Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Karl de Meyer| 24 May 2023 |

To safeguard financial stability, we need to keep central bank money at the heart of the financial system, Executive Board member Fabio Panetta tells Les Échos as the ECB turns 25. And a digital euro would be a risk-free means of payment that Europeans can use anywhere in the euro area.

As the ECB celebrates its 25th anniversary today, where do things stand with the digital euro project that you are responsible for?
We are studying the design of the digital euro, its distribution and its impact on the financial sector. There are around 50 people in the team working on this project. We are in regular contact with the European Commission which is due to present a legislative proposal in June. This will provide the regulatory framework for the digital euro. Then in October the Governing Council will decide whether to launch a preparation phase to develop and test the digital euro. This phase could last two or three years. If the Governing Council and the European legislators – Member States and Members of the European Parliament – agree, we could launch the digital euro in three or four years.
Why does the euro area need a central bank digital currency?
To safeguard financial stability, we need to keep central bank money at the heart of the financial system. And we want to offer citizens a risk-free European digital means of payment that they can use free of charge anywhere in the euro area, in shops, online or for payments between individuals. Such a solution doesn’t exist at the moment. The digital euro will also provide a platform for European financial intermediaries to offer innovative payment services across the entire euro area. At present, services developed in one European country are often not available in others. And the European card payments market is dominated by two non-European companies whose cards are not accepted everywhere. Can you imagine a similar situation in the United States? And this situation would be exacerbated by the growth of big techs, which don’t hesitate to use their customers’ personal data to make money.
Some in the political world or from consumer associations are also worried about how the ECB could use the data collected via the digital euro.
The European Central Bank will not have access to personal data.
As for the financial intermediaries that will distribute the digital euro, a balance will need to be found between ensuring data confidentiality and combating money laundering and terrorist financing.
This balance will be determined by the legislator. In current discussions, some want to prioritise confidentiality, while others want to prioritise the fight against illegal activities.
What can we expect from the digital euro?
The simplicity of a payment instrument that is easy to use, available across the entire euro area and which will strengthen the use of our currency. Increased competition in the payments market and innovation based on this financial “raw material” that we will make available to European financial intermediaries. And greater monetary sovereignty.
In concrete terms, what will people be able to do with their digital euro account?
The ECB will ensure that all users benefit from a basic service that enables payments between individuals, retailers and public authorities. Europeans will, for example, be able to use it to pay online or in shops, to send money to their loved ones or to pay their taxes. And banks will be able to offer additional features such as recurring payments, payments based on usage or access to other financial services.
Some commercial banks are clearly concerned that the ECB might take some of their business.
We have been very clear: the ECB would issue the digital euro but would not distribute it. Citizens will not have an account at the ECB or at the national central banks. We do not have any expertise in dealing with customers, and it would not make sense for us to enter into this business. And we are not looking to gain a large market share. We want to build a presence everywhere, but be dominant nowhere. Europeans will know that they always have the option to use the digital euro, but they will only use it for a fraction of their payments. We are not seeking to expand the role of public money, but rather to preserve it, as in its current form – cash – its use is declining. Making the digital euro available as a complement to cash is a natural development in an increasingly digital economy.
Why will digital euro accounts be capped?
Because we don’t want to create tensions for financial intermediaries that could negatively affect the financing of the economy and the transmission of monetary policy. The digital euro would be a means of payment, not a form of investment or savings. We have at times mentioned a ceiling of €3,000. This amount is close to the average gross salary in the euro area and would not cause problems for financial stability. Larger payments will be possible thanks to a link between digital euro accounts and traditional bank accounts.
Just to make it clear: the idea is not for the digital euro to replace cash is it?
Absolutely not. We are working on issuing a new series of high-tech banknotes with a view to preventing counterfeiting and reducing the environmental impact. We will make banknotes available to citizens for as long as there is demand for them. But it’s possible to imagine that one day the digitalisation of the economy could lead to cash becoming marginalised. We cannot run the risk that central bank money is no longer used. That’s why we need a digital euro.
Will these new banknotes that you just mentioned feature well-known European figures?
We want people to relate to the new series of banknotes we are working on. We are considering a number of themes, including European culture, and we will soon consult the wider public. Personally, I would like to see famous Europeans represented on our future banknotes.
The interoperability of the digital euro with other central bank digital currencies is another important topic…
We are already working closely with the central banks of the United States, the United Kingdom, Switzerland, Canada, Japan and Sweden. We are in a preliminary stage where we compare notes on our progress. But interoperability will require more work. For example, while interoperability is desirable, different national rules on confidentiality would make it more challenging.
The ECB is currently celebrating its 25th anniversary. What progress do you think Europe will make in the next 25 years?
If we, as Europeans, want to continue to play a role on the world stage, we need to act together. We need to make further progress towards closer integration, introduce more efficient decision-making processes, and develop a permanent fiscal capacity at the European level. We need to be able to provide a common response to crises, as we did during the pandemic. A European fiscal policy that complements monetary policy would enable us to avoid many tensions and imbalances.
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The euro is more than a currency, says President Christine Lagarde. It is the strongest form of European integration and stands for a united Europe that works together, protecting and benefiting all its citizens. The ECB, with its commitment to price stability, will always be a cornerstone of that effort.

On 1 June 1998, the European Central Bank was established to prepare for the launch of the euro – the world’s largest ever currency changeover. As a lawyer at the time, I remember how frantically we were revising contracts based on foreign exchange rates that would soon disappear. Could the common currency really work? Today, as we celebrate the 25th anniversary of this institution, we know that it works and that the euro has brought Europe closer together.
Entrusted by European Union governments to safeguard the euro, our staff in Frankfurt, together with colleagues in the 20 national central banks of the currency union, work tirelessly to achieve our mandate of maintaining price stability. That work is critical for the prosperity of European citizens.
Over the past 25 years, we have welcomed nine new countries to the euro area, bringing us from 11 to 20. And we have taken on new roles, including the supervision of European banks. Today the euro is the second most important currency in the international monetary system, after the US dollar.
There have been some tough times along the way. But through the economic highs and lows steered by my predecessors Wim Duisenberg, Jean-Claude Trichet and Mario Draghi, the ECB has always focused on building a stronger foundation for Europe’s future through delivering on our mandate.
The pandemic and Russia’s unjustified war against Ukraine have shown that stability cannot be taken for granted. And growing geopolitical rivalries may mean that the global economy becomes increasingly volatile in future. In a world of uncertainty, the ECB has been, and will continue to be, a reliable anchor of stability.
We have shown that we can act and adapt quickly in the face of even the most serious challenges. Only a few months after I became President of the ECB, we responded swiftly to the pandemic with an array of measures to support the euro area economy through its most acute phase, avoiding deflationary risks.
Today, we are acting with the same determination to bring inflation down. After years of being too low, inflation is now too high and is set to remain so for too long. That erodes the value of money, reducing purchasing power and hurting people and businesses across the euro area – especially the most vulnerable members of our society.
But we will bring inflation back to our target of 2% over the medium term. That is why we have raised interest rates at a record pace, and why we will bring them to sufficiently restrictive levels – and keep them at those levels for as long as necessary – to return inflation to our target in a timely manner.
As recent events in the banking sector remind us, the task of monetary policy is aided by a robust banking system. Financial stability is a precondition for price stability, and vice versa. Since 2014, when we took over banking supervision, we have worked to keep banks in the euro area sound. And banking supervisors chaired by Andrea Enria will continue our efforts to make sure that banks are well-capitalised and resilient to changing conditions, so that they can keep lending to businesses and households.
Our monetary union has been tested many times in the past quarter century. We have been confronted with crises that could have torn us apart – not least the great financial crisis, the sovereign debt crisis, the pandemic. But on each occasion, we have emerged stronger. We now need to build on that inner strength.
As the world becomes more unpredictable, Europe can foster resilience on two fronts. By integrating its capital markets, Europe can better facilitate investment in the green and digital sectors that are so crucial to powering its future growth. And by completing the banking union, we can ensure that the banking sector helps to dampen risks during future crises rather than amplifying them.
The former President of the European Parliament Simone Veil once said that “we need a Europe capable of solidarity, of independence and of cooperation”.  This captures well what the euro represents. Ultimately, the euro is more than a currency. It is the strongest form of European integration and stands for a united Europe that works together, protecting and benefiting all its citizens.
And the ECB will always be a cornerstone of that effort.
Author:

Christine Lagarde, President of the ECB

This blog was published as an opinion piece in newspapers of all 20 euro area countries
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Closer ties allowed Europe to find new natural gas sources after Russia’s supply cutoff, and growing global export capacity can reduce market fragmentation.

Natural gas might be the same commodity everywhere in the world, but prices can vary dramatically because of the complex network of infrastructure needed to transport it.
The result is a partially fragmented global market, mainly because most natural gas moves by pipeline—unlike the market for crude oil, which is more integrated and tends to trade at a single price in most places. Such fragmentation in the natural gas market means not only that prices differ across regions, but also that high prices in one part of the world don’t necessarily transmit to buyers in other places.
Russia’s invasion of Ukraine provided a stark illustration of the effects of segmentation. Pipeline flows to Europe from Russia dropped by 80 percent since mid-2021, sending the continent’s gas prices up 14-fold to a record level in August 2022.  Prices for globally traded liquefied natural gas saw a similar jump. But LNG prices in the United States merely tripled, remaining several times below Europe and Asia.

The disparity in prices, and the US insulation against global gas-market shocks, stems from the idiosyncrasies of gas extraction and transportation. Historically, the US market was linked to crude oil prices because gas was mostly a byproduct of oil drilling, but this relationship, sometimes called artificial integration, has been unwinding over the past decade, mainly because of rising shale gas production. And as gas production surged in the US, which surpassed Russia in 2012 as the world’s largest producer, and export terminals were built, it became easier to sell into markets beyond North America.
Another important factor for gas prices is the technology needed to liquefy and ship the fuel, which must be converted into a compact form—about 600 times smaller by volume than in its gas form—called liquefied natural gas before it can be loaded onto specially designed carriers for transport by sea or road.
LNG export capacity is fixed in the short-term. Facilities for the liquefaction, exporting, importing, and regasification require major investment, so a regional shock, such as Russia’s invasion of Ukraine, can send regional prices moving in different directions.
After the invasion last year, Europe turned to LNG to replace pipeline imports of Russian gas, and US shipments emerged as a key substitute. Why was that possible when US LNG export capacity is fixed? With gas in Europe commanding a temporary price premium during the spring and summer of 2022, Asian customers of US LNG decided to reroute their cargoes to sell in Europe.

There is another important quirk of the natural gas market at play. Pricing formulas for long-term delivery contracts with US companies usually use US prices. That meant Asian customers with long-term deals could buy more cheaply from the US, then reroute tanker ships at sea to sell cargo at the much higher European spot market price.
Despite an increasing reliance on LNG as a substitute for Russian pipeline gas, European LNG import capacity turned out not to be a binding constraint on market integration. European import terminals had plenty of spare capacity before Russia’s invasion of Ukraine, and with the addition of mobile floating storage regasification units, Europe has the necessary infrastructure to accommodate higher volumes of LNG imports.
On the other hand, the United States and other gas producers are exporting at the limits of their capacities, and expansions to global LNG export capacity are needed to bring European and Asian prices back to historically normal levels over the longer term. In the United States, these capacities are poised to keep growing, even after already rapid gains. The first LNG export terminal in the country opened in 2016, followed by many more.

Sizable expansion projects already under construction in the United States, Africa, the Middle East, and elsewhere are likely to increase global LNG export capacity by 14 percent by 2025. Other planned projects could bring export capacity to around 1 trillion cubic meters, roughly a quarter of last year’s global gas consumption.
Securing financing to build new terminals, however, can face major hurdles. Companies need 15- to 20-year contracts to obtain bank financing for construction. Terminals usually cost $10 billion to $15 billion and take two to four years to complete. Timelines are less certain for projects without long-term sales contracts, and some may never be built.
Ultimately, expanded LNG export capacity for the United States and other producers may prove crucial to creating truly global gas markets that are balanced across regions. As advanced economies increase reliance on weather-dependent renewable energy from wind and solar, they will likely see critical periods of increased demand for supplemental natural gas to meet power generation needs. Integrating global gas markets and building needed infrastructure allows prices to stimulate demand and supply reactions in larger, more integrated markets. This helps to buffer global energy markets against supply shocks.
Authors:

Rachel Brasier, Research Officer in the Commodities Unit in the Research Department of the International Monetary Fund

Andrea Pescatori, Chief of the Commodities Unit in the IMF Research Department and associate editor of the Journal of Money, Credit and Banking

Martin Stuermer, Economist at the Commodities Unit of the IMF’s Research Department

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How to handle China is a major political issue for the EU, one that is more complex than dealing with Russia. Certainly, the EU’s political and economic systems have profound differences with both Russia and China. Unlike Russia, China is a real systemic actor, approaching 20% of the world economy and growing while Russia represents around two percent and decreasing.
The economic, political, and financial influence of China is considerable, and its military power continues to grow. Its ambition is clearly to build a new  world order, with China at the centre, becoming by the middle of the century the world’s leading power.
The EU must be aware that many countries see the geopolitical influence of China as a counterweight to the West and therefore to Europe. And in a world that is becoming more fragmented and multipolar, most of the emerging countries are becoming hedgers, strengthening their room for manoeuvre without picking sides.
In this context the EU has to recalibrate its policy towards China for at least three reasons: the changes inside China with nationalism and ideology on the rise,; the hardening of US-China strategic competition; and the rise of China as a key player in regional and global issues.
This is putting growing pressure on the EU and sometimes creating uncomfortable dilemmas. Europe was built on the idea of shared prosperity and today is a power of peace. So we do not want to block the rise of emerging nations, be it China or India or others.  But logically we want to ensure that it does not harm our interests, does not threaten our values nor jeopardize the international rules-based order.
Last week we discussed EU-China relations with EU Foreign Ministers and we agreed that there is no viable alternative to the triptych of treating simultaneously China as a partner, competitor and systemic rival, depending on the issue. But it is necessary to adjust the relative weights among these three items and this adjustment depends in large part on China’s own behaviour and the issue concerned. EU ministers underscored that we must continue to engage with China wherever possible, and at the same time reducing strategic risks and vulnerabilities by re-calibrating our stance across three clusters of issues: values, economic security and strategic security.
On values, our differences are hardening. In all international fora, China has constructed a narrative subordinating fundamental rights to the right to development. The EU must counter this discourse and uphold the universality of human rights.
In spite those substantial differences, European and Chinese societies need to know each other better. The obstacles to the free flow of ideas and to the presence of Europeans in China must be removed. Otherwise China and Europe will become more foreign to each other.
On economic security, it is obvious that our trade relations are unbalanced. At over €400 billion a year, the EU’s trade deficit is at an unacceptable level. This is not due to the EU’s lack of competitiveness, but to China’s deliberate choices and policies. European companies face persistent obstacles and discriminatory practices. Moreover, the EU faces a growing risk of excessive dependencies on certain products and critical raw materials.
Hence, the importance of reducing risks and building up resilience, also for reasons of national security. This will require the diversification and reconfiguration of EU value chains, a more effective export control system, the control of inbound investment and possibly outbound investment, and the smart use of the anti-coercion instrument.  But our international partners can rest assured that all measures we take will remain in line with WTO rules. The multilateral system must be revitalized, not abandoned.
The third cluster concerns essentially Taiwan and China’s position on Russia’s war against Ukraine. On Taiwan, the EU’s position remains consistent and based on its ‘One China policy’. Any unilateral change of the status quo and any use of force would have massive economic, political and security consequences. The EU must prepare for all scenario’s and engage with China –  in maintaining the status quo and work to de-escalate tensions.
On Ukraine, our message is clear:  EU-China relations have no chance of developing if China does not push Russia to withdraw from Ukraine. Faced with a conflict involving the territorial integrity and sovereignty of an independent state, any so-called neutrality amounts in reality to taking the side of the aggressor. We welcome positive moves from China aiming at finding a solution to contribute to a just peace in Ukraine.
The message of all 27 Foreign Ministers last week was clear: the best way to shape China’s choices is through robust engagement and by reducing strategic risks.
Author:

Josep Borrell, High Representative of the European Union for Foreign Affairs and Security Policy / Vice-President of the EUROPEAN COMMISSION

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The United States and European Union are committed to working more closely on sanctions as a key tool to address shared foreign policy goals. From April 26–28, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC), the European External Action Service (EEAS), and the European Commission Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) concluded a multi-day technical meeting in Brussels, exchanging best practices and strengthening working relationships.
The purpose of the meeting was to share sanctions expertise to enhance and improve capabilities of those at the forefront of sanctions design, implementation, and compliance. OFAC, EEAS, and DG FISMA identified ways to align the implementation of sanctions, promote compliance, strengthen enforcement, and address shared foreign policy challenges. The teams also explored methods to ensure that sanctions do not prevent humanitarian trade and assistance from reaching those in need and that persons in sanctioned jurisdictions preserve their internet freedom.
The partners have been working together to provide coordinated information to the compliance community and will continue to update and maintain their sanctions-related lists and published guidance.
Background
Alongside partners, the United States and the European Union have imposed unprecedented costs on Russia in response to its illegal war of aggression against Ukraine. The efforts of these governments, industry, and other stakeholders who are at the forefront of implementing U.S., EU, and other multilateral sanctions are having a material impact on the Russian economy. For example, senior Russian officials have repeatedly admitted that the crude oil price cap, which both the U.S. and EU introduced in December 2022, is cutting into Russia’s most important source of revenue and darkening the Kremlin’s troubled fiscal situation.
Sanctions are most effective when coordinated with a broad range of international partners who can magnify the economic and political impact. Multilateral implementation maximizes effectiveness of sanctions and minimizes unintended costs and eases the compliance burden for the general public.
The U.S.-EU partnership is constructed on a foundation of shared common values that, combined with our deep economic ties and role in the global financial system, makes the partnership essential to tackling today’s global challenges. As they develop and deepen their collaborative efforts on financial sanctions, OFAC, EEAS, and DG FISMA continue to seek and welcome opportunities to work closely with partners around the world to ensure that sanctions make the fullest contribution to the policy aims they seek to achieve. For example, the U.S. and EU sanctions teams have recently participated in joint events to counter sanctions evasion, including at a private sector roundtable in Washington, D.C. and through joint travel to Central Asia.
For More Information
https://finance.ec.europa.eu/eu-and-world/sanctions-restrictive-measures_en 
https://ofac.treasury.gov/
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On 17 May 2023, the Commission put forward proposals for the most ambitious and comprehensive reform of the EU Customs Union since its establishment in 1968.
Key features of the proposals
The reform responds to the current pressures under which EU Customs operates, including a huge increase in trade volumes, especially in e-commerce, a fast-growing number of EU standards that must be checked at the border, and shifting geopolitical realities and crises.
The measures proposed present a world-leading, data-driven vision for EU Customs, which will massively simplify customs processes for business, especially for the most trustworthy traders. Embracing the digital transformation, the reform will cut down on cumbersome customs procedures, replacing traditional declarations with a smarter, data-led approach to import supervision. At the same time, customs authorities will have the tools and resources they need to properly assess and stop imports which pose real risks to the EU, its citizens and its economy.
A new EU Customs Authority will oversee an EU Customs Data Hub which will act as the engine of the new system. Over time, the Data Hub will replace the existing customs IT infrastructure in EU Member States, saving them up to €2 billion a year in operating costs. The new Authority will also help deliver on an improved EU approach to risk management and customs checks.
Overall, the new framework will make EU Customs fit for a greener, more digital era and contribute to a safer and more competitive Single Market. It simplifies and rationalises customs reporting requirements for traders, for example by reducing the time needed to complete import processes and by providing one single EU interface and facilitating data re-use. In this way, it helps deliver on President von der Leyen’s aim to reduce such burdens by 25%, without undermining the related policy objectives.
The three pillars of EU Customs Reform
A new partnership with business
In the reformed EU Customs Union, businesses that want to bring goods into the EU will be able to log all the information on their products and supply chains into a single online environment: the new EU Customs Data Hub. This cutting-edge technology will compile the data provided by business and – via machine learning, artificial intelligence and human intervention – provide authorities with a 360-degree overview of supply chains and the movement of goods.
At the same time, businesses will only need to interact with one single portal when submitting their customs information and will only have to submit data once for multiple consignments. In some cases where business processes and supply chains are completely transparent, the most trusted traders (‘Trust and Check’ traders) will be able to release their goods into circulation into the EU without any active customs intervention at all. The Trust & Check category strengthens the already existing Authorised Economic Operators (AEO) programme for trusted traders.
This new partnership with business is a world-first. It is a powerful new tool to support EU businesses, trade and the EU’s open strategic autonomy. The EU Customs Data Hub will allow goods to be imported into the EU with minimum customs intervention, without compromising on safety, security or anti-fraud requirements.
Under the proposals, the Data Hub will open for e-commerce consignments in 2028, followed (on a voluntary basis) by other importers in 2032, leading to immediate benefits and simplifications. Trust & Check traders will also be able to clear all of their imports with the customs authorities of the Member State in which they are based, no matter where the goods enter the EU. A review in 2035 will assess whether this possibility can be extended to all traders when the Hub becomes mandatory as from 2038.

Image courtesy of the European Commission.
A smarter approach to customs checks
The proposed new system will give customs authorities a bird’s-eye view of the supply chains and production processes of goods entering the EU. All Member States will have access to real-time data and will be able to pool information to respond more quickly, consistently and effectively to risks.
Artificial intelligence will be used to analyse and monitor the data and to predict problems before the goods have even started their journey to the EU. This will allow EU customs authorities to focus their efforts and resources where they are needed most: to stop unsafe or illegal goods from entering the Union and to uphold the growing number of EU laws that ban certain goods that go against common EU values – for example in the field of climate change, deforestation, forced labour, to give just a few examples. It will also help to ensure proper collection of duties and taxes, to the benefit of national and EU budgets.
To help Member States prioritise the right risks and coordinate their checks and inspections – especially during times of crisis – information and expertise will be pooled and assessed at EU level via the new EU Customs Authority acting on the data provided through the EU Customs Data Hub. The new regime will substantially improve cooperation between customs and market surveillance and law enforcement authorities at EU and national level, including through information sharing via the Customs Data Hub.
A more modern approach to e-commerce
Today’s reform will make online platforms key actors in ensuring that goods sold online into the EU comply with all customs obligations. This is a major departure from the current customs system, which puts the responsibility on the individual consumer and carriers. Platforms will be responsible for ensuring that customs duties and VAT are paid at purchase, so consumers will no longer be hit with hidden charges or unexpected paperwork when the parcel arrives. With online platforms as the official importers, EU consumers can be reassured that all duties have been paid and that their purchases are safe and in line with EU environmental, safety and ethical standards.
At the same time, the reform abolishes the current threshold whereby goods valued at less than €150 are exempt from customs duty, which is heavily exploited by fraudsters. Up to 65% of such parcels entering the EU are currently undervalued, to avoid customs duties on import.
The reform also simplifies customs duty calculation for the most common low-value goods bought from outside the EU, reducing the thousands of possible customs duty categories down to only four. This will make it much easier to calculate customs duties for small parcels, helping platforms and customs authorities alike to better manage the one billion e-commerce purchases entering the EU each year. It will also remove the potential for fraud. The new, tailor-made e-commerce regime is expected to bring additional customs revenues to the tune of €1 billion per year.
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The Council has reached agreement on its position (general approach) regarding amendments to the directive on administrative cooperation in the area of taxation. The amendments mainly concern the reporting and automatic exchange of information on revenues from transactions in crypto-assets and information on advance tax rulings for the wealthiest (high-net-worth) individuals. The aim is to strengthen the existing legislative framework by enlarging the scope for registration and reporting obligations and overall administrative cooperation of tax administrations.

Today we are strengthening the rules for administrative cooperation and closing loopholes that have previously been used to avoid taxation of income. This reduces the risk of crypto-assets being used as a safe haven for tax avoidance and tax fraud. The agreement is yet another example of the EU as a leader in the implementation of global standards.
Elisabeth Svantesson, Minister for Finance of Sweden

Additional categories of assets and income, such as crypto-assets, will now be covered. There will be a mandatory automatic exchange between tax authorities of information which will have to be provided by reporting crypto-asset service providers. So far, the decentralised nature of crypto-assets has made it difficult for member states’ tax administrations to ensure tax compliance. The inherent cross-border nature of crypto-assets requires strong international administrative cooperation to ensure effective tax collection.
This directive covers a broad scope of crypto-assets, building on the definitions that are set out in the regulation on markets in crypto-assets (MiCA) which the Council adopts today. Also those crypto-assets that have been issued in a decentralised manner, as well as stablecoins, including e-money tokens and certain non-fungible tokens (NFTs), are included in the scope.
Background
On 27 November 2020, the Council approved conclusions on fair and effective taxation in times of recovery, on tax challenges linked to digitalisation and on tax good governance in the EU and beyond. The Council recognised that the rapid development and increasing worldwide use of alternative means of payment and investment – such as crypto-assets and e-money – may undermine the progress made on tax transparency in recent years and pose substantial risks of tax fraud, tax evasion and tax avoidance; and that it is important to discuss at technical level on how to update the rules on administrative cooperation within the EU and on a global level in order to address these potential risks.
On 7 December 2021, the Council indicated in its report to the European Council on tax issues that it expects the European Commission to table in 2022 a legislative proposal on further revision of the directive 2011/16/EU on administrative cooperation in the field of taxation (DAC), concerning exchange of information on crypto-assets and tax rulings for wealthy individuals.
On 8 December 2022 the Commission presented a proposal for a Council directive amending directive 2011/16/EU on administrative cooperation in the field of taxation (DAC8). The key objectives of this legislative proposal are the following:

to extend the scope of automatic exchange of information under DAC to information that will have to be reported by crypto-asset service providers on transactions (transfer or exchange) of crypto-assets and e-money. Expanding administrative cooperation to this new area is aimed at helping member states to address the challenges posed by the digitalisation of the economy. The provisions of DAC8 on due diligence procedures, reporting requirements and other rules applicable to reporting crypto-asset service providers will reflect the Crypto-Asset Reporting Framework (CARF) and a set of amendments to the Common Reporting Standard (CRS), which were prepared by the OECD under the mandate of the G20. The G20 endorsed the CARF and the amendments to CRS, both of which it considers to be integral additions to the global standards for automatic exchange of information
to extend the scope of the current rules on exchange of tax-relevant information by including provisions on exchange of advance cross-border rulings concerning high-net-worth individuals, as well as provisions on automatic exchange of information on non-custodial dividends and similar revenues, in order to reduce the risks of tax evasion, tax avoidance and tax fraud, as the current provisions of DAC do not cover this type of income
to amend a number of other existing provisions of DAC. In particular, the proposal seeks to improve the rules on reporting and communication of the Tax Identification Number (TIN), in order to facilitate the task of tax authorities of identifying the relevant taxpayers and correctly assessing the related taxes, and to amend DAC provisions on penalties that are to be applied by member states to persons for the failure of compliance with national legislation on reporting requirements adopted pursuant to DAC.

Experts of the member states have since analysed the proposal. The Council presidency has prioritised work on this proposal with the objective of reaching an agreement by the ECOFIN Council at its May meeting.
This directive is not subject to the ordinary legislative procedure but the consultation procedure. This means that the European Parliament may present its views but has no legislative power to make changes to the proposal. The final outcome of this legislative process is decided by member states in the Council, by unanimity.
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As Emelia asked in Act V of Comedy of Errors, do “mine eyes deceive me?” Sorry to get all Shakespearean, but our eyes (and face, fingerprints, etc.) can reveal a lot of information about us – data that can be misused in deceptive or unfair ways. The FTC just issued a Policy Statement on Biometric Information and Section 5 of the Federal Trade Commission Act and it’s a must-read for businesses.
The increasing use of consumers’ biometric information – and the marketing of technologies that use it or claim to use it – raises significant concerns about data security, privacy, and the potential for bias and discrimination. This isn’t a new issue for the FTC. We’ve been looking at the consumer protection implications of biometric data for more than a decade – for example, at the FTC’s Face Facts: A Forum on Facial Recognition Technology and in the report, Facing Facts: Best Practices For Common Uses of Facial Recognition Technologies. More recently, the FTC has brought enforcement actions against photo app maker Everalbum and Facebook, charging they misrepresented their uses of facial recognition technology.
During this time, some biometric information technologies have made significant advances. NIST found that between 2014 and 2018, facial recognition had become 20 times better at finding a matching photo in a database. Many of these technologies have also become a lot less expensive to use. So it’s no surprise that the use of these technologies is showing up everywhere from retail stores to arenas.
But as rapidly as the technologies and risks are evolving, important guiderails remain in place to protect consumers: the FTC Act’s prohibitions on unfair or deceptive practices. The Policy Statement demonstrates how established legal requirements apply and lists examples of practices the agency will look at in determining whether a company’s use of biometric information or biometric information technology could violate the FTC Act.
You’ll want to read the Policy Statement for the full story, but on the deception side of Section 5, companies shouldn’t make “false or unsubstantiated marketing claims relating to the validity, reliability, accuracy, performance, fairness, or efficacy of technologies using biometric information.” What’s more, “deceptive statements about the collection and use of biometric information” could be actionable, too.
Turning to unfairness, the Policy Statement includes factors the Commission will consider in assessing whether a use of biometric information is potentially unfair:

failing to assess foreseeable harms to consumers before collecting biometric information;
failing to promptly address known or foreseeable risks;
engaging in surreptitious and unexpected collection or use of biometric information;
failing to evaluate the practices and capabilities of third parties who will have access to consumers’ biometric information;
failing to provide appropriate training for employees and contractors whose duties involve interacting with biometric information; and
failing to conduct ongoing monitoring of a business’ technologies that use biometric information to ensure they’re functioning as anticipated and they’re not likely to harm consumers.

There’s no need to read between the lines to discern the FTC’s message to your company and clients. As the Policy Statement makes clear:
The Commission wishes to emphasize that – particularly in view of rapid changes in technological capabilities and uses – businesses should continually assess whether their use of biometric information or biometric information technologies causes or is likely to cause consumer injury in a manner that violates Section 5 of the FTC Act. If so, businesses must cease such practices, whether or not the practices are specifically addressed in this statement.
Compliments of the Federal Trade Commission.The post Body language? FTC issues policy statement about misuse of biometric data first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European economy continues to show resilience in a challenging global context. Lower energy prices, abating supply constraints and a strong labour market supported moderate growth in the first quarter of 2023, dispelling fears of a recession. This better-than-expected start to the year lifts the growth outlook for the EU economy to 1.0% in 2023 (0.8% in the Winter interim Forecast) and 1.7% in 2024 (1.6% in the winter). Upward revisions for the euro area are of a similar magnitude, with GDP growth now expected at 1.1% and 1.6% in 2023 and 2024 respectively. On the back of persisting core price pressures, inflation has also been revised upwards compared to the winter, to 5.8% in 2023 and 2.8% in 2024 in the euro area.
Lower energy prices lift the growth outlook
According to Eurostat’s preliminary flash estimate, GDP grew by 0.3% in the EU and by 0.1% in the euro area in the first quarter of 2023. Leading indicators suggest continued growth in the second quarter.
The European economy has managed to contain the adverse impact of Russia’s war of aggression against Ukraine, weathering the energy crisis thanks to a rapid diversification of supply and a sizeable fall in gas consumption. Markedly lower energy prices are working their way through the economy, reducing firms’ production costs. Consumers are also seeing their energy bills fall, although private consumption is set to remain subdued as wage growth lags inflation.
As inflation remains high, financing conditions are set to tighten further. Though the ECB and other EU central banks are expected to be nearing the end of the interest rate hiking cycle, the recent turbulence in the financial sector is likely to add pressure to the cost and ease of accessing credit, slowing down investment growth and hitting in particular residential investment.
Core inflation revised higher but set to gradually decline
After peaking in 2022, headline inflation continued to decline in the first quarter of 2023 amid a sharp deceleration of energy prices. Core inflation (headline inflation excluding energy and unprocessed food) is, however, proving more persistent. In March it reached a historic high of 7.6%, but it is projected to decline gradually over the forecast horizon as profit margins absorb higher wage pressures and financing conditions tighten. The April flash harmonised index of consumer prices estimate for the euro area, released after the cut-off date of this forecast, shows a marginal decline in the rate of core inflation, which suggests that it might have peaked in the first quarter, as projected. On an annual basis, core inflation in the euro area in 2023 is set to average 6.1%, before falling to 3.2% in 2024, remaining above headline inflation in both forecast years.
Labour market remains resilient against economic slowdown
A record-strong labour market is bolstering the resilience of the EU economy. The EU unemployment rate hit a new record low of 6.0% in March 2023, and participation and employment rates are at record highs.
The EU labour market is expected to react only mildly to the slower pace of economic expansion. Employment growth is forecast at 0.5% this year, before edging down to 0.4% in 2024. The unemployment rate is projected to remain just above 6%. Wage growth has picked up since early 2022 but has so far remained well below inflation. More sustained wage increases are expected on the back of persistent tightness of labour markets, strong increases in minimum wages in several countries and, more generally, pressure from workers to recoup lost purchasing power.

Public deficits set to decrease especially in 2024
Despite the introduction of support measures to mitigate the impact of high energy prices, strong nominal growth and the unwinding of residual pandemic-related measures led the EU aggregate government deficit in 2022 to fall further to 3.4% of GDP. In 2023 and more markedly in 2024, falling energy prices should allow governments to phase out energy support measures, driving further deficit reductions, to 3.1% and 2.4% of GDP respectively. The EU aggregate debt-to-GDP ratio is projected to decline steadily to below 83% in 2024 (90% in the euro area), which is still above the pre-pandemic levels. There is a large heterogeneity of fiscal trajectories across Member States.
While inflation can support the improvement in public finances in the short term, this effect is bound to dissipate over time as debt repayment costs increase and public expenditures are progressively adjusted to the higher price level.
Downside risks to the economic outlook have increased
More persistent core inflation could continue restraining the purchasing power of households and force a stronger response of monetary policy, with broad macro-financial ramifications. Moreover, renewed episodes of financial stress could lead to a further surge in risk aversion, prompting a more pronounced tightening of lending standards than assumed in this forecast. An expansionary fiscal policy stance would fuel inflation further, leaning against monetary policy action. In addition, new challenges may arise for the global economy following the banking sector turmoil or related to wider geopolitical tensions. On the positive side, more benign developments in energy prices would lead to a faster decline in headline inflation, with positive spillovers on domestic demand. Finally, there is persistent uncertainty stemming from Russia’s ongoing invasion of Ukraine.
The forecast publication includes for the first time an overview of the economic structural features, recent performance and outlook for Ukraine, Moldova and Bosnia and Herzegovina, which were granted candidate status for EU membership by the Council in June and December 2022.
Background
This forecast is based on a set of technical assumptions concerning exchange rates, interest rates and commodity prices with a cut-off date of 25 April. For all other incoming data, including assumptions about government policies, this forecast takes into consideration information up until, and including, 28 April. Unless new policies are announced and specified in adequate detail, the projections assume no policy changes.
The European Commission publishes two comprehensive forecasts (spring and autumn) and two interim forecasts (winter and summer) each year. The interim forecasts cover annual and quarterly GDP and inflation for the current and following year for all Member States, as well as EU and euro area aggregates.
The European Commission’s Summer 2023 Economic Forecast will update GDP and inflation projections and is expected to be presented in July 2023.
Compliments of the European Commission.The post Spring 2023 EU Economic Forecast: An improved outlook amid persistent challenges first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.