The European Commission has today issued a recommendation to the Council to open negotiations on a new partnership with the United Kingdom.
This recommendation is based on the existing European Council guidelines and conclusions, as well as on the Political Declaration agreed between the EU and the United Kingdom in October 2019.
It includes a comprehensive proposal for negotiating directives, defining the scope and terms of the future partnership that the European Union envisages with the United Kingdom. These directives cover all areas of interest for the negotiations, including trade and economic cooperation, law enforcement and judicial cooperation in criminal matters, foreign policy, security and defence, participation in Union programmes and other thematic areas of cooperation. A dedicated chapter on governance provides an outline for an overall governance framework covering all areas of economic and security cooperation.
As EU negotiator, the Commission intends to continue work in close coordination with the Council and its preparatory bodies, as well as with the European Parliament, as was the case during the negotiations for the Withdrawal Agreement.
President of the European Commission Ursula von der Leyen said: “It’s now time to get down to work. Time is short. We will negotiate in a fair and transparent manner, but we will defend EU interests, and the interests of our citizens, right until the end.”
Michel Barnier,the European Commission’s Chief Negotiator,said: “We will negotiate in good faith. The Commission will continue working very closely with the European Parliament and the Council. Our task will be to defend and advance the interests of our citizens and of our Union, while trying to find solutions that respect the UK’s choices.”
Next steps
The Council will have to adopt the draft negotiating directives. This will formally authorise the Commission to open the negotiations as Union negotiator.
Background
On 31 January 2020, the United Kingdom withdrew from the European Union and the European Atomic Energy Community (Euratom).
The arrangements for the withdrawal are set out in the Withdrawal Agreement, which entered into force on 1 February 2020. It provides for a transition period during which EU law continues to apply to the United Kingdom until at least 31 December 2020, unless the Joint Committee established under the Withdrawal Agreement adopts, before 1 July 2020, a single decision extending the transition period for up to 1 or 2 years.
In the guidelines of 23 March 2018, the European Council restated the Union’s determination to have as close as possible a partnership with the United Kingdom in the future. According to these guidelines, such a partnership should cover trade and economic cooperation as well as other areas, in particular the fight against terrorism and international crime, as well as security, defence and foreign policy.
The framework for this future partnership between the European Union and the United Kingdom is set out in the Political Declaration.
Today’s recommendation by the European Commission is the first step in the negotiation process, as the Council is invited to authorise the Commission to formally open the negotiations for a new partnership with the United Kingdom.
Compliments of the European Commission

As the night draws in this evening, the sun will set on more than 45 years of the United Kingdom’s membership of the European Union. For us, as Presidents of the three main EU institutions, today will inevitably be a day of reflection and mixed emotions – as it will for so many people.
Our thoughts are with all of those who have helped to make the European Union what it is today. Those who are concerned about their future or disappointed to see the UK leave. Those British members of our institutions who helped shape policies that made lives better for millions of Europeans. We will think of the UK and its people, their creativity, ingenuity, culture, and traditions, that have been a vital part of our Union’s tapestry.
These emotions reflect our fondness for the United Kingdom – something which goes far beyond membership of our Union. We have always deeply regretted the UK’s decision to leave but we have always fully respected it, too.  The agreement we reached is fair for both sides and ensures that millions of EU and UK citizens will continue to have their rights protected in the place they call home.
At the same time, we need to look to the future and build a new partnership between enduring friends. Together, our three institutions will do everything in their power to make it a success. We are ready to be ambitious.
How close that partnership will be depends on decisions that are still to be taken. Because every choice has a consequence. Without the free movement of people, there can be no free movement of capital, goods and services. Without a level playing field on environment, labour, taxation and state aid, there cannot be the highest quality access to the single market. Without being a member, you cannot retain the benefits of membership.
Over the next weeks, months and years we will have to loosen some of the threads carefully stitched together between the EU and the UK over five decades. And as we do so, we will have to work hard to weave together a new way forward as allies, partners and friends.
Whilst the UK will cease to be an EU member, it will remain part of Europe. Our shared geography, history and ties in so many areas inevitably bind us and make us natural allies.  We will continue to work together on foreign affairs, security and defence with a common purpose and shared mutual interests. But we will do it in different ways.  
We do not underestimate the task that lies before us but we are confident that with goodwill and determination we can build a lasting, positive and meaningful partnership.    
But tomorrow will also mark a new dawn for Europe.
The last few years have brought us closer together – as nations, as institutions and as people. They have reminded us all that the European Union is more than a market or economic power but stands for values that we all share and defend. How much stronger we are when we are together.
This is why the Member States of the European Union will continue to join forces and build a common future. In an age of great power competition and turbulent geopolitics, size matters. No country alone can hold back the tide of climate change, find the solutions to the digital future or have a strong voice in the ever-louder cacophony of the world.
But together, the European Union can.
We can because we have the largest internal market in the world. We can because we are the top trading partner for 80 countries. We can because we are a Union of vibrant democracies. We can because our peoples are determined to promote European interests and values on the world stage. We can because EU member states will leverage their considerable, collective economic power in discussions with allies and partners – the United States, Africa, China or India.
All of this gives us a renewed sense of shared purpose. We have a common vision of where we want to go and a commitment to be ambitious on the defining issues of our times. As set out in the European Green Deal, we want to be the first climate neutral continent by 2050, creating new jobs and opportunities for people in the process. We want to take the lead on the next generation of digital technologies and we want a just transition so that we can support the people most affected by change.
We believe only the European Union can do this. But we know we can only do it together: people, nations, institutions. And we, as Presidents of the three institutions, are committed to playing our part.  
That work continues as soon as the sun rises tomorrow.
Ursula von der Leyen
Pres. of the European Commission                      
Charles Michel
Pres. of the European Council                      
David Maria Sassoli
Pres. of the European Parliament
Compliments of the European Commission.
The article appeared among others in 24 Chasa, Alithia, De Volkskrant, Dnevnik, Frankfurter Allgemeine, Gazeta Wyborcza, In-Nazzion, Jutarnji List, Kronen Zeitung, La Repubblica, Latvijas Avize, Le Parisien, Le Quotidien, Le Soir, Lidové noviny, Maaseudun Tulevaisuus, Magyar Nemzet, Politiken, Publico, Svenska Dagbladet, The Times.

In June 2016, the ECB launched its corporate sector purchase programme, through which it purchased corporate bonds in an effort to improve the financing conditions of euro area firms. In this article, I argue that the programme was successful. In particular, by increasing prices and reducing yields in the targeted bond market segment, the programme encouraged investors to shift their investments towards similar but somewhat riskier bonds. This reduced borrowing costs for many firms, including those whose bonds were not eligible for direct purchase by the ECB.
The corporate arm of the ECB’s quantitative easing
When interest rates are already so low that conventional rate cuts cannot further stimulate the economy, central banks may directly intervene in financial markets by buying assets from both the sovereign and the corporate sectors. That is exactly what the ECB started doing in March 2015. In that month, the ECB began purchasing assets issued by euro area central governments, agencies and European institutions. Then, in June 2016, it expanded the purchases to the corporate sector via the corporate sector purchase programme, or CSPP.
The aims of the CSPP were twofold. The first was straightforward: to signal that the ECB was committed to providing further stimulus to the economy. The second was somewhat more complex. Through the CSPP, the ECB wanted to lower the yield on the bonds that were targeted for purchase. However, mainly through the working of the so-called portfolio rebalancing channel, it also wanted to influence other asset prices, in particular those of corporate bonds not eligible for its own purchases. In this way, the ECB could support the financing conditions of all firms borrowing in the bond market (Draghi 2015, ECB 2017).
The portfolio rebalancing channel mainly works through investors shifting their investments away from the segment in which the ECB is making purchases. The idea is that investors, facing a scarcity of eligible bonds due to the ECB’s asset purchases, are encouraged to reallocate their holdings to other, riskier, bonds. This portfolio “rebalancing” in turn leads to higher prices and lower yields also for bonds in non-eligible market segments (Vayanos and Vila 2009, Krishnamurthy and Vissing-Jorgensen 2011, Hancock and Passmore 2011).[2]
While we know in theory how the rebalancing channel works, do we have any indication that it works in practice? In a recent research paper, I address this question through an empirical analysis (Zaghini, 2019). In particular, I analyse the evolution of the prices and quantities of bonds in three different market segments after the implementation of the CSPP: bonds actually purchased, eligible bonds not purchased, and bonds that were not eligible. Below I describe the article’s main findings. The main conclusion is that the CSPP, through the portfolio rebalancing channel, significantly reduced the cost of borrowing for euro area firms.
Portfolio rebalancing at work
In a nutshell, under the CSPP the Eurosystem purchases bonds issued by non-bank corporations registered in the euro area, denominated in euro, and that have at least an investment-grade rating. It purchases them both in the primary market (i.e. upon issuance) and in the secondary market.[3] I examine the effect of the CSPP by looking at changes in corporate bond spreads (the difference between the actual bond yield and an equivalent risk-free rate): if the implementation of the programme leads to a decline in such spreads, it will have succeeded in reducing borrowing costs for firms.
A first look at the evidence seems encouraging. Immediately after the announcement of the CSPP in March 2016, spreads on secondary market trades declined in both eligible and non-eligible market segments (see Chart 1). Initially, spreads on eligible bonds declined faster than those on non-eligible bonds, suggesting a larger improvement in the funding conditions for investment-grade firms. However, by June 2017 the gap had narrowed significantly, to the point of disappearance, thus hinting at better funding conditions also for lower rated firms.
While the evidence in Chart 1 is telling, bond spreads depend on many factors, such as the riskiness of the issuer, the amount placed and the maturity of the bond. Thus, in order to isolate the spread component due to the CSPP, I rely on a model proposed by Sironi (2003) and Zaghini (2016) for the euro area primary bond market. The model takes into account a large number of bond features and firm characteristics. In addition, it also considers the market conditions on the exact issuance date of every single bond. This makes it possible to isolate the effects of the CSPP on the bonds’ spreads quite precisely.
The empirical analysis shows that after a large signalling effect upon announcement (which saw spreads decrease by 36 basis points), the effect of the CSPP purchases on bond yields strengthened over time. In the first six months of the programme, from July to December 2016, eligible bonds enjoyed a spread (around 70 basis points) significantly lower than that on non-eligible bonds. This applied to all eligible bonds, regardless of whether or not they were purchased on the primary market by the ECB. By contrast, non-eligible bonds recorded a slight deterioration of their financing conditions. However, the difference between the two sets of bond spreads vanished in 2017. Indeed, in the first two quarters of that year non-eligible bonds caught up significantly, their spreads decreasing by around 50 basis points.
The spread dynamics estimated by the model are fully consistent with the theory on how the portfolio rebalancing channel works. In the first six months of the CSPP, the ECB purchased a great deal of eligible bonds. Doing so drove up prices (and accordingly reduced the spreads) in that market segment, crowding out other investors. Those investors then reached for the non-eligible bonds which are close substitutes, but have higher expected returns. Due to the higher demand for non-eligible bonds, that segment also saw prices increase and yields decrease.
In addition to price dynamics, the changes over time in the quantities of bonds issued in the two market segments suggest that the portfolio rebalancing channel was working. First there was a significant rise in both the number of bonds and the total volume issued in the eligible market segment in the second half of 2016. Then this was followed by a similar increase in the non-eligible segment in the first half of 2017. While the former increase was entirely driven by the additional demand from the ECB, the latter was purely market-driven and so due to the working of the rebalancing channel, since it only involved bonds which were not targeted by the ECB.
Concluding remarks
The announcement and actual deployment of the CSPP provide a good case study of the effects of large-scale asset purchase programmes. This analysis of developments in estimated bond spreads and amounts issued in the primary market shows that the programme eventually influenced the whole corporate bond market.
Indeed, in a first phase the CSPP only had an effect on the bonds directly targeted – immediately improving the funding conditions of eligible corporations, and gradually crowding out the other investors in that segment. Six months into the programme, the effect spilled over to non-eligible bonds. This was possible because the scarcity brought about in the eligible bond segment pressed investors to rebalance their portfolios towards other similar, but riskier, segments – in particular towards non-eligible corporate bonds. In this way the programme had an effect on both market segments. As a result, it achieved a more far-reaching improvement in the borrowing conditions of euro area corporations.
Compliments of the European Central Bank

The Governing Council of the European Central Bank (ECB) today launched a review of its monetary policy strategy. The monetary policy strategy was adopted in 1998 and some of its elements were clarified in 2003.
Since 2003 the euro area and the world economy have been undergoing profound structural changes. Declining trend growth, on the back of slowing productivity and an ageing population, as well as the legacy of the financial crisis, have driven interest rates down, reducing the scope for the ECB and other central banks to ease monetary policy by conventional instruments in the face of adverse cyclical developments. In addition, addressing low inflation is different from the historical challenge of addressing high inflation. The threat to environmental sustainability, rapid digitalisation, globalisation and evolving financial structures have further transformed the environment in which monetary policy operates, including the dynamics of inflation.
In the light of these challenges, the Governing Council has decided to launch a review of its monetary policy strategy, in full respect of the ECB’s price stability mandate as enshrined in the Treaty.
“As our economies are undergoing profound changes, it is the time for a strategy review to ensure we deliver on our mandate in the best interest of Europeans,” said ECB President Christine Lagarde.
The Governing Council will take stock of how the monetary policy strategy has supported the fulfilment of the ECB’s mandate under the Treaty over the years and consider whether any elements of the strategy need to be adjusted. The quantitative formulation of price stability, together with the approaches and instruments by which price stability is achieved, will figure prominently in this exercise. The review will also take into account how other considerations, such as financial stability, employment and environmental sustainability, can be relevant in pursuing the ECB’s mandate. The Governing Council will review the effectiveness and the potential side effects of the monetary policy toolkit developed over the past decade. It will examine how the economic and monetary analyses through which the ECB assesses the risks to price stability should be updated, also in view of ongoing and new trends. Finally, it will review its communication practices.
The process is expected to be concluded by the end of the year. The Governing Council will be guided by two principles: thorough analysis and open minds. Accordingly, the Eurosystem will engage with all stakeholders.
Compliments of the European Central Bank

The Presidents of the three main EU institutions will meet on Thursday in Bazoches to debate the future of the EU as well as current geopolitical challenges.

European Parliament President David Sassoli, European Council President Charles Michel and European Commission President Ursula von der Leyen will meet in Bazoches-sur-Guyonne (France) at the Jean Monnet House, a symbolic place for the history of European integration.
They will discuss the future of the EU, including the upcoming Conference on the Future of Europe, current geopolitical challenges as well as the climate and digital transitions.
President Sassoli said: “We stand at a new departure for Europe. The internal and external challenges facing us remind us all that the European Union is more than a market or economic power, but stands for values that we all share and defend. Our reflections should not forget how much stronger we can be when we act together.”
The three Presidents will wind up the discussions with a joint statement, to be delivered in the European Parliament in Brussels on the morning of Friday 31 January at 11:00. More details will follow.
Compliments of the European Commission

Ahead of 1 February 2020, the day on which the UK will leave the EU in accordance with the Withdrawal Agreement  concluded between the EU and the UK (read the latest news here), the EUIPO has updated the Brexit section on its website.
The Withdrawal Agreement stipulates that during a transition period that will last until 31 December 2020, EU law remains applicable to and in the UK. This extends to the EUTM and RCD Regulations and their implementing instruments.
This continued application of the EUTM Regulations and the RCD Regulations during the transition period includes, in particular, all substantive and procedural provisions as well as the rules concerning representation in proceedings before the EUIPO.
In consequence, all proceedings before the Office that involve grounds of refusal pertaining to the territory of the UK, earlier rights originating from the UK, or parties/representatives domiciled in the UK will run as they did previously, until the end of the transition period.  
For more information, please consult the relevant section on our website.
Compliments of the European Commission