euro area believe the euro is good for the EU.

A strengthened international role

The euro is the second most important currency in the international monetary system. Its stability and credibility has made it an international invoicing currency, a store of value and a reserve currency, accounting for around 20% of foreign exchange reserves. Sixty other countries and territories around the world, home to some 175 million people, have chosen to use the euro as their currency or to peg their own currency to it. Today, the euro is used for almost 40% of global cross-border payments and for more than half the EU’s exports.

Since the global financial crisis of 2008 and the subsequent sovereign debt crisis, the EU has continued to strengthen and deepen the Economic and Monetary Union. The EU’s unprecedented recovery plan NextGenerationEU will further improve the euro-area’s economic resilience and enhance economic convergence. The issuance of high-quality-denominated bonds under NextGenerationEU will add significant depth and liquidity to the EU’s capital markets and make them and the euro more attractive for investors. The euro is also now the leading currency for green investment: half of the world’s green bonds are denominated in euros, and this figure is rising thanks to the new green bonds issued to finance NextGenerationEU.

To further develop the international role of the euro, the Commission has launched outreach initiatives to promote euro denominated investments, facilitate the use of the euro as an invoicing and denomination currency, and foster a better understanding of the obstacles for its wider use. This outreach will take the form of dialogues, workshops and surveys with the public and private sector, financial regulatory agencies, and institutional investors in regional and global partner countries of the EU.

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EU Politics

The Commission proposes the next generation of EU own resources

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The Commission has today proposed to establish the next generation of own resources for the EU budget by putting forward three new sources of revenue: the first based on revenues from emissions trading (ETS), the second drawing on the resources generated by the proposed EU carbon border adjustment mechanism, and the third based on the share of residual profits from multinationals that will be re-allocated to EU Member States under the recent OECD/G20 agreement on a re-allocation of taxing rights (“Pillar One”). At cruising speed, in the years 2026-2030, these new sources of revenue are expected to generate on average a total of up to €17 billion annually for the EU budget.

The new own resources proposed today will help to repay the funds raised by the EU to finance the grant component of NextGenerationEU. The new own resources should also finance the Social Climate Fund. The latter is an essential element of the proposed new Emissions Trading System covering buildings and road transport, and will contribute to ensuring that the transition to a decarbonised economy will leave no one behind.

Johannes Hahn, Commissioner in charge of Budget and Administration, said: “With today’s package, we lay the foundations for the repayment of NextGenerationEU and provide essential support to the Fit for 55 package by putting in place the financing of the Social Climate Fund. With the set of new own resources, we, therefore, ensure that the next generation will truly benefit from NextGenerationEU.”

Today’s proposal builds on the Commission’s commitment undertaken as part of the political agreement on the 2021-2027 long-term budget and the NextGenerationEU recovery instrument. Once adopted, this package will strengthen the reform of the revenue system started in 2020 with the inclusion of the non-recycled plastic waste-based own resources.

EU emissions trading

The Fit for 55 package of July 2021 aims to reduce net greenhouse gas emissions in the EU by at least 55% by 2030, compared to 1990, to stay on track to reach climate neutrality by 2050. This package includes a revision of the EU Emissions Trading System. In future, emissions trading will also apply to the maritime sector, auctioning of aviation allowances will increase, and a new system for buildings and road transport will be established.

Under the current EU Emissions Trading System, most revenues from the auctioning of emission allowances are transferred to national budgets. Today, the Commission proposes that in future, 25% of the revenue from EU emissions trading flows into the EU budget. At cruising speed, revenues for the EU budget are estimated at around €12 billion per year on average over 2026-2030 (€9 billion on average between 2023-2030).

In addition to the repayment of NextGenerationEU funds, these new revenues would finance the Social Climate Fund, put forward by the Commission in July 2021. This Fund will ensure a socially fair transition and support vulnerable households, transport users and micro-enterprises to finance investments in energy efficiency, new heating and cooling systems and cleaner mobility, as well as, when appropriate, temporary direct income support. The total financial envelope of the Fund in principle corresponds to an amount equivalent to around 25% of the expected revenue from the new emissions trading system for buildings and road transport.

Carbon border adjustment mechanism

The objective of the carbon border adjustment mechanism, which the Commission also proposed in July 2021, is to reduce the risk of carbon leakage by encouraging producers in non-EU countries to green their production processes. It will put a carbon price on imports, corresponding to what would have been paid, had the goods been produced in the EU. This mechanism will apply to a targeted selection of sectors and is fully consistent with WTO rules.

The Commission proposes to allocate to the EU budget 75% of the revenues generated by this carbon border adjustment mechanism.Revenues for the EU budget are estimated at around €1 billion per year on average over 2026-2030 (€0.5 billion on average between 2023-2030).CBAM is not expected to generate revenue in the transitional period from 2023 to 2025.

Reform of the international corporate taxation framework

On 8 October 2021, more than 130 countries that are members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting agreed on a reform of the international tax framework: a two-pillar solution to tackle tax avoidance and aims at ensuring that profits are taxed where economic activity and value creation occur. The signatory countries representing more than 90% of global GDP. Pillar One of this agreement will reallocate the right to tax a share of so-called residual profits from the world’s largest multinational enterprises to participating countries worldwide. The Commission proposes an own resource equivalent to 15% of the share of the residual profits of in-scope companiesthat are reallocated to EU Member States.

The Commission has committed to propose a Directive in 2022, once the details of the OECD/G20 Inclusive Framework agreement on Pillar One are finalised, implementing the Pillar One agreement in line with the requirements of the Single Market. This process is complementary to the Pillar Two Directive for which the Commission adopted a separate proposal today. Pending the finalisation of the agreement, revenues for the EU budget could amount to roughly between €2.5 and €4 billion per year.

Legislative process

In order to incorporate these new own resources in the EU budget, the EU needs to amend two key pieces of legislation:

First, the Commission proposes to amend the Own Resources Decision to add the three proposed new resources to the existing ones.

Secondly, the Commission also puts forward a targeted amendment of the regulation on the current long-term EU budget 2021-2027, also known as the Multiannual Financial Framework (MFF Regulation). This amendment offers the legal possibility to start repaying the borrowing for NextGenerationEU already during the current MFF. At the same time, it proposes to increase the relevant MFF expenditure ceilings for the years 2025-2027 to accommodate the additional expenditure for the Social Climate Fund.

The Own Resources Decision needs to be approved unanimously in Council after consulting the European Parliament. The decision can enter into force once it is approved by all EU countries in line with their constitutional requirements. The MFF Regulation needs to be adopted unanimously by the Council after obtaining the consent of the European Parliament.

Next Steps

The European Commission will now work hand in hand with the European Parliament and the Council towards swift implementation of the package within the timelines set in the interinstitutional agreement.

Furthermore, the Commission will present a proposal for a second basket of new own resources by the end of 2023. This second package will build on the ‘Business in Europe: Framework for Income Taxation (BEFIT)’ proposal foreseen for 2023.

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