Index:

New regulatory framework on AI
Coordinated Plan – 2021 Update
New Machinery Regulation
Next steps

1. A new regulatory framework on AI
Why do we need to regulate the use of Artificial Intelligence technology?
The potential benefits of AI for our societies are manifold from improved medical care to better education. Faced with the rapid technological development of AI, the EU must act as one to harness these opportunities. While most AI systems will pose low to no risk, certain AI systems create risks that need to be addressed to avoid undesirable outcomes. For example, the opacity of many algorithms may create uncertainty and hamper the effective enforcement of the existing legislation on safety and fundamental rights. Responding to these challenges, legislative action is needed to ensure a well-functioning internal market for AI systems where both benefits and risks are adequately addressed. This includes applications such as biometric identification systems or AI decisions touching on important personal interests, such as in the areas of recruitment, education, healthcare or law enforcement. The Commission’s proposal for a regulatory framework on AI aims to ensure the protection of fundamental rights and user safety, as well as trust in the development and uptake of AI.
Which risks will the new AI rules address?
The uptake of AI systems has a strong potential to bring societal benefits, economic growth and enhance EU innovation and global competitiveness. However, in certain cases, the specific characteristics of certain AI systems may create new risks related to user safety and fundamental rights. This leads to legal uncertainty for companies and potentially slower uptake of AI technologies by businesses and citizens, due to the lack of trust. Disparate regulatory responses by national authorities would risk fragmenting the internal market.
To whom does the proposal apply?
The legal framework will apply to both public and private actors inside and outside the EU as long as the AI system is placed on the Union market or its use affects people located in the EU. It can concern both providers (e.g. a developer of a CV-screening tool) and users of high-risk AI systems (e.g. a bank buying this resume screening tool). It does not apply to private, non-professional uses.
What are the risk categories?
The Commission proposes a risk–based approach, with four levels of risk:
Unacceptable risk: A very limited set of particularly harmful uses of AI that contravene EU values because they violate fundamental rights (e.g. social scoring by governments, exploitation of vulnerabilities of children, use of subliminal techniques, and – subject to narrow exceptions – live remote biometric identification systems in publicly accessible spaces used for law enforcement purposes) will be banned.
High-risk: A limited number of AI systems defined in the proposal, creating an adverse impact on people’s safety or their fundamental rights (as protected by the EU Charter of Fundamental Rights) are considered to be high-risk. Annexed to the proposal is the list of high-risk AI systems, which can be reviewed to align with the evolution of AI use cases (future-proofing).
These also include safety components of products covered by sectorial Union legislation. They will always be high-risk when subject to third-party conformity assessment under that sectorial legislation.
In order to ensure trust and a consistent and high level of protection of safety and fundamental rights, mandatory requirements for all high-risk AI systems are proposed. Those requirements cover the quality of data sets used; technical documentation and record keeping; transparency and the provision of information to users; human oversight; and robustness, accuracy and cybersecurity. In case of a breach, the requirements will allow national authorities to have access to the information needed to investigate whether the use of the AI system complied with the law.
The proposed framework is consistent with the Charter of Fundamental Rights of the European Union and in line with the EU’s international trade commitments.
Limited risk: For certain AI systems specific transparency requirements are imposed, for example where there is a clear risk of manipulation (e.g. via the use of chatbots). Users should be aware that they are interacting with a machine.
Minimal risk: All other AI systems can be developed and used subject to the existing legislation without additional legal obligations. The vast majority of AI systems currently used in the EU fall into this category. Voluntarily, providers of those systems may choose to apply the requirements for trustworthy AI and adhere to voluntary codes of conduct.
How did you select the list of stand- alone high-risk AI systems (none embedded in products)? Will you update it?
Together with a clear definition of ‘high-risk’, the Commission puts forward a solid methodology that helps identifying high-risk AI systems within the legal framework. This aims to provide legal certainty for businesses and other operators.
The risk classification is based on the intended purpose of the AI system, in line with the existing EU product safety legislation. It means that the classification of the risk depends on the function performed by the AI system and on the specific purpose and modalities for which the system is used.
The criteria for this classification include the extent of the use of the AI application and its intended purpose, the number of potentially affected persons, the dependency on the outcome and the irreversibility of harms, as well as the extent to which existing Union legislation provides for effective measures to prevent or substantially minimise those risks.
A list of certain critical fields helps to make the classification clearer by identifying these applications in the areas of biometric identification and categorisation, critical infrastructure, education, recruitment and employment, provision of important public and private services as well as law enforcement, asylum and migration and justice.
Annexed to the proposal is a list of use cases which the Commission currently considers to be high-risk. The Commission will ensure that this list is kept up to date and relevant, based on the above mentioned criteria, evidence, and expert opinions in broad consultation with stakeholders.
How does the proposal address remote biometric identification?
Under the new rules, all AI systems intended to be used for remote biometric identification of persons will be considered high-risk and subject to an-ex ante third party conformity assessment including documentation and human oversight requirements by design. High quality data sets and testing will help to make sure such systems are accurate and there are no discriminatory impacts on the affected population.
The use of real-time remote biometric identification in publicly accessible spaces for law enforcement purposes poses particular risks for fundamental rights, notably human dignity, respect for private and family life, protection of personal data and non-discrimination. It is therefore prohibited in principle with a few, narrow exceptions that are strictly defined, limited and regulated. They include the use for law enforcement purposes for the targeted search for specific potential victims of crime, including missing children; the response to the imminent threat of a terror attack; or the detection and identification of perpetrators of serious crimes.
Finally, all emotion recognition and biometric categorisation systems will always be subject to specific transparency requirements. They will also be considered high-risk applications if they fall under the use cases identified as such, for example in the areas of employment, education, law enforcement, migration and border control.
Why are particular rules needed for remote biometric identification? 
Biometric identification can take different forms. It can be used for user authentication i.e. to unlock a smartphone or for verification/authentication at border crossings to check a person’s identity against his/her travel documents (one-to-one matching). Biometric identification could also be used remotely, for identifying people in a crowd, where for example an image of a person is checked against a database (one-to-many matching).
Accuracy of systems for facial recognition can vary significantly based on a wide range of factors, such as camera quality, light, distance, database, algorithm, and the subject’s ethnicity, age or gender. The same applies for gait and voice recognition and other biometric systems. Highly advanced systems are continuously reducing their false acceptance rates. While a 99% accuracy rate may sound good in general, it is considerably risky when the result leads to the suspicion of an innocent person. Even a 0.1% error rate is a lot if it concerns tens of thousands of people.
What are the obligations for providers of high-risk AI systems?
Before placing a high-risk AI system on the EU market or otherwise putting it into service, providers must subject it to a conformity assessment. This will allow them to demonstrate that their system complies with the mandatory requirements for trustworthy AI (e.g. data quality, documentation and traceability, transparency, human oversight, accuracy and robustness). In case the system itself or its purpose is substantially modified, the assessment will have to be repeated. For certain AI systems, an independent notified body will also have to be involved in this process. AI systems being safety components of products covered by sectorial Union legislation will always be deemed high-risk when subject to third-party conformity assessment under that sectorial legislation. Also for biometric identification systems a third party conformity assessment is always required.
Providers of high-risk AI systems will also have to implement quality and risk management systems to ensure their compliance with the new requirements and minimise risks for users and affected persons, even after a product is placed on the market. Market surveillance authorities will support post-market monitoring through audits and by offering providers the possibility to report on serious incidents or breaches of fundamental rights obligations of which they have become aware.
How will compliance be enforced?
Member States hold a key role in the application and enforcement of this Regulation. In this respect, each Member State should designate one or more national competent authorities to supervise the application and implementation, as well as carry out market surveillance activities. In order to increase efficiency and to set an official point of contact with the public and other counterparts, each Member State should designate one national supervisory authority, which will also represent the country in the European Artificial Intelligence Board.
What is the European Artificial Intelligence Board?
The European Artificial Intelligence Board would comprise high-level representatives of competent national supervisory authorities, the European Data Protection Supervisor, and the Commission. Its role will be to facilitate a smooth, effective and harmonised implementation of the new AI Regulation. The Board will issue recommendations and opinions to the Commission regarding high-risk AI systems and on other aspects relevant for the effective and uniform implementation of the new rules. It will also help building up expertise and act as a competence centre that national authorities can consult. Finally, it will also support standardisation activities in the area.
How do the rules protect fundamental rights?
There is already a strong protection for fundamental rights and for non-discrimination in place at EU and Member State level, but complexity and opacity of certain AI applications (‘black boxes’) pose a problem. A human-centric approach to AI means to ensure AI applications comply with fundamental rights legislation. Accountability and transparency requirements for the use of high-risk AI systems, combined with improved enforcement capacities, will ensure that legal compliance is factored in at the development stage. Where breaches occur, such requirements will allow national authorities to have access to the information needed to investigate whether the use of AI complied with EU law.
What are voluntary codes of conduct?
Providers of non-high-risk applications can ensure that their AI system is trustworthy by developing their own voluntary codes of conduct or adhering to codes of conduct adopted by other representative associations. These will apply simultaneously with the transparency obligations for certain AI systems. The Commission will encourage industry associations and other representative organisations to adopt voluntary codes of conduct.
Will imports of AI systems and applications need to comply with the framework?
Yes. Importers of AI systems will have to ensure that the foreign provider has already carried out the appropriate conformity assessment procedure and has the technical documentation required by the Regulation. Additionally, importers should ensure that their system bears a European Conformity (CE) marking and is accompanied by the required documentation and instructions of use.
How can the new rules support innovation?
The regulatory framework can enhance the uptake of AI in two ways. On the one hand, increasing users’ trust will increase the demand for AI used by companies and public authorities. On the other hand, by increasing legal certainty and harmonising rules, AI providers will access bigger markets, with products that users and consumers appreciate and purchase.
Rules will apply only where strictly needed and in a way that minimises the burden for economic operators, with a light governance structure. In addition, an ecosystem of excellence, including regulatory sandboxes establishing a controlled environment to test innovative technologies for a limited time, access to Digital Innovation Hubs and access to Testing and Experimentation Facilities will help innovative companies, SMEs and start-ups to continue innovating in compliance with the new rules for AI and the other applicable legal rules. These, together with other measures such as the additional Networks of AI Excellence Centres and the Public-Private Partnership on Artificial Intelligence, Data and Robotics will help build the right framework conditions for companies to develop and deploy AI.
What is the international dimension of the EU’s approach?
The proposal for regulatory framework and the Coordinated Plan on AI are part of the efforts of the European Union to be a global leader in the promotion of trustworthy AI at international level. AI has become an area of strategic importance at the crossroads of geopolitics, commercial stakes and security concerns. Countries around the world are choosing to use AI as a way to signal their desires for technical advancement due to its utility and potential. AI regulation is only emerging and the EU will take actions to foster the setting of global AI standards in close collaboration with international partners in line with the rules-based multilateral system and the values it upholds. The EU intends to deepen partnerships, coalitions and alliances with EU partners (e.g. Japan, the US or India) as well as multilateral (e.g. OECD and G20) and regional organisations (e.g. Council of Europe).

2. Coordinated Plan – 2021 Update
What is new compared to the 2018 Coordinated Plan?
The 2018 Coordinated Plan laid the foundation for policy coordination on AI and encouraged Member States to develop national strategies. Since then, the technological, economic and policy context on AI has considerably evolved. To remain agile and fit for the purpose, the Commission presents the 2021 review of the Coordinated Plan. To ensure a stronger link to the European Green Deal, developing markets and in response to the coronavirus pandemic, the updated plan strengthens its proposed actions on the environment and health.
What is the objective of the Coordinated Plan?
The Coordinated Plan puts forward a concrete set of joint actions for the European Commission and Member States on how to create EU global leadership on trustworthy AI. The proposed key actions reflect the vision that to succeed the European Commission together with Member States and private actors need to: accelerate investments in AI technologies to drive resilient economic and social recovery facilitated by the uptake of ‘new’ digital solutions; act on AI strategies and programmes by fully and timely implementing them to ensure that the EU fully benefits from first-mover adopter advantages; and align AI policy to remove fragmentation and address global challenges.
How many Member States have put in place a national AI strategy?
A total of 19 Member States (Bulgaria, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Hungary, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Sweden and most recently Spain and Poland, in December 2020), plus Norway have adopted national AI strategies. 
How will the EU drive excellence from the lab to the market?
The revised Coordinated Plan sets out the vision to co-fund Testing and Experimentation Facilities (TEFs), which can become a common, highly specialised resource at EU level that fosters the speedy deployment and greater uptake of AI.
In addition, the Commission is also setting up a network of European Digital Innovation Hubs (DIHs) which are ‘one-stop shops’ that help SMEs and public administrations to become more competitive in this area.
The Public-Private Partnership on AI, Data and Robotics also helps consolidate our efforts to boost resources, as it helps develop and implement a strategic research, innovation and deployment agenda, as well as a dynamic EU-wide AI innovation ecosystem.
The funding available through the AI/Blockchain Investment Fund and the European Innovation Council has proved to be successful and should be strengthened, including through the InvestEU and the implementation of Recovery and Resilience Facility by Member States.
How will the EU build strategic leadership in high-impact sectors?
To align with the market developments and ongoing actions in Member States and to reinforce the EU position on the global scale, the Coordinated Plan puts forward seven new sectoral action areas. The joint actions on environment and health are necessary to mobilise resources to reach the objectives of the European Green Deal, and effectively tackle the response to the coronavirus pandemic. The Commission also calls for and proposes concrete actions supported by funding instruments on the coordination and resources pooling in other five other areas: public sector, robotics, mobility, home affairs and agriculture.
How will Member States invest in AI? 
Maximising resources and coordinating investments is vital and a critical component of the Commission’s AI strategy. Through the Digital Europe programme, the first financial instrument of the EU focused on digital technology, and the Horizon Europe programme, the Commission plans to invest €1 billion per year in AI. The aim is to mobilise additional investments from the private sector and the Member States in order to reach an annual investment volume of €20 billion over the course of this decade. The newly adopted Recovery and Resilience Facility, the largest stimulus package ever financed through the EU budget, makes €134 billion available for digital. This will be a game-changer allowing Europe to amplify its ambitions and become global leaders in developing cutting-edge trustworthy AI.
How are EU-funded AI solutions helping to achieve Green Deal objectives?
The Commission will continue to accelerate research in this area by contributing to sustainable AI (e.g. developing less data-intensive and energy-consuming AI models). Specific calls for proposals under Horizon Europe on AI, data and robotics serving the Green Deal, as well as greener AI, are underway. As announced in the EU data strategy, the Digital Europe Programme will enable the Commission to invest in environmentally friendly AI through setting up data spaces, covering areas like the environment, energy and agriculture, to ensure that more data becomes available for use in the economy and society. Additionally, the Commission will invest in testing and experimentation facilities that have a specific focus on environment/climate (such as agriculture, manufacturing and smart cities / communities) to contribute to the environment/climate through their green dimension. The Recovery and Resilience Facility offers a unique opportunity for national actions supporting digital (including AI) and green transitions.

3. The new Machinery Regulation
How is the Machinery Regulation related to AI?
Machinery regulation ensures that the new generation of machinery products guarantee the safety of users and consumers, and encourage innovation. Machinery products cover an extensive range of consumer and professional products, from robots (cleaning robots, personal care robots, collaborative robots, industrial robots) to lawnmowers, 3D printers, construction machines, industrial production lines.
How does it fit with the regulatory framework on AI?
Both are complementary. The AI Regulation will address the safety risks of AI systems ensuring safety functions in machinery, while the Machinery Regulation will ensure, where applicable, the safe integration of the AI system into the overall machinery, so as not to compromise the safety of the machinery as a whole.
How will the new regulation ensure a high level of safety?
The Machinery regulation will adapt certain provisions in the scope, definitions and the safety requirements to bring greater legal clarity and capture the new features of machinery products. In addition, other elements seek to ensure a high level of safety, by setting classification rules for high-risk machinery and a conformity assessment for machinery products that have been substantially modified.
How will it benefit business, in particular SMEs?
Businesses will need to perform only a single conformity assessment for both the AI and the Machinery Regulations. The new legislation will reduce manufacturers’ administrative and financial burden by allowing digital formats for the instructions and the declaration of conformity, and by requesting an adaptation of fees for SMEs when a third party is needed for the machinery conformity assessment.

4. Next steps
The European Parliament and the Member States will need to adopt the Commission’s proposals on a European approach for Artificial Intelligence and on Machinery Products in the ordinary legislative procedure. Once adopted, the final Regulations will be directly applicable across the EU. In parallel, the Commission will continue to collaborate with Member States to implement the actions announced in the Coordinated Plan.
Compliments of the European Commission.
The post New rules for Artificial Intelligence – Questions and Answers first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission proposes today new rules and actions aiming to turn Europe into the global hub for trustworthy Artificial Intelligence (AI). The combination of the first-ever legal framework on AI and a new Coordinated Plan with Member States will guarantee the safety and fundamental rights of people and businesses, while strengthening AI uptake, investment and innovation across the EU. New rules on Machinery will complement this approach by adapting safety rules to increase users’ trust in the new, versatile generation of products.
Margrethe Vestager, Executive Vice-President for a Europe fit for the Digital Age, said: “On Artificial Intelligence, trust is a must, not a nice to have. With these landmark rules, the EU is spearheading the development of new global norms to make sure AI can be trusted. By setting the standards, we can pave the way to ethical technology worldwide and ensure that the EU remains competitive along the way. Future-proof and innovation-friendly, our rules will intervene where strictly needed: when the safety and fundamental rights of EU citizens are at stake.”
Commissioner for Internal Market Thierry Breton said: “AI is a means, not an end. It has been around for decades but has reached new capacities fueled by computing power. This offers immense potential in areas as diverse as health, transport, energy, agriculture, tourism or cyber security. It also presents a number of risks. Today’s proposals aim to strengthen Europe’s position as a global hub of excellence in AI from the lab to the market, ensure that AI in Europe respects our values and rules, and harness the potential of AI for industrial use.”
The new AI regulation will make sure that Europeans can trust what AI has to offer. Proportionate and flexible rules will address the specific risks posed by AI systems and set the highest standard worldwide. The Coordinated Plan outlines the necessary policy changes and investment at Member States level to strengthen Europe’s leading position in the development of human-centric, sustainable, secure, inclusive and trustworthy AI.
The European approach to trustworthy AI
The new rules will be applied directly in the same way across all Member States based on a future-proof definition of AI. They follow a risk-based approach:
Unacceptable risk: AI systems considered a clear threat to the safety, livelihoods and rights of people will be banned. This includes AI systems or applications that manipulate human behaviour to circumvent users’ free will (e.g. toys using voice assistance encouraging dangerous behaviour of minors) and systems that allow ‘social scoring’ by governments.
High-risk: AI systems identified as high-risk include AI technology used in:

Critical infrastructures (e.g. transport), that could put the life and health of citizens at risk;

Educational or vocational training, that may determine the access to education and professional course of someone’s life (e.g. scoring of exams);

Safety components of products (e.g. AI application in robot-assisted surgery);

Employment, workers management and access to self-employment (e.g. CV-sorting software for recruitment procedures);

Essential private and public services (e.g. credit scoring denying citizens opportunity to obtain a loan);

Law enforcement that may interfere with people’s fundamental rights (e.g. evaluation of the reliability of evidence);

Migration, asylum and border control management (e.g. verification of authenticity of travel documents);

Administration of justice and democratic processes (e.g. applying the law to a concrete set of facts).

High-risk AI systems will be subject to strict obligations before they can be put on the market:

Adequate risk assessment and mitigation systems;

High quality of the datasets feeding the system to minimise risks and discriminatory outcomes;

Logging of activity to ensure traceability of results;

Detailed documentation providing all information necessary on the system and its purpose for authorities to assess its compliance;

Clear and adequate information to the user;

Appropriate human oversight measures to minimise risk;
High level of robustness, security and accuracy.

In particular, all remote biometric identification systems are considered high risk and subject to strict requirements. Their live use in publicly accessible spaces for law enforcement purposes is prohibited in principle. Narrow exceptions are strictly defined and regulated (such as where strictly necessary to search for a missing child, to prevent a specific and imminent terrorist threat or to detect, locate, identify or prosecute a perpetrator or suspect of a serious criminal offence). Such use is subject to authorisation by a judicial or other independent body and to appropriate limits in time, geographic reach and the data bases searched.
Limited risk, i.e. AI systems with specific transparency obligations: When using AI systems such as chatbots, users should be aware that they are interacting with a machine so they can take an informed decision to continue or step back.
Minimal risk: The legal proposal allows the free use of applications such as AI-enabled video games or spam filters. The vast majority of AI systems fall into this category. The draft Regulation does not intervene here, as these AI systems represent only minimal or no risk for citizens’ rights or safety.
In terms of governance, the Commission proposes that national competent market surveillance authorities supervise the new rules, while the creation of a European Artificial Intelligence Board will facilitate their implementation, as well as drive the development of standards for AI. Additionally, voluntary codes of conduct are proposed for non-high-risk AI, as well as regulatory sandboxes to facilitate responsible innovation.
The European approach to excellence in AI
Coordination will strengthen Europe’s leading position in human-centric, sustainable, secure, inclusive and trustworthy AI. To remain globally competitive, the Commission is committed to fostering innovation in AI technology development and use across all industries, in all Member States.
First published in 2018 to define actions and funding instruments for the development and uptake of AI, the Coordinated Plan on AI enabled a vibrant landscape of national strategies and EU funding for public-private partnerships and research and innovation networks. The comprehensive update of the Coordinated Plan proposes concrete joint actions for collaboration to ensure all efforts are aligned with the European Strategy on AI and the European Green Deal, while taking into account new challenges brought by the coronavirus pandemic. It puts forward a vision to accelerate investments in AI, which can benefit the recovery. It also aims to spur the implementation of national AI strategies, remove fragmentation, and address global challenges.
The updated Coordinated Plan will use funding allocated through the Digital Europe and Horizon Europe programmes, as well as the Recovery and Resilience Facility that foresees a 20% digital expenditure target, and Cohesion Policy programmes, to:

Create enabling conditions for AI’s development and uptake through the exchange of policy insights, data sharing and investment in critical computing capacities;

Foster AI excellence ‘from the lab to the market’ by setting up a public-private partnership, building and mobilising research, development and innovation capacities, and making testing and experimentation facilities as well as digital innovation hubs available to SMEs and public administrations;

Ensure that AI works for people and is a force for good in society by being at the forefront of the development and deployment of trustworthy AI, nurturing talents and skills by supporting traineeships, doctoral networks and postdoctoral fellowships in digital areas, integrating Trust into AI policies and promoting the European vision of sustainable and trustworthy AI globally;

Build strategic leadership in high-impact sectors and technologies including environment by focusing on AI’s contribution to sustainable production, health by expanding the cross-border exchange of information, as well as the public sector, mobility, home affairs and agriculture, and Robotics.

The European approach to new machinery products
Machinery products cover an extensive range of consumer and professional products, from robots to lawnmowers, 3D printers, construction machines, industrial production lines. The Machinery Directive, replaced by the new Machinery Regulation, defined health and safety requirements for machinery. This new Machinery Regulation will ensure that the new generation of machinery guarantees the safety of users and consumers, and encourages innovation. While the AI Regulation will address the safety risks of AI systems, the new Machinery Regulation will ensure the safe integration of the AI system into the overall machinery. Businesses will need to perform only one single conformity assessment.
Additionally, the new Machinery Regulation will respond to the market needs by bringing greater legal clarity to the current provisions, simplifying the administrative burden and costs for companies by allowing digital formats for documentation and adapting conformity assessment fees for SMEs, while ensuring coherence with the EU legislative framework for products.
Next steps
The European Parliament and the Member States will need to adopt the Commission’s proposals on a European approach for Artificial Intelligence and on Machinery Products in the ordinary legislative procedure. Once adopted, the Regulations will be directly applicable across the EU. In parallel, the Commission will continue to collaborate with Member States to implement the actions announced in the Coordinated Plan.
Background
For years, the Commission has been facilitating and enhancing cooperation on AI across the EU to boost its competitiveness and ensure trust based on EU values.
Following the publication of the European Strategy on AI in 2018 and after extensive stakeholder consultation, the High-Level Expert Group on Artificial Intelligence (HLEG) developed Guidelines for Trustworthy AI in 2019, and an Assessment List for Trustworthy AI in 2020. In parallel, the first Coordinated Plan on AI was published in December 2018 as a joint commitment with Member States.
The Commission’s White Paper on AI, published in 2020, set out a clear vision for AI in Europe: an ecosystem of excellence and trust, setting the scene for today’s proposal. The public consultation on the White Paper on AI elicited widespread participation from across the world. The White Paper was accompanied by a ‘Report on the safety and liability implications of Artificial Intelligence, the Internet of Things and robotics‘ concluding that the current product safety legislation contains a number of gaps that needed to be addressed, notably in the Machinery Directive.
Compliments of the European Commission.
The post Europe fit for the Digital Age: Commission proposes new rules and actions for excellence and trust in Artificial Intelligence first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Council’s and the European Parliament’s negotiators reached a provisional political agreement setting into law the objective of a climate-neutral EU by 2050, and a collective, net greenhouse gas emissions reduction target (emissions after deduction of removals) of at least 55% by 2030 compared to 1990.

We are very happy with the provisional deal reached today. The European climate law is “the law of laws” that sets the frame for the EU’s climate-related legislation for the 30 years to come. The EU is strongly committed to becoming climate neutral by 2050 and today we can be proud to have set in stone an ambitious climate goal that can get everyone’s support. With this agreement we send a strong signal to the world – right ahead of the Leader’s Climate Summit on 22 April – and pave the way for the Commission to propose its “fit-for-55” climate package in June.
João Pedro Matos Fernandes, Minister of Environment and Climate Action

Regarding the 2030 target, negotiators agreed on the need to give priority to emissions reductions over removals. In order to ensure that sufficient efforts to reduce and prevent emissions are deployed until 2030, they introduced a limit of 225 Mt of CO2 equivalent to the contribution of removals to the net target. They also agreed the Union shall aim to achieve a higher volume of carbon net sink by 2030.
Other elements of the provisional agreement include the establishment of a European Scientific Advisory Board on Climate Change, composed of 15 senior scientific experts of different nationalities with no more than 2 members holding the nationality of the same member state for a mandate of four years. This independent board will be tasked, among other things, with providing scientific advice and reporting on EU measures, climate targets and indicative greenhouse gas budgets and their coherence with the European climate law and the EU’s international commitments under the Paris Agreement.
The negotiators agreed that the Commission would propose an intermediate climate target for 2040, if appropriate, at the latest within six months after the first global stocktake carried out under the Paris Agreement. It will at the same time publish a projected indicative Union’s greenhouse gas budget for the period 2030-2050, together with its underlying methodology. The budget is defined as the indicative total volume of net greenhouse gas emissions (expressed as CO2 equivalent and providing separate information on emissions and removals) that are expected to be emitted in that period without putting at risk the Union’s commitments under the Paris Agreement.
Negotiators also agreed that the Commission would engage with sectors of the economy that choose to prepare indicative voluntary roadmaps towards achieving the Union’s climate neutrality objective by 2050. The Commission would monitor the development of such roadmaps, facilitate the dialogue at EU-level, and share best practices among relevant stakeholders.
The provisional agreement also sets an aspirational goal for the EU to strive to achieve negative emissions after 2050.
The provisional political agreement is subject to approval by the Council and Parliament, before going through the formal steps of the adoption procedure. The provisional agreement was reached by the Council’s Portuguese Presidency and the European Parliament’s representatives, based on mandates from their respective institutions.
The text of the agreement will follow.
Background
The European Council, in its conclusions of 12 December 2019, agreed on the objective of achieving a climate-neutral EU by 2050, in line with the objectives of the Paris Agreement, while also recognising that it is necessary to put in place an enabling framework that benefits all member states and encompasses adequate instruments, incentives, support and investments to ensure a cost-efficient, just, as well as socially balanced and fair transition, taking into account different national circumstances in terms of starting points.
On 4 March 2020, the European Commission adopted its proposal for a European climate law, as an important part of the European Green Deal. On 17 September 2020, the Commission adopted a proposal amending its initial proposal to include a revised EU emissions reduction target of at least 55% by 2030. The Commission also published a communication on the 2030 climate target plan, accompanied by a comprehensive impact assessment.
On 10-11 December the European Council in its conclusions, endorsed a binding EU target of a net domestic reduction of at least 55% in greenhouse gas emissions by 2030 compared to 1990.
The Council adopted a general approach on 17 December 2020, after which the Council and the Parliament launched a series of trilogue meetings with the aim of securing an agreement on the final text.
Compliments of the Council of the European Union.
The post European climate law: Council and Parliament reach provisional agreement first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Testimony by Mark Van Der Weide, General Counsel before the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, Committee on Financial Services, U.S. House of Representatives, Washington, D.C. |
Chairman Sherman, Ranking Member Huizenga, and members of the subcommittee, thank you for the opportunity to appear today. My testimony will discuss the importance of ensuring a smooth, transparent, and fair transition away from LIBOR (formerly known as the London interbank offered rate) to more durable replacement rates, as well as some of the challenges posed by this transition. Before I delve into those issues, however, it may be helpful to review how LIBOR is used and why it will be discontinued.
LIBOR measures the average interest rate at which large banks can borrow in wholesale funding markets for different periods of time, ranging from overnight to one month, three months, and beyond. LIBOR is an unsecured rate that measures interest rates for borrowings that are made without collateral. Over the past few decades, LIBOR became a benchmark rate used to set interest rates for commercial loans, mortgages, derivatives, and many other products. In total, U.S. dollar LIBOR is used in more than $200 trillion of financial contracts worldwide.
By now the flaws of LIBOR are well documented.1 One of the fundamental problems is that LIBOR purported to be a representation of the actual funding costs of large banks in the London interbank market, but the evolution of that market over the years meant that, for many tenors, banks were estimating the likely cost of such funding rather than reporting the actual cost. This increasing element of subjectivity and discretion, coupled with the mechanisms that had been adopted to aggregate various banks’ inputs into the determination of LIBOR, made the rate vulnerable to collusion and manipulation. Particularly after the global financial crisis of 2008, as banks sharply reduced their reliance on wholesale unsecured funding, there were few actual funding transactions on which to base a rate for many tenors of LIBOR.
While banks are, of course, not required to price their credit as a direct function of their cost of funding or on any amalgam of actual transaction data, the LIBOR mechanism—by purporting to be a measure of such costs even though there were not sufficient transactions to justify that perception—had become potentially misleading to many of those relying on it for credit pricing and other decisions. Over time, with a large number of contracts referencing a thinly traded rate, the incentive to manipulate LIBOR grew and actual manipulation of LIBOR abounded.
Following the exposure of these weaknesses, and the imposition of material legal penalties on a number of banks and individuals that engaged in misconduct related to the setting of LIBOR rates, the great majority of the banks that had provided submissions to be used in the setting of LIBOR (the so-called panel banks) determined that they would not continue participating in the process. This was not the result of a regulatory or legal requirement to end LIBOR. It was a private sector decision to stop providing what had always been a completely voluntary service, given the firms’ assessment of the costs and benefits of doing so. While regulators are appropriately focusing on whether financial firms have prepared themselves for the date when the panel banks have said they will no longer provide LIBOR, the decision to end LIBOR itself has not been a governmental decision, but a private sector development.
Last month, LIBOR’s regulator in the United Kingdom announced that the one-week and two-month U.S. dollar LIBOR term rates will cease to be published at the end of 2021, while overnight and other LIBOR term rates will cease to be published on a representative basis in mid-2023.2 This definitive announcement about the end of panel-based LIBOR underscores the importance of transitioning away from this moribund benchmark rate.
Efforts to Transition Away from LIBOR
Market participants, regulatory agencies, consumer groups, and other stakeholders have put in a great deal of work to prepare for life after LIBOR. Beginning in 2013, the domestic Financial Stability Oversight Council and the international Financial Stability Board expressed concern that the decline in unsecured short-term funding by banks could pose serious structural risks for unsecured benchmarks like LIBOR.3 To mitigate these risks and promote a smooth transition away from LIBOR, the Federal Reserve convened the Alternative Reference Rates Committee (ARRC) in November 2014. Recognizing that the private sector must drive this transition, the ARRC’s voting members are private-sector firms. The Federal Reserve and the other agencies testifying today are ex-officio members of the ARRC.
The ARRC set about to identify alternative reference rates that were rooted in transactions from an active and robust underlying market. In June 2017, the ARRC identified the Secured Overnight Financing Rate (SOFR) as its recommended alternative to U.S. dollar LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight, collateralized by Treasury securities. The Federal Reserve Bank of New York publishes SOFR each morning. Unlike LIBOR, SOFR is based on a market with a high volume of underlying transactions—regularly around $1 trillion daily. The ARRC developed a multi-step plan in October 2017 to facilitate the transition from LIBOR to SOFR.
The Federal Reserve and other agencies also sponsored a series of workshops with lenders and borrowers that focused on the use of credit-sensitive alternative reference rates for loans. Relatedly, the Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) issued a statement last year to emphasize that a bank may use any reference rate for its loans that the bank determines to be appropriate for its funding model and customer needs.4 The statement also noted, however, that a bank’s loan contracts should include robust fallback language that provides for a clearly defined alternative reference rate to be used if the initial reference rate is discontinued.
Supervisory Efforts
Beginning in 2018, Federal Reserve staff began outreach to supervised institutions and examiners to raise awareness about, and encourage preparation for, the transition away from LIBOR. In 2019, we established a LIBOR Transition Working Group to coordinate monitoring of the transition and develop supervisory plans to assess banks’ preparation efforts.
In November 2020, the Federal Reserve, OCC, and FDIC sent a letter to the banking organizations that we regulate, noting that there are safety and soundness risks associated with the continued use of U.S. dollar LIBOR in new transactions after 2021.5 Accordingly, we have encouraged supervised entities to stop using LIBOR in new contracts as soon as practicable and, in any event, by the end of this year. Federal Reserve Vice Chair for Supervision Randal Quarles emphasized in a recent speech that banking firms should be aware of the intense supervisory focus the Federal Reserve is placing on the LIBOR transition, and especially on plans to end issuance of new LIBOR contracts by year-end.6
Legacy Contracts
A key question is whether existing LIBOR-based contracts (legacy contracts) can seamlessly transition to alternative reference rates when LIBOR ends. The ARRC recently estimated that 35 percent of legacy contracts will not mature before mid-2023. Some of these legacy contracts have workable fallback language to address the end of LIBOR, but others do not. For example, most business loans have workable fallback language—by their terms, business loans generally fall back to an alternative floating rate, such as the prime rate. Similarly, most derivatives are governed by a master agreement published by the International Swaps and Derivatives Association (ISDA), and ISDA has published a “protocol” that allows derivative counterparties to amend their master agreements, on a multilateral basis, so that their derivative contracts fall back to a floating SOFR-based rate for counterparties that adhere to the protocol. Conversely, many floating-rate notes and securitizations have problematic fallback language—generally, these contracts convert to fixed-rate instruments at the last published value of LIBOR. Moreover, the rate terms in floating-rate notes and securitizations can typically be changed only with the unanimous consent of all noteholders, which typically would be difficult to secure.
The end of LIBOR may result in significant litigation. For example, if a legacy contract converts to a fixed rate when LIBOR ends, a party disadvantaged by that conversion might request that a court reform the contract by substituting an alternative floating rate for LIBOR.7 Parties also might request that a court reform or void a legacy contract that lacks any fallback language if the parties cannot agree bilaterally on a successor rate.8 Similarly, in instances where a legacy contract allows a person to select a replacement rate when LIBOR ends, a party disadvantaged by the replacement rate might argue that the manner in which another person—for example, a bond trustee—selected the replacement rate violates the implied covenant of good faith and fair dealing.9
Chair Powell and Vice Chair Quarles have publicly stated their support for federal legislation to mitigate risks related to legacy contracts. Federal legislation would establish a clear and uniform framework, on a nationwide basis, for replacing LIBOR in legacy contracts that do not provide for an appropriate fallback rate.10 Federal legislation should be targeted narrowly to address legacy contracts that have no fallback language, that have fallback language referring to LIBOR or to a poll of banks, or that convert to fixed-rate instruments. Federal legislation should not affect legacy contracts with fallbacks to another floating rate, nor should federal legislation dictate that market participants must use any particular benchmark rate in future contracts. Finally, to avoid conflict of laws problems, federal legislation should pre-empt any outstanding state legislation on legacy LIBOR contracts.
Thank you. I look forward to your questions on this important matter.
Compliments of the U.S. Federal Reserve Board.
The post Testimony | The End of LIBOR: Transitioning to an Alternative Interest Rate Calculation for Mortgages, Student Loans, Business Borrowing, and Other Financial Products first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by Vice Chair Richard H. Clarida at “SOMC: The Federal Reserve’s New Policy Framework” a forum sponsored by the Manhattan Institute’s Shadow Open Market Committee, New York, New York (via webcast) |
On August 27, the Federal Open Market Committee (FOMC) unanimously approved a revised Statement on Longer-Run Goals and Monetary Policy Strategy, and, at its September and December FOMC meetings, the Committee made material changes to its forward guidance to bring it into line with this new policy framework.1 Before I discuss the new framework and the policy implications that flow from it, I will first review some important changes in the U.S. economy that motivated the Committee to assess ways we could refine our strategy, tools, and communication practices to achieve and sustain our goals in the economy in which we operate today and for the foreseeable future.2
Shifting Stars and the End of “Copacetic Coincidence”
Perhaps the most significant change in our understanding of the economy since the Federal Reserve formally adopted inflation targeting in 2012 has been the substantial decline in estimates of the neutral real interest rate, r*, that, over the longer run, is consistent with our maximum-employment and price-stability mandates. Whereas in January 2012 the median FOMC participant projected a longer-run r* of 2.25 percent and a neutral nominal policy rate of 4.25 percent, as of March 2021, the median FOMC participant projected a longer-run r* equal to just 0.5 percent, which implies a neutral setting for the federal funds rate of 2.5 percent.3 Moreover, as is well appreciated, the decline in neutral policy rates since the Global Financial Crisis (GFC) is a global phenomenon that is widely expected by forecasters and financial markets to persist for years to come (Clarida, 2019).
The substantial decline in the neutral policy rate since 2012 has critical implications for monetary policy because it leaves the FOMC with less conventional policy space to cut rates to offset adverse shocks to aggregate demand. This development, in turn, makes it more likely that recessions will impart elevated risks of more persistent downward pressure on inflation and inflation expectations as well as upward pressure on unemployment that the Federal Reserve’s monetary policy should—in design and implementation—seek to offset throughout the business cycle and not just in downturns themselves.
With regard to inflation expectations, there is broad agreement that achieving price stability on a sustainable basis requires that long-run inflation expectations be well anchored at the rate of inflation consistent with the price-stability goal. The pre-GFC academic literature (Clarida, Galí, and Gertler, 1999; Woodford, 2003) derived the important result that a credible inflation-targeting monetary policy strategy that is not constrained by the effective lower bound (ELB) can deliver, under either rational expectations or linear least-squares learning (Bullard and Mitra, 2002), inflation expectations that themselves are well anchored at the inflation target. In other words, absent a binding ELB constraint, a policy that targets actual inflation in these models delivers long-run inflation expectations well anchored at the target “for free.” And, indeed, in the 15 years before December 2008, when the federal funds rate first hit the ELB—a period when, de facto, if not de jure the Federal Reserve conducted a monetary policy that was interpreted to be targeting an inflation rate of 2 percent (Clarida, Galí, and Gertler, 2000)—personal consumption expenditures (PCE) inflation averaged very close to 2 percent (see figure 1).
But this “copacetic coincidence” no longer holds in a world of low r* in which adverse aggregate demand shocks drive the economy in downturns to the ELB. In this case, economic analysis indicates that flexible inflation-targeting monetary policy cannot be relied on to deliver inflation expectations that are anchored at the target but instead will tend to deliver inflation expectations that, in each business cycle, become anchored at a level below the target (Mishkin, 2016). This finding is the crucial insight in my colleague John Williams’s research with Thomas Mertens (2019) and in the research of Bernanke, Kiley, and Roberts (2019). This downward bias in inflation expectations under inflation targeting in an ELB world can in turn reduce already scarce policy space—because nominal interest rates reflect both real rates and expected inflation—and it can open up the risk of the downward spiral in both actual and expected inflation that has been observed in some other major economies.
Two other, related developments that have also become more evident than they appeared in 2012 are that price inflation seems empirically to be less responsive to resource slack, and that estimates of resource slack based on historically estimated price Phillips curve relationships are less reliable and subject to more material revision than was once commonly believed. For example, in the face of declining unemployment rates that did not result in excessive cost-push pressure to price inflation, the median of the Committee’s projections of u*—the rate of unemployment consistent in the longer run with the 2 percent inflation objective—has been repeatedly revised lower, from 5.5 percent in January 2012 to 4 percent as of the March 2021 Summary of Economic Projections (SEP). In the past several years of the previous expansion, declines in the unemployment rate occurred in tandem with a notable and, to me, welcome increase in real wages that was accompanied by an increase in labor’s share of national income, but not a surge in price inflation to a pace inconsistent with our price-stability mandate and well-anchored inflation expectations. Indeed, this pattern of mid-cycle declines in unemployment coincident with noninflationary increases in real wages and labor’s share has been evident in the U.S. data since the 1990s (Clarida, 2016; Heise, Karahan, and Sahin, 2020; Feroli, Silver, and Edgerton, 2021).
The New Framework and Price Stability
I will now discuss the implications of the new framework for the Federal Reserve’s price-stability mandate before turning to its implications for the maximum-employment mandate. Five features of the new framework and fall 2020 FOMC statements define how the Committee will seek to achieve its price-stability mandate over time.
First, the Committee expects to delay liftoff from the ELB until PCE inflation has risen to 2 percent and other complementary conditions, consistent with achieving this goal on a sustained basis, have also been met.4
Second, with inflation having run persistently below 2 percent, the Committee will aim to achieve inflation moderately above 2 percent for some time in the service of keeping longer-term inflation expectations well anchored at the 2 percent longer-run goal.5
Third, the Committee expects that appropriate monetary policy will remain accommodative for some time after the conditions to commence policy normalization have been met.6
Fourth, policy will aim over time to return inflation to its longer-run goal, which remains 2 percent, but not below, once the conditions to commence policy normalization have been met.7
Fifth, inflation that averages 2 percent over time represents an ex ante aspiration of the FOMC but not a time inconsistent ex post commitment.8
As I highlighted in speeches at the Brookings Institution in November and the Hoover Institution in January, I believe that a useful way to summarize the framework defined by these five features is temporary price-level targeting (TPLT, at the ELB) that reverts to flexible inflation targeting (once the conditions for liftoff have been reached).9 Just such a framework has been analyzed by Bernanke, Kiley, and Roberts (2019) and Bernanke (2020), who in turn build on earlier work by Evans (2012), Reifschneider and Williams (2000), and Eggertsson and Woodford (2003), among many others.
A policy that delays liftoff from the ELB until a threshold for average inflation has been reached is one element of a TPLT strategy. Starting with our September FOMC statement, we communicated that inflation reaching 2 percent is a necessary condition for liftoff from the ELB. TPLT with such a one-year memory has been studied by Bernanke, Kiley, and Roberts (2019). The FOMC also indicated in these statements that the Committee expects to delay liftoff until inflation is “on track to moderately exceed 2 percent for some time.” What “moderately” and “for some time” mean will depend on the initial conditions at liftoff (just as they do under other versions of TPLT), and the Committee’s judgment on the projected duration and magnitude of the deviation from the 2 percent inflation goal will be communicated in the quarterly SEP for inflation.
Our new framework is asymmetric. That is, as in the TPLT studies cited earlier, the goal of monetary policy after lifting off from the ELB is to return inflation to its 2 percent longer-run goal, but not to push inflation below 2 percent. In the case of the Federal Reserve, we have highlighted that making sure that inflation expectations remain anchored at our 2 percent objective is just such a consideration. Speaking for myself, I follow closely the Fed staff’s index of common inflation expectations (CIE)—which is now updated quarterly on the Board’s website—as a relevant indicator that this goal is being met (see figure 2).10 Other things being equal, my desired pace of policy normalization post liftoff to return inflation to 2 percent would be somewhat slower than otherwise if the CIE index at the time of liftoff is below the pre-ELB level.
Our framework aims ex ante for inflation to average 2 percent over time but does not make a commitment to achieve ex post inflation outcomes that average 2 percent under any and all circumstances. The same is true for the TPLT studies I cited earlier. In these studies, the only way in which average inflation enters the policy rule is through the timing of liftoff itself. Yet in stochastic simulations of the FRB/US model under TPLT with a one-year memory that reverts to flexible inflation targeting after liftoff, inflation does average very close to 2 percent (see the table). The model of Mertens and Williams (2019) delivers a similar outcome: Even though the policy reaction function in their model does not incorporate an ex post makeup element, it delivers a long-run (unconditional) average rate of inflation equal to target by aiming for a moderate inflation overshoot away from the ELB that is calibrated to offset the inflation shortfall caused by the ELB.
The New Framework and Maximum Employment
I turn now to the maximum-employment mandate. An important evolution in our new framework is that the Committee now defines maximum employment as the highest level of employment that does not generate sustained pressures that put the price-stability mandate at risk.11 As a practical matter, this means to me that when the unemployment rate is elevated relative to my SEP projection of its long-run natural level, monetary policy should, as before, continue to be calibrated to eliminate such employment shortfalls, so long as doing so does not put the price-stability mandate at risk. Indeed, in our September and subsequent FOMC statements, we indicated that we expect it will be appropriate to keep the federal funds rate in the current 0 to 25 basis point target range until inflation has reached 2 percent (on an annual basis) and labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment. Moreover, in our December and subsequent FOMC statements, we have indicated that we expect to continue our Treasury and MBS purchases at least at the current pace until we have made substantial further progress toward achieving these dual mandate goals. In our new framework, when in a business cycle expansion labor market indicators return to a range that in the Committee’s judgment is broadly consistent with its maximum-employment mandate, it will be data on inflation itself that policy will react to, but, going forward, policy will not tighten solely because the unemployment rate has fallen below any particular econometric estimate of its long-run natural level. Of note, the relevance of uncertainty about the natural rate of unemployment or the output gap for monetary policy reaction functions is a long-studied topic that remains important.12 For example, Berge (2020) provides a discussion around the difficult task of estimating the output gap (see figure 3).
These considerations have an important implication for the Taylor-type policy reaction function I consult. Consistent with our new framework, the relevant policy rule benchmark I will consult once the conditions for liftoff have been met is an inertial Taylor-type rule with a coefficient of zero on the unemployment gap, a coefficient of 1.5 on the gap between core PCE inflation and the 2 percent longer-run goal, and a neutral real policy rate equal to my SEP projection of long-run r*.13 The most recent Monetary Policy Report features a box on policy rules, including a Taylor-type “shortfalls” rule in which the federal funds rate reacts only to shortfalls of employment from the Committee’s best judgment of its maximum level but reverts to the rule previously described once that level of employment is reached (see figure 4).14
Concluding Remarks
In closing, I think of our new flexible average inflation-targeting framework as a combination of TPLT at the ELB, to which TPLT reverts once the conditions to commence policy normalization articulated in our most recent FOMC statement have been met. In this sense, our new framework indeed represents an evolution, not a revolution, from the flexible inflation-targeting framework in place since 2012. Thank you very much for your time and attention, and I look forward to my conversation with Peter Ireland and Athanasios Orphanides.
Compliments of the U.S. Federal Reserve.
The post Speech | The Federal Reserve’s New Framework and Outcome-Based Forward Guidance first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Commission has concluded that Polish measures to support the restructuring of Polish Regional Railways, the nationwide operator of regional passenger rail transport in Poland, are in line with EU state aid rules.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Our investigation showed that the Polish restructuring aid measures in favour of Polish Regional Railways were necessary and proportionate to ensure that the company could continue operating. This avoided serious disruptions in the provision of regional passenger rail transport and ensured connectivity in Poland. At the same time, the possible negative effects on competition brought about by the public intervention will be limited by Poland’s commitment to accelerate the opening of the Polish regional passenger rail transport sector to competition.”
Polish Regional Railways (Przewozy Regionalne) is the largest passenger regional rail operator in Poland and the sole provider of public passenger rail transport in 7 out of 16 regions. The company, which is majority owned by the State-owned Industrial Development Agency, has been experiencing financial difficulties.
In January 2018, the Commission opened a formal investigation to assess whether certain aid measures in favor of Polish Regional Railways were in line with EU State aid rules.
The Commission’s investigation covered a restructuring aid measure for an amount of PLN 770 million (around €181 million), notified by Poland to the Commission in 2015, as well as other State aid measures granted to the company in the context of the same overall restructuring prior to 2015, namely:

Aid to cover past losses for an overall amount of PLN 2,403 million (around €565 million);
A debt restructuring agreement between the company and the Polish rail infrastructure manager, PKP PLK, providing for the restructuring of liabilities towards the State-owned PKP Group companies, in the amount of PLN 1,902 million (around €448 million);
25 agreements between Polish Regional Railways and State-owned creditors providing for deferral of the company’s liabilities towards those creditors for the total amount of PLN 1,106.4 million (around €260 million);
Support in the form of training aid and recruitment aid granted in connection and for the same purpose (i.e. ensuring the continuous provision of regional passenger rail services) de minimis aid, overall exceeding the threshold for de minimis aid under EU rules.

The Commission assessed the restructuring measures under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU), which enables Member States to grant State aid to facilitate the development of certain economic activities or of certain economic areas, subject to certain conditions.
The Commission found that the measures were both proportionate and necessary to ensure the viability of Polish Regional Railways, and thus avoid the serious disturbance in the provision of an important service in Poland that the insolvency of the sole nationwide provider of regional passenger rail services would have caused.
In its assessment, the Commission took particularly into account the importance of a well-functioning regional railway service for the Polish population. In this respect, railway services are essential to ensure connectivity (such as enabling commuting). It also considered that the Polish regional passenger rail transport sector is, in certain respects, different from other economic sectors, in particular because it provides an important public service on a market that is generally underfinanced and not yet fully open to competition in Poland and at EU level.
Furthermore, the Fourth Railway Package establishes that Member States will have to terminate the practice of directly and unconditionally awarding public service contracts in the regional passenger rail transport sector by 25 December 2023. In addition, such directly awarded contracts may, in principle, have a length of maximum 10 years.
In order to limit the possible negative effects of the aid on competition, Poland committed to accelerate the shift away from this practice and to complete this process earlier than required by the Railway Package. Furthermore, Poland has committed to already start gradually opening the market via public tendering. In practice this is possible by not renewing certain existing contracts or by not making use of the maximum possible contract length, before the end date for directly awarding public service contracts.
On this basis, the Commission considered that the positive effects of the measure outweigh its possible negative effects on competition and approved the measures under EU State aid rules.
Background
Given the specificities of the Polish regional passenger rail transport sector, which is generally and structurally underfinanced, the Commission assessed the aid measures directly under Article 107 (3)(c) of the Treaty on the Functioning of the EU (TFEU), rather than under the Commission’s State aid Guidelines on rescuing and restructuring.
The non-confidential version of the decision will be made available under the case numbers SA.43127 in the State aid register on the Commission’s  competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-news.
Compliments of the European Commission.
The post State aid: EUCommission approves restructuring aid for Polish Regional Railways, as Poland commits to an accelerated opening to competition of regional passenger rail transport first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Current account recorded €26 billion surplus in February 2021, down from €35 billion in previous month

Current account surplus amounted to €259 billion (2.3% of euro area GDP) in 12 months to February 2021, down from €263 billion (2.2%) one year earlier
In financial account, euro area residents’ net acquisitions of foreign portfolio investment securities totalled €804 billion and non-residents’ net sales of euro area portfolio investment securities totalled €21 billion in 12 months to February 2021

Chart 1
Euro area current account balance
(EUR billions unless otherwise indicated; working day and seasonally adjusted data)
The current account of the euro area recorded a surplus of €26 billion in February 2021, decreasing by €9 billion from the previous month (see Chart 1 and Table 1). Surpluses were recorded for goods (€32 billion) and services (€11 billion). These were partly offset by deficits for secondary income (€16 billion) and primary income (€2 billion).

Table 1
Current account of the euro area
(EUR billions unless otherwise indicated; transactions; working day and seasonally adjusted data)
Source: ECB.
Note: Discrepancies between totals and their components may be due to rounding.

Data for the current account of the euro area
In the 12 months to February 2021, the current account recorded a surplus of €259 billion (2.3% of euro area GDP), compared with a surplus of €263 billion (2.2% of euro area GDP) in the 12 months to February 2020. This decline was driven by a reduction in the surplus for primary income (down from €48 billion to €18 billion) and an increase in the deficit for secondary income (up from €151 billion to €167 billion). These developments were partly offset by larger surpluses for services (up from €36 billion to €58 billion) and for goods (up from €330 billion to €350 billion).

Chart 2
Selected items of the euro area financial account
(EUR billions; 12-month cumulated data)
Source: ECB.
Notes: For assets, a positive (negative) number indicates net purchases (sales) of non-euro area instruments by euro area investors. For liabilities, a positive (negative) number indicates net sales (purchases) of euro area instruments by non-euro area investors.

In direct investment, euro area residents made net disinvestments of €16 billion in non-euro area assets in the 12-month period to February 2021, compared with net disinvestments of €10 billion in the 12 months to February 2020 (see Chart 2 and Table 2). Non-residents’ net investments in euro area assets increased to €168 billion in the 12-month period to February 2021, up from €107 billion in the 12 months to February 2020.
In portfolio investment, net purchases of foreign debt securities by euro area residents increased to €443 billion in the 12-month period to February 2021, following net purchases of €390 billion in the 12 months to February 2020. Over the same period, euro area residents’ net purchases of foreign equity increased to €361 billion from €81 billion in the 12 months to February 2020. Non-residents made net disposals of euro area debt securities amounting to €119 billion in the 12 months to February 2021, following net purchases of €230 billion in the 12 months to February 2020. Over the same period, non-residents’ net purchases of euro area equity decreased to €97 billion from €344 billion in the 12 months to February 2020.

Table 2
Financial account of the euro area
(EUR billions unless otherwise indicated; transactions; non-working day and non-seasonally adjusted data)
Source: ECB.
Notes: Decreases in assets and liabilities are shown with a minus sign. Net financial derivatives are reported under assets. “MFIs” stands for monetary financial institutions. Discrepancies between totals and their components may be due to rounding.

Data for the financial account of the euro area
In other investment, euro area residents recorded net disposals of foreign assets amounting to €63 billion in the 12 months to February 2021 (following net purchases of €549 billion in the 12 months to February 2020), while their net incurrence of liabilities increased to €255 billion from €187 billion.

Chart 3
Monetary presentation of the balance of payments
(EUR billions; 12-month cumulated data)
Source: ECB.
Notes: “MFI net external assets (enhanced)” incorporates an adjustment to the MFI net external assets (as reported in the consolidated MFI balance sheet items statistics) based on information on MFI long-term liabilities held by non-residents, available in b.o.p. statistics. B.o.p. transactions refer only to transactions of non-MFI residents of the euro area. Financial transactions are shown as liabilities net of assets. “Other” includes financial derivatives and statistical discrepancies.

The monetary presentation of the balance of payments (see Chart 3) shows that the net external assets (enhanced) of euro area MFIs decreased by €78 billion in the 12-month period to February 2021. This decrease was mainly driven by euro area non-MFIs’ net outflows in portfolio investment equity and portfolio investment debt. These developments were partly offset by the current and capital accounts surplus and, to a lesser extent, euro area non-MFIs’ net inflows in direct investment and other flows.
In February 2021 the Eurosystem’s stock of reserve assets decreased to €848.6 billion, down from €880.2 billion in the previous month (see Table 3). This decrease was driven by negative changes in the price of gold (€29.4 billion) and to a lesser extent by net disposals of assets (€1.6 billion).

Table 3
Reserve assets of the euro area
(EUR billions; amounts outstanding at the end of the period, flows during the period; non-working day and non-seasonally adjusted data)
Source: ECB.
Note: “Other reserve assets” comprises currency and deposits, securities, financial derivatives (net) and other claims. Discrepancies between totals and their components may be due to rounding.

Data for the reserve assets of the euro area
Data revisions
This press release incorporates revisions to the data for January 2021, which mainly affect direct investment. In addition, it includes revisions to the seasonally adjusted current account components from January 2008 onwards due to the incorporation of newly estimated seasonal and calendar factors. These latter revisions did not significantly alter the figures previously published.
Next releases:

Monthly balance of payments: 20 May 2021 (reference data up to March 2021)
Quarterly balance of payments and international investment position: 5 July 2021 (reference data up to the first quarter of 2021)

Notes

Current account data are always seasonally and working day-adjusted, unless otherwise indicated, whereas capital and financial account data are neither seasonally nor working day-adjusted.
Hyperlinks in this press release lead to data that may change with subsequent releases as a result of revisions.

Contacts:

Philippe Rispal | philippe.rispal[at]ecb.europa.eu, tel.: +49 69 1344 5482

Compliments of the European Central Bank.
The post ECB | Euro area monthly balance of payments: February 2021 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Executive Board of the Conference on the Future of Europe, comprising representatives from the European Parliament, the Council of the European Union and the European Commission, is launching the multilingual digital platform for the Conference on the Future of Europe inviting all EU citizens to contribute to shaping their own future and that of Europe as a whole. The platform is available in 24 languages, allowing citizens from across the Union to share and exchange their ideas and views through online events.
The Joint Presidency of the Conference welcomed the launch of the platform.
European Parliament President, David Sassoli, said: “The platform represents a key tool to allow citizens to participate and have a say on the Future of Europe. We must be certain that their voices will be heard and that they have a role in the decision-making, regardless of the COVID-19 pandemic. European democracy, of the representative and participatory kind, will continue to function no matter what, because our shared future demands it.”
Prime Minister of Portugal António Costa, on behalf of the Presidency of the Council, said: “The time has come for our citizens to actively share their greatest concerns and their ideas. This discussion couldn’t happen at a more relevant time. We have to prepare now, so that we come out of this crisis even stronger and when we overcome the pandemic we stand ready for the future. We hope to continue to build the Europe of the future together, a fairer, greener and more digital Europe that responds to our citizens’ expectations.”
European Commission President, Ursula von der Leyen, said: “Health, climate change, good and sustainable jobs in a more and more digital economy, the state of our democratic societies: We are inviting Europeans to speak up, to address their concerns and tell us what Europe they want to live in. With this citizens’ platform, we are giving everyone the opportunity to contribute to shaping the future of Europe and engage with other people from across Europe. This is a great opportunity to bring Europeans together virtually. Join the debate! Together, we can build the future we want for our Union.”
The Conference on the Future of Europe is an unprecedented, open and inclusive exercise in deliberative democracy. It seeks to give people from all walks of life, across Europe, a greater say on what they expect from the European Union, which should then help guide the EU’s future direction and policymaking. The Joint Presidency has committed to follow up on the outcome of the Conference.
Background
The multilingual digital platform is fully interactive and multilingual: people can engage with one another and discuss their proposals with fellow citizens from all Member States, in the EU’s 24 official languages. People from all walks of life and in numbers as large as possible are encouraged to contribute via the platform in shaping their future, but also to promote it on social media channels, with the hashtag #TheFutureIsYours
The platform will ensure full transparency – a key principle of the Conference – as all submissions and event outcomes will be collected, analysed, monitored, and made publicly available. The key ideas and recommendations from the platform will be used as input for the European citizens’ panels and the Plenaries, where they will be debated to produce the Conference’s conclusions.
All Conference-related events that will be registered on the platform will be visualised on an interactive map, enabling citizens to browse and sign up online. Organisers can use the toolkit available on the platform to help organise and promote their initiatives. All participants and events must respect the Charter of the Conference on the Future of Europe, which lays down standards for a respectful pan-European debate.
The platform is organised around key topics: climate change and the environment; health; a stronger and fairer economy; social justice and jobs; EU in the world; values and rights, rule of law, security; digital transformation; European democracy; migration; and education, culture, youth and sport. These topics are complemented by an ‘open box’ for cross-cutting and other topics (‘other ideas’), as citizens remain free to raise any issue that matters to them, in a truly bottom-up approach.
The platform also provides information on the Conference’s structure and work. It is open to all EU citizens, as well as EU institutions and bodies, national Parliaments, national and local authorities and civil society. It will fully respect users’ privacy, and EU data protection rules.
Compliments of the European Commission.
The post Conference on the Future of Europe: launch of the multilingual digital platform first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Committee of the Regions and the European Commission’s Joint Research Centre organized a joint online workshop on 15 April to underline the role of regional Smart Specialisation Strategies as a cornerstone of EU policies, from the post-pandemic recovery plans to the delivery of the European Green Deal, digital transition and the Sustainable Development Goals.
Smart Specialisation is an essential part of EU’s cohesion policy: a place-based approach characterised by the identification of the strengths and assets of each region and on an Entrepreneurial Discovery Process with wide stakeholder involvement.
Elisa Ferreira, Commissioner for Cohesion and Reforms, underlined in her speech the close link between growth and R&I and emphasized that the EU’s cohesion policy and smart specialisation are key tools to tackle Europe’s innovation divide and avoid a “K shaped” recovery, where some regions recover fast and others risk stagnating or falling behind.
“Over the 2014-2020 programming period, more than €65 billion of cohesion policy funds were invested in R&I. While the new programmes are still in preparation, it is likely that at least half of new cohesion policy investment will target smart and green projects. Innovation is place-based and smart specialisation strategies help regions build their capacities around their assets. We are aiming to further strengthen links between our investments and smart specialisation strategies, to improve synergies with Horizon Europe and to simplify procedures”, Commissioner Ferreira said.
This view was shared by the representative from Commissioner Mariya Gabriel’s cabinet, who underlined that “smart specialisation will continue playing a major role supporting research and innovation to ensure sustainable and resilient development of all regions in Europe over the next programming period 2021-2027. In the light of the challenges posed by the COVID-19 pandemic, this helps consolidating a sustainable, smart and inclusive Europe”.
Apostolos Tzitzikostas, President of the European Committee of the Regions, stated that “overcoming the crisis triggered by the pandemic requires unprecedented cooperation and innovation capacities. Building efficient partnerships to deliver inclusive innovation processes is the essence of Smart Specialisation. This is why in the current scenario, Smart Specialisation is not a luxury or a best practice, but a powerful method to mobilise available investment.”
Bernard Magenhann, Deputy Director General of the European Commission’s Joint Research Centre, spoke about the concept of S4 – Smart Specialisation Strategy for Sustainability and inclusiveness – “an innovation-driven policy for competitive sustainability leaving no place and no one behind. It builds on the Smart Specialisation approach that we have developed over the past years, adapting it to the new context.”
SEDEC chair Anne Karjalainen (FI/PES), Member of Kerava City Council, underlined that “Smart Specialisation Strategies empower regions and cities to take responsibility for their own development potential, including the attainment of the Sustainable Development Goals, and to effectively build much-needed social resilience at local and regional level.”
Mayor of Seville Juan Espadas (ES/PES), who chairs the CoR’s ENVE Commission and the Green Deal Working Group, concluded that “Smart specialisation is an excellent tool to assist policy-makers in guiding the resources to the projects offering the best opportunities for jobs and growth in the post-pandemic recovery. Strategies must be oriented towards sustainable development to improve citizens’ quality of life, for instance through new models for energy and mobility at local and regional level. In this regard, the Joint Research Centre, which has one of its seats in Seville, is doing an important work to reach out to every corner of Europe and provide information about all available tools.”
Watch the recording of the event (agenda)
Compliments of the European Committee of the Regions.
The post Smart specialisation strategies are a cornerstone of EU’s sustainable recovery first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.