Russia has demonstrated that it is an unreliable supplier of energy to Europe through unjustified and unacceptable actions such as cutting off electricity and natural gas to Finland, halting natural gas exports to Poland and Bulgaria, and threatening similar actions against other European nations. The European Commission and the United States condemn Russia’s use of energy blackmail and reaffirm our commitment to strengthening Europe’s energy security.
Across Europe, from the Nordics to the Balkans, efforts are underway to diversify supplies and reduce dependence on Russian gas. Since 2020, Finland has been interconnected to Estonia via the Balticonnector, a project supported by the European Commission, which increases security of supply for Finland and the region. Furthermore, on May 1, the Poland-Lithuania Gas Interconnector started its commercial operation which reinforces optionality and resilience of the whole Baltic gas market and was also supported through the Connecting Europe Facility of the European Commission.
The European Commission and the United States understand the urgency of taking decisive action to reduce energy imports from Russia. Together, we are partnering to address these challenges under our joint Task Force on Energy Security announced by Presidents Biden and von der Leyen on March 25. Through the Task Force we will continue working to diversify Europe’s supply of natural gas while we accelerate the deployment of energy efficiency and smart technologies in European homes and businesses, electrify heating, and ramp-up clean energy output to reduce demand for fossil fuels altogether.
As an important step towards realizing the goals of the Task Force, the European Commission and the United States welcome Finland’s contract to lease a floating LNG import terminal from a U.S. provider that will be operational before the end of this year.
Compliments of the European Commission.
The post Joint Statement between the European Commission and the United States on European Energy Security first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

On 23 May, 2022, the Council approved conclusions on developing the Union’s cyber posture. The posture aims to demonstrate the EU’s determination to provide immediate and long-term responses to threat actors seeking to deny the EU a secure and open access to cyberspace and affect its strategic interests, including the security of its partners.
Cybersecurity initiatives
In the conclusions Council highlights the five functions of the EU in the cyber domain:

strengthen resilience and capacities to protect;
enhance solidarity and comprehensive crisis management;
promote the EU’s vision of cyberspace;
enhance cooperation with partner countries and international organisations;
prevent, defend against and respond to cyber-attacks.

Ministers, among other things, call upon the Commission to propose EU common cybersecurity requirements for connected devices and associated processes and services, invites relevant authorities such as the EU’s Agency for Cybersecurity (ENISA) to formulate recommendations in order to reinforce the resilience of communications networks and infrastructure within the EU and stresses the importance of establishing regular cyber exercises in order to test and develop the EU internal and external response to large-scale cyber incidents.
Background
Cyberspace has become an arena for geopolitical competition and therefore the EU must be able to swiftly and forcefully respond to cyberattacks, such as state-sponsored malicious cyber activities targeting the EU and its Member States and make full use of all its instruments. Hostile actors need to be aware that cyberattacks against Member States and EU institutions will be detected early, identified promptly and met with all necessary tools and policies.
Compliments of the European Council.
The post Cyber posture: EU Council approves conclusions first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

What is included in this year’s European Semester Spring Package?
The 2022 European Semester Spring Package includes:

a Communication on the main elements of the European Semester Spring Package;
country-specific recommendations (CSRs) for 27 Member States;
country reports for 27 Member States;
in-depth reviews for 12 Member States
a report under Article 126(3) of the Treaty on the Functioning of the EU;
opinions on the draft budgetary plans of Germany and Portugal;
the fourteenth enhanced surveillance report for Greece;
post-programme surveillance reports for Cyprus, Ireland, Spain and Portugal;
a proposal for a Council Decision on guidelines for the employment policies of the Member States; and
a monitoring report on progress towards the UN Sustainable Development Goals in an EU context.

How has the European Semester process been adapted this year?
For the 2022 cycle, the European Semester preserves its main purpose of broad economic and employment policy coordination, while evolving in line with the implementation requirements of the Recovery and Resilience Facility (RRF). The implementation of the RRF makes it necessary to continue adapting the European Semester to take into account overlaps and ensure that joint efforts can focus on the delivery of high-quality and ambitious recovery and resilience plans (RRPs).
The implementation of the plans will drive Member States’ reform and investment agendas for the years to come. The European Semester, with its broader scope and multilateral surveillance, will complement this implementation process. The two processes will continue to be intrinsically linked and every effort will be made to avoid overlaps and eliminate unnecessary administrative burdens.
As announced in the 2022 Annual Sustainable Growth Survey, this year’s Spring Package reintroduces country reports and country-specific recommendations (CSRs). The country reports provide a snapshot of the existing and newly emerging challenges along the four dimensions of competitive sustainability, as well as an analysis of individual Member States’ resilience.
How does the European Semester Spring Package take account of the exceptional circumstances brought about by Russia’s invasion of Ukraine?
The EU economy reached its pre-pandemic output level in the autumn of 2021 and the outlook before Russia invaded Ukraine was for a phase of prolonged and robust expansion.
However, Russia’s war of aggression against Ukraine has created a new environment, exacerbating pre-existing headwinds to growth, which were previously expected to subside. Further hikes in commodity prices, renewed supply disruptions and heightening uncertainty are denting growth and imply significant downside risks. It also poses additional challenges to the EU economies related to security of energy supply and fossil fuel dependency on Russia.
REPowerEU is Europe’s plan to end Europe’s dependency on Russian fossil fuels as soon as possible. It is also about rapidly reducing our dependence on Russian fossil fuels by fast-forwarding the clean transition and joining forces to achieve a more resilient energy system and a true Energy Union.
The CSRs adopted in the context of the European Semester provide guidance to Member States to adequately respond to persisting and new challenges and deliver on their shared key policy objectives. This year, they also include guidance on new and dedicated REPowerEU chapters in the RRPs, to reduce the dependency on fossil fuels through reforms and investments in line with the REPowerEU objectives.
What is the link between the European Semester Spring Package and REPowerEU?
The CSRs adopted in the context of the European Semester provide guidance to Member States to adequately respond to persisting and new challenges and deliver on their shared key policy objectives. This year, this includes an energy-related recommendation to all Member States addressing major challenges such as security of supply, EU´s energy independence and climate change – offering targeted guidance for each Member State on reducing the dependency on fossil fuels in line with the REPowerEU objectives. Measures to be included in the REPowerEU chapters are expected to address the 2022 country-specific recommendations related to energy challenges.
How do the country-specific recommendations reflect the Commission’s priorities?
The RRF is the central tool to deliver the EU policy priorities under the European Semester and, in combination with REPowerEU, to address newly emerged challenges.
In line with the RRF Regulation, national RRPs cover all or a significant subset of the relevant CSRs.
Targeted new CSRs address a limited number of additional reform and investment challenges. The Commission proposes that the Council address all Member States which have had their recovery and resilience plan approved with:

a recommendation on fiscal policy, including fiscal structural reforms where relevant;
a recommendation on the implementation of the RRP and the cohesion policy programmes;
a recommendation on energy policy in line with the objectives of REPowerEU and the European Green Deal; and
where relevant, an additional recommendation on outstanding and/or newly emerging structural challenges.

The scope of the recommendations is larger for Member States that do not yet have approved RRPs.
How do the country-specific recommendations support the green transition?
The CSRs adopted in the context of the European Semester provide guidance to Member States to adequately respond to persisting and new challenges and deliver on their shared key policy objectives. This year, they also include guidance on reducing the dependency on fossil fuels in line with the REPowerEU objectives.
The CSRs focus on the need to end the European dependency on fossil fuel imports from Russia, while at the same time reduce the use of fossil fuels by prioritising energy savings and producing clean energy. Where relevant, Member States are recommended to accelerate and reinforce their reforms and investments in these areas, backed by financial and legal measures to build the new energy infrastructure and system that Europe needs.
How do the country-specific recommendations provide guidance to Member States on reducing dependence on fossil fuels in line with REPowerEU objectives?
The EU is heavily reliant on fossil fuels. Around 90% of the gas used in the EU is imported, with Russia providing almost half of these volumes in 2021.
A new country-specific recommendation has been introduced and tailored to each Member State in order to reduce the EU’s reliance on fossil fuels overall, and gas dependency on Russia. The recommendations take into consideration the need for Member States to accelerate the deployment of renewable energy and the necessary infrastructure sector, as well as increasing energy efficiency to reduce energy consumption overall. They also consider the need and potential to increase the capacity of interconnections across the EU.
What fiscal guidance is the Commission providing to Member States for the period ahead?
The specific nature of the macroeconomic shock imparted by Russia’s invasion of Ukraine, as well as its long-term implications for the EU’s energy security needs, call for a careful design of fiscal policy in 2023.
Based on the spring 2022 forecast, which projects GDP growth to remain in positive territory over the forecast horizon albeit amid high uncertainty and downside risks, a broad-based fiscal impulse to the economy in 2023 does not appear warranted. Fiscal policy should expand public investment for the green and digital transition and energy security. Full and timely implementation of the RRPs is key to achieving higher levels of investment. Fiscal policy should be prudent in 2023, by controlling the growth in nationally-financed primary current expenditure, while allowing automatic stabilisers to operate and providing temporary and targeted measures to mitigate the impact of the energy crisis and to provide humanitarian assistance to people fleeing from Russia’s invasion of Ukraine.  Fiscal policy has to remain agile so as to adjust to the rapidly evolving circumstances.
Moreover, Member States’ fiscal plans for next year should be anchored by prudent medium-term adjustment paths reflecting fiscal sustainability challenges associated with high debt-to GDP levels that have increased further due to the pandemic. To reduce risks from climate change, Member States are encouraged to systematically consider its implications on budgetary planning, alongside with policies and tools that help prevent, reduce and prepare for climate-related impacts in a fair way. Green budgeting practices in the Member States should be continued and encouraged to ensure coherence of public expenditures and revenues with environmental goals.
Fiscal policies should continue to be appropriately differentiated across Member States:

Member States with high debt should ensure a prudent fiscal policy in 2023, in particular by limiting the growth of nationally-financed current expenditure below medium-term potential output growth, taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. For the period beyond 2023, these countries should pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring credible and gradual debt reduction and fiscal sustainability in the medium term through gradual consolidation, investment and reforms.
Member States with low/medium term should ensure current expenditure is in line with an overall neutral policy stance in 2023, taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. For the period beyond 2023, Member States should pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions.

Does the Commission have any concerns regarding Member States’ fiscal sustainability?
Continuing to ensure public debt sustainability remains important for many Member States. Medium- and long-term fiscal sustainability challenges largely reflect the significant impact of the COVID-19 pandemic on public finances, which added to existing pre-crisis debt vulnerabilities in several countries.
The challenge of rising expenditure on pensions, health care and long-term care because of an ageing population needs to go hand in hand with ensuring adequacy of pensions and other social benefits. Putting pension systems on a sustainable footing from both a fiscal and social perspective will require further reforms to lengthen careers and making labour markets more inclusive.
Improving the fiscal sustainability of health care and long-term care requires improving their efficiency, while at the same time ensuring their adequacy and accessibility.
What is the Commission’s assessment on the status of the general escape clause?
Heightened uncertainty and strong downside risks to the economic outlook in the context of war in Europe, unprecedented energy price hikes and continued supply chain disturbances warrant the extension of the general escape clause of the Stability and Growth Pact through 2023.
On 3 March 2021, the Commission concluded that the deactivation of the general escape clause of the Stability and Growth Pact should be conditional upon the state of the EU and euro area economy, recognising that it will take time for the economy to return to more normal conditions and that the decision on the deactivation or continued application of the general escape clause should be taken as an overall assessment of the state of the economy with the level of economic activity in the EU or euro area compared to pre-crisis levels as the key quantitative criterion.  In the context of war in Europe, unprecedented energy price hikes and continued supply chain disturbances, the state of the EU and euro area economy has not returned to more normal conditions. Moreover, the decision on the continued application or deactivation of the general escape clause should also consider the need for fiscal policy to be able to respond appropriately to the economic repercussions of Russia’s military aggression against Ukraine, including from energy supply disruptions.
The continued activation of the general escape clause in 2023 will provide the space for national fiscal policy to react promptly when needed, while ensuring a smooth transition from the broad-based support to the economy during the pandemic times towards an increasing focus on temporary and targeted measures and fiscal prudence required to ensure medium-term fiscal sustainability.
The general escape clause does not suspend the Stability and Growth Pact. It allows for a temporary departure from the normal budgetary requirements, provided that this does not endanger fiscal sustainability in the medium term. In autumn 2022, the Commission will re-assess the relevance of proposing to open excessive deficit procedures based on the outturn data for 2021. In spring 2023, the Commission will assess the relevance of proposing to open excessive deficit procedures based on the outturn data for 2022, in particular taking into account compliance with the fiscal country-specific recommendations addressed to the Member States by the Council. Based on the above considerations, and given the implications of heightened uncertainty and strong downside risks on the economic outlook for the EU and euro area as a whole, the Commission considers that the Union is not yet out of a period of severe economic downturn.
On this basis, the conditions to maintain the general escape clause in 2023 and to deactivate it as of 2024 are met. The Commission invites the Council to endorse this conclusion to provide clarity to Member States.
When will the Commission present the next steps on the economic governance review?
The Commission will provide orientations on possible changes to the economic governance framework after the summer break and well in time for 2023.
What are the main findings of the Article 126(3) report?
The Commission prepared a report under Article 126(3) of the Treaty on the Functioning of the European Union for 18 Member States (Belgium, Bulgaria, Czechia, Germany, Estonia, Greece, Spain, France, Italy, Latvia, Lithuania, Hungary, Malta, Austria, Poland, Slovenia, Slovakia and Finland).
For all these Member States except Finland, the report assesses their compliance with the deficit criterion. In the case of Lithuania, Estonia and Poland, the report was prepared due to a planned deficit in 2022 exceeding the 3% of GDP Treaty reference value, whereas the other Member States had a general government deficit in 2021 exceeding 3% of GDP.
For Member States with general government gross debt above 60% of GDP in 2021 and who did not respect the debt reduction benchmark – namely Belgium, France, Italy, Hungary and Finland – the report assesses compliance with the debt criterion in 2021 based on outturn data.
The report finds that the deficit criterion is not fulfilled by Belgium, Bulgaria, Czechia, Germany, Estonia, Greece, Spain, France, Italy, Latvia, Lithuania, Hungary, Malta, Austria, Poland, Slovenia and Slovakia. Taking into account all relevant factors, the report finds that the debt criterion is not fulfilled by Belgium, France, Italy, Hungary and Finland. The debt criterion is complied with by Slovakia.
As regards Member States with a debt ratio above the 60% of GDP reference value, the Commission considers, within its assessment of all relevant factors, that compliance with the debt reduction benchmark would imply a too demanding frontloaded fiscal effort that risks to jeopardise growth. Therefore, in the view of the Commission, compliance with the debt reduction benchmark is not warranted under the current exceptional economic conditions.
The Commission does not propose to open new excessive deficit procedures in spring 2022. The COVID-19 pandemic continues to have an extraordinary macroeconomic and fiscal impact that, together with the current geopolitical situation, creates exceptional uncertainty, including for designing a detailed path for fiscal policy. On these grounds, the Commission considers that a decision on whether to place Member States under the excessive deficit procedure should not be taken.
Romania is the only Member State under an excessive deficit procedure, based on the pre-pandemic developments. On 3 April 2020, the Council decided that an excessive deficit existed in Romania based on planned excessive deficit in 2019. In its latest recommendation of 18 June 2021, the Council asked Romania to put an end to the excessive deficit situation by 2024 at the latest. Romania’s general government deficit in 2021 and the fiscal effort in 2021 are in line with those recommended by the Council. Therefore, the procedure is kept in abeyance.
The Commission will reassess Member States’ budgetary situation in autumn 2022. The monitoring of debt and deficit developments will continue on the basis of the 2022 autumn Economic Forecast and the 2023 Draft Budgetary Plans to be submitted by euro area Member States by 15 October 2022. In autumn 2022, the Commission will reassess the relevance of proposing to open excessive deficit procedures.
What are the general findings of the country reports?
The country reports provide a snapshot of the existing and newly emerging challenges along the four dimensions of competitive sustainability, as well as an analysis of the individual Member States’ resilience.
The reports take stock of the implementation of past CSRs and of the measures included in the recovery and resilience plans that will largely drive and complement Member States’ reform and investment agendas until 2026.
The reports identify key outstanding or newly emerging challenges, not sufficiently covered by commitments undertaken in the recovery and resilience plans, which are the basis for this year’s CSRs. This ‘gap analysis’ and the related recommendations notably take into account the need to reduce our energy dependencies following Russia’s invasion of Ukraine, in line with the REPowerEU objectives, and to properly address the related socio-economic implications.
Each country report presents an accessible narrative for the reader to quickly become acquainted with the economic and employment outlook of the country, its key challenges, the main thrust of the policy response envisaged, as well as topical outstanding issues. In addition, the annexes of each report provide country-specific data and analysis across a wealth of topics, covering cross-cutting perspectives (such as progress towards the Sustainable Development Goals) as well as specific policy areas and shedding light on questions such as “the employment and social impact of the green transition”. Such analysis draws on a wide range of data and tools, including the resilience dashboards developed by the Commission, the Social Scoreboard agreed with Member States, and many more.
The findings are varied and – inherently – country-specific given the combination of shocks affecting each country differently. Moreover, as their RRPs differ in scope and magnitude, the key findings distinguish between actions already foreseen in the plans and remaining challenges to be addressed.
How does the Commission assess the recent evolution of macroeconomic imbalances?
The assessment of macroeconomic vulnerabilities is marked by a strong economic recovery from the COVID-19 crisis in a context of rising uncertainty in face of the surging energy and commodity prices and other impacts from the Russian aggression of Ukraine. Private and public debt levels are easing as the economy rebounds from the crisis. Nonetheless, in many cases they remain above their pre-COVID-19 levels, reflecting the sharpness of the economic contraction in 2020, and the measures taken to support the economy. External rebalancing remains incomplete: the current accounts of large net-debtor countries with significant cross-border tourism sectors have improved, but remain below their pre-COVID-19 levels, while large current account surpluses in some Member States persist despite some temporary reduction during the pandemic. House prices are growing at their fastest pace in over a decade. The banking sector weathered the pandemic crisis well, although some risks might emerge as moratoria on debt repayments have ended and temporary support measures are withdrawn.
Overall, vulnerabilities are receding and are falling below their pre-pandemic levels in various Member States; justifying a revision of the classification of imbalances in two cases. The policy agenda embedded in the RRPs, as well as past policy action support further adjustment and stronger fundamentals for the concerned economies, delivering prospects for a continued narrowing of vulnerabilities. Economic growth will support further adjustment but countries marked by low potential growth could face challenging dynamics. Inflationary pressures are rising and tighter financing conditions and exchange rate volatility may weigh on debt servicing. This is a particular risk where private or public debt is held in foreign currencies, and where refinancing needs are substantial.
What are the main findings of the in-depth reviews?
The Commission has assessed the existence of macroeconomic imbalances for the 12 Member States selected for in-depth reviews in the 2022 Alert Mechanism Report. All those Member States had been identified with imbalances or excessive imbalances in the last annual cycle of surveillance under the Macroeconomic Imbalances Procedure.

Ireland and Croatia are no longer experiencing imbalances. In Ireland, debt ratios have declined significantly over the years and continue to display strong downward dynamics. In Croatia, debt ratios have also declined significantly over the years and continue to display strong downward dynamics.
Greece, Italy, and Cyprus continue to experience excessive imbalances.
Germany, Spain, France, the Netherlands, Portugal, Romania, and Sweden continue to experience imbalances.

Details on the country-specific aspects for the 12 concerned Member States are laid out in Appendix 4 of the Communication.
In which areas is the implementation of country-specific recommendations particularly lagging behind? What will the Commission do to improve this?
The 2022 European Semester cycle takes stock of the Member States’ policy action taken to address structural challenges identified in the CSRs adopted since 2019.
Following the establishment of the RRF, the 2022 CSR assessment takes into account the policy action taken by the Member States to date, as well as the commitments undertaken in the recovery and resilience plans, depending on their degree of implementation.
Overall, at least some progress has been achieved with the implementation of 63% of the 2019-2020 CSRs. Compared to last year’s assessment, additional progress has been achieved regarding both 2019 CSRs of a structural nature and more crisis-oriented 2020 CSRs. However, reform implementation differs significantly across policy areas. In particular, Member States have made most progress over recent years in the area of access to finance and financial services, followed by progress in the areas of anti-money laundering and business environment. On the other hand, progress has been particularly slow on pension systems, the single market, competition and state aid, and housing.
Progress with the implementation of the fiscal recommendations adopted in 2021 has been sizeable. Member States have made at least “some progress” in almost 80% of the recommendations addressed to them in July 2021.
The RRF is a central tool to deliver EU and national policy priorities under the European Semester, as the recovery and resilience plans are required to address all or a significant subset of the relevant CSRs. The CSR assessment reflects the current early stages of the RRF’s implementation, rather than the level of progress that could be achieved assuming a full implementation of the plans. Therefore, considerable additional progress in addressing structural CSRs is expected in the years to come with the further implementation of the RRF.
What is the Commission’s assessment of the German draft budgetary plan?
Germany submitted an updated draft budgetary plan (DBP) for 2022 in April, after a new government took office in December 2021.
In 2022, based on the Commission’s forecast and including the information incorporated in its updated Draft Budgetary Plan, the fiscal stance, including the impulse provided by the RRF, is projected to be supportive, as recommended by the Council. Germany plans to provide continued support to the recovery by making use of the RRF to finance additional investment. As recommended by the Council, Germany also plans to preserve nationally financed investment.
The Commission recalls the importance of the composition of public finances and the quality of budgetary measures, including through growth-enhancing investment, notably supporting the green and digital transition. These objectives are fulfilled by the measures underpinning the updated Draft Budgetary Plan.
Germany is invited to regularly review the use, effectiveness and adequacy of the support measures, including those aimed at addressing the increase in energy prices, and stand ready to adapt them to changing circumstances.
What is the Commission’s assessment of the Portuguese draft budgetary plan?
Portugal submitted a new DBP for 2022 in April when the draft law on the State Budget for 2022 was presented to the Portuguese Parliament. In autumn 2022, the Commission did not assess the DBP as submitted by Portugal, given that the State Budget for 2022 had been rejected in the Portuguese Parliament. It instead invited the Portuguese authorities to submit a new DBP for 2022 in due course, and as soon as a government presented to the Portuguese Parliament a new draft law on the State Budget for 2022.
In 2022, based on the Commission’s forecast and including the information incorporated in the DBP, the fiscal stance – including the impulse provided by the RRF – is projected to be supportive. As recommended by the Council, Portugal plans to provide continued support to the recovery by making use of the RRF to finance additional investment. As recommended by the Council, Portugal also plans to preserve nationally financed investment. Portugal broadly limits the growth of nationally financed current expenditure as the significant expansionary contribution of nationally financed current expenditure in 2022 is mainly due to the above-mentioned measures to address the economic and social impact of the increase in energy prices, as well as the costs of providing support to displaced persons. Given the level of Portugal’s government debt and high sustainability challenges in the medium term, when taking supportive budgetary measures, it is important to preserve prudent fiscal policy in order to ensure sustainable public finances in the medium term.
The Commission recalls the importance of the composition of public finances and the quality of budgetary measures, including through growth-enhancing investment, notably supporting the green and digital transition. Making decisive progress in strengthening expenditure control, cost-efficiency, and appropriate budgeting – in particular through intensified efforts in the planned review of public expenditure and in the implementation of measures to improve the financial sustainability of the National Health Service and state-owned enterprises – remains important to facilitate the rechannelling of public resources towards new strategic policy priorities, such as delivering on the twin transition.
Portugal is invited to regularly review the use, effectiveness and adequacy of the support measures, including those aimed at addressing the increase in energy prices, and stand ready to adapt them to changing circumstances.
What are the main findings of the enhanced surveillance report for Greece?
The Commission has published the fourteenth report for Greece under the enhanced surveillance framework that was activated following the conclusion of the financial assistance programme in August 2018. The report concludes that Greece has taken the necessary actions to achieve agreed commitments, despite the challenging circumstances triggered by the economic implications of new waves of the pandemic as well as of Russia’s invasion of Ukraine.
The authorities have completed a number of specific commitments in the areas of public financial management, property taxation, disability benefits, environmental inspections and justice, and agreed on the extension of the mandate of the Hellenic Financial Stability Fund. The EU institutions welcome the close and constructive engagement in all areas and encourage the authorities to keep up the momentum and, where necessary, reinforce the efforts, in particular as concerns reforms in the area of financial sector policies, primary health care, the cadastre, codification of the labour legislation, and reaching the agreed targets for the clearance of arrears.
The report could serve as a basis for the Eurogroup to decide on the release of the next set of policy-contingent debt measures.
The successful delivery of the bulk of the policy commitments and the effective reform implementation have improved the resilience of the Greek economy and strengthened its financial stability. This has significantly reduced the risks of adverse spill-over effects on other Member States in the euro area, hence effectively addressing the condition underpinning the application of enhanced surveillance. The authorities remain committed to reform implementation and to completion of outstanding elements. On the basis of these considerations, the European Commission may not prolong enhanced surveillance after its expiration on 20 August 2022.
What are the main findings of the post-programme reports for Cyprus, Ireland, Spain, and Portugal?
Cyprus‘ economy rebounded strongly from the recession-related to the COVID-19 pandemic. Growth is expected to slow down this year – as Russia’s invasion of Ukraine and the related sanctions are expected to have a negative impact and higher inflation dampens disposable income – before rebounding in 2023. The country’s fiscal position improved markedly in 2021. The general government deficit is expected to narrow further in 2022 and 2023. The Cypriot financial sector also performed well during the COVID-19 crisis and significant further progress was achieved in reducing non-performing loans (NPLs). Cyprus continues to have a sizeable liquidity buffer and benefits from ‘investment grade’ ranking by three major rating agencies.
Ireland‘s economy is expected to continue to grow strongly, though the Russian invasion of Ukraine poses new challenges, including general uncertainty, additional inflationary pressures and new supply bottlenecks, as well as lower growth in Ireland’s trading partners. The outlook for the public finances is favourable, also thanks to buoyant tax revenues. Irish banks recorded sound results for 2021 and remain on a stable footing despite the pandemic. Overall, downside risks prevail.
Spain‘s economy remains on a recovery path despite the disruptions prompted by Russia’s invasion of Ukraine. More dynamic tourism activity and the implementation of the recovery and resilience plan are expected to sustain economic growth over the forecast horizon, while targeted policy response could help moderate energy prices and mitigate the impact of Russia’s invasion of Ukraine on vulnerable households and on the most exposed economic sectors. The very dynamic performance on the revenue side is driving the recovery of the government balance. Nonetheless, downside risks are predominant given the context of large global instability and uncertainty. The Spanish banking sector has remained resilient during the pandemic and the level of NPLs moderate.
Portugal‘s economy has continued to recover at a strong pace, rising beyond its pre-pandemic level in the first quarter of 2022. Growth is expected to continue at a sound pace, helped by the improved outlook in the tourism sector. Public finances have benefited from the recovery and the public deficit turned out significantly below government plans in 2021 and supports the expectation of a comparatively favourable budgetary outlook for 2022. The government debt-to-GDP ratio is set to move below its pre-pandemic level in 2023. The banking sector has improved its profitability, while solvency rates have remained stable after the end of most credit moratoria in September 2021. Overall, the economic outlook remains favourable but the balance of risks has moved to the downside.
What is the current economic and employment outlook?
After the soft patch at the turn of 2021, the EU economy entered 2022 with the prospect of a vigorous expansion over this year and the next. The Russian invasion of Ukraine and the related heightened uncertainty, however, has forced a reassessment of the economic outlook.
According to the Spring 2022 Economic forecast, real GDP growth in the EU is set to slow from an estimated 5.8% in 2021 to 2.7% in 2022 and 2.3% in 2023. Inflation is expected to be higher and remain high for longer than in the previous forecast, driven by war-induced commodity price increases and broadening price pressures. For 2022, it is projected at 6.1% and 2.7% in 2023. While the new growth outlook is considerably less bright than projected before the invasion of Ukraine, it still implies economic expansion, adding momentum to the comfortable starting position upon entering the crisis and the crucial support provided by the full deployment of the RRF. At the same time, the unprecedented nature and size of the new shocks makes all projections subject to considerable uncertainty.
The COVID-19 crisis has affected sectors, regions, and population groups unevenly, and revealed underlying vulnerabilities. Over the past year, the labour market has rallied. By the fourth quarter of 2021, the employment rate had reached 74.0%, surpassing the pre-pandemic level at the end of 2019 by 0.6 pps. The unemployment rate decreased to 6.2% in March 2022 (1.3 pps less than one year before), with substantial support from short-time work schemes and other job retention measures during the peak of the crisis. Over the same period, the monthly youth unemployment rate declined by 4.2 pps to 13.9%, reaching the lowest level ever recorded.
What is included in the proposal on guidelines for employment policies?
This year’s Commission proposal for the employment policies of the Member States for 2022 aligns the narrative to the post-pandemic environment, bringing in more elements related to making the green transition socially fair, as well as reflecting recent policy initiatives of particular relevance, notably in the context of the Ukraine crisis.
For example, the proposed revisions to the Employment Guidelines:

take into account the post-pandemic environment, with flexible working arrangements, such as telework;
incorporate recent policy developments, such as the European Child Guarantee and improving working conditions for people working through digital labour platforms;
underline the need to redouble efforts to address labour shortages and skills mismatches through skills policies and lifelong learning; emphasise the importance of a fair energy transition and policy measures to mitigate its social impact;
refer to support for labour market access and social integration of people fleeing the war in Ukraine; and
underline the importance of support measures for vulnerable households in light of the increase in energy prices and cost of living.

The Guidelines link actions to the three EU headline targets on employment, skills and poverty reduction for 2030 as agreed by EU Leaders at the Porto Summit in 2021, and underline the importance of ambitious national targets.
What lessons can be drawn from the analysis of the EU’s progress in implementing the UN Sustainable Development Goals (SDGs)? How have the SDGs been taken into account in the Spring Package?
The Commission remains committed to integrating the United Nations Sustainable Development Goals (SDGs) into the European Semester. It provides the opportunity for taking a comprehensive look at progress towards EU targets as well as globally shared objectives. The Commission does so along the four dimensions of competitive sustainability, i.e. macroeconomic stability, aspects of environmental sustainability, productivity and fairness.
The 2022 European Semester cycle provides updated and consistent reporting on progress towards the achievement of the SDGs across Member States. Specifically, the country reports summarise the progress of each Member State towards implementation of the SDGs, and include a detailed annex, based on the monitoring carried out by Eurostat.
The country reports will also make reference to the recovery and resilience plans of the 24 Member States which have been adopted by the Council. The support provided under the RRF underpins a significant number of reforms and investments that are expected to help Member States make further progress towards the SDGs.
While progress has been observed in past years with regard to almost all SDGs, there are areas where more needs to be done. This includes, for example, combatting climate change and its impacts (SDG13).
The Commission will continue to monitor the effects of the COVID-19 pandemic and the current geopolitical situation on progress towards achieving the SDGs.
What are the main findings of Eurostat’s report on progress in the implementation of the UN Sustainable Development Goals in the EU? 
The EU made progress towards most goals (14 out of 17 SDGs) over the last five years of available data. The EU continued to make the most progress towards fostering peace and personal security within its territory and improving access to justice and trust in institutions (SDG 16), followed by the goals of reducing poverty and social exclusion (SDG 1) as well as the economy and the labour market (SDG 8).  The assessment of EU progress for the goals on partnerships (SDG 17), clean water and sanitation (SDG 6) and life on land (SDG 15) is broadly neutral, meaning they are characterised by an almost equal number of sustainable and unsustainable developments.
What are the next steps in the European Semester process?
The Commission calls on the European Council to endorse and on the Council to adopt the Commission proposals for the 2022 CSRs. The Commission also calls on Member States to implement the recommendations fully and in a timely manner, in close dialogue with their social partners, civil society organisations and other stakeholders at all levels.
Compliments of the European Commission.
The post Questions and answers on the European Semester 2022 Spring Package first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Commission’s 2022 European Semester Spring Package provides Member States with support and guidance two years on from the first impact of the COVID-19 pandemic and in the midst of Russia’s ongoing invasion of Ukraine.
The Spring 2022 Economic Forecast projects the EU economy to continue growing in 2022 and 2023. However, while the EU economy continues to show resilience, Russia’s war of aggression against Ukraine has created a new environment, exacerbating pre-existing headwinds to growth, which were previously expected to subside. It also poses additional challenges to the EU economies related to security of energy supply and fossil fuel dependency on Russia.
Linking the European Semester, the Recovery and Resilience Facility and REPowerEU
The case for reducing our dependency on fossil fuels from Russia has never been clearer. REPowerEU is about rapidly reducing our dependence on Russian fossil fuels by fast-forwarding the clean transition and joining forces to achieve a more resilient energy system and a true Energy Union.
The European Semester and the Recovery and Resilience Facility (RRF) – at the heart of NextGenerationEU – provide for robust frameworks to ensure effective policy coordination and to address the current challenges. The RRF will continue to drive Member States’ reform and investment agendas for years to come. It is the main tool to speed up the twin green and digital transition and strengthen Member States’ resilience, including through the implementation of national and cross-border measures in line with REPowerEU.
The country-specific recommendations adopted in the context of the European Semester provide guidance to Member States to adequately respond to persisting and new challenges and deliver on shared key policy objectives. This year, they include recommendations for reducing the dependency on fossil fuels through reforms and investments, in line with the REPowerEU priorities and the European Green Deal.
Fiscal policy guidance
The activation of the general escape clause of the Stability and Growth Pact in March 2020 allowed Member States to react swiftly and adopt emergency measures to mitigate the economic and social impact of the pandemic. Coordinated policy action cushioned the economic blow and paved the way for a robust recovery in 2021.
Policies to mitigate the impact of higher energy prices and support those fleeing Russia’s military aggression against Ukraine will contribute to an expansionary fiscal stance in 2022 for the EU as a whole.
The specific nature of the macroeconomic shock imparted by Russia’s invasion of Ukraine, as well as its long-term implications for the EU’s energy security needs, call for a careful design of fiscal policy in 2023. Fiscal policy should expand public investment for the green and digital transition and energy security. Full and timely implementation of the RRPs is key to achieving higher levels of investment. Fiscal policy should be prudent in 2023, by controlling the growth in nationally financed primary current expenditure, while allowing automatic stabilisers to operate and providing temporary and targeted measures to mitigate the impact of the energy crisis and to provide humanitarian assistance to people fleeing from Russia’s invasion of Ukraine. Moreover, Member States’ fiscal plans for next year should be anchored by prudent medium-term adjustment paths reflecting fiscal sustainability challenges associated with high debt-to GDP levels that have increased further due to the pandemic. Finally, fiscal policy should stand ready to adjust current spending to the evolving situation.
The Commission considers that the conditions to maintain the general escape clause of the Stability and Growth Pact in 2023 and to deactivate it as of 2024 are met. Heightened uncertainty and strong downside risks to the economic outlook in the context of war in Ukraine, unprecedented energy price hikes and continued supply chain disturbances warrant the extension of the general escape clause through 2023. The continued activation of the general escape clause in 2023 will provide the space for national fiscal policy to react promptly when needed, while ensuring a smooth transition from the broad-based support to the economy during the pandemic times towards an increasing focus on temporary and targeted measures and fiscal prudence required to ensure medium-term sustainability.
The Commission will provide orientations on possible changes to the economic governance framework after the summer break and well in time for 2023.
Article 126(3) report on compliance with the deficit and debt criteria of the Treaty
The Commission has adopted a report under Article 126(3) of the Treaty on the Functioning of the EU (TFEU) for 18 Member States (Belgium, Bulgaria, Czechia, Germany, Greece, Spain, France, Italy, Latvia, Lithuania, Hungary, Malta, Estonia, Austria, Poland, Slovenia, Slovakia and Finland). The purpose of this report is to assess Member States’ compliance with the deficit and debt criteria of the Treaty. For all these Member States except Finland, the report assesses their compliance with the deficit criterion. In the case of Lithuania, Estonia and Poland, the report was prepared due to a planned deficit in 2022 exceeding the 3% of GDP Treaty reference value, whereas the other Member States had a general government deficit in 2021 exceeding 3% of GDP.
The pandemic continues to have an extraordinary macroeconomic and fiscal impact that, together with the current geopolitical situation, creates exceptional uncertainty, including for designing a detailed path for fiscal policy. The Commission therefore does not propose to open new excessive deficit procedures.
The Commission will reassess Member States’ budgetary situation in the autumn of 2022. In spring 2023, the Commission will assess the relevance of proposing to open excessive deficit procedures based on the outturn data for 2022, in particular taking into account compliance with the fiscal country-specific recommendations.
Addressing macroeconomic imbalances
The Commission has assessed the existence of macroeconomic imbalances for the 12 Member States selected for in-depth reviews in the 2022 Alert Mechanism Report.
Ireland and Croatia are no longer experiencing imbalances. In both Ireland and Croatia, debt ratios have declined significantly over the years and continue to display strong downward dynamics.
Seven Member States (Germany, Spain, France, the Netherlands, Portugal, Romania, and Sweden) continue to experience imbalances. Three Member States (Greece, Italy, and Cyprus) continue to experience excessive imbalances.
Overall, vulnerabilities are receding and are falling below their pre-pandemic levels in various Member States, justifying a revision of the classification of imbalances in two cases, where also notable policy progress has been made.
Opinions on the draft budgetary plans of Germany and Portugal
On 19 May, the Commission adopted its opinions on the 2022 draft budgetary plans of Germany and Portugal.
Germany submitted an updated draft budgetary plan for 2022 in April, after a new government took office in December 2021. Also Portugal submitted a new draft budgetary plan for 2022 in April. The Commission did not assess the draft budgetary plan submitted by Portugal in the autumn of 2021, given that the State Budget for 2022 had been rejected in the Portuguese Parliament.
Germany’s fiscal stance in 2022 is projected to be supportive. Germany plans to provide continued support to the recovery by making use of the RRF to finance additional investment. Germany also plans to preserve nationally financed investment.
Portugal’s fiscal stance in 2022 is projected to be supportive. Portugal plans to provide continued support to the recovery by making use of the RRF to finance additional investment. Portugal also plans to preserve nationally financed investment. Portugal is expected to broadly limit the growth of nationally financed current expenditure in 2022.
Enhanced surveillance report and post-programme surveillance reports
The fourteenth enhanced surveillance report for Greece finds that the country has taken the necessary actions to achieve the agreed commitments, despite the challenging circumstances triggered by the economic implications of new waves of the pandemic as well as of Russia’s invasion of Ukraine. The report could serve as a basis for the Eurogroup to decide on the release of the next set of policy-contingent debt measures.
The Commission has also adopted the post-programme surveillance reports for Ireland, Spain, Cyprus, and Portugal. The reports conclude that the repayment capacities of each of the Member States concerned remain sound.
Employment guidelines
The Commission is also proposing guidelines – in the form of a Council decision – for Member States’ employment policies in 2022. Every year, these guidelines set common priorities for national employment and social policies to make them fairer and more inclusive. Member States will now be called to approve them.
Member States’ continued reforms and investments will be crucial to supporting high-quality job creation, the development of skills, smooth labour market transitions, and to address the ongoing labour shortages and skills mismatches in the EU. The guidelines provide steering on how to continue modernising labour market institutions, education and training, as well as social protection and health systems, in order to make them fairer and more inclusive.
This year, the Commission proposes to update the guidelines for Member States’ employment policies with a strong focus on the post-COVID 19 environment, on making the green and digital transitions socially fair, as well as on reflecting recent policy initiatives, including in response to Russia’s invasion of Ukraine, such as measures to enable access to the labour market for people fleeing the war in Ukraine.
Progress towards the UN Sustainable Development Goals
The Commission remains committed to integrating the United Nations Sustainable Development Goals (SDGs) into the European Semester. The 2022 European Semester cycle provides updated and consistent reporting on progress towards the achievement of the SDGs across Member States. Specifically, the country reports summarise the progress of each Member State towards implementation of the SDGs, and include a detailed annex, based on the monitoring carried out by Eurostat.
The country reports also make reference to the recovery and resilience plans of the 24 Member States which have been adopted by the Council. The support provided under the RRF underpins a significant number of reforms and investments that are expected to help Member States make further progress toward the SDGs.
In parallel to the Spring Package, Eurostat has today released the “Monitoring report on progress towards the SDGs in an EU context”. The EU has made progress towards most of the SDGs over the last five years of available data. Most progress has been achieved towards fostering peace and personal security within the EU territory and improving access to justice and trust in institutions (SDG 16), followed by the goals of reducing poverty and social exclusion (SDG 1) as well as the economy and the labour market (SDG 8). In general, further efforts will be necessary to achieve the Goals, in particular in the environmental area like clean water and sanitation (SDG 6) and life on land (SDG 15).
Members of the College said:
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “Russia’s invasion of Ukraine has undoubtedly put Europe into extraordinary economic uncertainty. This has resulted in significantly higher prices for energy, raw materials, commodities and food, and is hurting consumers and businesses. With this European Semester Spring package, we are looking to sustain Europe’s economic recovery from the pandemic, and simultaneously phase out our strategic dependence on Russian energy before 2030.”
Paolo Gentiloni, Commissioner for Economy, said: “Ever since the first weeks of the pandemic more than two years ago, the EU and national governments have delivered strong and coherent policy support to our economies, helping to sustain a swift recovery. Today, our common priorities are investment and reform. This is reflected in the recommendations presented today, with their clear focus on the implementation of national recovery and resilience plans and on the energy transition. Fiscal policies should continue to transition from the universal support provided during the pandemic to more targeted measures. As we navigate the new period of turbulence caused by Russia’s invasion of Ukraine, governments must also have the flexibility to adapt their policies to unpredictable developments. The extension of the general escape clause to 2023 recognises the high uncertainty and strong downside risks in a situation where the state of the European economy has not normalised.”
Nicolas Schmit, Commissioner for Jobs and Social Rights said: “The Commission’s Employment Guidelines are a vital aspect of Member States’ priority-setting and policy coordination for employment and social policies. In the wake of the pandemic, it is crucial that the Union and its Member States ensure that the green and digital transitions are socially just. The Commission’s 2022 Guidelines pave the way towards creating more and better jobs and promoting social fairness, which includes supporting the integration of people fleeing the war in Ukraine into labour markets.”
Next steps
The Commission invites the Eurogroup and Council to discuss the package and endorse the guidance offered today. It looks forward to engaging in a constructive dialogue with the European Parliament on the contents of this package and each subsequent step in the European Semester cycle.
Compliments of the European Commission.
The post European Semester Spring Package: Sustaining a green and sustainable recovery in the face of increased uncertainty first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published a study looking at the potential reasons behind the relatively lower ongoing costs, and better performance, of environmental, social and governance (ESG) funds compared to other funds, between April 2019 and September 2021.
ESMA recently determined that ESG equity undertakings for collective investment in transferable securities (UCITS), excluding exchange-traded funds, were cheaper and better performers in 2019 and 2020 compared to non-ESG peers.
Understanding the cost and performance dynamics of ESG funds is of particular interest as it may bring insights for the overall fund industry on how to make funds more affordable and profitable for retail investors.
ESMA, in today’s article, is looking at some of the potential drivers behind this relative cheapness, and outperformance, of ESG funds, and finds several differences between the two categories of funds:

ESG funds are more oriented towards large cap stocks;
ESG funds are more oriented towards developed economies; and
The sectoral exposures also differ between ESG and non-ESG funds.

Even after controlling for these differences, ESG funds remain statistically cheaper and better performing than non-ESG peers. Further research is thus needed to identify the other factors driving these cost and performance differences.
Contact:

Solveig Kleiveland, Senior Communications Officer | press@esma.europa.eu

Compliments of the European Securities and Market Authority.
The post ESMA study looks at reasons for lower costs in ESG funds first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the Commission has set out plans in a Communication for the EU’s immediate response to address Ukraine’s financing gap, as well as the longer-term reconstruction framework. This Communication follows from the European Council call to address the consequences of the war in Ukraine via a dedicated Europe-led effort.
Immediate response and short terms needs
Since the Russian aggression started, the EU has significantly stepped up its support, mobilising around €4.1 billion to support Ukraine’s overall economic, social and financial resilience in the form of macro-financial assistance, budget support, emergency assistance, crisis response and humanitarian aid. Military assistance measures have also been provided under the European Peace Facility, amounting to €1.5 billion, that will be used to reimburse Member States for their in-kind military support to Ukraine and the mobilisation of an additional €500 million is under way.
The war resulted in a collapse of tax, export and other revenues, compounded by large scale illegal appropriation of assets and export goods including in the agricultural sector, while essential expenditure skyrocketed. The International Monetary Fund has estimated Ukraine’s balance of payments gap until June at roughly €14.3 billion ($15 billion).
Addressing Ukraine’s significant short-term financial support to sustain basic services, address humanitarian needs and fix the most essential destroyed infrastructure will require a joint international effort, in which the Union will be ready to play its part.
The Commission therefore envisages to propose granting Ukraine in 2022 additional macro-financial assistance in the form of loans of up to €9 billion, to be complemented by support from other bilateral and multilateral international partners, including the G7. This would be paid in tranches with long maturities and concessional interest rates thanks to the guarantee from the Union budget. To make this possible, Member States should agree on making available additional guarantees. Together with grant support from the EU budget for subsidising the related interest payments, this will ensure well-coordinated and highly concessionary support to Ukraine.
Reconstruction of Ukraine
A major global financial effort will be required to rebuild the country after the war damage, to create the foundations of a free and prosperous country, anchored in European values, well integrated into the European and global economy, and to support it on its European path. While Russia’s aggression continues, the overall needs for the reconstruction of Ukraine are not yet known. Nevertheless, it is important to design the main building blocks of this international effort already now. Support will have to have a medium to long-term horizon.
The reconstruction effort should be led by the Ukrainian authorities in close partnership with the European Union and other key partners, such as G7 and G20 partners, and other third countries, as well as international financial institutions and international organisations. Partnerships between cities and regions in the European Union and those in Ukraine will enrich and accelerate reconstruction.
An international coordination platform, the ‘Ukraine reconstruction platform’, co-led by the Commission representing the European Union and by the Ukrainian government, would work as an overarching strategic governance body, responsible for endorsing a reconstruction plan, drawn up and implemented by Ukraine, with administrative capacity support and technical assistance by the EU. It would bring together the supporting partners and organisations, including EU Member States, other bilateral and multilateral partners and international financial institutions. The Ukrainian Parliament and the European Parliament would participate as observers.
The ‘RebuildUkraine’ reconstruction plan endorsed by the platform, based on a needs assessment, would become the basis for the European Union and the other partners to determine the priority areas selected for financing and the specific projects. The platform would coordinate the financing sources and their destination to optimise their use, as well as monitor progress in the implementation of the plan.
To support the reconstruction plan, the Commission proposes to set up the ‘RebuildUkraine’ Facility as the main legal instrument for the European Union’s support, through a mix of grants and loans. It would be embedded in the EU budget, thereby ensuring the transparency, accountability and sound financial management of this initiative, with a clear link to investments and reforms. It would build on the EU’s experience under the Recovery and Resilience Facility, but adapted to the unprecedented challenges of reconstructing Ukraine and accompanying it on its European path. The Facility itself would have a specific governance structure ensuring full ownership by Ukraine.
A significant emphasis will be put on the rule of law reforms and fight against corruption, whilst investments, brought in line with climate, environmental and digital EU policies and standards, will help Ukraine emerge stronger and more resilient from the devastation of the Russian invasion.
The unforeseen needs created by war in Europe are well beyond the means available in the current multiannual financial framework. Therefore, new financing sources will have to be identified.
The architecture suggested is sufficiently flexible to accommodate such new financing sources. The additional grants to be made available to Ukraine could be financed either by additional contributions from Member States (and third countries should they wish to do so) to the Facility and existing Union programmes, thus benefitting from the Union’s financial mechanisms and safeguards for the proper use of funds, or through a targeted revision of the multiannual financial framework. These sources could also finance the loans to be granted to Ukraine under the Facility. However, given the scale of the loans that are likely to be required, options include raising the funds for the loans on behalf of the EU or with Member States national guarantees.
Members of the College said:
Ursula von der Leyen, President of the European Commission, said: “The unprovoked and unjustified Russian invasion of Ukraine has caused terrible human suffering and massive destruction across the country, forcing millions of innocent Ukrainians to flee their homes. Ukraine can count on the EU’s full support. The EU will continue to provide short-term financial support to Ukraine to meet its needs and keep basic services running. And we stand ready to take a leading role in the international reconstruction efforts to help rebuild a democratic and prosperous Ukraine. This means, investments will go hand in hand with reforms that will support Ukraine in pursuing its European path.”
Executive Vice-President for an Economy that works for people, Valdis Dombrovskis, said: “The EU’s support for Ukraine is unwavering. We will continue using all available means to help our friend and neighbour to resist Russia’s unprovoked and brutal aggression. We need to address both keeping the country running on a daily basis, and working to rebuild the country. To address Ukraine’s most urgent needs, we envisage to provide emergency loans under a new macro-financial assistance programme. In the longer term the EU will lead a major international financial effort to rebuild a free and democratic Ukraine – working with partners such as the G7, international financial institutions and in close coordination with Ukraine itself. We will stand with Ukraine at every step of the way, to repair the destruction caused by Russia’s war and to create a brighter future and new opportunities for its people”.
High Representative/Vice-President for a Stronger Europe in the World, Josep Borrell said: “The EU will remain steadfast in its solidarity with and support for Ukraine as it defends itself against Russia’s unjustifiable, and illegal war of aggression. We continue to provide Ukraine with military assistance measures.”
Commissioner for Budget and Administration, Johannes Hahn, said: “The European Union will continue to stand by Ukraine and its people and to play a key role in all political, humanitarian, resilience and economic efforts to address the short-term and long-term needs that will bring Ukraine back to peace and socio-economic recovery. I am convinced that the new “Ukraine reconstruction platform” led jointly by Ukraine and the Commission, as well as our proposed ‘RebuildUkraine’ Facility, will help offer Ukraine a better future. This will be done in close coordination with all donors”.
Commissioner for the Economy, Paolo Gentiloni said: “The destruction Russia has unleashed on Ukraine has no precedent in postwar Europe; nor does its disregard for the international order so painstakingly constructed over decades. Today the European Commission is setting out a path to help a new Ukraine rise from the ashes of war, just as our Union emerged from the rubble of 1945. Together with the Ukrainian authorities and in cooperation with our international partners, we will mobilise the funding Ukraine needs to ride out this storm – and to ‘build back better’ its economic and social infrastructure.”
Commissioner for Neighbourhood and Enlargement, Olivér Várhelyi said: “In the last weeks we have witnessed the terrible loss of lives and the devastation this war caused in the infrastructure in Ukraine. We have swiftly mobilised assistance and are committed to support rebuilding Ukraine. The reconstruction should fully reflect the needs identified by Ukraine and be firmly anchored in the country’s reform agenda”.
Background
The EU’s commitment to supporting Ukraine is long-standing and has delivered results. The EU has provided significant financial assistance to Ukraine, which over the years from 2014 to 2021 amounted to €1.7 billion in grants under the European Neighbourhood Instrument, €5.6 billion under five macro-financial assistance programmes in the form of loans, €194 million in humanitarian aid and €355 million from foreign policy instruments. The EU provides its support to Ukraine for policy development and comprehensive reforms, with strong involvement from Member States in a Team Europe approach. Among the flagship programmes are those on decentralisation, public administration reform and anti-corruption.
Before and during the war, the EU has worked closely with European financial institutions to support Ukraine. Since 2014, the European Investment Bank and the European Bank for Reconstruction and Development have mobilised over €10 billion in loans to Ukraine. In recent weeks, the European Investment Bank has disbursed €668 million to the Ukrainian budget. The EU is also working in close cooperation with the World Bank and the International Monetary Fund, which have been key partners in the Ukrainian efforts since 2014.
Compliments of the European Commission.
The post Ukraine: EU Commission presents plans for the Union’s immediate response to address Ukraine’s financing gap and the longer-term reconstruction first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by Luis de Guindos, Vice-President of the ECB, at the 20th annual symposium on “Building the financial system of the 21st century: an agenda for Europe and the United States” organised by the Program on International Financial Systems and Harvard Law School (by videoconference) |
It is with great pleasure that I am taking part in this symposium once again. It is hard to believe how much has happened since we last met two years ago.
In my remarks back then, I touched upon the enhanced resilience of the banking sector following the design and implementation of the Basel III regulatory framework – a long process that was set in motion in the aftermath of the global financial crisis.
Since that crisis, and the ensuing sovereign debt crisis, the euro area has been hit by two unrelated but sequential global shocks: first, the pandemic and then the massive surge in energy prices exacerbated by the Russian invasion of Ukraine, which has so far affected Europe more than other parts of the world. To use some jargon, these were “low probability” events. But they materialised in rapid succession with a large impact on inflation at global level.
So it is not easy to be a central banker right now. In the euro area, we moved from having to deal with stubbornly low inflation levels for almost a decade to the highest inflation figures since the creation of the euro, while also having to contend with extraordinary uncertainty surrounding inflation dynamics.
Today, I will give a brief overview of the current economic situation in the euro area, and then share our assessment of the current risks to the overall stability of the financial system.
Economic outlook
Just as we were getting the pandemic and its economic implications under control, geo-political tensions in Europe erupted. Russia’s war against Ukraine has cast a dark shadow over our continent and is likely to trigger a slowdown in growth and higher inflation in the near-term.
After the largest contraction on record in 2020, the euro area economy transitioned to a firm path of recovery in 2021. However, rising inflationary pressures that had been building up since the latter half of last year and renewed pandemic-related restrictions look likely to have slowed the momentum of the recovery in 2022. The Russian invasion of Ukraine exacerbated these pressures on account of large rises in commodity and energy prices. The war has also created new bottlenecks on top of the supply chain disruptions resulting from recent restrictions in Asia.
Following a steady rise in the course of 2021, inflation reached a record high of 7.4% in March 2022, remaining at this level in April. Price increases will most likely remain high over the coming months, mainly because of the rise in energy costs but also due to higher food prices and renewed supply chain disruptions.
Medium-term inflation expectations remain anchored, close to our 2% target. That said, we are closely monitoring for second-round effects, notably wage-setting behaviour. We need to prevent the scenario where the high inflation that we currently see becomes entrenched in expectations.
We are faced with an exceptional degree of uncertainty regarding the outlook for economic activity and inflation. So we need to move gradually and cautiously as we normalise our monetary policy. At our April meeting, the ECB’s Governing Council judged that the incoming data reinforced our expectation that net asset purchases under the asset purchase programme should be concluded in the third quarter. I would expect this to happen earlier in the third quarter rather than later. A first interest rate hike could take place some time after that, depending on our evolving assessment of the outlook. Our June staff projections will put us in a better position to appraise where the euro area economy is heading. We need to observe the impact that shifts in financing conditions and the erosion of purchasing power are having on activity and inflation dynamics.
For the past two years, the combination of fiscal and monetary policy has been crucial in helping the euro area to navigate the pandemic. This combination remains critical today. Monetary policy has to ensure that inflation stabilises at 2% over the medium-term while fiscal measures need to be very selective, targeted and temporary – also in part because fiscal space is now more limited than it was in 2020 and 2021.
Despite the current uncertainty, financial markets have, so far, remained relatively calm. If stress conditions arise, we will deploy flexibility to ensure that monetary policy is transmitted smoothly across the euro area, as we did to good effect during the height of the pandemic.
Financial stability
The macroeconomic forces I have just discussed, amplified by the economic fallout from the Russia-Ukraine war, also have implications for the financial stability outlook. The improved economic conditions throughout 2021 helped to reduce near-term risks to financial stability. But medium-term vulnerabilities continued to build up in the latter half of last year. The pandemic left a legacy of significantly higher levels of indebtedness across sectors, signs of overvaluation in some financial and property markets, and increased risk-taking by non-bank financial institutions.
Since the Russian invasion, financial stability concerns have centred on the economic and inflationary impacts of the current macro-financial environment through higher commodity and energy prices, trade disruptions and weaker confidence. Let me touch upon some components of the euro area financial system in turn.
The banking sector is facing new headwinds from the war. Higher energy and commodity prices, combined with potential energy supply disruptions, could lead to rising credit risks in the corporate sector, especially in energy intensive sectors. This has already led analysts to cut bank profitability forecasts for 2022, due to increased provisioning expectations.
An upward shift in interest rate expectations may affect banks’ financial positions in two different ways. On the one hand, bank earnings are expected to benefit from higher rates in the short-term; on the other, their net worth is vulnerable to rate increases in the medium-term. The economic value of banks with a high share of fixed-rate assets may drop as assets lose more value than liabilities. That said, overall interest rate risk exposures are moderate, on aggregate, and banks have actively managed them to prepare for increasing interest rates.
The slowdown in growth and tightening financing conditions could also lead to renewed challenges for sovereign debt sustainability, particularly in more highly indebted countries. These risks appear manageable in the short-term. But a sustained rise in interest rates, or more subdued growth, could contribute to a reassessment of sovereign risk by market participants and to higher fragmentation risks in sovereign bond markets.
To the extent that increased sovereign vulnerabilities coincide with fragilities in the corporate and banking sectors, risks materialising in any of these sectors may lead to the re-emergence of adverse feedback loops between sovereigns, banks and corporates.
The uncertain outlook could also have an adverse impact on the euro area non-bank financial sector. Duration risk has recently started to materialise, and valuation losses may further increase in an environment of rising interest rates. Some non-bank financial institutions have large exposures to firms with higher credit risk, or firms in energy-intensive industries that are more vulnerable to risks from rising commodity prices.
Turning to financial markets, corrections we saw after the Russian invasion of Ukraine have remained largely orderly. But high volatility in some commodity prices has triggered liquidity stress in related derivatives markets. An increase in initial margin requirements has greatly increased firms’ liquidity needs, making it more difficult for some firms to hedge. This recent episode raises the question of whether margining practices, including those between the clearing member and their clients, may be too procyclical. Financial markets remain vulnerable to further corrections that could potentially be triggered by an escalation of the war, or a faster-than-expected pace of monetary policy normalisation.
Conclusion
Let me conclude.
Sound financial regulation and greater resilience have helped the European financial system navigate both the pandemic and the economic fallout stemming from the Russia-Ukraine war.
Yet sizeable challenges remain. To address financial stability risks, we need to implement targeted macroprudential policy instruments. At the same time, amid global inflationary pressures and risks to growth, we are walking on a narrow path as we strive to deliver on our price stability mandate. But rest assured, we remain fully committed to stabilising inflation at our 2% target over the medium-term.
Compliments of the European Central Bank.
The post ECB Speech | Luis de Guindos: Building the Financial System of the 21st Century first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Commission has today presented the REPowerEU Plan, its response to the hardships and global energy market disruption caused by Russia’s invasion of Ukraine. There is a double urgency to transform Europe’s energy system: ending the EU’s dependence on Russian fossil fuels, which are used as an economic and political weapon and cost European taxpayers nearly €100 billion per year, and tackling the climate crisis. By acting as a Union, Europe can phase out its dependency on Russian fossil fuels faster. 85% of Europeans believe that the EU should reduce its dependency on Russian gas and oil as soon as possible to support Ukraine. The measures in the REPowerEU Plan can respond to this ambition, through energy savings, diversification of energy supplies, and accelerated roll-out of renewable energy to replace fossil fuels in homes, industry and power generation.
The green transformation will strengthen economic growth, security, and climate action for Europe and our partners. The Recovery and Resilience Facility (RRF) is at the heart of the REPowerEU Plan, supporting coordinated planning and financing of cross-border and national infrastructure as well as energy projects and reforms. The Commission proposes to make targeted amendments to the RRF Regulation to integrate dedicated REPowerEU chapters in Member States’ existing recovery and resilience plans (RRPs), in addition to the large number of relevant reforms and investments which are already in the RRPs. The country-specific recommendations in the 2022 European Semester cycle will feed into this process.
Saving energy
Energy savings are the quickest and cheapest way to address the current energy crisis, and reduce bills. The Commission proposes to enhance long-term energy efficiency measures, including an increase from 9% to 13% of the binding Energy Efficiency Target under the ‘Fit for 55′ package of European Green Deal legislation. Saving energy now will help us to prepare for the potential challenges of next winter. Therefore the Commission also published today an ‘EU Save Energy Communication‘ detailing short-term behavioural changes which could cut gas and oil demand by 5% and encouraging Member States to start specific communication campaigns targeting households and industry. Member States are also encouraged to use fiscal measures to encourage energy savings, such as reduced VAT rates on energy efficient heating systems, building insulation and appliances and products. The Commission also sets out contingency measures in case of severe supply disruption, and will issue guidance on prioritisation criteria for customers and facilitate a coordinated EU demand reduction plan.
Diversifying supplies and supporting our international partners
The EU has been working with international partners to diversify supplies for several months, and has secured record levels of LNG imports and higher pipeline gas deliveries. The newly created EU Energy Platform, supported by regional task forces, will enable voluntary common purchases of gas, LNG and hydrogen by pooling demand, optimising infrastructure use and coordinating outreach to suppliers. As a next step, and replicating the ambition of the common vaccine purchasing programme, the Commission will consider the development of a ‘joint purchasing mechanism‘ which will negotiate and contract gas purchases on behalf of participating Member States. The Commission will also consider legislative measures to require diversification of gas supply over time by Member States. The Platform will also enable joint purchasing of renewable hydrogen.
The EU External Energy Strategy adopted today will facilitate energy diversification and building long-term partnerships with suppliers, including cooperation on hydrogen or other green technologies. In line with the Global Gateway, the Strategy prioritises the EU’s commitment to the global green and just energy transition, increasing energy savings and efficiency to reduce the pressure on prices, boosting the development of renewables and hydrogen, and stepping up energy diplomacy. In the Mediterranean and North Sea, major hydrogen corridors will be developed. In the face of Russia’s aggression, the EU will support Ukraine, Moldova, the Western Balkans and Eastern Partnership countries, as well as our most vulnerable partners. With Ukraine we will continue to work together to ensure security of supply and a functioning energy sector, while paving the way for future electricity and renewable hydrogen trade, as well as rebuilding the energy system under the REPowerUkraine initiative.
Accelerating the rollout of renewables
A massive scaling-up and speeding-up of renewable energy in power generation, industry, buildings and transport will accelerate our independence, give a boost to the green transition, and reduce prices over time. The Commission proposes to increase the headline 2030 target for renewables from 40% to 45% under the Fit for 55 package. Setting this overall increased ambition will create the framework for other initiatives, including:

A dedicated EU Solar Strategy to double solar photovoltaic capacity by 2025 and install 600GW by 2030.
A Solar Rooftop Initiative with a phased-in legal obligation to install solar panels on new public and commercial buildings and new residential buildings.

Doubling of the rate of deployment of heat pumps, and measures to integrate geothermal and solar thermal energy in modernised district and communal heating systems.
A Commission Recommendation to tackle slow and complex permitting for major renewable projects, and a targeted amendment to the Renewable Energy Directive to recognise renewable energy as an overriding public interest. Dedicated ‘go-to’ areas for renewables should be put in place by Member States with shortened and simplified permitting processes in areas with lower environmental risks. To help quickly identify such ‘go-to’ areas, the Commission is making available datasets on environmentally sensitive areas as part of its digital mapping tool for geographic data related to energy, industry and infrastructure.

Setting a target of 10 million tonnes of domestic renewable hydrogen production and 10 million tonnes of imports by 2030, to replace natural gas, coal and oil in hard-to-decarbonise industries and transport sectors. To accelerate the hydrogen market increased sub-targets for specific sectors would need to be agreed by the co-legislators. The Commission is also publishing two Delegated Acts on the definition and production of renewable hydrogen to ensure that production leads to net decarbonisation. To accelerate hydrogen projects, additional funding of €200 million is set aside for research, and the Commission commits to complete the assessment of the first Important Projects of Common European Interest by the summer.
A Biomethane Action Plan sets out tools including a new biomethane industrial partnership and financial incentives to increase production to 35bcm by 2030, including through the Common Agricultural Policy.

Reducing fossil fuel consumption in industry and transport
Replacing coal, oil and natural gas in industrial processes will reduce greenhouse gas emissions and strengthen security and competitiveness. Energy savings, efficiency, fuel substitution, electrification, and an enhanced uptake of renewable hydrogen, biogas and biomethane by industry could save up to 35 bcm of natural gas by 2030 on top of what is foreseen under the Fit for 55 proposals.
The Commission will roll out carbon contracts for difference to support the uptake of green hydrogen by industry and specific financing for REPowerEU under the Innovation Fund, using emission trading revenues to further support the switch away from Russian fossil fuel dependencies. The Commission is also giving guidance on renewable energy and power purchase agreements and will provide a technical advisory facility with the European Investment Bank. To maintain and regain technological and industrial leadership in areas such as solar and hydrogen, and to support the workforce, the Commission proposes to establish an EU Solar Industry Alliance and a large-scale skills partnership. The Commission will also intensify work on the supply of critical raw materials and prepare a legislative proposal.
To enhance energy savings and efficiencies in the transport sector and accelerate the transition towards zero-emission vehicles, the Commission will present a Greening of Freight Package, aiming to significantly increase energy efficiency in the sector, and consider a legislative initiative to increase the share of zero emission vehicles in public and corporate car fleets above a certain size. The EU Save Energy Communication also includes many recommendations to cities, regions and national authorities that can effectively contribute to the substitution of fossil fuels in the transport sector.
Smart Investment
Delivering the REPowerEU objectives requires an additional investment of €210 billion between now and 2027. This is a down-payment on our independence and security. Cutting Russian fossil fuel imports can also save us almost €100 billion per year. These investments must be met by the private and public sector, and at the national, cross-border and EU level.
To support REPowerEU, €225 billion is already available in loans under the RRF. The Commission adopted legislation and guidance to Member States today on how to modify and complement their RRPs in the context of REPowerEU. In addition, the Commission proposes to increase the RRF financial envelope with €20 billion in grants from the sale of EU Emission Trading System allowances currently held in the Market Stability Reserve, to be auctioned in a way that does not disrupt the market. As such, the ETS not only reduces emissions and the use of fossil fuels, it also raises the necessary funds to achieve energy independence.
Under the current MFF, cohesion policy will already support decarbonisation and green transition projects with up to €100 billion by investing in renewable energy, hydrogen and infrastructure. An additional €26.9 billion from cohesion funds could be made available in voluntary transfers to the RRF. A further €7.5 billion from the Common Agricultural Policy is also made available through voluntary transfers to the RRF. The Commission will double the funding available for the 2022 Large Scale Call of the Innovation Fund this autumn to around €3 billion.
The Trans-European Energy Networks (TEN-E) have helped to create a resilient and interconnected EU gas infrastructure. Limited additional gas infrastructure, estimated at around €10 billion of investment, is needed to complement the existing Projects of Common Interest (PCI) List and fully compensate for the future loss of Russian gas imports. The substitution needs of the coming decade can be met without locking in fossil fuels, creating stranded assets or hampering our climate ambitions. Accelerating electricity PCIs will also be essential to adapt the power grid to our future needs. The Connecting Europe Facility will support this, and the Commission is launching today a new call for proposals with a budget of €800 million, with another one to follow in early 2023.
Background
On 8 March 2022, the Commission proposed the outline of a plan to make Europe independent from Russian fossil fuels well before 2030, in light of Russia’s invasion of Ukraine. At the European Council on 24-25 March, EU leaders agreed on this objective and asked the Commission to present the detailed REPowerEU Plan which has been adopted today. The recent gas supply interruptions to Bulgaria and Poland demonstrate the urgency to address the lack of reliability of Russian energy supplies.
The Commission has adopted 5 wide-ranging and unprecedented packages of sanctions in response to Russia’s acts of aggression against Ukraine’s territorial integrity and mounting atrocities against Ukrainian civilians and cities. Coal imports are already covered by the sanctions regime and the Commission has tabled proposals to phase out oil by the end of the year, which are now being discussed by Member States.
The European Green Deal is the EU’s long-term growth plan to make Europe climate neutral by 2050. This target is enshrined in the European Climate Law, as well as the legally binding commitment to reduce net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The Commission presented its ‘Fit for 55′ package of legislation in July 2021 to implement these targets; these proposals would already lower our gas consumption by 30% by 2030, with more than a third of such savings coming from meeting the EU energy efficiency target.
On 25 January 2021, the European Council invited the Commission and the High Representative to prepare a new External Energy Strategy. The Strategy interlinks energy security with the global clean energy transition via external energy policy and diplomacy, responding to the energy crisis created by Russia’s invasion of Ukraine and the existential threat of climate change. The EU will continue to support the energy security and green transition of Ukraine, Moldova and the partner countries in its immediate neighbourhood. The Strategy acknowledges that Russia’s invasion of Ukraine has a global impact on energy markets, affecting in particular developing partner countries. The EU will continue to provide support for a secure, sustainable and affordable energy worldwide.
Compliments of the European Commission.
The post REPowerEU: A plan to rapidly reduce dependence on Russian fossil fuels and fast forward the green transition first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

With the REPowerEU package adopted today, we are helping to provide a common, supportive, and coordinated response to the energy implications of Russia’s invasion of Ukraine.
There are three main messages that I would like to share with you in my condition as EU Commissioner for internal market and industry.
1. The industrial dimension of unplugging Europe from Russian gas
Industry consumes more than a quarter of gas demand, sometimes with limited substitution options. That is why accelerating our independence from Russian gas requires working with industry to identify alternatives.
It also means understanding that Europe must mobilize an unprecedented industrial capacity to produce and deploy alternatives to Russian fossil fuels. More than 210 billion euros will have to be invested over 5 years to achieve our objectives. This is 10% on top of the annual investment needed to achieve the “Fit for 55” objectives.
These investments involve deep transformation of industrial processes, by investing in electrification, hydrogen, or carbon storage. They require access to more and more decarbonised electricity, more and better performing networks. All of this to be able to put on the market the clean technologies needed for our energy transition.
At each stage of the process, a new industry needs to emerge, an industrial ecosystem must be transformed, and workers reskilled.
Let’s take our electricity needs as an example. We need decarbonised and abundant electricity, which will allow us to electrify industrial processes wherever possible, and to produce hydrogen where it is needed, particularly as energy storage.
Today we have 165 Gigawatts (GW) of solar energy capacity installed. We will need more then 600 GW by 2030. And today, more than 70% of these needs are imported from a single country, China.
To ensure that Europe has the industrial capacity to meet its ambitions, and that regulatory targets also lead to job creation in Europe, we are launching an industrial alliance for solar energy. The alliance will aim to foster an innovative and value-creating industry in Europe.
We are also stepping up efforts on hydrogen. Most recently, I signed a declaration with industry to work to increase our electrolyser capacity tenfold by 2025.
In the coming months, we will have to continue our efforts in the wind energy or heat pump sectors, as these technologies are equally needed.
And, of course, we should optimise the potential of nuclear power. In the short term, by extending power plants wherever possible and safe should reduce our dependence. We can also use them to produce hydrogen. And in the longer term, by supporting an innovative and flexible nuclear sector, in particular small modular reactors.
2. Preparing for all scenarios
REPowerEU presents options to reduce Russian gas consumption by two-thirds in the short term. While we have identified ways to be even faster, provided we consider the broadest possible basket of measures, we must continue to prepare ourselves.
Because we are not immune to unilateral decisions from the Russians. I will continue my dialogue with industry to help us to work, in a coordinated and united way, on all the alternatives.
Some of these alternatives, like using coal or heavy fuel oils instead of gas for certain industrial processes, will not be very popular in the short term. But I believe we should consider all options without taboos.
3. Reducing our dependence on imported raw materials
Today’s package aims to end our dependence on Russian gas. Whether it is solar, wind, hydrogen, batteries or any other technology or component, their manufacture requires raw materials. Almost all of which come from distant, concentrated, non-European sources.
With Maroš Šefčovič and my other colleagues in the College, we are working on a legislative initiative that is up to the challenge. Because what’s the point of ending one dependency if you’re going to be locked into another one even more dramatically? 
The demand for raw materials is exploding, due to the green and digital transition, but also in light of our growing defence and security needs highlighted in a separate Commission communication today. And we depend almost exclusively on imports, often from a single country. So if one of those countries is at war, bans exports, its industry is in lockdown, or there is an earthquake, we have a problem.
That is why you can expect raw materials to become a focal point of our attention and actions.
This does not mean producing everything in Europe, of course. But we must be present on all value chains, so that we can take our industrial destiny and our geopolitical choices in hand.
Compliments of the European Commission.
The post REPowerEU: time to address our energy dependencies first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.