A look at the EU’s autumn in-tray
7 September 2020: With autumn in the air, ICAEW Head of European Affairs Susanna Di Feliciantonio takes a closer look at some of the key items on the EU’s agenda for the rest of the year.
La rentrée – the back to school period – is a traditional moment for Brussels to take stock of its political and policy priorities. In the run-up to the now annual State of the European Union speech by the Commission’s President, what is on the EU’s to-do list for the rest of the year?
EU leaders may have reached a ‘historic’ agreement in July on the €1.8tn package to tackle the socio-economic consequences of the coronavirus pandemic – but the deal is not yet over the line. MEPs must consent to the multiannual budget. They have already made clear that they want changes, including greater involvement in the governance around recovery funds and a clearer timeline on potential new sources of revenue to pay for any debt raised on the markets, before giving a green light.
In what could be a testing process, national parliaments will also have to ratify the €750bn recovery fund. At the same time, much of the detail still needs setting out in EU legislation – while countries are having to draft recovery blueprints to present to the Commission and their counterparts as a condition of accessing funding.
The following few months will show if the EU can follow through on its climate ambitions. Will the EU be able to agree on a climate law to make the bloc’s already agreed objective of climate neutrality by 2050 legally binding? Negotiations should also kick off on attempts to raise the EU’s 2030 goal of cutting emissions from 40% to 55% (from 1990 levels) once the plans are issued in late September.
Sustainable finance, reporting and governance
In the financial services sector, many will be awaiting the outcome of the recent review of the EU’s sustainable finance agenda, due before the end of the year. The revised strategy will show how the EU intends to further integrate environmental and social considerations into the policy framework in order to mobilise sustainable investments. Measures thought to be under consideration include further tweaks to the recently agreed EU taxonomy rules, new green bond standards and labels for investment funds, potential changes to capital requirements and an EU database to compare companies’ green credentials.
In the meantime, the Commission will be continuing work on legislative changes to non-financial reporting rules, with proposals due early next year. The European Financial Reporting Advisory Group (EFRAG) is also kicking off preparatory work for possible EU non-financial reporting. A forthcoming Commission consultation will address how sustainability can be further embedded into the corporate governance framework, with a view to better aligning the long-term interests of management, shareholders and stakeholders.
Work is in progress on potential new measures to enhance regulation of big tech. A new Digital Services Act, expected before the end of the year, should set out proposals to modernise the existing legal framework, including new rules framing the responsibilities of large online platforms with regard to users, as well as stronger supervision and enforcement mechanisms. Changes to competition rules may also seek to facilitate competition and prevent abuse of dominant market power.
The question of how to tax big tech also remains on the table. The Commission recently confirmed that it will table proposals for a digital tax next year. Whether European legislation will be based on an international blueprint will depend on what progress is made in ongoing OECD talks this autumn.
With a focus on the financial services sector again, the coming months are likely to see new initiatives on fintech and crypto assets. Growing concerns with cybersecurity are leading the EU to also tighten requirements and oversight in relation to operational and cyber resilience for the financial industry, including dependencies on cloud platforms.
Against a backdrop of ongoing trade disputes, the EU wants greater retaliatory powers while remaining in line with WTO rules. MEPs are pressing for such powers to also cover trade in services and IP rights. A new trade commissioner, following last month’s resignation of Ireland’s Phil Hogan, will need to be appointed first. The outcome of the US election could well have a major impact on discussions on this file – as it will on digital trade, given the July ruling by the European Court of Justice striking down the second iteration of the EU-US deal enabling data flows across the Atlantic. Talks are underway to find a new agreement that will address European surveillance concerns but progress before November may be limited. At the same time, the EU also has to consider whether to accept the UK’s data protection regime as adequate under EU rules, post-Brexit.
Negotiations on the future of EU-UK trade arrangements made little progress in August. With the next round of talks kicking off later in the month, the two will need to find ways of overcoming the current impasse on state aid, level playing field rules and fisheries in order to move forward. With the end of the transition period coming closer into sight, the EU continues to stress the need for a deal by October in order to allow for ratification before the end of the transition period on 31 December.
Coronavirus and the rest
The EU’s to-do list does not end there – and progress on different priorities could well be impacted again by COVID-19. Indeed, steps to secure European access to coronavirus vaccines are a top priority. Other key files include the long-awaited and controversial migration reform as well as steps to bring two years of negotiations on the future of the Common Agricultural Policy to a close. And as always, geopolitical developments, including in Belarus and the Eastern Mediterranean as well as the outcome of the US elections, could also rapidly rise up EU leaders’ in-trays this autumn.