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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 Citizenship: New survey shows EU citizens are more aware of their rights

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A new Eurobarometer survey on EU Citizenship and Democracy released today by the European Commission shows that a vast majority of Europeans (91%) are familiar with the term “citizen of the European Union”. This is the highest level of awareness yet since 2007 and a steady increase from 87% recorded in 2015. Most Europeans are well informed about their electoral rights – at national and European levels. Today, the European Commission is also launching a public consultation on EU Citizenship Rights.

Vice-President for Values and Transparency, Věra Jourová said: “I am happy to see that more and more Europeans are aware of their EU citizenship rights: the right to reside in another Member State, to be treated equally regardless of their nationality or to vote and stand in EU elections. But citizens also need to know how to protect those rights when they are not respected. I want to empower European citizens, so that they can fully benefit from what Europe has to offer.

Commissioner for Justice and Consumers, Didier Reynders, said, “Fostering EU citizenship and participation in democratic life remains one of the Commission’s highest priorities. It is therefore very encouraging to see that an overwhelming majority of Europeans know what being a citizen of the European Union means concretely. The European Commission is equally committed to ensuring that citizens can continue enjoying all the rights that EU citizenship gives them. This holds particularly true in COVID-19 times, where we have to be extra vigilant to protect citizen’s rights.”

Main findings of EU Citizenship and Democracy survey

  1. High level of awareness of EU citizenship rights

According to the survey, more than six in ten Europeans (65%) are aware of the term “citizenship of the European Union” and know what it means, while almost one in three (26%) have heard about it. Citizens are particularly aware about the right to make a complaint to the European Union institutions (89%), the right to reside in any Member State of the EU (85%) and when in another Member State, the right to be treated in the same way as a national of that Member State (81%). Although a number of Europeans, who know what to do when their rights as an EU citizen are not respected, is steadily growing only 37% feel well informed. This represents an 11 percentage point increase from 26% recorded in 2015. Finally, 92% of respondents said that if they were in a country outside the EU with no consulate or embassy from their own country and needed help, they would seek support from an EU Delegation.

  1. Overall benefits of free movement in the EU

When asked about free movement, 84% of respondents said they think the free movement of EU citizens within the European Union brings overall benefits to the economy of their country. This shows a 13 percentage points rise since 2015, when 71% citizens recognised the benefits of the free movement. This Eurobarometer was carried out before the COVID-19 lockdown measures were introduced in majority of Member States.

  1. Good knowledge of EU electoral rights

The Eurobarometer also included questions on the electoral rights of the EU citizens. Just over seven in ten respondents (71%) know that a European citizen living in different EU country than the country of his/her origin has the right to vote or stand as a candidate in European Parliament elections. When asked about the 2019 European Parliament elections, a vast majority of respondents said that having more or better information about the elections in general and the impact of the EU on daily lives more specifically, would have made them more inclined to vote.

Public consultation on EU Citizenship

Today, the European Commission is also launching a public consultation on EU Citizenship Rights. The focus of this consultation is to gather information, experiences and views on EU citizenship rights, which will feed into the next EU Citizenship Report. In view of the COVID-19 pandemic, this consultation also includes questions related to the impact of emergency measures on EU citizenship rights. All citizens and organisations are welcome to contribute to this consultation until 1 October 2020.

Next steps

The feedback from the Eurobarometer on EU citizenship and democracy, the public consultation launched today, and a broader stakeholder consultation (to be launched in the second half of 2020), will feed into the next EU Citizenship Report. This Report will set out concrete actions to further advance the EU citizenship rights, including democratic participation and in a cross-border context.

The 2020 EU Citizenship Report will complement the European Democracy Action Plan, both to be adopted by the end of 2020, to help improve the resilience of EU democracies.

Background

In line with Article 25 of the Treaty on the Functioning of the European Union, the Commission is legally obliged to publish an EU Citizenship Report on the application of the provisions on non-discrimination and citizenship and outlining new priorities in this area every three years. With regard to the Political Guidelines of the Commission 2019-2024, the upcoming Citizenship Report will provide an additional impetus to deliver on the priorities of the Commission including nurturing, strengthening and protecting democracy in the European Union.

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New EU rules and guidance for a fairer online economy

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The Commission publishes today a set of resources to help traders, online platforms and search engines get the most out of the new Platform to Business rules, which apply from this Sunday, 12 July. In addition, three progress reports prepared by the expert group for the Observatory on the Online Platform Economy are published for feedback. The reports will inform the broader work of the Commission on online platforms and in particular on the upcoming Digital Services Act package.

Executive Vice-President Margrethe Vestager said: “The more than 10,000 online platforms in the EU are only one part of a broader digital services ecosystem that drives innovation. Despite their role as an essential resource during the on-going health crisis, major issues of fairness and safety have to be addressed. The new rules will ban certain unfair practices such as unexplained account suspension, unclear terms and conditions; ensure greater transparency about ranking, level the playing field among online platforms and search engine and provide new possibilities for resolving disputes and complaints.

Commissioner for the Internal Market Thierry Breton said: “Trust is key when it comes to the online economy. Businesses are increasingly moving online – a trend that the coronavirus pandemic has reinforced. To ensure that we have a fair, transparent and predictable online environment, all operators need to adapt to the new rules we are implementing. They will strengthen trust in the online platform economy and make it strive for the benefit of all.”

The EU has adopted the first set of rules regulating the platform economy. As of this coming Sunday, businesses and traders selling online via marketplaces will know which criteria will determine their position in search results, hotels using booking platforms will have greater clarity and protection from unfair terms and conditions, app developers will have a chance to challenge decisions by app stores that wish to remove their content.

The Commission will also publish official guidelines on ranking in the coming weeks. These guidelines will help online platforms and search engines improve predictability and transparency to help businesses consider how best to increase and manage their online visibility.

Q&A on Platform to Business for small businesses and other online operators

The Commission has prepared a Q&A document that can serve as a checklist for online platforms and search engines, particularly smaller ones, when implementing the new requirements. It will help businesses get information on their new rights and the options available to resolve problems that may arise in their commercial relationships with online platforms. It also contains useful information for online intermediation services, search engines and representative organisations or associations. Furthermore, the Commission has produced a video to help online platforms and search engines assess whether the new rules apply to them.

Progress reports of the expert group for the observatory on the online platform economy

The Commission is closely following the developments in the online platform economy. The expert group for the Observatory for the Online Platform Economy has supported the Commission in this task by helping to monitor the market and the effective implementation of the new rules.

The three progress reports point to imbalances in market power in the relationship between online platforms and their business users in terms of both access to and the use of data, as well as to discrimination as a potential source of issues in the online platform economy. Stakeholders, including online platforms, the businesses relying on these online platforms, experts as well as enforcers are invited to provide feedback by 8 September.

Next steps

The progress reports will feed into the Commission’s current work priorities in the digital area as announced in the Commission’s Communication on Shaping Europe’s Digital Future as well as in its data strategy and provide input for the Digital Services Act package. Two more reports will be produced on online advertising and platforms with significant market power that will, alongside the present reports, feed into a final contribution by the expert group of the Observatory later this year.

Background

The Platform to Business Regulation entered into force in July 2019 and will apply from 12 July 2020. It sets the basic horizontal foundationfor a fair, transparent and predictable business environment for smaller businesses and traders relying on search engines and online platforms such as online marketplaces, app stores, certain price comparison tools or business pages on social media for their activities.

As part of the European Digital Strategy, the Commission has announced a Digital Services Act package that will further strengthen the Single Market for digital services and foster innovation and competitiveness of the European online environment. The Commission launched a wide-ranging public consultation in early June. It will close on 8 September.  

The Commission has also set out general guidelines to online platforms and Member States for tackling illegal content online through a Communication in 2017 and a Recommendation in 2018. The Commission continues to lead targeted actions in coordinating the cooperation between online platforms, authorities and trusted organisations in areas such as combatting illegal hate speech online, or ensuring that products reaching European consumers in the single market are safe. In addition, sector-specific legislation has been adopted (in particular in the field of audiovisual and media services and copyright) or proposed (as regards terrorist content online).

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Relocation of unaccompanied children from Greece to Portugal and Finland

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© IOM/Uygar Emrah Özesen

On 7 and 8 July, 49 unaccompanied children were relocated from Greece to Portugal and Finland as part of a scheme organised by the Commission and the Greek Special Secretary for Unaccompanied Minors, in partnership with UN agencies and the European Asylum Support Office.

These two operations mark the beginning of the main phase of the scheme. With preparatory work coordinated by the Commission now completed and coronavirus-related travel restrictions easing, relocations will proceed progressively over the next months. The next transfers will take place later in the month, with 18 children finding new homes in Belgium, 50 in France, 106 (including siblings and parents) in Germany, 4 in Slovenia and 2 in Lithuania.

While the scheme started with an aim to relocate at least 1,600 children and young people, Member States have now pledged up to 2,000 places. The scheme is focused primarily on unaccompanied children, but will also include children with severe medical conditions and their core family members. At the same time, durable solutions for the protection and care of those unaccompanied children that will stay in Greece must also be found. The Commission stands ready to provide increased support for Greece and Member States in this respect.

Vice-President for Promoting our European Way of Life, Margaritis Schinas, said: “In a tangible expression of support to Greece, Portugal and Finland will soon open their doors to 49 children as part of our programme to relocate unaccompanied minors. This is the embodiment of the European spirit of solidarity and I truly commend the Member States taking part. We cannot, however, rely on ad hoc solutions forever. No Member State should be left alone to shoulder a disproportionate responsibility. The aim of the New Pact on Migration and Asylum will be to ensure that solidarity is provided on a permanent basis.”

Commissioner for Home Affairs, Ylva Johansson, said: “We have worked tirelessly to make sure that relocations can take place despite complications caused by the outbreak of the coronavirus. Seeing that these 49 children will start a new life in Portugal and Finland shows our efforts are bearing fruit. Our services are working well with Greek authorities and international organisations on this scheme, turning pledges into action.”

Greek Alternate Minister of Migration Policy Giorgos Koumoutsakos said:“49 unaccompanied minors have departed yesterday and today to start a new life in another EU Member State, in Portugal and Finland. I want to thank Portugal and Finland for the support and for this tangible gesture of solidarity. I also want to express my gratitude to the European Commission for the continuous help and encouragement so as to make possible the relocation of 1,600 unaccompanied minors to other Member States.”

Background

As of mid-June, there were over 4,800 unaccompanied children in Greece. As part of the Action Plan for immediate measures to support Greece, the Commission proposed to relocate up to 1,600 children as part of a scheme supported by the European Asylum Support Office (EASO), the International Organization for Migration (IOM), the United Nations High Commissioner for Refugees (UNHCR) and the United Nations International Children’s Emergency Fund (UNICEF).

To date, 11 Member States and Norway (Belgium, Bulgaria, France, Croatia, Finland, Germany, Ireland, Portugal, Luxembourg, Lithuania and Slovenia) are participating in the scheme. The first relocation operations took place in April, when 12 children were relocated from Greece to Luxembourg and 47 to Germany. On 17 June, 8 unaccompanied children were relocated to Ireland, following a bilateral agreement that predates the scheme. Finally, 6 unaccompanied children who could not be relocated to Germany in April as they were not fit for travel at the time were transferred to Germany on 26 June.

Relocations under the scheme will be carried out progressively in groups of various sizes to ensure adequate reception capacity in the receiving Member States. In addition to its coordinating role, the European Commission is financially supporting most preparatory and pre-departure steps in Greece, as well as the transfer costs, while Member States can also request funding for participating in the scheme (€6,000 per person transferred).

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