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EU Economic governance review: Q&A

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The Commission has presented a Communication reviewing the EU’s Economic governance framework. Specifically, this includes an assessment of the application of the six- and two-pack legislation.

The Communication also sets out how the Commission plans to consult interested parties to receive their views on the functioning of the economic framework so far and the possible ways to enhance its effectiveness.

Why is the Commission presenting this review now?

The legislation in the six-pack and two-pack requires the Commission to review and report on the application of the legislation every five years.

The start of a new political cycle at European level is an opportune moment to assess the effectiveness of the current rules.

The economic context has changed considerably since these measures were introduced in response to the vulnerabilities exposed by the economic and financial crisis. Meanwhile, Europe is aiming to become the world’s first climate-neutral continent and to seize the new opportunities of the digital age, as set out in the Annual Sustainable Growth Strategy

What are the main findings of the review?

The review considers the effectiveness of the different surveillance elements as regards the achievements of the three key objectives, namely:

        ensuring sustainable government finances, growth and avoiding macroeconomic imbalances;

        enabling closer coordination of economic policies; and

        promoting convergence of economic performances of the Member States.

The review has revealed strengths as well as possible areas for improvement.

The surveillance framework has supported the correction of existing macroeconomic imbalances and the reduction of public debt. This, in turn, has helped to create the conditions for sustainable growth, strengthened resilience and reduced vulnerabilities to economic shocks.

The implementation of recommended policies by Member States has contributed to the gradual strengthening of the EU economies and to job creation.

The establishment of a common budgetary timeline and the policy guidance issued on the basis of Member States’ draft budgetary plans has led to a closer coordination of fiscal policies within the euro area.

The surveillance framework has also promoted the gradual convergence of Member States’ economic performances. All Member States have returned to growth since the economic and financial crisis and experienced declining unemployment rates. Public finances have also improved, with public deficits and debt levels falling.

At the same time, potential growth has not recovered to its pre-crisis level and there has been persistently low inflation. Public debt levels remain high in some Member States. Reform efforts are waning. Member States’ economies remain vulnerable to an economic slowdown with risks of spill-overs that would affect the functioning of the euro area as a whole.

The fiscal stance at Member State-level has frequently been pro-cyclical. The composition of public finances has not become more growth-friendly, with Member States consistently opting to increase current expenditure rather than protect investment.

The ability to steer the fiscal stance for the euro area as a whole rests exclusively on coordination of national fiscal policies in the absence of a central stabilisation capacity.

The fiscal framework has grown excessively complex. This complexity has resulted in those rules becoming less transparent, hampering predictability, communication and political ownership.

What are the review’s findings on the Macroeconomic Imbalance Procedure?

The MIP has widened and complemented the scope of economic surveillance and raised awareness about economic challenges beyond fiscal policy.

It has allowed a greater focus on macro-structural and macro-financial issues relevant to macroeconomic stability, such as external imbalances, productivity, competitiveness, the housing market and private indebtedness.

The MIP has helped to focus national debates on policy action. It has also helped to deepen the dialogue between the EU institutions and national authorities about key economic challenges and priorities. The report finds that implementation of country-specific recommendations linked to the MIP was stronger compared with other recommendations, and that imbalances accumulated during the crisis are receding. However, implementation has waned in more recent years. The review also finds that the MIP has been more successful in reducing current account deficits than it has been in reducing persistent and large current account surpluses.

The reports concludes that the MIP has complemented other surveillance instruments. In particular, it provided the basis for prioritising policies not dealt with by the SGP, but relevant to public finances. This is the case for policies helping competitiveness and the growth potential in high-debt countries. 

Will the Commission come forward with any new proposals on the basis of this review?

The next step is to engage openly with interested parties to seek their views on how to strengthen the economic governance framework.

The Commission will consider all those views and on that basis complete its internal reflections on the scope for possible future steps by the end of 2020.

When and how does the Commission plan to engage with the other institutions and interested parties on the functioning of EU fiscal rules?

The Commission looks forward to an inclusive debate, involving interested parties including the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions, national governments and parliaments, national central banks, independent fiscal institutions, national productivity boards, social partners, as well as academic institutions.

This engagement will take place through various means including dedicated meetings, workshops and an online consultation platform.

These consultations will take place over the first half of 2020.

The debate will consider, among others, the following questions:

How can the framework be improved to ensure sustainable public finances in all Member States and to help eliminate existing macroeconomic imbalances and avoid new ones arising?

How to ensure responsible fiscal policies that safeguard long-term sustainability, while allowing for short-term stabilisation?

What is the appropriate role for the EU surveillance framework in incentivising Member States to undertake key reforms and investments needed to help tackle today and tomorrow’s economic, social, and environmental challenges while preserving safeguards against risks to debt sustainability?

How can one simplify the EU framework and improve the transparency of its implementation?

How can surveillance focus on the Member States with more pressing policy challenges and ensure quality dialogue and engagement?

How can the framework ensure effective enforcement? What should be the role of pecuniary sanctions, reputational costs and positive incentives?

Is there scope to strengthen national fiscal frameworks and improve their interaction with the EU fiscal framework?

How should the framework take into consideration the euro area dimension and the agenda towards deepening the Economic and Monetary Union?

Within the context of the European Semester, how can the SGP and the MIP interact and work better together, so as to improve economic policy coordination among Member States?

What is the link between the review and the European Green Deal?

This review was conducted in the context of the ambitions set out in the European Green Deal to make Europe the world’s first climate-neutral continent.

This includes re-assessing the appropriateness of the current flexibility clauses in terms of their scope and eligibility, in order to facilitate the right type and level of investment while preserving debt sustainability.  

‘Green budgeting’ could also play a role in improving the quality of public finances and helping to deliver on the objectives of the European Green Deal. However, it is too soon to say whether the review will lead to the development of such tools.

The Commission will consider the input from interested parties in its reflections on the scope of any possible future steps in this regard. 

Does the existing economic governance framework facilitate green investments?

The EU’s fiscal rules aim to ensure the credibility and sustainability of public finances, thereby ensuring financial stability and smooth access to financial markets at low interest rates. These are necessary factors to ensure sustainable public investment over the medium term.

In principle, the Stability and Growth Pact (SGP) is neutral as regards to the composition of public revenue and expenditure, focusing on deficit and debt. Member States are therefore free to prioritise their public expenditures in favour of investment. The rules recognise in several instances the importance of protecting investment. They also provide support for investment through the so-called “investment clause” and other flexibility provisions provided for in the Commonly Agreed Position on Flexibility contained within the SGP.

What is the link between the review and the Commission’s agenda to further deepen Europe’s Economic and Monetary Union (EMU)?

Our deep economic links and interdependence mean that sound economic and fiscal governance are critically important to the Economic and Monetary Union. The governance framework needs to ensure the sustainability of public finances, support the strength and resilience of Member State economies and promote effective policy coordination. 

At the same time, further EMU reforms such as the introduction of a stabilisation capacity of appropriate size would allow fiscal policy to contribute more to macroeconomic stabilisation at the level of the euro area as a whole.

The completion of the financial union (Banking Union and Capital Markets Union) could facilitate market discipline and allow to simplify the design of an effective fiscal surveillance framework.

Does the review include any recommendations on how to reduce the complexity of the EU’s fiscal rules?

In general the review does not include any recommendations as it is an assessment  of how the rules have worked so far.

The review acknowledges that the current EU fiscal governance framework has grown excessively complex. This complexity results from the framework pursuing multiple objectives and the need to cater for a wide variety of evolving circumstances, including by the use of flexibility, in a context of divergences of views among Member States. It is reflected in a very detailed codification, encompassing several operational indicators of which a number are non-observable and frequently revised, as well as a variety of escape clauses.

As a result, the fiscal rules have become less transparent, hampering predictability, communication and political ownership.

To what extent does the review take on board the recent reports from the European Court of Auditors and the European Fiscal Board?

This reviewdraws on the assessment of the EU fiscal rules by the European Fiscal Board, as well as on existing reports and views of other interested parties, such as Member States, the European Parliament, the European Court of Auditors on the SGP and the MIP, and academia.

Those references are made explicit in the accompanying staff working documents.

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EU Politics

EU proposes a strong multilateral trade response to the COVID-19 pandemic

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EU has submitted its proposal seeking the commitment of World Trade Organization (WTO) members for a multilateral trade action plan to expand the production of COVID-19 vaccines and treatments, and ensure universal and fair access. With this proposal to the WTO, divided in two communications, the EU underlines the WTO’s central role in the response to the COVID-19 pandemic and urges fellow WTO members to agree on a set of commitments, including on intellectual property rights.

President von der Leyen said: “The EU has actively shown solidarity with the world since the beginning of the pandemic. The European Union authorized exports of around half of the total amount of vaccines produced in Europe. Our immediate, urgent goal is to ensure equitable access for low – and middle-income countries, to share vaccines wider and faster. And we continue to help ramping up production. The EU proposes concrete short and medium term solutions to ensure universal access at affordable prices. I am looking forward to discuss with the G7 leaders next week how to achieve this goal. Beyond the current crisis, it is important to ensure global preparedness for future pandemics: diversifying manufacturing so that it is not centralised only in a handful of countries and strengthening the resilience of the healthcare infrastructure in least developed countries”.

Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said: “The pandemic is still with us and there can be no room for complacency. We need to urgently concentrate on proposals that accelerate the equitable distribution of COVID-19 vaccines worldwide. In this respect, a strong multilateral trade response could deliver a huge boost in the fight against COVID-19. In reality, the main problem at this moment relates to the lack of sufficient manufacturing capacity to rapidly produce the required quantities. The objective must be to ensure that any available and adequate manufacturing capacity anywhere in the world is used for the COVID-19 vaccines production.”

More on the EU’s proposal

The EU calls on governments to:

  1. Ensure that COVID-19 vaccines, treatments and their components can cross borders freely;
  2. encourage producers to expand their production, while ensuring that those countries most in need of vaccines receive them at an affordable price, and;
  3. facilitate the use of compulsory licensing within the WTO’s existing Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS Agreement already provides this flexibility, which is a legitimate tool during the pandemic that can be used swiftly where needed

The first element aims to limit the use of export restrictions and keep supply chains open. Vaccine-producing countries should be ready to export a fair share of their domestic production. Supply chains are highly interconnected and should not be disrupted. In addition, the EU considers that supplies to the COVAX Facility should never be restricted, and no measures should limit trade in inputs necessary for the production of COVID-19 vaccines and treatments. 

The second element calls on governments to strongly encourage and support vaccine manufacturers and developers to expand production and ensure the affordable supply of vaccines to low- and middle-income countries. Such actions could include licensing agreements, the sharing of expertise, tiered pricing including non-profit sales to low-income countries, contract manufacturing and new investments in manufacturing facilities in developing countries. The EU expects all vaccine producers and developers to make concrete pledges that increase supplies to vulnerable developing countries. In this regard, the EU welcomes the commitment of companies such as BioNTech and Pfizer, Johnson & Johnson and Moderna, which have already committed to delivering 1.3 billion doses this year to low-income countries at no profit and to middle-income countries at lower cost.

The third element, on intellectual property, sets out that voluntary licences are the most effective instrument to facilitate the expansion of production and sharing of expertise. Where voluntary cooperation fails, compulsory licences, whereby a government grants a targeted licence allowing a willing producer to make a vaccine without the consent of a patent holder, are a legitimate tool in the context of a pandemic. The EU considers that all WTO members should be ready to:

  • agree that the COVID-19 pandemic is an exceptional circumstance of national emergency, and that the requirement to negotiate with the rights’ holder may be legitimately waived where needed;
  • support manufacturers that are ready to produce vaccines and/or treatments at affordable prices under a compulsory licence so that the level of remuneration paid by the manufacturer to the patent holder reflects such affordable prices;
  • agree that the compulsory licence could cover any exports destined to countries that lack manufacturing capacity, including via the COVAX facility.

The EU is also tabling a dedicated communication on intellectual property to the WTO body in charge of implementing the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Council). Here, the EU provides more detail and clarity on each of the three points on intellectual property and links them with the specific provisions in the TRIPS Agreement. As regards the broad waiver proposed by a number of WTO members, the European Commission, while ready to discuss any option that helps end the pandemic as soon as possible, is not convinced that this would provide the best immediate response to reach the objective of the widest and timely distribution of COVID-19 vaccines that the world urgently needs. Today’s proposals aim at achieving that objective in a swift and effective manner.

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EU Digital COVID Certificate: Parliament and Council reach agreement

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Photo: Lukas Souza/Unsplash

The Commission welcomes today’s provisional political agreement between the European Parliament and the Council on the Regulation governing the EU Digital COVID Certificate. This means that the certificate (previously called the Digital Green Certificate) is well on track to be ready end of June, as planned. Today’s agreement has been reached in record time just two months after the Commission’s proposal. The negotiations on the certificate for the Commission have been led by Commissioner Didier Reynders in close cooperation with Vice-Presidents Vera Jourová and Margaritis Schinas and Commissioners Thierry Breton, Stella Kyriakides, and Ylva Johansson.

Welcoming this swift progress, President Ursula von der Leyen said:

“We are delivering on our commitment to have the EU Digital COVID Certificate up and running before the summer. European citizens are looking forward to travelling again, and today’s agreement means they will be able to do so safely very soon.

The EU Digital COVID Certificate is free of charge, secure and accessible to all. It will cover vaccination, test and recovery offering different options to the citizens. It fully respects citizens’ fundamental rights, including protection of personal data.

All EU citizens have a fundamental right to free movement in the EU. The EU Digital COVID Certificate, available in paper or digital format, will make it easier for Europeans to travel – whether to see their families and loved ones or to get some well-deserved rest.

We would like to thank the European Parliament and the Portuguese Presidency for their dedication, perseverance and immense work at record speed to find an agreement on the proposal we presented.

Work still remains. At EU level, the system will be ready in the next few days. It is now crucial that all Member States press ahead with the roll-out of their national systems to ensure that the system can be up and running as soon as possible. This is what EU citizens rightly expect.

Today’s agreement has demonstrated that with the commitment and cooperation of all, the EU Digital COVID Certificate will be available on time.”

The EU Digital COVID Certificate – key features

Following the agreement reached by the European Parliament and the Council, the EU Digital COVID Certificate:

  • will cover vaccination, test and recovery;
  • will be available in a digital and paper-based format, depending on the choice of the recipients, and contain a digitally signed QR code;
  • will be free of charge, be obtained easily and also available to persons vaccinated before the EU Digital COVID Certificate Regulation has entered into force;
  • may also be used by Member States for national purposes, if this is provided for in national law.
  • Member States shall refrain from imposing additional travel restrictions on the holders of an EU Digital COVID Certificate, unless they are necessary and proportionate to safeguard public health.
  • The Commission will also mobilise €100 million to support Member States in providing affordable tests.

Next Steps

The political agreement will now have to be formally adopted by the European Parliament and the Council. The Regulation will enter into force on 1 July, with a phasing-in period of six weeks for the issuance of certificates for those Member States that need additional time.

In parallel, the Commission will continue to support the Member States in finalising their national solutions for the issuance and verification of EU Digital COVID Certificate, and to provide technical and financial support to Member States to on-board the gateway.

Background

On 17 March 2021, the European Commission presented a proposal to create an EU COVID certificate to facilitate the safe free movement of citizens within the EU during the COVID-19 pandemic. At the Commission’s request, the Parliament voted in favour of the activation of the urgent procedure for the two proposals on 25 March. The Council adopted its negotiating position on 14 April, and the Parliament did so on 29 April. On 20 May co-legislators reached provisional agreement on this file.

In parallel to the legislative process, important progress was already made on the technical side. The EU Gateway, which allows to verify certificates across borders, is ready and will go live as of June. Successful pilot tests took place with 17 Member States and Iceland during the last two weeks, further five Member States will test next week.

The Commission also provide open source reference software to support Member States to develop their national solution to issue certificates, to scan and check the QR codes, and a reference wallet for storage.

Previously, on 21 April, technical specification guidelines were adopted by Member States representatives in the eHealth Network, a voluntary network connecting national authorities responsible for eHealth. They are building on the close work of the Commission with the Member States, having resulted in first guidelines adopted in January and updated on 12 March, and a trust framework outline agreed on 12 March 2021. In addition, a common design template was developed in the eHealth network.

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Coronavirus: EU Strategy for the development and availability of therapeutics

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The European Commission is today complementing the successful EU Vaccines Strategy with a strategy on COVID-19 therapeutics to support the development and availability of much-needed COVID-19 therapeutics, including for the treatment of ‘long COVID’. Today’s Strategy covers the full lifecycle of medicines: from research, development and manufacturing to procurement and deployment.

It is part of the strong European Health Union, in which all EU countries prepare and respond together to health crises and ensure the availability of affordable and innovative medical supplies – including the therapeutics needed to treat COVID-19.

The Strategy includes clear actions and targets, including authorising three new therapeutics to treat COVID-19 by October 2021 and possibly two more by end of the year. Concretely:

  • Research, development and innovation
    • Invest €90 million in population studies and clinical trials to establish links between risk factors and health outcomes to further inform public health policy and clinical management, including for long-COVID patients.
    • Set up a ‘therapeutics innovation booster’ by July 2021 to support the most promising therapeutics from preclinical research to market authorisation. It will build on current initiatives and investments in therapeutic development, working in a close cooperation with the European Health Emergency Preparedness and Response Authority (HERA) preparatory action on mapping therapeutics. It will therefore ensure the coordination of all research projects on COVID-19 therapeutics, stimulating innovation and boosting therapeutic development.
  • Access to and swift approval of clinical trials
    • Invest €5 million under the EU4Health programme to generate better, high-quality safety data in clinical trials, which will help produce robust results in a timely manner.
    • Provide EU countries with financial support of €2 million under the EU4Health 2021 work programme for expedited and coordinated assessments to facilitate approval of clinical trials.
    • Explore how to support developers of therapeutics to build capacity to produce high-grade material for clinical trials.
  • Scanning for candidate therapeutics
    • Invest €5 million to map therapeutics and diagnostics to analyse development phases, production capacities and supply chains, including possible bottlenecks.
    • Establish a broader portfolio of 10 potential COVID-19 therapeutics and identify five of the most promising ones by June 2021.
  • Supply chains and delivery of medicines
    • Fund a €40 million preparatory action to support flexible manufacturing and access for COVID-19 therapeutics under the EU Fab project, which in turn will become over time an important asset for the future the European Health Emergency Preparedness and Response Authority (HERA).
  • Regulatory flexibility
    • Authorise at least three new therapeutics by October and possibly two more by the end of the year and develop flexible regulatory approaches to speed up the assessment of promising and safe COVID-19 therapeutics.
    • Start seven rolling reviews of promising therapeutics by end-2021, subject to research and development outcomes.
  • Joint procurement and financing
    • Launch new contracts for the purchase of authorised therapeutics by the end of the year.
    • Secure faster access to medicines with shorter administrative deadlines.
  • International cooperation to make medicines available to all
    • Reinforce engagement for the therapeutics pillar of the Access to COVID-19 Tools Accelerator.
    • Boost ‘OPEN’ initiative for international collaboration.

Next Steps

The Commission will draw up a portfolio of 10 potential COVID-19 therapeutics and by June 2021, identify the five most promising ones. It will organise matchmaking events for industrial actors involved in therapeutics to ensure enough production capacity and swift manufacturing. New authorisations, rolling reviews and joint procurement contracts will be up and running before the end of the year.

The therapeutics innovation booster, matchmaking events and preparatory action to support flexible manufacturing and access for COVID-19 therapeutics under the EU Fab project, will feed into the HERA, for which a proposal is due later in the year. The pilot project on access to health data will feed into the European Health Data Space proposal expected later this year.

Members of the College said:

Vice-President for Promoting our European Way of Life, Margaritis Schinas, said: “The situation in many intensive care units across the continent remains critical. We need to focus both on vaccines and therapeutics, as two powerful and complementary ways to combat COVID-19. But currently we have only one authorised medicine to treat COVID-19. By acting on better availability of medicines today, we are making sure patients receive the treatments they need while also preparing our future biomedical preparedness. A coordinated strategy on quick access to therapeutics will boost our strategic autonomy and contribute to a strong Health Union.”

Commissioner for Health and Food Safety, Stella Kyriakides, said: “Vaccinations save lives, but they cannot yet eradicate COVID-19. We need a strong push on treatments to limit the need for hospitalisation, speed up recovery times, and reduce mortality. Patients in Europe and across the world should have access to world-class COVID-19 medicines. This is why we have set a very clear goal: by October, we will develop and authorise three new effective COVID-19 therapeutics that can have the potential to change the course of the disease. We will do so by investing in research and innovation, the identification of new promising medicines, ramping up production capacity and supporting equitable access. Our Therapeutics Strategy is a strong European Health Union in action.”

Commissioner for Innovation, Research, Culture, Education and Youth, Mariya Gabriel, said: “By increasing vaccine availability across Europe, more and more Europeans are now protected against COVID-19. In the meantime, the development of innovative medicines to treat coronavirus patients remains a priority when it comes to saving lives. Research and innovation is the first step to finding effective and safe therapeutics, which is why we are proposing to establish a new COVID-19 ‘therapeutics innovation booster’ and will invest € 90 million in population studies and clinical trials.

Background

The Strategy on COVID-19 therapeutics complements the EU strategy for COVID-19 vaccines from June 2020 and builds on ongoing work by the European Medicines Agency and the Commission to support research, development, manufacturing and deployment of therapeutics.

The Strategy forms part of a strong European Health Union, using a coordinated EU approach to better protect the health of our citizens, equip the EU and its Member States to better prevent and address future pandemics, and improve the resilience of Europe’s health systems.

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