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European Defence Fund: EU funds new joint research and industrial projects

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The Commission is opening calls for proposals to finance more than €160 million in joint defence industrial projects in 2020, and announcing seven new defence research projects selected for more than €19 million of funding under the 2019 budget.

Thierry Breton, Commissioner for Internal Market, said: “In this difficult period on many fronts, we are mobilising all EU programmes to support our companies, big or small. We are also preparing for the future. With the joint development of defence technologies, we are making Europe more resilient and strengthening our industrial base.”

The projects are financed respectively under the European Defence Industrial Development Programme (EDIDP), worth €500 million for 2019-2020, and the Preparatory Action on Defence Research (PADR), which has a budget of €90 million for 2018-2020. They are the precursor programmes of the fully-fledged European Defence Fund, which will foster an innovative and competitive defence industrial base and contribute to the EU’s strategic autonomy.

European Defence Industrial Development Programme: calls for 2020

With a total budget of more than €160 million, the 2020 calls for proposals cover 12 categories reflecting the critical capability needs defined in close cooperation with the Member States.

The Commission is looking for project proposals including design, prototyping and testing Chemical Biological Radiological Nuclear (CBNR) medical countermeasures, such as preventive and therapeutic immunotherapy, which could be beneficial to tackle future pandemic crises such as the one Europe and the world are facing today. The calls also seek to increase the EU’s capabilities to detect and counter Unmanned Air Systems such as drones in defence scenarios, and the EU’s cyber situational awareness and defence capabilities, defence networks and technologies for secure communication and information sharing.

The programme includes incentives for the participation of small and medium-sized enterprises (SMEs). As in 2019, one category with a budget of €10 million is fully earmarked for SMEs that can provide innovative and future-oriented defence solutions.

The Commission will organise an information day in order to guide interested consortia through the submission process and to foster cooperation among European entities through dedicated match-making sessions. The precise date will be communicated in the coming weeks.

In parallel, the Commission is currently evaluating applications to the 2019 call for applications.

Preparatory Action on Defence Research: projects selected for 2019

Following calls for proposals launched in 2019, seven new defence research projects have been selected for funding under the Preparatory Action on Defence Research (PADR) for a total of more than €19 million.

The selected projects focus on technologies with a high disruptive potential in the defence sector such as artificial intelligence and quantum technologies, as well as critical defence technologies for electronic warfare and interoperability standards for military unmanned systems.

The consortia that submitted the selected proposals consist of 65 leading-edge European system integrators, original equipment manufacturers, high-tech MidCap and SMEs and research institutes located in 15 EU Member States.

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EU Politics

Strong EU trade enforcement rules enter into force

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Robust new trade enforcement rules have entered into force that will further strengthen the EU’s toolbox in defending its interests. With the update of the EU’s Trade Enforcement Regulation, the EU is able to act in a broader range of circumstances.

The new rules upgrade the EU’s enforcement by introducing the following changes:

  • empowering the EU to act to protect its trade interests in the World Trade Organization (WTO) and under bilateral agreements when a trade dispute is blocked despite the EU’s good faith effort to follow dispute settlement procedures (the regulation previously only allowed action after the completion of dispute settlement procedures); and
  • expanding the scope of the regulation and of possible trade policy countermeasures to services and certain trade-related aspects of intellectual property rights (IPR) (the regulation previously only permitted countermeasures in goods).

Executive Vice-President and Commissioner for Trade, Valdis Dombrovskis, said: “The European Union must be able to defend itself against unfair trading practices. These new rules will help protect us from those trying to take advantage of our openness. We continue to work towards our first preference, which is a reformed and well-functioning multilateral rulebook with an effective Dispute Settlement System at its core. But we cannot afford to stand defenseless in the meantime. These measures allow us to respond resolutely and assertively.”

In line with the Political Guidelines of Commission President Ursula von der Leyen, the Commission is further reinforcing the Union’s tools to focus on compliance and enforcement of the EU’s trade agreements.

Ensuring the respect of the commitments agreed with other trade partners is a key priority of this Commission. The EU is therefore increasing the focus on enforcing its partners’ commitments in multilateral, regional and bilateral trade agreements. In so doing the Union will rely on a suite of instruments.

Background

The proposal to amend the existing Enforcement Regulation came as a reaction to the blockage of the operations of the WTO Appellate Body. The current regulation – a basis under EU law for adopting trade countermeasures – requires that a dispute goes all the way through the WTO procedures, including the appeal stage, before the Union can react. The lack of a functioning WTO Appellate Body allows WTO Members to avoid their obligations and escape a binding ruling by simply appealing a panel report.

The revised Regulation enables the EU to react even if the WTO has not delivered a final ruling because the other WTO member blocks the dispute procedure by appealing to the non-functioning Appellate Body and by not agreeing to an alternative arbitration under WTO Dispute Settlement Agreement.

This new mechanism also applies to the dispute settlement in relation to regional or bilateral trade agreements to which the EU is party if a similar blockage arises. The EU must be able to respond resolutely in case trade partners hinder effective dispute settlement resolution, for instance, by blocking the composition of panels.

Anti-coercion mechanism

As part of the agreement, the Commission committed to developing the EU’s anti-coercion mechanism swiftly. As announced in the Letter of Intent of the President of the European Commission to the President of the European Parliament and President in office of the Council of 16 September 2020 the Commission shall adopt the proposal on the anti-coercion mechanism no later than the end of 2021. The anti-coercion mechanism is also included in the European Commission’s 2021 Work Programme.

Additional efforts on implementation and enforcement

In addition to upgrading the Enforcement Regulation and to proposing an anti-coercion mechanism, several other steps have been taken since the start of this Commission to strengthen and target EU implementation and enforcement efforts. This includes:

  • the appointment of a Chief Trade Enforcement Officer;
  • the creation of a new Directorate in DG Trade for enforcement, market access and SMEs; and
  • the establishment under Access2Markets of a single entry point for complaints from EU stakeholders and businesses on trade barriers on foreign markets and violations of sustainable trade commitments in EU trade agreements.

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Explainer: The Recovery and Resilience Facility

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What are the main elements of the agreement on the Recovery and Resilience Facility regulation (RRF)?

The political agreement reached by co-legislators in December and approved by the European Parliament structures the scope of the RRF around six pillars: green transition; digital transformation; economic cohesion, productivity and competitiveness; social and territorial cohesion; health, economic, social and institutional  resilience; policies for the next generation.

The national recovery and resilience plans should devote at least 37% of total expenditure to investments and reforms that support climate objectives. Furthermore, all investments and reforms must respect the “do no significant harm” principle, ensuring that they do not significantly harm the environment.

A minimum of 20% of expenditure should support the digital transition.

The recovery and resilience plans are also expected to contribute to effectively addressing the relevant challenges identified in country-specific recommendations under the European Semester.

The European Parliament will have a strong role in the RRF’s governance, with regular structured dialogues enabling it to invite the Commission to discuss the implementation of the RRF.

Pre-financing of 13% of the total amount allocated to each Member State will be made available as pre-financing after the approval of the respective recovery and resilience plans.

A scoreboard will be established and made publicly available to provide information on progress in the implementation of the RRF and national plans.

Member States will need to put in place strong measures to protect the financial interests of the Union, especially to prevent fraud, corruption and conflicts of interest.

What are the next steps? When will the RRF come into force?

Following the European Parliament’s approval, the Council now also needs to formally approve the political agreement reached in December 2020. This is scheduled to happen before the 16 February ECOFIN meeting. The RRF regulation will then be published in the Official Journal, allowing it to enter into force on the day after publication.

The Commission expects all the necessary formal steps to be concluded for the RRF to enter into force in the second half of February.

What are recovery and resilience plans?

Member States prepare recovery and resilience plans that set out a coherent package of reforms and investment initiatives to be implemented up to 2026 that will be supported by the RRF. These plans will be assessed by the Commission and approved by the Council.

When will Member States present their Recovery and Resilience Plans?

The Commission is currently engaging in intensive dialogue with all Member States on the preparation of their recovery and resilience plans.

Member States have been able to present their draft recovery and resilience plans to the Commission since 15 October 2020. They will have the opportunity to revise and finalise their plans following the initial presentation of the drafts.

They will be able to submit the final versions of their recovery and resilience plans once RRF is legally in force. The plans should be presented by 30 April, as a rule.

How will the Commission assess the recovery and resilience plans?

The Commission will assess the recovery and resilience plans based on eleven transparent criteria set out in the Regulation itself. The assessments will notably consider whether the investments and reforms set out in the plans:

  • represent a balanced response to the economic and social situation of the Member State, contributing appropriately to all six RRF pillars;
  • contribute to effectively addressing the relevant country-specific recommendations;
  • devote at least 37% of total expenditure on investments and reforms that support climate objectives;
  • devote at least 20% of total expenditure on the digital transition;
  • contribute to strengthening the growth potential, job creation and economic, institutional and social resilience of the Member State;
  • do not significantly harm the environment.

What is the timeline for the assessment of recovery and resilience plans?

The Commission will complete its assessment of recovery and resilience plans within two months of receiving them.

The Council will have up to four weeks to consider the Commission’s assessment and adopt an implementing decision by qualified majority.

What technical guidance has the Commission provided to Member States to help prepare their national recovery and resilience plans?

The Commission provided Member States with clear guidance to support them in the preparation of the recovery and resilience plans in September 2020. It updated this guidance in January 2021 to assist Member States in preparing plans in line with the political agreement of the co-legislators on the regulation. This update maintains the key aspects of the previous guidance. It reflects that the scope of the RRF is now structured around six pillars, as well as the fact that Member States should explain how the plans contribute to equality and the principles of the European Pillar of Social Rights. Plans should also include a summary of the consultation process at national level as well as a presentation of the controls and audit system put in place to ensure that the financial interests of the Union are protected. The guidance also asks Member States to detail an outline of their communication plans in order to make sure that EU support is visible to all Europeans who benefit from it.

The Commission has also published a standard template, which Member States are encouraged to use for their plans.

The Commission will provide Member States with guidance on the application of the ‘do no significant harm’ principle by mid-February.

How much funding will be provided under the Recovery and Resilience Facility in total?

The Recovery and Resilience Facility will provide up to €672.5 billion to support investments and reforms (in 2018 prices). This breaks down into €312.5 billion in grants and €360 billion in loans.

How will the allocation of grants to Member States be determined?

For 70% of the total of €312.5 billion available in grants, the allocation key will take into account

  • the Member State’s population
  • the inverse of its GDP per capita
  • its average unemployment rate over the past 5 years (2015-2019) compared to the EU average.

For the remaining 30%, instead of the unemployment rate, the observed loss in real GDP over 2020 and the observed cumulative loss in real GDP over the period 2020-2021 will be considered. While Annex I of the Regulation provides an indicative amount for the 30% in current prices on the basis of the Autumn forecast, this will only be finalised when Eurostat presents final data in June 2022. The amounts in current prices are available here.

Member States can also request a loan worth up to 6.8% of their 2019 GNI as part of the submission of their recovery and resilience plan.

When will Member States begin to receive the first disbursements under the Recovery and Resilience Facility?

The 13% pre-financing payment will be made after the approval of the national recovery and resilience plan and the adoption of the legal commitment by the Commission. The Own Resources Decision will also have to be ratified by all Member States by that time in order for the Commission to be able to borrow on financial markets. This means that the first payments could be made starting from mid-2021, subject to all necessary legal acts being in place.

How will disbursements made under the Recovery and Resilience Facility be linked to progress with the implementation of investments and reforms?

Under the RRF, payments will be linked to performance. The Commission will authorise disbursements based on the satisfactory fulfilment of a group of milestones and targets reflecting progress on several reforms and investments of the plan. Milestones and targets should be clear, realistic, well defined, verifiable, and directly determined or otherwise influenced by public policies. Since disbursements can take place a maximum of twice a year, there cannot be more than two groups of milestones and targets per year.

Upon completion of the relevant agreed milestones and targets indicated in its recovery and resilience plan, the Member State will present a request to the Commission for a disbursement of financial support. The Commission will prepare an assessment within two months and ask the opinion of the Economic and Financial Committee on the satisfactory fulfilment of the relevant milestones and targets. In exceptional circumstances where one or more Member State considers that there are serious deviations from the satisfactory fulfilment of the relevant milestones and targets of another Member State, they may request that the President of the European Council refers the matter to the next European Council.

The Commission will adopt the decision on disbursement under the “examination procedure” of comitology.

If the Member State has not satisfactorily implemented the milestones and targets, the Commission will not pay all or part of the financial contribution to that Member State.

How will the Recovery and Resilience Facility support the green transition?

The Recovery and Resilience Facility Regulation establishes a climate target of 37% at the level of the individual national recovery and resilience plans. Each Member State will be responsible for presenting evidence on the overall share of climate-related expenditure in its plan based on a binding climate tracking methodology. When assessing the plan, the Commission will also scrutinise whether the climate target is reached. A plan that does not reach the target will not be accepted.

Each measure proposed in a recovery and resilience plan will also have to respect the “do no significant harm” principle. Specifically, there are six environmental objectives to which no significant harm should be done: (i) climate change mitigation, (ii) climate change adaptation, (iii) water and marine resources, (iv) the circular economy, (v) pollution prevention and control, and (vi) biodiversity and ecosystems. This obligation applies to all reforms and investments, and is not limited to green measures. The Commission will provide technical guidance to Member States giving further support on the application of this principle.

In addition, the Commission encourages Member States to propose flagship investment and reform initiatives that would have an added value for the EU as a whole. These are aimed at, for example, accelerating the development and use of renewables.

How will the Recovery and Resilience Facility support the digital transition?

Member States should ensure a high level of ambition when defining reforms and investments enabling the digital transition as part of their recovery and resilience plans. The Regulation requires that each recovery and resilience plan include a minimum level of 20% of expenditure related to digital. This includes, for instance, investing in the deployment of 5G and Gigabit connectivity, developing digital skills through reforms of education systems and increasing the availability and efficiency of public services using new digital tools.

What will be the role of the European Parliament?

The European Parliament will play a key role in the implementation of the RRF, in full respect of the EU institutional architecture. A ‘recovery and resilience dialogue’ is established, allowing the Parliament to invite the Commission up to every two months to discuss matters concerning the implementation of the RRF. The Commission is required to take into account the views arising from this dialogue. The Recovery and Resilience Scoreboard – to be finalised in December 2021 – will serve as a basis for the recovery and resilience dialogue.

The Commission should transmit information simultaneously to the European Parliament and the Council on the Recovery and Resilience Plans officially submitted by the Member States, and the proposals for Council implementing decisions. The Parliament will also receive an overview of the Commission’s preliminary findings on the fulfilment of milestones and targets related to payment requests and disbursement decisions.

What is the scoreboard? What indicators will be included in it?

A dedicated Recovery and Resilience Facility scoreboard will be established by means of delegated act. It will display the progress of the implementation of recovery and resilience plans in each of the six pillars of the RRF. This scoreboard should be operational by December 2021 and should be updated by the Commission on a biannual basis.

How will the EU’s financial interests be protected?

The Recovery and Resilience Facility requires a control framework that is tailored and proportionate to its unique nature. Member States’ national control systems will serve as the main instrument for safeguarding the financial interests of the Union.

Member States will have to ensure compliance with Union and national laws, including the effective prevention, detection and correction of conflict of interests, corruption and fraud, and avoidance of double funding. They are required to explain the relevant arrangements in their recovery and resilience plans, and the Commission will assess whether they provide sufficient assurance. For instance, Member States need to collect data on final recipients of funds and make this available upon request.

For each payment request, Member States will provide  a ‘management declaration’ that the funds were used for their intended purpose, that information provided is correct, and that the control systems are in place and funds were used in accordance with applicable rules. In addition, the Commission will implement its own risk-based control strategy.

OLAF, the Court of Auditors, the European Public Prosecutors Office and the Commission itself may access relevant data and investigate the use of funds if necessary.

How will the Recovery and Resilience Facility be integrated into the European Semester?

The European Semester and the Recovery and Resilience Facility are closely linked. The assessment of the recovery and resilience plans will be checked against the country-specific recommendations. Given that the deadlines within the European Semester and the Facility will overlap, it is necessary to temporarily adapt the Semester.

Member States are encouraged to submit their National Reform Programmes and their recovery and resilience plans in a single integrated document. This document will provide an overview of the reforms and investments that the Member State will undertake in the coming years, in line with the objectives of the RRF.

The Commission will accompany the proposals for the Council implementing decisions with analytical documents assessing the substance of the recovery and resilience plans. These documents will replace the European Semester country reports in 2021 for those Member States submitting plans in 2021.

Given the comprehensive and forward-looking policy nature of the recovery and resilience plans, there will be no need for the Commission to propose country-specific recommendations in 2021.

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Southern Neighbourhood: EU proposes new Agenda for the Mediterranean

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To relaunch and strengthen the strategic partnership between the European Union and its Southern Neighbourhood partners, the European Commission and the High Representative today adopted a joint communication proposing an ambitious and innovative new Agenda for the Mediterranean.

The new Agenda is based on the conviction that by working together and in a spirit of partnership, common challenges can be turned into opportunities, in the mutual interest of the EU and its Southern neighbours. It includes a dedicated Economic and Investment Plan to spur the long-term socio-economic recovery in the Southern Neighbourhood. Under the new EU’s Neighbourhood, Development and International Cooperation Instrument (NDICI), up to €7 billion for the period 2021-2027 would be allocated to its implementation, which could mobilise up to €30 billion in private and public investment in the region in the next decade.

High Representative/Vice-President Josep Borrell said: “This Communication sends a crucial message about the importance we attach to our Southern Neighbourhood. A strengthened Mediterranean partnership remains a strategic imperative for the European Union. 25 years after the Barcelona Declaration and 10 years after the Arab Spring, challenges in the Mediterranean – many of which resulting from global trends – remain daunting. To address these challenges, we need to renew our mutual efforts and act closely together as partners, in the interest of all of us. This is what this new Agenda is all about. We are determined to work together with our Southern Partners on a new Agenda that will focus on people, especially women and youth, and help them meet their hopes for the future, enjoy their rights and build a peaceful, secure, more democratic, greener, prosperous and inclusive Southern Neighbourhood.”

Commissioner for Neighbourhood and Enlargement Olivér Várhelyi added: “With the Renewed Partnership with the Southern Neighbourhood we are presenting a new beginning in our relations with our Southern partners. Based on common interests and common challenges; developed together with our neighbours. It shows that Europe wants to contribute directly to a long-term vision of prosperity and stability of the region, especially in the social and economic recovery from the COVID-19 crisis. In close dialogue with our partners, we have identified a number of priority sectors, from creating growth and jobs, investing in human capital or good governance. We consider migration to be a common challenge, where we are ready to work together to fight irregular migration and smugglers together with our partners as it is a risk for all of us. We will work together to bring real change on the ground for the benefit of both our neighbours and Europe!”

The new agenda draws on the full EU toolbox and proposes to join forces in fighting climate change and speeding up the twin green and digital transition and harness their potential, to renew our commitment to shared values, to jointly address forced displacement and migration, and to strengthen the unity and resolve of the EU, its Member States and Southern neighbourhood partners in promoting peace and security in the Mediterranean region. It focuses on five policy areas:

  • Human development, good governance and the rule of law: Renew the shared commitment to democracy, the rule of law, human rights and accountable governance;
  • Resilience, prosperity and digital transition: Support resilient, inclusive, sustainable and connected economies that create opportunities for all, especially women and youth;
  • Peace and security: Provide support to countries to address security challenges and find solutions to ongoing conflicts,
  • Migration and mobility: Jointly address the challenges of forced displacement and irregular migration and facilitate safe and legal pathways for migration and mobility,
  • Green transition: climate resilience, energy, and environment: Taking advantage of the potential of a low-carbon future, protect the region’s natural resources and generate green growth.

A dedicated Economic Investment Plan for the Southern Neighbours aims at ensuring that the quality of life for people in the region improves and the economic recovery, including following the COVID-19 pandemic, leaves no one behind. The plan includes preliminary flagship initiatives to strengthen resilience, build prosperity and increase trade and investment to support competitiveness and inclusive growth. Respect for human rights and the rule of law are an integral part of our partnership and essential to ensure citizens’ trust in the institutions.

Background

In 1995, the Barcelona Declaration launched the Euro-Mediterranean Partnership with the objective to create an area of peace, shared prosperity, and human and cultural exchanges. The last European Neighbourhood Policy review took place in 2015.

25 years on, the Mediterranean region is facing a number of governance, socio-economic climate, environmental and security challenges, exacerbated by the COVID-19 pandemic. The European Council in December 2020 highlighted the need to develop a new Agenda for the Southern neighbourhood and looked forward to the Joint Communication.

The new Agenda for the Mediterranean will guide the EU’s policy towards the region and the multi-annual programming under the EU’s new Neighbourhood, Development and International Cooperation Instrument (NDICI) at the regional and bilateral levels. The EU will carry out a mid-term review of the Joint Communication by 2024.

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