04 Jul
EACC

MEPs elect David Sassoli as Parliament President

Italian S&D member David Sassoli was elected as European Parliament president on 3 July following two rounds of voting.

Sassoli, 63, received 345 votes out of 667 votes cast in the second ballot. He is a former TV journalist and has been an MEP since 2009.

In his statement before the start of the election procedure, Sassolis spoke of Parliament’s responsability towards all the new voters that took part in the last European elections in May: “They have given us a mandate, because they believe in our institution, they believe in democracy and in free elections. We must not disappoint them.”

“Throughout this coming legislature, we have to be in the vanguard, we have to be leading the necessary, and indeed vital, changes to make Europe stronger and modernise it,” he added.

Compliments of the European Parliament

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04 Jul
EACC

Parliament starts new term with seven political groups

As the new European Parliament meets for the first time 2 July, MEPs have formed seven political groups. Read on to find out more.

Ever since the results of the European elections have been in, newly-elected MEPs have been organising themselves into political groups, which bring together representatives from different EU countries based on their political affinities.

According to Parliament rules, a political group must be composed of at least 25 MEPs from at least one-quarter of member states (at the moment that would mean from at least seven countries). MEPs can belong to only one political group, but may choose not to belong to any; they are then called non-attached. Currently, 57 MEPs have opted not to join a political group.

Political groups can be formed at any time during the term. So far, seven have been recognised as fulfilling the necessary criteria.

Political groups enjoy certain advantages: they play an important role in setting the Parliament’s agenda, are allocated more speaking time during debates and are also allocated more office space, staff and  money. They also decide on the set up of parliamentary committees and delegations.

Below are the political groups in order of size as of 2 July 2019:

Political group Chair or co-chairs Number of members
Group of the European People’s Party (EPP) Manfred Weber (Germany). This is his fourth term as an MEP. He has been chairing the group since 2014. 182
Group of the Progressive Alliance of Socialists and Democrats in the European Parliament (S&D) Iratxe García (Spain). MEP since 2004.  

154

 
Renew Europe group Dacian Cioloș (Romania). This is his first term as MEP. He was agricultural commissioner in 2010-2014 and is a former prime minister. 108
Group of the Greens/European Free Alliance (Greens/EFA) Ska Keller (Germany) and Philippe Lamberts (Belgium). Keller has been an MEP since 2009 and became co-president of the group in 2016. Lamberts became an MEP in 2009 and co-president in 2014. 74
Identity and Democracy (ID) Marco Zanni (Italy). MEP since 2014. 73
European Conservatives and Reformists (ECR) Ryszard Legutko (Poland) and Raffaele Fitto (Italy). Legutko, an MEP since 2009, became co-chair in 2017. Fitto served as an MEP in 1999-2000 and again since 2014. 62
Confederal Group of the European United Left – Nordic Green Left (GUE/NGL) Martin Schirdewan (Germany) is the acting president until the group votes on a new chair. MEP since 2017. 41

Find out more about the political groups and their size in this and previous parliamentary terms on our elections results website.

Compliments of the European Parliament 
04 Jul
EACC

European Council appoints new EU leaders

The European Council elected today Charles Michel as President of the European Council. The President of the European Council is elected for the period from 1 December 2019 until 31 May 2022. The mandate of two and a half years of the President of the European Council is renewable once. The European Council also welcomed the decision of the Heads of State or Government of the Member States whose currency is the euro to appoint Charles Michel as President of the Euro Summit, for the same term of office.

The European Council adopted the decision proposing Ursula von der Leyen to the European Parliament as candidate for President of the European Commission. The proposed candidate will need to be elected by the European Parliament by a majority of its component members.

The European Council also considered Josep Borrell Fontelles to be the appropriate candidate for High Representative of the Union for Foreign Affairs and Security Policy. The formal appointment of the High Representative by the European Council requires the agreement of the President-elect of the Commission.

The President of the Commission, the High Representative and the other members of the Commission will be subject as a body to a vote of consent by the European Parliament, before the formal appointment by the European Council. Their term of office will last 5 years from the end of the current Commission until 31 October 2024.

The European Council also considered Christine Lagarde to be the appropriate candidate for President of the European Central Bank. The European Council will take a formal decision on the appointment on the basis of a Council recommendation, after having consulted the European Parliament and the ECB’s Governing Council. The mandate for the President of the European Central Bank is for 8 years non-renewable.

Compliments of the European Council

04 Jul
EACC

Constitution of the 9th legislature of the European Parliament

The 9th legislature of the European Parliament was officially constituted today, July 2nd, in Strasbourg at 10.00 by outgoing President Antonio Tajani.

The President of the European Parliament will be elected tomorrow morning at 9am. Nominations must be submitted by political groups or by 1/20th of members by 22:00 this evening. Eight tellers, drawn by lot, have been appointed to oversee the vote.

Following direct elections across 28 member states on 23 – 26 May, in which 51% of voters cast a ballot to choose their representatives, the new European Parliament was officially constituted today in Strasbourg. There is a higher percentage turnover than ever before (61% new MEPs) and a higher percentage of female MEPs than in the past (40%), compared to 37% in 2014.

The youngest MEP is Kira Marie Peter-Hansen from Denmark (21) and the oldest is Silvio Berlusconi from Italy (82).

The new parliament is composed of seven political groups – one less than the previous legislature. All MEPs who have not joined a political group are listed as non-aligned, but can decide at any stage to join a group. Since 2009, according to Parliament’s rules of procedure, a political group shall consist of at least 25 Members elected in at least seven member states.

Compliments of the European Parliament

04 Jul
EACC

G20 leaders united to address major global economic challenges

European Commission President Jean-Claude Juncker and European Council President Donald Tusk attended the 14th G20 Leaders’ summit hosted by Prime Minister Shinzō Abe in Osaka (Japan). President Juncker was accompanied by Commissioner Pierre Moscovici. 

On the second day of the Summit, at the joint press conference with the President of Argentina, Mauricio Macri in the presence of EU and Mercosur leaders and following the political agreement for a trade pact between the EU and Mercosur, President Juncker said: “This deal sends a real message in support of open, fair, sustainable and rules-based trade because trade creates good jobs for all concerned. It shows that in these turbulent moments, agreements can be reached. Mutually beneficial compromises can be found.  

This is a landmark agreement for a number of reasons. Firstly, its sheer size. The agreement reached today will create a free trade area covering 780 million people, bringing two continents closer together in a spirit of openness and cooperation.

The immediate benefits will be significant. The agreement will save European companies up to €4 billion in duties at the border. That is 4 times more than our agreement with Japan. It opens up new markets, for instance in public procurement, and breaks down non-tariff barriers. And it will give our companies a head start as it is the first such deal agreed by Mercosur.”

Following the two days Summit, leaders adopted the G20 Osaka Leaders’ Declaration to work together to foster global economic growth, while harnessing the power of technological innovation, in particular digitalisation, and its application for the benefit of all. 

On trade, leaders underlined their determination to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep markets open. International trade and investment are important engines of growth, productivity, innovation, job creation and development. They reaffirmed their support for the necessary reform of the World Trade Organization to improve its functions. Leaders notably agreed that action is necessary regarding the functioning of the dispute settlement system consistent with the rules as negotiated by World Trade Organization members. 

On global economy and finance, leaders reaffirmed their commitment to use all policy tools to achieve strong, sustainable, balanced and inclusive growth, and safeguard against downside risks, by stepping up dialogue and actions to enhance confidence.

On climate change, signatories to the Paris Agreement who confirmed at Buenos Aires its irreversibility and are determined to implement it, reaffirmed their commitment to its full implementation, reflecting common but differentiated responsibilities and respective capabilities, in the light of different national circumstances – while the United States reiterated its decision to withdraw from the Paris Agreement.

On terrorism, leaders reaffirmed their commitment “to act to protect our people from terrorist and violent extremism conducive to terrorism exploitation of the internet” and urged “online platforms to meet our citizens’ expectations that they must not allow use of their platforms to facilitate terrorism and violent extremism conducive to terrorism”. G20 leaders committed to continue working together to tackle this challenge — including by sharing their domestic experiences — in their countries and through international fora and initiatives. 

On anti-corruption, G20 leaders expressed their commitment to play a leading role in the global efforts to prevent and fight against corruption, as well as promoting integrity, by implementing the G20 Anti-Corruption Action Plan 2019-2021 while strengthening synergies among related international instruments and mechanisms.

On migration, leaders stressed that large movements of refugees are a global concern with humanitarian, political, social and economic consequences. They emphasized the importance of shared actions to address the root causes of displacement and to respond to growing humanitarian needs.

Compliments of the European Commission

26 May
EACC

SMEs are driving job growth, but need higher investment in skills, innovation and tech to boost wages and productivity

Small and medium-sized enterprises (SMEs) have been a significant driver of employment growth in recent years, mainly through the creation of new firms, including in high-growth sectors such as information and communication technologies (ICT). But the new OECD SME and Entrepreneurship Outlook highlights that most SME job creation has been in sectors with below average productivity levels, with SMEs typically paying employees around 20 percent less than large firms.

While SMEs are more engaged in new organisational or marketing practices than large firms, and sometimes more innovative in developing new products and processes, many continue to struggle disproportionately to navigate the increasing complexity in technologies and markets.

“We need a fundamental rethinking of SME and entrepreneurship policies to improve business conditions and access to resources. This will enable workers to have higher wages and greater productivity, as smaller employers harness major trends like digitalisation,” said OECD Secretary-General Angel Gurría, launching the report at the annual OECD Forum. “We need a renewed policy and measurement agenda to understand how countries, regions and cities can capitalise on their many diverse small businesses as drivers for inclusive and sustainable growth.”

Bringing together unique data and evidence on SME performance and policies, this first edition of the OECD SME and Entrepreneurship Outlook offers policymakers new benchmarking tools and insights on good practices to help frame national SME and entrepreneurship policies. The report illustrates that SMEs are more dependent on the business ecosystem and the policy environment than large companies, and identifies a number of key challenges:

  • While the wage gap is smaller for exporting SMEs, trade barriers are disproportionately large, and recent trade tensions may further hamper their ability to benefit from globalisation.
  • SMEs struggle to combine different types of innovation, and continue to face size-related barriers in accessing strategic resources, such as skills, finance and knowledge. A quarter of SMEs in the EU reported a lack of skilled staff or experienced managers as their most important problem and, in most OECD countries, less than one-quarter of small firms provided ICT training in 2018.
  • The digital transformation provides scope for productivity growth but large adoption gaps exist compared to larger firms, with half as many small firms in the OECD investing in cloud computing services in 2016, for example.

Governments have been proactive in their efforts to improve framework conditions and address size-related barriers for SMEs. The 36 country profiles in the OECD SME and Entrepreneurship Outlook show that, in the OECD area, governments are focused on accelerating innovation diffusion to SMEs; ensuring SMEs keep pace with the digital transformation; engaging SMEs in upskilling; scaling-up innovation networks and MNE-SME linkages; and levelling the playing field in product markets, public procurement and ‘lead’ innovative markets. Small businesses are also benefiting from the strengthening of e-government services and from reforms undertaken in OECD countries aiming to lower administrative and tax burdens and enforce smart regulation.

Despite these efforts, the complexity of regulatory procedures remains a major obstacle for SMEs and entrepreneurs. Furthermore, the pace of structural reform has slowed in recent years and progress remains uneven in areas that are key for business creation and SME investment, such as insolvency regimes, civil justice and enforcement of competition laws.

The report argues for more efficient governance and more coherent arrangements across national and subnational levels, regions and cities. It also calls for fostering international peer learning and enhanced monitoring and evaluation capacity.

 

Compliments of the OECD

26 May
EACC

General Data Protection Regulation: one year on

On 25 May 2019, the General Data Protection Regulation will celebrate its first year of entry into application. To mark the occasion, Andrus Ansip, Vice-President for the Digital Single Market and Věra Jourová, Commissioner for Justice, Consumers and Gender Equality, issued the following statement:

“25 May marks the anniversary of Europe’s new data protection rules, the General Data Protection Regulation, also widely known as the GDPR. These game-changing rules have not only made Europe fit for the digital age, they have also become a global reference point.

The main aim of the rules has been to empower people and help them to gain more control over their personal data. This is already happening as people are starting to use their new rights and more than two-third of Europeans have heard of the regulation.

Also, companies now benefit from one set of rules applying throughout our Union. They have put their house in order when it comes to data, which led to increased data security and a trust-based relationship with their clients.

The GDPR gave authorities teeth to tackle breaches. For example, one year on, the newly established European Data Protection Board has registered over 400 cross-border cases around Europe. This is a testimony to the additional benefit of the GDPR, as data protection does not stop at national borders.

People are becoming more aware – and this is a very encouraging sign. New figures show that nearly six in ten people know that there is a data protection authority in their country. This is a significant increase from four in ten people back in 2015. The data protection authorities have an essential role to play in making GDPR deliver on the ground.

The new law has become Europe’s regulatory floor that shapes our response in many other areas. From Artificial Intelligence, development of 5G networks to integrity of our elections, strong data protection rules help to develop our policies and technologies based on people’s trust.

The principles of the GDPR are also radiating beyond Europe. From Chile to Japan, from Brazil to South Korea, from Argentina to Kenya, we are seeing new privacy laws emerge,

based on strong safeguards, enforceable individual rights, and independent supervisory authorities. Such upward convergence offers new opportunities to promote data flows based on trust and security.

The GDPR has changed the landscape in Europe and beyond. But compliance is a dynamic process and does not happen overnight. Our key priority for months to come is to ensure proper and equal implementation in the Member States. We urge the Member States to respect to the letter and the spirit of the GDPR in order to create a predictable environment and avoid unnecessary burden for stakeholders, in particular SMEs. We will also continue our close collaboration with the European Data Protection Board and national data protection authorities, as well as businesses and civil society to address the most burning questions and facilitate the implementation of the new rules.”

Background
The General Data Protection Regulation is a single set of rules with a common EU approach to the protection of personal data, directly applicable in the Member States. It reinforces trust by putting individuals back in control of their personal data and at the same time guarantees the free flow of personal data between EU Member States. The protection of personal data is a fundamental right in the European Union.

The GDPR has been applicable since 25 May 2018. Since then, nearly all Member States have adapted their national laws in the light of GDPR. The national Data Protection Authorities are in charge of enforcing the new rules and are better coordinating their actions thanks to the new cooperation mechanisms and the European Data Protection Board. They are issuing guidelines on key aspects of the GDPR to support the implementation of the new rules.

The Commission will take stock of one year of application of the GDPR in an event to be held on 13 June. As foreseen by the GDPR, the Commission will report on the application of the new rules in 2020.

Today, the first results of a special Eurobarometer on data protection, collecting the views of over 27,000 people across the EU will be released. The European Commission will release the full Eurobarometer results at the anniversary event on 13 June.

 

Compliments of the European Commission

26 May
EACC

Fairness in the food supply chain: Commission proposes to increase price transparency

Having banned unfair trading practices and improved producer cooperation, the Commission is today presenting the third element to improve fairness in the food supply chain by introducing greater transparency in the way prices are reported throughout the chain.

The European Commission today tabled a proposal that will make available crucial information on how prices are determined as agri-food products move along the food supply chain.

Buying and selling price differences can provide information about intermediary costs (such as transport, insurance, storage, etc.) between seller and buyer. Greater transparency can support better business decisions and improve trust in fair dealing between the stages in the food supply chain. Having access to timely and easily accessible information about market developments is also key to compete effectively in global markets.

Agriculture and rural development Commissioner Phil Hogan said: “Strengthening the position of farmers in the food supply chain has been a priority for the Commission. Enhancing market transparency will allow equal access to and greater clarity about price information, making our food chain fairer and better balanced. These new rules will complement the recently adopted directive banning unfair trading practices in empowering weaker and smaller actors of the food supply chain and their introduction reflects the very significant public support that there is throughout the EU to strengthen the role of farmer in the food supply chain.”

While there is a large amount of information available about developments in agricultural markets (prices, volumes of production, stocks, etc.), there is almost no market information about other key markets in the agri-food supply chain, namely those that operate between farmers and consumers at the food processing and the retail level. This asymmetry of information between farmers and the other actors in the food supply chain puts farmers at a significant disadvantage in the market and erodes trust in fair dealing. This lack of information on market developments from processors and retailers has been called the ‘black box’ of the agri-food supply chain and today’s proposal unlocks that box.

The proposed measures will cover the meat, eggs, dairy, fruit and vegetables, arable crops, sugar, and olive oil sectors. They build on existing data collection systems and procedures that are already in place and used by operators and Member States to report market information to the Commission, with a now wider scope. Each Member State will be responsible for the collection of price and market data. The Commission recommends that Member States choose the most cost-effective approach and do not target small and medium-sized enterprises to reduce the administrative burden. Member States will communicate the data to the Commission, who will in turn make the monitoring available on its agri-food data portal and EU market observatories. It is essential that the information provided by the Member States is accurate and timely.

According to the Commission’s Better Regulation procedures, the proposal is now published for a 4-weeks’ public consultation period. It will then be adopted by the European Commission and is planned to enter into force six months after its adoption.

Background
The Commission has been working towards a fairer and more balanced food supply chain since the beginning of its mandate.

In 2016, the Agricultural Markets Task Force (AMTF) was set up with the aim of assessing the role of farmers in the wider food supply chain and make recommendations on how it can be strengthened and improved.

Based on these recommendations, the Commission launched an inception impact as­sessment and a public consultation on the improvement of the food supply chain in 2017, both of which covered three elements: unfair trading practices, producer cooperation, and market transparency.

An EU-wide opinion poll published in February 2018 shows that a great majority of respondents (88%) considers that strengthening farmers’ role in the food supply chain is important. Confirming this trend, 96% of the respondents to the 2017 public consultation on the modernisation of the CAP agreed with the proposition that improving farmers’ position in the value chain should be an objective of the EU’s Common Agricultural Policy.

The Commission presented last year its proposal to ban unfair trading practices in the food supply chain, which was voted by co-legislators in April 2019. These new rules will ensure the protection of 100% of European farmers as well as small and mid-range suppliers against unfair trading practices in the food supply chain.

 

Compliments of the European Commission

26 May
EACC

Germany: Staff Concluding Statement of the 2019 Article IV Mission

May 17, 2019

A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

Germany’s economic fundamentals are sound, public and private balance sheets are healthy, unemployment is at a historical low, wages have finally accelerated, and the large current account surplus is slowly shrinking. However, a slowdown in global demand and other temporary setbacks hit the economy unexpectedly hard in the second half of last year, highlighting its vulnerability to external shocks, notably growing international trade tensions. From a longer-term perspective, Germany’s population is aging and its technological edge is being challenged, while lower incomes have remained stagnant and the energy transition is progressing only slowly. With euro area inflation still below the European Central Bank’s objective, long-term interest rates have fallen back near or below zero, putting additional pressure on banks and life insurance companies. Against this background, the team’s key policy recommendations are:

  • Continue to use the space within the fiscal rules to bolster long-term growth and help rebalance the economy. Priorities include lowering the burden of taxation on low-income households further while also reducing disincentives to work for secondary earners; expanding Research & Development credits for companies to speed up innovation; and continuing to invest in public infrastructure.
  • Facilitate the upgrading of the digital infrastructure, push ahead with the e-government project to reduce the bureaucratic burden of doing business, and reduce uncertainty related to the energy transition.
  • Encourage the banking sector to accelerate restructuring plans to bolster profitability and reduce risks. The life insurance sector should continue its adjustment to the low interest rate environment to improve resilience.
  • Activate macroprudential instruments to enhance banking sector resilience and guard against imbalances in the real estate sector. Urgently address data gaps to allow for a fuller assessment of financial stability risks.

Context and key challenges
1. Economic performance has been strong over the last decade, but its benefits have been unevenly shared. The sharp decline in structural unemployment has been an important success. However, as wage growth lagged behind, lower incomes stagnated, and a rising share of national income took the form of savings inside the corporate sector, particularly in family-owned and -managed firms. These trends, together with fiscal consolidation after 2011, fueled the rise in the current account surplus, which peaked at 8.5 percent of GDP in 2015.

2. More recently, imbalances started to slowly unwind as unemployment reached a post-reunification low. With the tight labor market, wage growth picked up, and the labor share in national income began to recover. The introduction of the national minimum wage in 2015 also bolstered wages for unskilled workers. The current account surplus began shrinking gradually and reached 7.3 percent of GDP in 2018.

3. The short-term outlook is still good, but the long expansion could come to a halt if the current slowdown is compounded by new shocks. Real GDP growth slowed sharply in the second half of 2018, reflecting a mixture of weak external demand and special circumstances, notably the slow rollout of new emission tests for cars. But the underlying momentum of domestic demand is still robust, driven by low unemployment, solid wage increases and investment, and supportive fiscal policy. We expect a gradual increase in output growth by the end of 2019 as external trade recovers. However, risks are significant, including further escalation of trade tensions, a more pronounced China slowdown, a disorderly Brexit, and renewed stress in the euro area.

4. Continued strong wage growth is key for the economy to continue to rebalance. Though the external surplus has come down from its peak, it remains well above the level consistent with fundamentals and is expected to remain so in the medium term. This contributes to global imbalances at a time when trade tensions threaten Germany’s export-dependent economy. Faster wage growth, which would be consistent with the very tight labor market, could help accelerate real exchange rate appreciation and speed up external rebalancing, while also ensuring that the benefits of growth are widely shared.

5. Unfavorable demographics, weak productivity growth, and the challenges of the energy transition will continue to weigh on long-term growth potential. Against the backdrop of a rapidly aging population, and on the heels of a long economic expansion, reported labor shortages are widespread. A new immigration law, which aims to attract skilled labor from outside of the European Union, could provide some relief. And there are still margins to expand domestic labor supply through increased participation by older workers, mothers, and refugees, but the aging labor force is expected to decline in the medium run. As in other advanced countries, Germany’s labor productivity growth has been declining over the last two decades. The decline is broad-based, including in the manufacturing sector, reflecting in part limited capital deepening. On the energy front, Germany is on track to meet its renewable energy target. But building the necessary internal electricity transmission capacity remains a challenge. At the same time, there is still uncertainty about how the ambitious goals to cut greenhouse gas emissions will be met.

6. Limited access to high-speed internet and obstacles for startups—especially at the growth stage—contribute to slow productivity growth and may erode Germany’s technological edge. Relatively low high-speed internet coverage prevents Germany from taking full advantage of the digital transformation. Only 2.5 percent of broad-band connections in Germany are fiber optic, more than 20 percentage points below the OECD average. Germany’s venture capital investment as a share of GDP was only 60 percent of the EU average in 2017.

Fiscal policy
7. Fiscal policy is set to turn expansionary in 2019. After recording the largest surplus since reunification (1.7 percent of GDP) last year, the 2019 budget includes a welcome increase in family support and further resources for needed public investment (which grew by almost 8 percent in nominal terms in 2018), as well as income tax relief in the form of a higher basic tax allowance and correction of bracket creep. The fiscal expansion measures amount to around 2/3 of a percent of GDP.

8. Beyond 2019, remaining space under the fiscal rules should be used to strengthen the economy’s growth potential. Including all of this year’s budget measures as well as additional measures in the coalition agreement, Germany’s fiscal position is expected to remain well within the limits imposed by the national and European fiscal rules, while the public debt ratio will continue to decline rapidly. These budgetary resources should be deployed from 2020 onwards to strengthen the economy by promoting innovation, expanding labor supply to counter population aging, and continuing to fill infrastructure gaps.

9. There is scope to reform the tax system to make it more growth friendly and inclusive. Additional tax relief for low-income households would, alongside continued wage growth, boost their disposable income and consumption, supporting rebalancing. In addition, reducing the high effective marginal tax rate for secondary earners could help promote full-time female labor force participation. Further expanding childcare and after-school programs would also be important in this regard. Budgetary room for these plans, if needed, could be created by reforming property and inheritance taxes.

10. Incentivizing targeted business investment would also help long-term growth. A generous R&D tax credit would support innovation and generate positive growth spillovers. The government’s new proposal of tax credits for R&D is welcome, but the total envelope could be usefully expanded. In the face of changes in the global international tax environment, Germany should maintain its position of leadership in implementing anti-tax avoidance measures and preserve the competitive corporate tax system while not engaging in damaging tax competition. There are, however, adjustments to various provisions—notably regarding controlled foreign corporations—which could be beneficial. Looking ahead, the minimum tax proposed by Germany and France is very welcome, but its modalities need to be developed further.

11. Raising investment in education and life-long learning can expand the quantity and quality of labor. Addressing teacher shortages—in vocational education, training, and primary education—is urgent. In addition, the education system needs to ensure that workers acquire the skills to adapt to rapid technological change. The integration of refugees is gaining momentum. Yet, continuing support to help refugees improve German language proficiency and gain experience in German labor market norms, as well as making selected qualifications transferrable could accelerate integration.

12. Continuing to address infrastructure gaps, particularly at the local government level (Länder and municipalities), will require rebuilding planning capacity and better coordination across levels of government. In the past, local governments prioritized fiscal consolidation at the expense of investment. More recently, budget surpluses have alleviated financial constraints in most localities, but capacity constraints and price pressures in the construction industry have emerged as new obstacles. Now is a good time for local governments to rebuild planning capacity. The ongoing reform of the federal fiscal relations and direct budget support from the federal government (for instance, through the Municipal Investment Promotion Fund and Digital Infrastructure Fund), as well as technical expertise (through Partnerschaft Deutschland) are steps in the right direction, but stronger coordination across various government levels is needed to ensure that larger and longer-term projects get under way.

Structural reforms
13. Initiatives to upgrade the digital infrastructure should be strengthened. The budget allocation of up to EUR 12 billion and the strategy to support a nationwide high-performance network through 2025 are welcome. However, progress in expanding the coverage of high-speed internet at the national level remains slow, possibly reflecting capacity constraints and insufficient incentives for private sector participation. Digitalization can also help reduce the administrative cost of doing business and improve the delivery of public services. The “National E-Government Strategy” should be implemented rapidly.

14. A more dynamic start-up environment can also raise productivity and growth. Investment in start-ups has been rising in recent years, also thanks to several government initiatives. But there is scope for further scaling up venture capital by attracting institutional investors and encouraging cross-border investment in the context of the EU-wide Capital Markets Union.

15. A clearer strategy for curbing greenhouse gas emissions would help reduce uncertainty about the energy transition. This should include measures to promote public transportation and sustainable mobility, as well as concrete plans to phase out coal-fired power production by 2038, as recommended by the Commission on Growth, Structural Change and Employment in January 2019 and decided by the government. The introduction of a carbon tax could be part of the solution.

Financial stability
16. Banks and life insurance companies should accelerate their restructuring to boost profitability and resilience. German banks appear to be well capitalized in risk-weighted terms and hold appropriate levels of liquidity, but profitability continues to be low in important parts of the banking sector while leverage is high among large banks compared to peers. Large banks tend to underperform European peers in market valuation, reflecting high costs and operating weakness, and in some cases provisions for compliance violations. The low interest rate environment puts pressure on already thin interest margins at small- and medium-sized banks. Restructuring must be accelerated in the banking sector through further consolidation, cost-cutting, and continued development of fee-based income. In the life insurance sector, low interest rates challenge the sector’s resilience, and the replacement of conventional guaranteed return products with other types of products needs to proceed faster. In this context, supervisors should continue monitoring interest rate risk and progress in implementing adjustment plans in both banking and insurance sectors.

17. Macro-financial vulnerabilities are building up. In recent years, low default rates have led to a substantial decline in risk provisions, and banks that rely on the internal ratings-based approach to calculate regulatory capital have reduced risk weights. Furthermore, there is evidence of various forms of “search-for-yield” behavior. Residential and commercial real estate (CRE) prices have continued to rise further. Although price increases have not been accompanied by strong credit growth at the aggregate level, the lack of granular data covering residential real estate loans hinders a full assessment of potential financial stability risks emanating from specific market segments and geographic locations.

18. To enhance resilience in the banking system and guard against potential imbalances in the real estate market, it is time to activate macroprudential instruments.

  • Gradually raise the counter-cyclical capital buffer, which would enhance resilience in the banking system without materially altering credit supply.
  • Urgently address data gaps to enable a fuller assessment of possible financial stability risks. The ongoing one-off bank survey on real estate lending and corporate credit underwriting standards is a step in the right direction, but regular collection of granular data is needed for effective macroprudential policy-making.
  • Consider an early implementation of the existing borrower-based measures (cap on the loan-to-value ratio and amortization requirements) on residential mortgage lending to prevent the buildup of vulnerabilities in the residential real estate sector.
  • Consider expanding the toolkit by introducing income-based instruments (e.g., cap on debt-service-to-income, cap on debt-to-income) residential loans and appropriate borrower-based measures for CRE loans.

Compliments of the IMF

26 May
EACC

European Elections 2019 Campaign Tracker

To help keep track of the European election campaigns, the European Parliament Press service provides a daily newsfeed on country-specific electoral facts, events and debates in all member states.  Here is the update for 24 May:

VOTING TODAY: Czechia and Ireland are going to the polls today, to elect 21 and 11 MEPs respectively. Tomorrow’s voters are Czechia for the second day, Latvia, Malta and Slovakia.

EUROPE. Lead candidates have travelled the continent to vote. Violeta Tomić (EL) voted early on Tuesday in Ljubljana, Frans Timmermans (PES) cast his vote on Thursday in a booth in Heerlen, the city of his former college, while Bas Eickhout (Greens) in Utrecht. On Sunday, Manfred Weber (EPP) votes in his hometown Landshut, Bavaria; Margrethe Verstager (ALDE) in Copenhagen, Ska Keller (Greens) in Berlin, and Jan Zahradil (ACRE) in Prague. Oriol Junqueras (EFA) casts his vote by mail.

BULGARIA. 525, professors, teachers, artists, researchers and journalists have written an open letter that urges citizens to be active, inform themselves and vote for candidates supporting European values. Published ahead of Bulgarian Education and Culture, and Slavonic Literature Day (24 May) and the European elections (26 May), the letter calls on citizens to firmly support the democratic principles and liberal values, as laid down in the EU Treaties.

CROATIA: Campaign silence kicks off at midnight 25 May and last until 26 May 19:00. State election commission DIP has warned political parties, candidates and media to abstain from any form of political campaigning or reporting on electoral campaigns in the blackout period. This includes publication of photos, statements or interviews of the participants in the elections or any projections of results. DIP also called on employers to organise their business process flexibly on Sunday, to enable their employees to take part in the elections.

FINLAND. YLE, Finland’s national public broadcasting company, has published an “election bot” to help young voters select their preferred candidate. The election bot is based on the data YLE’s general vote compass uses, but targets 18-29 year-old first time voters.

FRANCE, GERMANY. “Who will be your match for the next 5 years?” For those curious to know, in Germany and France, the matchmaking app Tinder is running an ad until Sunday) to help users find the best fit – as far as voting is concerned. When users swipe up, they are redirected to the #thistimeimvoting homepage.

IRELAND. Alongside European Parliament and local council elections, two other votes will take place in Ireland on 24 May. One will be a referendum on easing divorce legislation. The other vote will be a plebiscite in the cities of Cork, Limerick, and Waterford, consulting voters on the question of having directly-elected mayors.

ITALY. Italian football players present their priorities for the next European Parliament ahead of the EU elections. Assocalciatori, the Italian association representing professional footballers, in partnership with the European Parliament, will present a survey that asks for EU action on women’s inclusion in football, fight against doping and violent behaviour during sport competitions in Rome, today (24 May).

THE NETHERLANDS. The first polling station in the country that voted yesterday (23 May) opened at midnight at the train station in Castricum. In The Hague, people could cast their ballot on tram #9. Schiedam’s windmills were flying the European flag (see picture attached). Other polling stations could be found, amongst others, in churches, swimming pools, Lelystad airport, museums, restaurants and sport clubs.

ROMANIA. The Youth Federation in 200,000-strong Bacău, with a group of 50 dedicated high-school students and teachers, have been organising scores of meetings and events within their high-schools to inform their colleagues on the role of the EP and the importance of their vote. That’s how it started two months ago and this is what their journey looks like.

PORTUGAL. ‘We are 28’ is the title of the song recorded by the school class that won the EU’s Euroscola contest, about the importance of voting. The song urges citizens to vote in the European elections and expresses the wish that the UK remains as part of the EU.

SLOVAKIA. Business leaders in Slovakia released a video message on the benefits of the country’s membership in the EU. The “Businesses care about Europe” declaration calls for a globally competitive Europe, that defends democratic principles and the rule of law. It points out that Slovakia as an active EU member can be more relevant globally.

SLOVENIA. Early voting finished yesterday (23 May). According to National Electoral Commission data, on the first two days 20,408 people casted their vote (1.2 percent of the entire electorate). In 2014 European elections, 11,826 people voted in the same period (0.70% of the entire electorate). Several MEP-candidates and President of the Republic Borut Pahor casted their vote during early voting, the latter urging Slovenians to vote. The European Parliament office in Ljubljana encouraged fellow citizens to vote via a Twitter post.

 

Compliments of the European Parliament

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