Why do we need InvestEU for the post-coronavirus recovery?
InvestEU is the EU’s proposed flagship investment programme to kick-start the European economy. It is well-placed to provide long-term funding and to support Union policies in the recovery from a deep economic and social crisis. This has been shown with the successful implementation of the European Fund for Strategic Investments and other EU financial instruments in the wake of the past financial crisis.
In the current coronavirus crisis, the market allocation of financial resources is not fully efficient and perceived risk impairs private investment significantly. Deep uncertainty currently compromises the quality of financial market information and lenders’ ability to assess the viability of companies and investment projects. If left unchecked, this can create pervasive risk aversion towards private investment projects and contribute to a ‘credit crunch’. Under such circumstances, the key feature of InvestEU of de-risking projects to crowd in private finance is particularly valuable and should be utilised.
An enhanced InvestEU programme thanks to Next Generation EU will be able to provide crucial support to companies and to ensure a strong focus of investors on the Union’s medium- and long-term policy priorities, such as the European Green Deal and the digitalisation transition and greater resilience. To address all of these challenges, the Commission is updating its original InvestEU proposal from 2018 to make sure it can better respond tothe current economic crisis.
What are the main changes to InvestEU?
The new proposal contains two main changes to the InvestEU Programme as partially agreed between co-legislators in April 2019:
- An increase of the InvestEU budget to reflect the higher investment needs and an environment of increased risk. The financial envelope for the sustainable infrastructure window is doubled, in line with the President’s Communication “Europe’s moment: Repair and Prepare for the Next Generation”.
- A broadened scope through the addition of a fifth window – the strategic European investment window – in order to cater for the future needs of the European economy and to promote and secure EU strategic autonomy in key sectors.
What will the new strategic European investment window finance?
The outbreak of the pandemic has shown the interconnectivity of global supply chains and exposed some vulnerabilities, such as the over-reliance of strategic industries on non-diversified external supply sources. Such vulnerabilities need to be addressed, to improve the Union’s emergency response as well as the resilience of the entire economy, while maintaining its openness to competition and trade in line with its rules. The new strategic European investment windowwill focus on building stronger European value chains in line with the strategic agenda of the Union and the New Industrial Strategy for Europe, as well as supporting activities in critical infrastructure and technologies
This reinforcement is of particular importance in the post-crisis situation, as some Member States might not have sufficient financial capacity to support these projects with national State aid. Moreover, many of these projects are cross-border and require a European approach.
How will the new window complement the pre-existing windows?
In the current context, the strategic European investment window would bring value added to the original windows, as it focuses on recipients or projects based on their high European strategic importance.
The new window would both target specific projects (e.g. supporting large consortia or public-private partnerships aimed at developing a specific technology and building critical infrastructure) and provide diffused financing, for instance by supporting the emergence of whole ecosystems of entrepreneurs active in the targeted sectors (e.g. innovative SMEs working on technologies of potential relevance to industrial biotechnology and pharmaceuticals).
The additionality requirements under this window would also differ from those envisaged for the other windows. For instance, the additionality of the support under the new window to large corporates would be in maintaining and developing their production within the Union or under the control of European investors and in scaling up the deployment of innovative technologies, rather than in purely risk-related considerations of the InvestEU support.
What are the changes in budgetary terms?
The new proposal foresees an increase of the original financial envelope. This includes a doubling of the guarantee amount allocated to the sustainable infrastructure window under the InvestEU Fund as well as the allocation of an additional guarantee amount to the new window. More concretely:
- Sustainable infrastructure window: €20 bn
- Research, innovation and digitisation window: €10 bn
- SME window: €10 bn
- Social investment and skills window: €3.6 bn
- Strategic European investment window: €31 bn
The new proposal also foresees an increase of the financial envelope allocated to the InvestEU Advisory Hub by an amount of €200 million to cater for the needs of the new window as well as the increasing needs of the other four windows.
How will InvestEU work?
The main principle of how InvestEU will function does not change. The InvestEU Fund will mobilise public and private investment through an EU budget guarantee of €75 billion that will back the investment projects of implementing partners such as the European Investment Bank (EIB) Group and others, and increase their risk-bearing capacity.
Under the new proposal, the guarantee will be provisioned at 45%, meaning that €34 billion of the EU budget is set aside in case calls are made on the guarantee. The size of the provisioning is based on the type of envisaged financial products and the riskiness of the portfolios, taking into account the experience under the EFSI and current financial instruments, as well as the likely changes in market circumstances following the coronavirus crisis.
What is the role of the EIB Group in the new proposal?
Given its role under the Treaties, its capacity to operate in all Member States and the existing experience under the current financial instruments and the EFSI, the European Investment Bank Group will remain a privileged implementing partner for the InvestEU. It will implement 75% of the EU guarantee.
The EIB Group will also play a central role in implementing advisory support under the InvestEU Advisory Hub. Moreover, it will advise the Commission and perform operational tasks in relation to the Hub.
Is the new window open to other implementing partners than the EIB Group?
Yes. The new window is open to other implementing partners than the EIB Group, including national promotional banks and institutions, as well as international financial institutions such as the European Bank for Reconstruction and Development or the Council of Europe Development Bank.
The Commission will continue the discussions with potential implementing partners to ensure a swift and efficient deployment of the instrument, which is even more crucial under the current circumstances.
Are there any changes to the InvestEU governance?
An Investment Committee composed of independent experts will remain responsible for approving the individual requests. As the Investment Committee will operate in different configurations corresponding to the InvestEU policy windows, a fifth configuration has been added to the proposal.
Are there any changes to the InvestEU eligibility criteria?
The policy areas eligible for financing and investment operations under the existing four windows remain the same as proposed and negotiated in annex II to the InvestEU Regulation. However, for the strategic European investment window, new intervention areas are introduced, as referenced above.
In case a financing or investment operation proposed to the Investment Committee falls under more than one policy window, it will be attributed to the policy window under which its main objective or the main objective of most of its sub-projects falls. The Investment Guidelines will specify the criteria for the allocation of financial products (under which financing and investment operations will be submitted) to specific windows.
Advancing the EU social market economy: adequate minimum wages for workers
The Commission today proposes an EU Directive to ensure that the workers in the Union are protected by adequate minimum wages allowing for a decent living wherever they work. When set at adequate levels, minimum wages do not only have a positive social impact but also bring wider economic benefits as they reduce wage inequality, help sustain domestic demand and strengthen incentives to work. Adequate minimum wages can also help reduce the gender pay gap, since more women than men earn a minimum wage. The proposal also helps protect employers that pay decent wages to workers by ensuring fair competition.
The current crisis has particularly hit sectors with a higher share of low-wage workers such as cleaning, retail, health and long-term care and residential care. Ensuring a decent living for workers and reducing in-work poverty is not only important during the crisis but also essential for a sustainable and inclusive economic recovery.
President of the European Commission Ursula von der Leyen said: “Today’s proposal for adequate minimum wages is an important signal that also in crisis times, the dignity of work must be sacred. We have seen that for too many people, work no longer pays. Workers should have access to adequate minimum wages and a decent standard of living. What we propose today is a framework for minimum wages, in full respect of national traditions and the freedom of social partners. Improving working and living conditions will not only protect our workers, but also employers that pay decent wages, and create the basis for a fair, inclusive and resilient recovery.”
Executive Vice-President for an Economy that Works for People, Valdis Dombrovskis, said: “It is important to ensure that also low wage workers benefit from the economic recovery. With this proposal we want to make sure that workers in the EU earn a decent living wherever they work. Social partners have a crucial role to play in negotiating wages nationally and locally. We support their freedom to negotiate wages autonomously, and where this is not possible, we give a framework to guide Member states in setting minimum wages.”
Nicolas Schmit, Commissioner for Jobs and Social Rights, said: “Almost 10% of workers in the EU are living in poverty: this has to change. People who have a job should not be struggling to make ends meet. Minimum wages have to play catch up with other wages which have seen growth in recent decades, leaving minimum wages lagging behind. Collective bargaining should be the gold standard across all Member States. Ensuring adequate minimum wages is written in black and white in Principle 6 of the European Pillar of Social Rights, which all Member States have endorsed, so we are counting on their continued commitment.”
A framework for minimum wages in full respect of national competences and traditions
Minimum wages exist in all EU Member States. 21 countries have statutory minimum wages and in 6 Member States (Denmark, Italy, Cyprus, Austria, Finland and Sweden) minimum wage protection is provided exclusively by collective agreements. Yet, in the majority of Member States, workers are affected by insufficient adequacy and/or gaps in the coverage of minimum wage protection. In light of this, the proposed Directive creates a framework to improve the adequacy of minimum wages and for access of workers to minimum wage protection in the EU. The Commission’s proposal fully respects the subsidiary principle: it sets a framework for minimum standards, respecting and reflecting Member States’ competences and social partners’ autonomy and contractual freedom in the field of wages. It does not oblige Member States to introduce statutory minimum wages, nor does it set a common minimum wage level.
Countries with high collective bargaining coverage tend to have a lower share of low-wage workers, lower wage inequality and higher minimum wages. Therefore, the Commission proposal aims at promoting collective bargaining on wages in all Member States.
Countries with statutory minimum wages should put in place the conditions for minimum wages to be set at adequate levels. These conditions include clear and stable criteria for minimum wage setting, indicative reference values to guide the assessment of adequacy and regular and timely updates of minimum wages. These Member States are also asked to ensure the proportionate and justified use of minimum wage variations and deductions and the effective involvement of social partners in statutory minimum wage setting and updating.
Finally, the proposal provides for improved enforcement and monitoring of the minimum wage protection established in each country. Compliance and effective enforcement is essential for workers to benefit from actual access to minimum wage protection, and for businesses to be protected against unfair competition. The proposed Directive introduces annual reporting by Member States on its minimum wage protection data to the Commission.
President von der Leyen promised to present a legal instrument to ensure that the workers in our Union have a fair minimum wage at the start of her mandate and repeated her pledge in her first State of the Union address on 16 September 2020.
The right to adequate minimum wages is in Principle 6 of the European Pillar of Social Rights, which was jointly proclaimed by the European Parliament, the Council on behalf of all Member States, and the European Commission in Gothenburg in November 2017.
Today’s proposal for a Directive is based on Article 153 (1) (b) of the Treaty on the Functioning of the EU (TFEU) on working conditions. It follows a two-stage consultation of social partners carried out in accordance with Article 154 TFEU. The Commission’s proposal will now go to the European Parliament and the Council for approval. Once adopted, Member States will have two years have to transpose the Directive into national law.
Commission proposes new ‘Single Window’ to modernise and streamline customs controls
The European Commission has today proposed a new initiative that will make it easier for different authorities involved in goods clearance to exchange electronic information submitted by traders, who will be able to submit the information required for import or export of goods only once. The so-called ‘EU Single Window Environment for Customs‘ aims to enhance cooperation and coordination between different authorities, in order to facilitate the automatic verification of non-customs formalities for goods entering or leaving the EU.
The Single Window aims to digitalise and streamline processes, so that businesses will ultimately no longer have to submit documents to several authorities through different portals. Today’s proposal is the first concrete deliverable of the recently adopted Action Plan on taking the Customs Union to the next level. It launches an ambitious project to modernise border controls over the coming decade, in order to facilitate trade, improve safety and compliance checks, and reduce the administrative burden for companies.
Paolo Gentiloni, Commissioner for the Economy, said: “Digitalisation, globalisation and the changing nature of trade present both risks and opportunities when it comes to goods crossing the EU’s borders. To rise to these challenges, customs and other competent authorities must act as one, with a more holistic approach to the many checks and procedures needed for smooth and safe trade. Today’s proposal is the first step towards a fully paperless and integrated customs environment and better cooperation between all authorities at our external borders. I urge all Member States to play their part in making it a true success story.”
Each year, the Customs Union facilitates the trade of more than €3.5 trillion worth of goods. Efficient customs clearance and controls are essential to allow trade to flow smoothly while also protecting EU citizens, businesses and the environment. The coronavirus crisis has highlighted the importance of having agile yet robust customs processes, and this will become ever more important as trade volumes keep on increasing and new challenges related to digitalisation and e-commerce, such as new forms of fraud, emerge.
Currently, the formalities required at the EU’s external borders often involve many different authorities in charge of different policy areas, such as health and safety, the environment, agriculture, fisheries, cultural heritage and market surveillance and product compliance. As a result, businesses have to submit information to several different authorities, each with their own portal and procedures. This is cumbersome and time-consuming for traders and reduces the capacity of authorities to act in a joined-up way in combatting risks.
Today’s proposal is the first step in creating a digital framework for enhanced cooperation between all border authorities, through one Single Window. The Single Window will enable businesses and traders to provide data in one single portal in an individual Member State, thereby reducing duplication, time and costs. Customs and other authorities will then be able to collectively use this data, allowing for a fully coordinated approach to goods clearance and a clearer overview at EU level of the goods that are entering or leaving the EU.
This is an ambitious project that will entail significant investment at both EU and Member State level, in order to be fully implemented over the next decade or so. The Commission will support Member States in this preparation, where possible, including through funding from the Recovery and Resilience Facility, to enable them to reap the full, long-term benefits of the Single Window.
The EU is the largest trading bloc in the world, accounting for 15% of the world trade. In 2018, almost 343 million customs declarations were handled by more than 2,000 EU customs offices, who collected €25.3 billion in customs duties.
The Single Window is part of the new Customs Union Action Plan, which sets out a series of measures to make EU customs smarter, more innovative and more efficient over the next four years. In her Political Guidelines, President von der Leyen announced plans for an integrated European approach to customs risk management, which supports effective controls by EU Member States. The measures will strengthen the Customs Union and enhance its ability to collect EU revenues and protect the security, health and prosperity of EU citizens and businesses.
Commission opens infringements against Cyprus and Malta for “selling” EU citizenship
Today, the European Commission is launching infringement procedures against Cyprus and Malta by issuing letters of formal notice regarding their investor citizenship schemes also referred to as “golden passport” schemes.
The Commission considers that the granting by these Member States of their nationality – and thereby EU citizenship – in exchange for a pre-determined payment or investment and without a genuine link with the Member States concerned, is not compatible with the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union. This also undermines the integrity of the status of EU citizenship provided for in Article 20 of the Treaty on the Functioning of the European Union.
Due to the nature of EU citizenship, such schemes have implications for the Union as a whole. When a Member State awards nationality, the person concerned automatically becomes an EU citizen and enjoys all rights linked to this status, such as the right to move, reside and work freely within the EU, or the right to vote in municipal elections as well as elections to the European Parliament. As a consequence, the effects of investor citizenship schemes are neither limited to the Member States operating them, nor are they neutral with regard to other Member States and the EU as a whole.
The Commission considers that the granting of EU citizenship for pre-determined payments or investments without any genuine link with the Member States concerned, undermines the essence of EU citizenship.
The Cypriot and Maltese governments have two months to reply to the letters of formal notice. If the replies are not satisfactory, the Commission may issue a Reasoned Opinion in this matter.
Investor citizenship schemes allow a person to acquire a new nationality based on payment or investment alone. These schemes are different to investor residence schemes (or “golden visas”), which allow third-country nationals, subject to certain conditions, to obtain a residence permit to live in an EU country.
The conditions for obtaining and forfeiting national citizenship are regulated by the national law of each Member State, subject to due respect for EU law. As nationality of a Member State is the only precondition for EU citizenship and access to rights conferred by the Treaties, the Commission has been closely monitoring investor schemes granting the nationality of Member States.
The Commission has frequently raised its serious concerns about investor citizenship schemes and certain risks that are inherent in such schemes. As mentioned in the Commission’s report of January 2019, those risks relate in particular to security, money laundering, tax evasion and corruption and the Commission has been monitoring wider issues of compliance with EU law raised by investor citizenship and residence schemes. In April 2020, the Commission wrote to the Member States concerned setting out its concerns and asking for further information about the schemes.
In a resolution adopted on 10 July 2020, the European Parliament reiterated its earlier calls on Member States to phase out all existing citizenship by investment (CBI) or residency by investment (RBI) schemes as soon as possible. As stated by President von der Leyen in the State of the Union Address of 16 September 2020, European values are not for sale.
The Commission is also writing again to Bulgaria to highlight its concerns regarding an investor citizenship scheme operated by that Member State and requesting further details. The Bulgarian government has one month to reply to the letter requesting further information, following which the Commission will decide on the next steps.
Iran Policy toward Nagorno-Karabakh Conflict
Nagorno-Karabagh is located inside the Azerbaijani territory that, with the other seven districts around it, has been occupied by Armenian...
Russia Readies to Host XII BRICS Summit
Under Russia’s BRICS Chairmanship 2020, President Vladimir Putin will host Heads of State of Brazil, China, India and South Africa...
Japan the Titan of Soft Power
Japan the titan of soft power is well recognized for its technological superiority, arts, aesthetics, and cuisines. Japan once avoided...
International organizations in the Armenian-Azerbaijani war must demonstrate a constructive position
Recent events in the Caucasus are in the spotlight of the whole world. For 30 years, the policy of aggression...
Millions affected as devastating typhoon strikes Viet Nam
A major typhoon has struck central Viet Nam, affecting millions of people – including about 2.5 million children – in...
Escaping the ‘Era of Pandemics’: Experts warn worse crises to come options offered to reduce risk
Future pandemics will emerge more often, spread more rapidly, do more damage to the world economy and kill more people...
Poland ‘slammed the door shut’ on legal and safe abortions
A group of UN independent human rights experts have denounced a court ruling in Poland that bans abortions on the...
Defense3 days ago
How Mercenaries in Nagorno-Karabakh can destabilize the situation
Southeast Asia3 days ago
The Role of Malaysia in ASEAN
South Asia3 days ago
Kashmir Bleeds, International Community Sleeps
Southeast Asia22 hours ago
From October to October: Youth and politics in Thailand
Americas2 days ago
Israel, the Middle East and Joe Biden
East Asia3 days ago
What prevents Japan from ratifying the recently assented Nuclear Ban Treaty?
Diplomacy2 days ago
Nuclear Weapons and Coercive Diplomacy- Book Review
Development3 days ago
A framework agreement of cooperation between IsDB and Standard Chartered Bank