Speech by François Villeroy de Galhau, Governor of the Banque de France | Berlin Academy – Berlin, 10 September 2020
Ambassador DescôtesProfessors Schwan, Göring, Kaplan, Ladies and gentlemen,
I am very pleased to be with you today, despite the obstacles related to Covid. The Berlin Academy is one of the essential forums where Franco-German relations, which are at the heart of the European project, can be deepened over time. I am completely convinced of this. I am French, but my family’s roots are in Saarland. My family has lived there since the end of the 18th century and its ceramics manufacturing company Villeroy & Boch is part of the German “Mittelstand”. I love Germany, its language and its culture.
I’ve always been struck by a difference in terminology: the French speak, as romantics, of the Franco-German “couple”, and the Germans speak as engineers and use the term “engine”. But let’s set clichés aside: France also has excellent engineers, and romanticism was also born in Germany with Goethe, and Schiller. And above let’s all see the common reality.
We are experiencing, I believe, one of those “Franco-German moments” that will mark history, and we can now rightly celebrate it:  on 18 May, a Franco-German initiative on the European stimulus package; on 21 July, a historic agreement by the European Council in Brussels on a EUR 750 billion package, supported by a united Franco-German alliance; on 20 August, the Chancellor visited the President of the Republic in Brégançon.
Despite any fears, faced with the threat of the Covid crisis, Germany has clearly and unequivocally opted for Europe and the euro. However, in its early stages, the crisis appeared to distance us, due to our  different abilities to respond, and sometimes in different orders. Europe has once again demonstrated in this crisis that it is stronger than is commonly believed.
I will concentrate here on economic matters, because that is where my competence lies. Naturally, there are broader issues in Europe, that are concrete and emotional: those of our borders, our institutions, our military and diplomatic power, and, in a wider sense, our common identity, which is apparent to our fellow citizens. The President of the French Republic speaks of the necessary “European sovereignty”. I am aware that this expression gives rise to debate. In any case, it means that Europe must not passively put up with events, in the face of the growing rivalry between the United States and China. That we can and should be proud collectively of our achievements. In the economic sphere, these are the single market, the single currency, and our European social model – the soziale Marktwirtschaft. The world needs Europe, today. We must be decisive… and at the same time aware that economic rigour is a prerequisite for our political influence in this world of 2020 so fraught with danger. This brings me to what I want to say today. So far Europe has stood firm in the face of a shock of unprecedented severity: this will constitute the first part of my speech. And I will then address the following question: can reconstruction now strengthen Europe and the Franco-German alliance?
**
I.    So far Europe has stood firm in the face of a shock of unprecedented severity
Over the past six months, we have experienced a crisis of unprecedented proportions: the most serious that the European economy has endured since 1945. The European project has been subjected to a veritable full-scale – almost existential – “stress test”. But, to date, Europe has held firm. Europeans have an essential asset: their common social model based on social solidarity and organised public services. For instance, household purchasing power has been preserved overall, thanks in particular to short-time working measures. This is one major difference with the United States, where 22 million jobs were destroyed in a matter of weeks.
We know that the health shock has affected European countries to varying degrees, but the economic shock has been more symmetrical, due to the restrictive measures that ended up being substantial in all countries. GDP figures for the second quarter show that the recession is widespread, with double-digit percentage declines: -11.8 % in the euro area, -13.8% in France and -9.7% in Germany. Almost half of the differences between our two countries can be attributed to the construction sector, which has contracted much less in Germany, and more than half to the differences in methodology regarding public services statistics.
The European response to the health crisis was initially monetary, thanks to the rapid and decisive action of the Eurosystem. I attended the Governing Council today, and I will not comment immediately on our decisions that Christine Lagarde has just presented. In mid-March, when the economy was threatened by a breakdown in financing, the Governing Council of the ECB put in place an immediate and virtually unlimited liquidity shield. On 12 March, we acted first of all for businesses and SMEs that obtain financing from banks, by allocating them an exceptional refinancing envelope at a very attractive rate: the TLTRO III, which as of their first take up in June represented an amount of nearly EUR 1,350 billion. Then, on 18 March, for large companies and governments that fund themselves through the financial markets, we created the Pandemic Emergency Purchase Programme (PEPP), initially totalling EUR 750 billion, which was increased to EUR 1,350 billion on 4 June.
This massive and rapid action was welcomed but raised questions, particularly in Germany: is the ECB not going beyond its mandate, endangering price stability? And even more “fundamentally “, where do these thousands of billions created all of a sudden come from? I will start with the second question:  the specific feature of a central bank is its ability to create money virtually and without limits. However, it must be borne in mind that the money created by central banks is never simply “given away” permanently: it is loaned for a limited period; and it is channelled into the economy and eventually comes back to the central bank. The central bank can buy time through its monetary creation, and this is important. But it cannot sustainably increase wealth; only our work and economic growth can.
I will now return to the first question, on whether or not we are fulfilling our mandate. In its founding Treaties, and under the legitimacy afforded to it by economic actors and public opinion, the ECB’s measures are bound by two interlinked anchors: its price stability mandate and its independence. They are inherited from the Bundesbank and in my view vital. Independence : the ECB is subject to neither national governments, nor to the pressures of the financial markets nor of passing trends.
The ECB’s monetary policy must continue to support economic activity, for the sake of its own mandate of price stability. In the short and medium term, the crisis will have desinflationary effects that are already noticeable, with inflation temporarily falling in August by 0.2% in the euro area, and by 0.1% in Germany. For a year as a whole, we are expecting a slightly positive inflation of 0.3% in 2020 and 1.0% in 2021. As you know, we unfortunately remain well below our inflation target of “less than, but close to 2%”.
The other aspect of the response to the health crisis are fiscal measures, primarily at the national level. Germany clearly made greater use of the financial leeway it had built up since the 2009 crisis. Its fiscal stimulus package (as a percentage of GDP) is at this stage greater than France’s. The effectiveness of its stimulus package is still difficult to anticipate: in particular, the temporary reduction in VAT appears costly. The French government also announced a EUR 100 billion stimulus package last week. I wish to mention three positive features. It focuses on business supply and investment, and not household demand. This is fully justified, since households, protected by short-time working measures, except for the most vulnerable ones, will have saved nearly EUR 100 billion this year. This plan also has a strong focus on transformation, including ecological reconstruction – a third of the funds are allocated to this area.  Lastly, most spending is temporary and non-recurring, which will make it hopefully possible, once the crisis is over, to return to a sound and sustainable fiscal path.
II.    Can reconstruction now strengthen Europe and the Franco-German alliance?
After the emergency phase, the time has come to exit the crisis. We Europeans have common objectives here: to support growth during the recovery phase, but above all to invest for the future (climate change, digital, health, etc.), in a world that is increasingly uncertain. To achieve this, Europe has four concrete and innovative levers at its disposal: an unprecedented recovery plan, a Financing Union for private savings, its single market, and its commitment to fight global warming.
An unprecedented recovery planThe Franco-German initiative of 18 May, and the subsequent European agreement of 21 July, have been a major step forward for European financial solidarity. This is an unprecedented act of solidarity towards the countries most affected by a pandemic, which is itself unparalleled. For the first time, a common European-wide fund to finance final expenditure has been adopted, representing over half of the package (EUR 390 billion). This is not only a strong political signal, but also an economic rebalancing of the policy-mix in the euro area, which lays the groundwork for a real common fiscal policy. The ECB’s Governing Council has long advocated that monetary policy should not be “the only game in town” in Europe. This is very good news.
The commitment of the German leaders was decisive, but here too I hear questions from my German friends: “we are all for showing solidarity in this crisis, but might this not become the one-way transfer union that we fear?” No, because it is a common debt: Germany will hold 23%, but France too will hold 18%. No, because all our economies will benefit from the health of the other economies in the single market. And, no, because this “Next generation fund” must be the lever for the beneficiaries, starting with the countries of the South, to invest and reform for the future. And let’s rejoice in the fact that we have, no doubt, at last resolved the decade-long and fruitless squabble over the collectivisation of debts. Existing debts are, and will remain, the responsibility of national governments, and that’s the way it should be. Conversely, the future financing needs related to the recovery should be the natural ground in which financial solidarity is exercised, and hence a European bond.
A Financing Union for Investment and Innovation.Alongside the public – fiscal – risk-sharing mechanisms that tend to monopolise the debate, private risk-sharing mechanisms, which are less frequently considered, are just as important and effective. The euro area has an abundant resource at its disposal: a surplus of savings over investment which amounted to EUR 360 billion in 2019, making it the world’s largest pool of private savings. This resource is currently invested outside the euro area, although our potential investment requirements are significant. A better allocation of European private savings, however, requires more effective cross-border financing channels.
We therefore need to combine a more efficient Banking Union and an at last completed Capital Markets Union (CMU) to make a genuine “Financing Union for Investment and Innovation”. Jens Weidmann, the President of the Bundesbank, and I had made a strong case for it in a joint op-ed published in April 2019.
Reviving the single market, our essential assetThere is an essential asset that Europe does not talk about enough: it is its single market. Yet, this is its great economic success, together with the euro. But it is vital to remain vigilant as to the dangers of fragmentation with the Covid crisis. National governments acted appropriately during the critical phase, adopting emergency measures in particular to provide liquidity support to their businesses. But the single market means common rules for businesses: if this were not the case, the divergence between our economies could regrettably increase further. It is therefore necessary to quickly restore the Commission’s control over state aid and fair competition
Furthermore, we must revive the single market, above all because we can optimise its power by combining its various components much better: free movement of goods, naturally; but also the cross-border financing capacity with the financing Union; and last but not least, regulatory power. There are still too many implicit borders and too much fragmentation. We must use regulatory power to guide innovations – the example of the General Regulation on Data Protection (GDPR) -, have the courage to develop an industrial policy with public-private partnerships, as in the case of artificial intelligence and batteries, and make progress, for example, on Franco-German business law.
Climate change and carbon taxLastly, the ecological transition is clearly one of our common structural priorities and carbon tax is generally considered to be the most effective instrument to fight global warming. The European agreement of 21 July provides for the Commission proposing in the first half of 2021 a “carbon border adjustment mechanism”, accompanied by a “revised emissions trading system, possibly extending it to the aviation and maritime sectors.” The advantage of this solution is that it provides the European Union with a resource of its own and restores fair competition between European products and imported products that have a higher carbon footprint. The success of this instrument will depend on our negotiations at the WTO, and on its more extensive integration into European policies (transport, industrial policy, etc.).
**
Earlier I mentioned the difference in terminology between French and German: the French use “couple”, while the Germans speak of “engine”. But I will conclude by quoting a Frenchman, Clément Beaune, the new Minister for European Affairs, who I believe sums up the situation eloquently: “Celebration is necessary, but it is never enough and does not dispense with what has for six decades been the unique strength of the Franco-German relationship: a working relationship, organised at all levels of our political and administrative life, whose power stems from the fact that our two countries have indeed often divergent positions but know, at key moments, how to overcome them by involving others”.  Involving others is what we did in July 2019 with the appointments to the Commission and the ECB, and even more so this year in the face of the crisis. Together we have served Europe and Europeans well. We can be sure of one thing: they will still need our common commitment, on many ambitions and for a long time to come.
Compliments of the Banque de France. 
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EU countries lost an estimated €140 billion in Value-Added Tax (VAT) revenues in 2018, according to a new report released by the European Commission today.
Though still extremely high, the overall ‘VAT Gap’ – or the difference between expected revenues in EU Member States and the revenues actually collected – has improved marginally in recent years. However, figures for 2020 forecast a reversal of this trend, with a potential loss of €164 billion in 2020 due to the effects of the coronavirus pandemic on the economy.
In nominal terms, the overall EU VAT Gap slightly decreased by almost €1 billion to €140.04 billion in 2018, slowing down from a decrease of €2.9 billion in 2017. This downward trend was expected to continue for another year, though the coronavirus pandemic is likely to revert the positive trend.
The considerable 2018 VAT Gap, coupled with forecasts for 2020 – which will be impacted  by the coronavirus pandemic – highlights once again the need for a comprehensive reform of EU VAT rules to put an end to VAT fraud, and for increased cooperation between Member States to promote VAT collection while protecting legitimate businesses. The Commission’s recent Fair and Simple Taxation package (July 2020) also details a number of upcoming measures in this area.
Paolo Gentiloni, Commissioner for Economy, said: “Today’s figures show that efforts to shut down opportunities for VAT fraud and evasion have been making gradual progress – but also that much more work is needed. The coronavirus pandemic has drastically altered the EU’s economic outlook and is set to deal a serious blow to VAT revenues too. At this time more than ever, EU countries simply cannot afford such losses. That’s why we need to do more to step up the fight against VAT fraud with renewed determination, while also simplifying procedures and improving cross-border cooperation.”
Main results in Member States
As in 2017, Romania recorded the highest national VAT Gap with 33.8% of VAT revenues going missing in 2018, followed by Greece (30.1%) and Lithuania (25.9%). The smallest gaps were in Sweden (0.7%), Croatia (3.5%), and Finland (3.6%). In absolute terms, the highest VAT Gaps were recorded in Italy (€35.4 billion), the United Kingdom (€23.5 billion) and Germany (€22 billion).

Member State
VAT Gap %
VAT Gap (in €mn)
Member State

VAT    Gap %

VAT Gap (in €mn)

Belgium
10.4%
3,617
Lithuania
25.9%
1,232

Bulgaria
10.8%
614
Luxembourg
5.1%
199

Czechia
12.0%
2,187
Hungary
8.4%
1190

Denmark
7.2%
2,248
Malta
15.1%
164

Germany
8.6%
22,077
The Netherlands
4.2%
2,278

Estonia
5.2%
127
Austria
9.0%
2,908

Ireland
10.6%
1,682
Poland
9.9%
4,451

Greece
30.1%
6570
Portugal
9.6%
1,889

Spain
6.0%
4,909
Romania
33.8%
6,595

France
7.1%
12,788
Slovenia
3.8%
148

Croatia
3.5%
252
Slovakia
20.0%
1,579

Italy
24.5%
35,439
Finland
3.6%
807

Cyprus
3.8%
77
Sweden
0.7%
306

Latvia
9.5%
256
United Kingdom
12.2%
23,452

Individual performances by Member States still vary significantly. Overall, in 2018 half of EU-28 Member States recorded a gap above the median of 9.2%, though 21 countries did see decreases compared to 2017, most significantly in Hungary (-5.1%), Latvia (-4.4%), and Poland (-4.3%). The biggest increase was seen in Luxembourg (+2.5%), followed by marginal increases in Lithuania (+0.8%), and Austria (+0.5%).
Background
The annual ‘VAT Gap’ report measures the effectiveness of VAT enforcement and compliance measures in each Member State. It provides an estimate of revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations.
The VAT Gap is relevant for both the EU and Member States since VAT makes an important contribution to both the EU and national budgets. The study applies a “top-down” methodology using national accounts data to produce estimations of the VAT Gaps. This year’s edition includes notable additions, such as a 20-years back casting exercise, an improved econometric analysis of the VAT Gap determinants and a projection of the potential impact of the coronavirus recession on the evolution of the VAT Gap.
Compliments of the European Commission.
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Today, the Commission presents the assessment of the implementation and effectiveness of the Code of Practice on Disinformation. The assessment shows that the Code has proven a very valuable instrument, the first one of its kind worldwide, and has provided a framework for a structured dialogue between relevant stakeholders to ensure greater transparency of platforms’ policies against disinformation within the EU. At the same time, the assessment highlights certain shortcomings mainly due to the Code’s self-regulatory nature.
Věra Jourová, Vice President for Values and Transparency, said: “The Code of Practice has shown that online platforms and the advertising sector can do a lot to counter disinformation when they are put under public scrutiny. But platforms need to be more accountable and responsible; they need to become more transparent. The time has come to go beyond self-regulatory measures. Europe is best placed to lead the way and propose instruments for more resilient and fair democracy in an increasingly digital world.”
Thierry Breton, Commissioner for the Internal Market, said: “Organising and securing our digital information space has become a priority. The Code is a clear example of how public institutions can work more efficiently with tech companies to bring real benefits to our society. It is a unique tool for Europe to be assertive in the defence of its interests and values. Fighting disinformation is a shared responsibility, which the tech and advertising sector must fully assume.”
The Commission, assisted by the European Regulators Group for Audiovisual Media Services (ERGA), has been working with online platforms and advertising associations to monitor the effective implementation of the commitments set forth in the Code of Practice on Disinformation. The assessment of the Code covers its initial 12-months of operation. It brought positive outcomes. In particular, it increased platforms’ accountability and public scrutiny of the measures taken by the signatories to counter disinformation within the EU. However, the quality of the information disclosed by the Code’s signatories is still insufficient and shortcomings limit the effectiveness of the Code.
The assessment identified the following shortcomings:

the absence of relevant key performance indicators (KPIs) to assess the effectiveness of platforms’ policies to counter the phenomenon;
the lack of clearer procedures, commonly shared definition and more precise commitments;
the lack of access to data allowing for an independent evaluation of emerging trends and threats posed by online disinformation;
missing structured cooperation between platforms and the research community;
the need to involve other relevant stakeholders, in particular from the advertising sector.

Reports on actions taken to fight coronavirus-related disinformation
Since the outbreak of the coronavirus pandemic and ‘infodemic’, the Commission has set out a balanced and comprehensive European approach on coronavirus-related disinformation in the 10 June 2020 Joint Communication and has been in close contact with the platforms adhering to the Code of practice to ensure that its safeguards were effectively applied.
Platforms have shown that they can further improve their performance, when compared with what was achieved previously under the Code. Actions taken have led to concrete and measurable results, i.e. an increase in the prominence given to authoritative sources of information, and the availability of new tools to users to critically assess online content and report possible abuses. The crisis has also resulted in a stepping up of collaborations with fact-checkers and researchers and, in certain cases, the demoting or removing of content fact-checked as false or misleading and potentially harmful to people health.
Therefore, alongside the assessment of the Code of Practice, the Commission is today also publishing the first baseline reports on the actions taken by the signatories of the Code to fight false and misleading coronavirus-related information until 31 July. This includes initiatives to:

promote and give visibility to authoritative content at EU and Member State level. For example, Google Search gave prominence to articles published by EU fact-checking organisations, which generated more than 155 million impressions over the first half of 2020 and LinkedIn sent the “European Daily Rundown”, a curated news summary by experienced journalist, to close to 10 million EU interested members.

improve users’ awareness: Facebook and Instagram directed more than 2 billion people to resources from health authorities, including the WHO.

Detect and hamper manipulative behaviour: Twitter challenged more than 3.4 million suspicious accounts targeting coronavirus discussion.

Limit advertising linked to coronavirus disinformation to prevent advertisers from capitalising on them. All platforms have facilitated coronavirus-related ads from public health authorities and healthcare organisations.

Delivering on the Joint Communication, the Commission will gather, on a monthly basis, specific indicators from the platforms to monitor the effectiveness and impact of their policies in curbing the spread of disinformation related to the coronavirus pandemic.
Building both on the actions listed in the Joint Communication, and addressing the shortcomings identified in today’s assessment of the Code, the Commission will deliver on its comprehensive approach by presenting two complementary initiatives by the end of the year: a European Democracy Action plan and a Digital Services Act package. They will further strengthen the EU’s work to counter disinformation and to adapt to evolving threats and manipulations, support free and independent media, better regulate the digital informational space and upgrade the ground-rules for all internet services. A public consultation on the former is ongoing until 15 September while the consultation on the latter ended earlier this week.
Background
The assessment published today delivers on a specific action point of the December 2018 Action Plan against Disinformation, which charged the Commission to carry out a comprehensive assessment of the Code at the conclusion of its initial 12-month period of application. Online platforms signatories to the Code (Google, Facebook, Twitter, Microsoft, Mozilla and, as from June 2020, TikTok) committed to put in place policies aimed at:
(1) reducing opportunities for advertising placements and economic incentives for actors that disseminate disinformation online,
(2) enhancing transparency of political advertising, by labelling political ads and providing searchable repositories of such ads,
(3) taking action against,  and disclose information about the use by malicious actors of manipulative techniques on platforms’ services  designed to artificially boost the dissemination of information online and enable certain false narrative to become viral,
(4) setting up technological features that give prominence to trustworthy information, so that users have more instruments and tools to critically assess content they access online, and
(5) engaging in collaborative activities with fact-checkers and the research community, including media literacy initiatives.
The Code asked signatories, which include also trade associations representing the advertising industry, to report on the implementation of their commitments, based on annual self-assessment reports, and to cooperate with the Commission in assessing the Code. The assessment published today takes into consideration these annual self-assessment reports, a study carried out by an independent consultancy, Valdani, Vicari and Associates, a monitoring report carried out by European Regulators Group for Audiovisual Media Services (ERGA), and the Commission’s report on the 2019 elections.
Compliments of the European Commission. 
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The European Securities and Markets Authority (ESMA), the EU securities markets regulator, today publishes a Working Paper on Closet Indexing Indicators and Investor Outcomes.  The study finds that investors can expect lower net returns from closet indexers than from a genuinely actively managed fund portfolio. A summary of this study was also included in the Trends, Risks and Vulnerabilities report published on 2 September.
Closet indexing refers to the situation in which asset managers claim to manage their funds in an active manner while in fact tracking or staying close to a benchmark index. The authors of the study looked at annual fund-level data for the period 2010 to 2018, finding that investors saw both lower expected returns and higher fees when they invest in closet indexers compared with active funds. Overall, the net performance of potential closet indexers was worse than the net performance of genuinely active funds, as the marginally lower fees of potential closet indexers are outweighed by reduced performance.
Closet indexing is a practice that has been criticised by supervisors and investor advocacy groups on numerous occasions in recent years, over concern that investors are being misled about a fund’s investment strategy and objective and are not receiving the service that they have paid for.
ESMA and NCAs have worked to identify potential closet indexers by examining metrics on fund composition and performance and by conducting follow-up detailed supervisory work on a fund-by-fund basis. ESMA recognises that such metrics, while imperfect screening tools, are a useful source of evidence to help direct supervisory focus.
This study published today does not aim to identify particular closet indexers, but analyses how closet indexing relates to the costs and performance of EU-domiciled equity funds. In so doing, it aims to contribute to the understanding of closet indexing in the EU.
Compliments of the European Securities and Markets Authority.
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Today, the European Commission adopted its first-ever Strategic Foresight Report, aiming to identify emerging challenges and opportunities to better steer the European Union’s strategic choices. Strategic foresight will inform major policy initiatives. It will support the Commission in designing future-proof policies and legislation that serves both the current needs and longer-term aspirations of European citizens. The 2020 Report presents the rationale for using foresight in EU policy-making, and introduces a comprehensive concept of EU resilience.
European Commission President Ursula von der Leyen said: “In these challenging times, political leaders have to look wide and far ahead. This report shows the importance of resilience for a strong and lasting recovery. We aim to steer the necessary transitions in a sustainable, fair, and democratic manner.”
Vice-President Maroš Šefčovič, in charge of interinstitutional relations and foresight, said: “The pandemic has not only thrown a sharp light on our vulnerabilities, but has presented opportunities that the EU cannot afford to miss. It has also reaffirmed the need to make our policies evidence-based, future-proof and centred on resilience. We cannot expect the future to become less disruptive – new trends and shocks will continue to affect our lives. The first-ever Strategic Foresight Report therefore sets the scene for how we can make Europe more resilient – by boosting our open strategic autonomy and building a fairer, climate-neutral and digitally sovereign future.”
In light of the ambitious Recovery Plan for Europe, the 2020 Strategic Foresight Report considers EU resilience in four dimensions: social and economic, geopolitical, green, and digital. For each dimension, the report identifies the capacities, vulnerabilities and opportunities revealed by the coronavirus crisis, which need to be addressed in the medium- to long-term.
Embedding Strategic Foresight into EU Policy-making
Strategic Foresight helps improve policy design, develop future-proof strategies and ensure that short-term actions are coherent with long-term objectives. The Commission has relied on foresight for many years; it now aims to embed it into all policy areas, to exploit its strategic value. A first example is the recent Communication on Critical Raw Materials, with foresight helping boost the EU’s open strategic autonomy. Mainstreaming foresight will be achieved by:

systematically conducting foresight exercises for all major policy initiatives;
publishing forward-looking, annual Strategic Foresight reports, analysing emerging trends and challenges to inform our policy- and decision-making;
supporting the development of foresight capacities in EU and Member State administrations; and
building a collaborative and inclusive foresight community with EU and international institutions and partners.

Monitoring Resilience
The 2020 Strategic Foresight Report proposes prototype resilience dashboards to kick‑start discussions among Member States and other key stakeholders on how best to monitor resilience. These discussions can help identify and assess strengths and weaknesses at EU and Member State level, in view of emerging megatrends and anticipated challenges. It can help answer the following question: are we, through our policies and recovery strategy, making the EU more resilient?
Next Steps:

The 2020 Strategic Foresight Report and its successors will inform President von der Leyen’s annual State of the Union addresses and Commission Work Programmes. They will also feed into the forthcoming inter-institutional negotiations on our first-ever multiannual programming.
The overarching Strategic Foresight agenda will chart EU political priorities and key initiatives in Commission Work Programmes, as well as major cross-cutting issues: such as the EU’s open strategic autonomy for a new global order; the future potential of green jobs and required skills; and the intersections of the green and digital transitions across policies.
The annual European Strategy and Political Analysis System (ESPAS) conference  in November 2020 will offer the opportunity to discuss the topic of next year’s Strategic Foresight Report and launch an EU-wide Foresight Network.
The development of shared reference foresight scenarios to inform future policy debate, to ensure coherence across policies, and to serve as a shared, forward‑looking framework for policy proposals. This can also feed into the Conference on the Future of Europe.

Compliments of the European Commission.
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Good morning,

Yesterday I interviewed the candidates put forward by the Irish government for the post of Commissioner, Ms Mairead McGuinness and Mr Andrew McDowell.
Both candidates showed great commitment to the European Union and to the job of Commissioner – excellent candidates. They also both clearly have significant experience of EU matters, of course from different perspectives.
Following these interviews, I have decided to propose to the Council and the European Parliament the appointment of Ms McGuinness to the post of Commissioner. She will be in charge of financial services, financial stability and the Capital Markets Union. Executive Vice-President Valdis Dombrovskis will assume responsibility for the trade portfolio, and he will remain the Commission’s representative on the Eurogroup, alongside with Commissioner Gentiloni.
Ms McGuinness has significant political experience on EU issues, having been an MEP since 2004 and currently holding the post of first Vice-President of the European Parliament. This experience is crucial in carrying forward the EU’s financial sector policy agenda and ensuring it supports and strengthens the Commission’s key priorities, notably the twin green and digital transition.
I would like to express my thanks to Mr McDowell for his application and wish him well in his future endeavours.
Thank you.
Compliments of the European Commission.
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The European Commission has launched a public consultation inviting Member States and other stakeholders to provide their views and comments on the existing EU State aid rules on public support for the deployment of broadband networks. The public consultation is part of an overall evaluation by the Commission of the relevant rules with a view to assess whether they are still fit purpose or whether they will need to be updated in light of recent technological and market developments. All interested parties can respond to the public consultation until 5 January 2021.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: ”Europe’s digital transformation depends on high quality networks. These are crucial for connecting the regions in the European Union, and contribute to a more competitive and sustainable social market economy. The public consultation will help the Commission assess whether the existing State aid rules on public support for the deployment of broadband networks are still fit for purpose and are equipped to meet the challenges of Europe’s digital future”.
The 2013 Broadband State aid Guidelines enable Member States to provide support for the deployment of broadband networks, subject to certain conditions. In particular, they allow for public investments where a market failure exists and where these investments bring a significant improvement to the market in terms of service availability, capacity, speeds and competition (step change). This ensures that public interventions focus on areas that would otherwise be left behind due to the absence of commercial interest to invest and that support “state of the art” technologies. At the same time, the Guidelines also aim at protecting private investments by providing that no public intervention can take place where private operators have invested or credibly plan to invest and fostering fair competition through competitive selection procedures, technological neutrality and open access requirements for the benefit of all European citizens and businesses.
Separately, the General Block Exemption Regulation (“GBER”) exempts Member States from having to notify aid measures supporting the deployment of broadband networks in areas where no infrastructure of the same category exists or is credibly planned in the near future, provided that certain conditions are met.
Since the adoption of the Broadband State Guidelines in 2013 and of the relevant GBER rules in 2014, broadband technologies have significantly improved and users’ needs have increased, requiring larger bandwidth as well as an improvement of the networks in terms of other parameters such as latency, availability and reliability.
The purpose of the public consultation is to assess whether the Broadband State aid  Guidelines and the relevant GBER provisions have met their objectives, what effect they have had on the market and on competition, and whether they need to be updated in light of recent technological and market developments and the new EU digital policy goals.  In the consultation, the Commission aims at assessing the effectiveness, efficiency, coherence, relevance and EU added value of the existing rules, in line with the Better Regulation requirements.
All details about the public consultation are available online.
Next steps
The consultation will be open until 5 January 2021.
The consultation is part of an overall evaluation by the Commission of the Broadband State aid Guidelines and the relevant provisions of the GBER, which will be carried out under the Commission’s Better Regulation rules. In addition to the public consultation, the evaluation will involve internal analyses by the Commission as well as the conclusions of a study prepared by an external consultant. The Commission will summarise the results of the exercise in a Staff Working Document, which will be made public. The evaluation will provide the basis for a future Commission decision on whether an update of the current rules is necessary.
Background
Under the Better Regulation Guidelines, the Commission evaluates if specific laws, policies and spending activities are fit for purpose and have delivered, at minimum cost, the desired changes to European businesses and citizens. The evaluation findings help the Commission decide whether EU actions should be continued or changed.
The existing 2013 Broadband State Aid Guidelines allow for public investments where a market failure exists and where these investments bring a significant improvement (step change). This is also subject to certain other parameters to protect competition and private investment incentives.
Between 2014 and 2019, Member States spent approximately €30 billion in public funding, in compliance with EU State aid rules, to fill investment gaps in broadband infrastructure deployment and to reach the objectives set out for 2020 by the Digital Agenda for Europe. As a result and according to the Digital Economy and Society Index, by mid-2019, already 86% of households in Europe had access to fast broadband of at least 30 megabits per second (Mbps) download speed, and 30% benefited from Gigabit connectivity.
Building on the EU’s existing 2020 broadband targets, the Commission has identified in its Gigabit Society Communication the connectivity needs to be achieved by 2025 to build a European Gigabit society, where very high capacity networks enable the widespread use and development of products, services and applications in the Digital Single Market. The identified connectivity needs are: (i) all European households should have access to internet connectivity offering download speeds of at least 100 Mbps, upgradable to Gigabit speed, (ii) all main socio-economic drivers such as schools, transport hubs and main providers of public services as well as digitally intensive enterprises should have access to internet Gigabit connectivity with download and upload speeds of at least 1 Gbps; (iii) uninterrupted 5G coverage for all urban areas and all major terrestrial transport paths should be ensured.
In February 2020, the Commission published the EU digital priorities among which the Communication on Shaping Europe’s Digital Future and recalled that connectivity to achieve the EU 2025 objectives remains the most fundamental building block of the digital transformation of Europe.
Compliments of the European Commission.
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The European Commission today published a proposal for a Council and European Parliament regulation to scrap duties on certain imports to the EU. In return, the United States will reduce its duties on certain EU exports to the U.S. market. This will put into effect the agreement announced by the EU and the U.S. on 21 August 2020. These tariff reductions between the EU and the U.S. will increase access to both EU and U.S. markets by around €200 million per year.
Executive Vice-President Valdis Dombrovskis said: “The EU and the U.S. share the most important economic partnership in the world, with trade in goods and services worth over €1.3 trillion annually. This deal provides both sides with a true win-win outcome, helping us to strengthen our partnership even further. Lowering tariffs on both sides improves access for our exporters and reduces the cost of imported goods. Those are both critically important factors in this time of coronavirus-related economic crisis. From the EU side, we view this agreement as an important step towards improving our relationship and resolving outstanding disputes. We remain eager to deepen transatlantic cooperation wherever possible as we firmly believe that, when it comes to truly global challenges, the chances of achieving successful global outcomes are improved if the European Union and United States work together.”
Once approved in line with the relevant procedures on either side of the Atlantic, the agreement will entail the reduction of U.S. tariffs on EU exports worth some $160 million a year. This includes prepared meals, crystal glassware, surface preparations, propellant powders, lighters and lighter parts. On its side, the EU will eliminate tariffs on imports of U.S. live and frozen lobster products. U.S. exports of these products to the EU are worth some $111 million.
Both sides will eliminate those tariffs on a most-favored nation (MFN) basis, i.e. for any partner, in line with the existing multilateral commitments. The measures will apply with retroactive effect as of 1 August 2020.
Compliments of the European Commission.
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September 07, the Commission, trade unions, chambers of commerce and employers’ organisations are renewing their cooperation to enhance the integration of migrants and refugees into the labour market. In a joint statement released today, they highlight areas for future focus, and express interest in cooperating further in the area of labour migration under the European Partnership on Integration launched in 2017. The signatories reaffirm the importance of a multi-stakeholder approach for early integration into the labour market benefitting both refugees and the economy and society at large.
Commissioner for Jobs and Social Rights, Nicolas Schmit, said: “The European Pillar of Social Rights makes no distinction where people come from. Regardless of gender, racial or ethnic origin, religion or belief, disability, age or sexual orientation, everyone has the right to equal treatment and opportunities regarding employment. Helping refugees integrate into the labour market by upskilling and by accessing quality jobs is paramount for their dignity, and it is paramount for Europe’s social cohesion.”
Commissioner for Home Affairs, Ylva Johansson, said: “Better using the skills and potential of refugees and migrants makes our labour markets more inclusive and contribute to the prosperity and cohesion of European society. The past months have shown that migrant workers and entrepreneurs have skills and talents that contribute to the recovery of Europe’s economy. Today, we are renewing our commitment to support employers’ organisations, trade unions and chambers of commerce in their engagement with refugees and we are open to expanding our cooperation further, for instance on labour migration.”
Since the launch of the European Partnership on Integration 3 years ago, the Commission has financed projects implemented by social and economic partners’ organisations to promote the integration of refugees into the labour market. Examples include the Labour-INT project, supporting the integration of refugees from arrival up to the workplace, through skills assessment, training and job placement in Italy, Germany and Belgium; or the European Refugees Integration Action Scheme operating in Bulgaria, Greece, Italy and Spain. Social and economic partners have also put in place initiatives in 20 Member States, such as the fachkraeftepotenzial platform launched by the Austrian Federal Economic Chamber and providing information to companies wishing to hire refugees.
Building on these achievements, the signatories agreed to focus future efforts on 3 areas: linking up stakeholders across economy and society for labour market integration; supporting entrepreneurship; and facilitating the identification, assessment and validation of skills.
In parallel, the Commission and the social and economic partners will aim to explore how to extend their dialogue and future cooperation to the area of labour migration in line with the objectives of the new European Skills Agenda and the upcoming New Pact on Migration and Asylum. This could focus on how to improve labour migration channels to meet Europe’s changing needs.
Background
Through the European Partnership on Integration signed on 20 December 2017, the Commission and social and economic partners have been joining forces to promote the integration of refugees into the labour market. The objectives of the Partnership are to enhance the early integration of refugees into the labour market, ensure that integration benefits refugees as well as the economy and society at large, and promote a multi-stakeholder approach (involving public authorities, employment services, social and economic partners, business organisations, chambers of commerce and industry, skilled crafts chambers, companies and workers, public services’ employers, education and training providers and civil society organisations).
Compliments of the European Commission.
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It is increasingly likely that, unless things change, on 1 January 2021, we will have a no deal Brexit. The only agreement between the EU and the UK would then be the already ratified Withdrawal Agreement.
There are only 50 working days left in which to make a broader agreement. The consequences of a failure to do so for Ireland will be as profound, and even as  long lasting, that those of Covid 19.
A failure to reach an EU/UK Agreement would mean a deep rift between the UK and Ireland.
It would mean heightened tensions within Northern Ireland (NI), disruptions to century’s old business relations, and a succession of high profile and prolonged court cases between the EU and the UK dragging on for years.
Issues, on which agreement could easily have been settled in amicable give and take negotiations, will be used as hostages or for leverage on other issues. The economic and political damage would be incalculable.
We must do everything we can to avoid this.
Changing the EU Trade Commissioner in such circumstances would be dangerous.  Trying to change horses in mid stream is always difficult. But attempting to do so at the height of a flood, in high winds, would be even more so.
The EU would lose an exceptionally competent Trade Commissioner when he was never more needed. An Irishman would no longer hold the Trade portfolio. The independence of the European commission, a vital ingredient in the EU’s success would have been compromised…a huge loss for all smaller EU states.
According to Michel Barnier, the EU/UK talks, which ended last week, seemed at times to be going “backwards rather than forwards”.
The impasse has been reached for three reasons.
The meaning of sovereignty
Firstly, the two sides have set themselves incompatible objectives.
The EU side wants a “wide ranging economic partnership” between the UK and the EU with” a level playing field for open and fair competition”. The UK also agreed to this objective in the joint political declaration made with the EU at the time of the Withdrawal Agreement.
Since it agreed to this, the UK has had a General Election, and it has changed its mind. Now it is insisting, in the uncompromising words of it chief negotiator, on “sovereign control over our laws, our borders, and our waters”.
This formula fails to take account of the fact that any Agreement the UK might make with the EU (or with anyone else) on standards for goods, services or food stuffs necessarily involves a diminution of sovereign control.
Even being in the World Trade Organisation (WTO) involves accepting its rulings which are a diminution of “sovereign control”. This is why Donald Trump does not like the WTO and is trying to undermine it.
The Withdrawal Agreement from the EU (WA), which the UK has already ratified, also involves a diminution of sovereign control by Westminster over the laws that will apply in Northern Ireland (NI) and thus within the UK.
The WA obliges the UK to apply EU laws on tariffs and standards to goods entering NI from Britain, ie. going from one part of the UK to another.
This obligation is one of the reasons given by a group of UK parliamentarians, including Ian Duncan Smith, David Trimble, Bill Cash, Owen Patterson and Sammy Wilson, for wanting the UK to withdraw from the Withdrawal Agreement, even though most of them voted for it last year!
Sovereignty is a metaphysical concept, not a practical policy.
Attempting to apply it literally would make structured, and predictable, international cooperation between states impossible. That is not understood by many in the UK Conservative Party.
The method of negotiation
The second difficulty is one of negotiating method. The legal and political timetables do not gel.
The UK wants to discuss the legal texts of a possible Free Trade Agreement first, and leave the controversial issues, like level playing field competition and fisheries, over until the endgame in October.
The EU side wants serious engagement to start on these controversial issues straight away.
Any resolution of these controversial issues will require complex legal drafting, which cannot be left to the last minute. After all, these legal texts will have to be approved by The EU and UK Parliaments before the end of this year.
There can be no ambiguities or late night sloppy drafting.
The problem is that the UK negotiator cannot yet get instructions, on the compromises he might make, from Boris Johnson. Boris Johnson is preoccupied instead with Covid 19, and with keeping the likes of Ian Duncan Smith and Co. onside.  He is a last minute type of guy.
Trade relations with other blocs
The Third difficulty is that of making provision for with the Trade Agreements the UK wants to make in future with other countries like the US, Japan and New Zealand. Freedom to make such deals was presented to UK voters as one of the benefits of Brexit.
The underlying problem here is that the UK government has yet to make up its mind on whether it will continue with the EU’s strict precautionary policy on food safety, or adopt the more permissive approach favoured by the US.
Similar policy choices will have to be made by the UK on chemicals, energy efficiency displays, and geographical indicators.
The more the UK diverges from existing EU standards on these issues, the more intrusive will have to be the controls on goods coming into Northern Ireland from Britain, and the more acute will be the distress in Unionist circles in NI.
Issues that are uncontroversial in themselves will assume vast symbolic significance, and threaten the peace of our island.
The UK is likely be forced to make side deals with the US on issues like hormone treated beef, GMOs and chlorinated chicken. The US questions the scientific basis for the existing EU restrictions, and has won a WTO case on beef on that basis.  It would probably win on chlorinated chicken too.
If the UK conceded to the US on hormones and chlorination, this would create control problems at the border between the UK and the EU, wherever that border is in Ireland.
Either UK officials would enforce EU rules on hormones and chlorination on entry of beef or chicken to this island, or there would be a huge international court case.
All this shows that, in the absence of some sort of Partnership Agreement between the EU and the UK, relations could spiral out of control.
Ireland, and the EU, needs its best team on the pitch to ensure that this does not happen!
Compliments of John Bruton, former Fine Gael politician and Taoiseach and Ambassador of the European Union to the United States | This article was first published in The Irish Farmers Journal.
The post John Bruton | We need a full strength team on the pitch as Brexit reaches the endgame first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.