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From Green Deal to Green Recovery

While the COVID-19 crisis has seen unprecedented challenges for the European transport sector, it also demonstrated the crucial role transport plays to ensure an uninterrupted supply of goods and services across Europe. Although the recovery of the sector is of vital importance of Europe’s economy, the recovery from the crisis also provides a momentum for the industry to act on the ambition of decarbonization and reaching climate neutrality by 2050. As put forward in the Commission’s EU Recovery Plan, the COVID-19 recovery phase should be used to pave the way towards not only a resilient and reliable transport sector, but also a sustainable one that is at the heart of the European Green Deal.

Following the publication of the Commission’s plan for recovery – dubbed as ‘Next Generation EU’ – as well as its updated Work Program for 2020, we have a clearer picture how the greening of the sector will unfold in the coming years. Dr2 Consultants’ transport team presents four take-aways for sustainable transport that will dominate the EU’s policy agenda in the years to come.

1. Alternative fuels, sustainable vehicles

Alternative fuels are a key priority for the Commission to cut emissions and create jobs. The EU’s executive arm aims to accelerate the production of low-emission fuels and the deployment of sustainable vehicles and vessels. In order to finance this, public investment should come with a commitment from the industry to invest in cleaner and more sustainable mobility.

The roadmaps for the further deployment of different fuel types are expected to be part of the highly-anticipated FuelEU proposals – to be published later this year – that will aim at increasing the use of alternative fuels in the maritime and aviation sector. Furthermore, in early 2021, the Commission will put forward the revision of the Alternative Fuels Infrastructure Directive, which will ensure the development of the necessary infrastructure across Member States to stimulate the uptake of sustainable fuels for all transport modes. 

2. The convergence of the energy and mobility systems

In order to decarbonize the transport sector, no stone is currently left unturned. Although electrification seems to be the most viable option on the short term, hydrogen is dubbed as the energy source for the future. The Commission’s flagship instrument for research and innovation, Horizon Europe, will be instrumental to kick-start the clean hydrogen revolution. The Commission has increased its budget in the new Multiannual Financial Framework (MFF) with €13.5 billion, bringing Horizon Europe’s new budget to a total of €94.4 billion.

Later this month, the Commission will launch the Clean Hydrogen Alliance to stimulate the upscaling of clean hydrogen production in Europe. Also, the work of the European Battery Alliance will be accelerated. On 24 June, the Hydrogen Strategy is expected to be published.

3. Cities at the heart of sustainable mobility

With over 70% of EU citizens currently living in urban areas, achieving sustainability in cities across Europe is one of the main challenges of the recovery period. As a direct result of the COVID-19 crisis, noise pollution and air quality figures have dropped to an unprecedented level. Moreover, cities reinvented the way citizens move around, e.g. by giving priorities to pedestrians, introducing speed limits for vehicles and implementing new cycling lanes. The shift towards smart and more livable cities, therefore, places a big responsibility on the transport sector.

The Commission aims to increase the support for zero and low-emission mobility in cities by investing significantly in clean urban mobility. Funding calls in the Connecting Europe Facility (CEF) and InvestEU programs will focus on clean fleet renewals by cities, the deployment of charging points and mobility-as-a-service solutions.

4. Taxation, anyone?

In the Next Generation EU, the Commission proposes to generate additional own resources by new taxes. Although the Commission still must draw up the specifics, it floated the option of extending the EU’s Emissions Trading System (ETS) to the maritime sector, thereby raising up to €10 billion annually that will feed into the EU’s budget. In addition, the so-called carbon border adjustment mechanism is likely to be introduced, putting a carbon levy on non-EU imports.

Raising these kinds of ‘European’ taxes is unprecedented. As Member States have diverging views on this matter, it remains to be seen whether we can expect a breakthrough on these new own resources any time soon.

Next steps

The Commission aims to have the new MFF and recovery fund operational by 1 January 2021. EU leaders are expected to start the negotiations on the budget proposal during the European Council Summit on 19 June and will have multiple rounds of very difficult talks until a compromise is made. This ultimately means that the budget as proposed now for transport-related funding instruments can still change. The budget negotiations are expected to accelerate when Germany takes over the rotating six-months Presidency of the Council of the EU on 1 July 2020.

Europe’s green recovery from the COVID-19 pandemic

On 27 May, the European Commission’s published its historic proposal for the ‘Next Generation EU’ recovery fund worth €750 billion, topping the renewed proposal for a €1.1 trillion Multiannual Financial Framework (MFF) 2021-2027. This proposal for unprecedented investment in the European economy is set to dominate the political agenda of the European institutions for the upcoming months. However, as the European Green Deal was put on the top of the agenda only recently, the current situation begs the question how Green Deal initiatives are incorporated into the Commission’s recovery plans.

Main takeaways                

  •  The European Green Deal will be central in Next Generation EU, public recovery investments should follow EU energy and climate priorities;
  • Additional funding of €30 billion for the Just Transition Fund, bringing the total up to €40 billion;
  • The CAP budget will fall by around €34 billion, but farmers will receive funds for the green transition;
  • The Commission will increase its own resources via an extension of the Emission Trading System (ETS) to the maritime and aviation sectors and a carbon border adjustment mechanism.

Accelerated investments in the green transition

Within the recovery fund, the Commission proposes to set up a Solvency Support Instrument to mobilize private investment and thereby kick-start the economy. The Solvency Support Instrument will have a budget of €31 billion and will unlock up to €300 billion in support that will be linked to the green and digital ambitions of the EU. Apart from that, a new Strategic Investment Facility will be built into InvestEU, generating investment up to €150 billion in boosting the resilience of strategic sectors, notably linked to the green and digital transition.

To kick-start the green transition in times of crisis, the European Commission will come up with a Communication to start a European ‘renovation wave’ in the third quarter of 2020. This massive renovation wave of buildings will improve energy efficiency and promote the circular economy, whilst creating local jobs in the coming years.

On top of the renovation wave, the Commission will focus on rolling out renewable energy projects, especially wind and solar. To this end, the Commission will publish an offshore renewable energy strategy later this year. Moreover, the EU will reinforce its efforts to develop a clean hydrogen economy in Europe, something that is currently mainly promoted by Germany and the Netherlands.

When it comes to clean transport and logistics, the Commission aims to accelerate the production and deployment of sustainable vehicles and vessels as well as alternative fuels. This ambition includes the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in European cities and regions.

The Next Generation EU recovery fund also adds €30 billion to the Just Transition Mechanism, bringing its allocated budget 2021-2027 up to €40 billion. As part of the Just Transition Mechanism, the Just Transition Fund will be reinforced to support re-skilling and to help businesses create new economic opportunities in the regions of the EU that are most affected by the green transition.

EU ‘green’ levies to finance recovery

How will this sustainable recovery be financed? The Next Generation EU will raise money by temporarily lifting the own resources ceiling to 2.00% of EU Gross National Income, allowing the Commission to use its strong credit rating to borrow €750 billion on the financial markets. To repay these loans in a fair and shared way, the Commission proposes a number of new own resources. The Commission will for example increase its own resources via an extension of the Emission Trading System (ETS) to the maritime and aviation sectors and a carbon border adjustment mechanism.

Next steps

German chancellor Angela Merkel, shortly before the start of the German Presidency of the Council of the EU, expressed the ambition to reach a compromise on the future EU budget and recovery fund by fall 2020. The proposal of the Commission, as well as the plans put forward by the Franco-German axis and the Frugal Four (Austria, Denmark, the Netherlands and Sweden), have kept the green transition high on the agenda and one can therefore reasonably expect the EU’s great leap forward in green technologies to materialize in the upcoming years.

The EU Budget proposal and its impact on the digital sector

On 27 May, the European Commission put forward its proposal for a major recovery plan. The plan includes not only a proposal for the EU’s Multiannual Financial Framework for 2021-2027 – The EU budget powering the recovery plan for Europe, but the European Commission also proposes to create a new recovery instrument, Next Generation EU.

Next Generation EU, with a budget of €750 billion, together with targeted reinforcements to the 2021-2027 EU budget with a proposed budget of €1.1 trillion, will bring the total financial firepower of the EU budget to €1.85 trillion. Including other schemes such as Support to mitigate Unemployment Risks in an Emergency (Commission’s safety net for workers), the European Stability Mechanism Pandemic Crisis Support (Eurozone’s enhanced credit line) and the European Investment Bank Guarantee Fund for Workers and Businesses (focused primarily on small and medium-sized companies), with a combined budget of €540 billion, significant funds will be available for European recovery.

Next Generation EU will raise money by temporarily lifting the European Commission’s own resources ceiling to 2.00% of EU Gross National Income, allowing the Commission to use its strong credit rating to borrow €750 billion on the financial markets. To help do this in a fair and shared way, the Commission proposes a number of new own resources among which extension of the EU Emission Trading System (ETS) to include maritime and aviation sectors, a carbon border adjustment mechanism, a digital tax and a tax on large enterprises.

Finally, the Commission has published an update of its 2020 Work Program, which will prioritize the actions needed to propel Europe’s recovery and resilience.

The future is digital

The outbreak of COVID-19 has highlighted the importance of digitization across all areas of the economy and society. New technologies have helped businesses and public services to keep functioning and have made sure that international trade could continue. It is expected that, in the long run, the pandemic will have triggered permanent social and economic changes: more remote working, e-learning, e-commerce, e-government. It has, therefore, become imperative for businesses and governments to invest in digitalization.

The twin transitions to a green and digital Europe remain the defining challenges of this generation. This is reflected throughout the Commission’s proposals, which stress that investing in digital infrastructure and skills will help boost competitiveness and technological sovereignty.

Implications for the digital sector

A new instrument, the Solvency Support instrument would be primarily aimed at countries hit hardest by the crisis and unable to provide state aid to their most vulnerable sectors. The distribution of this ‘immediate and temporary’[1] tool will also aim to prioritize green investment according to the Commission. While welcomed by poorer countries the instrument might not have the desired effect unless agreed upon and deployed quickly by the Member States.

The Strategic Investment Facility will be used to promote the green and digital transitions by investing in 5G, artificial intelligence, the industrial internet of things, low CO2 emission industry and cybersecurity. Since such investments might become significantly riskier in the aftermath of the pandemic, the Commission stands behind a common European approach to provide the crucial long-term investments for companies implementing projects of strategic importance. The Strategic Investment Facility will take a more forward-looking approach by focusing on ‘projects relevant for achieving strategic autonomy in key value chains in the single market.

The Digital Europe Programme will be used for the development of EU-wide electronic identities and for the building of strategic data capabilities, such as artificial intelligence, cybersecurity, secured communication, data and cloud infrastructure, 5G and 6G networks, supercomputers, quantum and blockchain. The Commission has managed to withstand the significant pressure from Member States to reduce the funding of the Programme and the digital transition remains one of its key priorities.

In terms of financial inputs, the digital sector would be affected by two of the newly proposed taxes, aimed at funding the Commission’s so called ‘own resources’ used to repay the recovery package. The new digital tax would come into play at EU level if no global solution could be reached at OECD level. If the tax is applied to companies with an annual turnover higher than €750 million, it could generate up to €1.3 billion per year for the EU budget. The other relevant provision is the new corporate revenue tax, which if applied according to the same principle as the digital tax at a rate of 0.1 percent could generate up to €10 billion annually.

The Commission tried to introduce a European digital tax last year but its proposal was blocked by several Member States. The chance of such a proposal being accepted at this date appear slim as unanimity is required and Ireland, amongst others, has been adamantly against it. However, with the departure of the UK who had previously provided strong backing for Ireland’s opposition, some form of digital taxation being accepted remains a possibility. The new corporate tax was also previously unsuccessfully introduced by the Commission in 2016 and would be aimed at ‘companies that draw huge benefits from the EU single market and will survive the crisis.’[2] The chances of the proposal being accepted are also relatively low with countries such as Ireland, Denmark, Luxembourg and the Netherlands strongly opposing it. The proposal might also provoke a ‘race to the bottom’ phenomenon where companies relocate to countries willing to provide them with the most favorable business conditions. While both taxes are facing strong opposition from some Member States, the alternative of increased national contributions might convince leaders that accepting a form of these levies would be the more politically savvy option.

In conclusion, the new EU budget proposal creates new opportunities and challenges for the digital sector with the potential application of new pan-European taxes but also with additional funding devoted to digitalization, increased connectivity and sustainable value chains. The Coronavirus pandemic has demonstrated the increasing importance of digitalisation for the daily functioning of the economy and the Commission’s proposal reflects that through a series of digital political priorities. Increased connectivity, investment in strategic digital capacities (artificial intelligence, cybersecurity, data and cloud infrastructure, 5G and 6G networks, blockchain and more) building a real data economy and legislative efforts on data sharing (a EU-wide Data Act), as well as a thorough reform of the single market for digital services (Digital Services Act expected in late 2020). The combination of budgetary provisions and policy priorities makes the moment beneficial for a transition to online business models, a trend which has appeared during the pandemic but is expected to remain for the next few years.

[1] Annex to the Commission Budget Communication, p 6.

[2] Commission Budget Communication, p 15.

Why now is the time to embed European affairs in your organization?

Author:

Margreet Lommerts

Managing Partner at Dr2 Consultants

More than ever, it is important to have a focused and effective European Affairs Strategy and structure in place to effectively contribute to the (re)shaping of the European economy for the next decades. Now is the time for organizations to see EU affairs no longer in isolation but as an integral part of their Corporate Affairs Strategy.

Soon after the start of the new European Commission at the end of 2019, we could already see the outline of the agenda of Commissioner President von der Leyen. The Commission’s Green Deal – published on 13 December – presents an overarching growth strategy to achieve a green transformation and climate neutrality of the economy.

Before the realization of tangible proposals for the green and digital transformations of the EU economy, COVID-19 turned the Commission into full crisis mode. Priorities shifted and the Commission and Council of the EU dedicated their work on drafting a comprehensive recovery plan from the health and economic crisis. It will not come as a surprise that a green recovery and the digital transformation will continue to be prioritized and play a central role in relaunching and modernizing the EU economy. According to the Commission, the trillions of euros for the recovery should be spent in a clean, competitive, resilient, and inclusive economy for the 21st century, into a new economy.

As the Commission is formulating its economic and green recovery plan, there is an enormous momentum for organizations to engage with EU institutions in Brussels and to play a role in the shaping of the new economy which will have a huge impact on all businesses.

Looking at the transport sector, it is clear that the demand for mobility and individual transport is changing due to the COVID-19 crisis. The European transport sector faces the great challenge of regaining consumer confidence while stimulating economic growth. According to the Commission, green and digital transitions are at the center of the recovery to create new jobs, remain internationally competitive and bring the sector in line with European climate goals. The Commission aims to better coordinate modes of transport and to encourage the use of sustainable fuels.

In addition, the European energy market will be heavily impacted by the EU’s climate ambitions. The European solar and wind energy market is expected to shrink by about 30% because of disruptions in the logistics chain, delays in projects and stricter financing conditions. As a result, the realization of the EU’s climate targets for 2030 are in jeopardy. This means that acceleration must take place to achieve the EU’s green ambition. The Commission is expected to make additional funding available for sustainable industrial projects and technologies (e.g. carbon capture and storage, relaxation of state aid rules, and alignment of energy taxation with climate ambitions with the aim of getting innovative projects off the ground and scaled up.

As an effect of the COVID-19 crisis, the digital transformation of more “traditional” businesses has definitely accelerated, like brick-and-mortar shops, some of which probably had no online presence whatsoever, maybe not even a Facebook or Google page, before the outbreak. In order to continue operating in a full lockdown situation, these businesses have had to quickly “go online”, either individually or in cooperation with other similar businesses or by relying on the services of online platforms such as e-commerce marketplaces.

As the Commission, Members of the European Parliament (MEPs), and Member States are actively reaching out for industry input, it is important for these businesses to get involved and make their voices heard at EU level, so that they can contribute to the shaping of EU policies that can actually benefit them.

Even though advocacy in these challenging times may not seem top priority and will take more time, the EU institutions are calling for input and involvement from industry which is a prerequisite for future-proof legislation.

Dr2 Consultants has a proven track record in supporting organizations to become more effective in their European Affairs by providing support in:

  • Identifying the role of European Affairs within the current structure and develop the ideal proposition for your organization;
  • Defining a targeted European Affairs strategy with key objectives;
  • Providing tools and know-how on how to execute the strategy successfully;
  • Creating effective internal structures.

For more information or to get in touch click here.

Dr2 Consultants hosts webinar on competitiveness of transport sector post COVID-19

Main takeaways

The COVID-19 outbreak has seen an unprecedented impact on the transport sector in the EU. Due to national containment measures, travel restrictions and the closure of border crossings, passenger transport is at a standstill and trade flows are severely impacted. In order to help EU citizens and businesses, the Commission has issued several contingency measures to support the transport sector, e.g. by identifying green freight lanes, issuing guidelines on passenger rights and allowing financial relief under the temporary state aid framework.

In this context, Dr2 Consultants organized a dedicated transport webinar on 7 May 2020, focusing on the question how to reinstate the EU’s transport industry in a post COVID-19 era, in order to ensure the transport sector can enable economic growth, secure jobs, increase global competitiveness and allow people and goods to move across Europe and beyond. Mr. Daniel Mes, Member of the Cabinet of Executive Vice-President on the European Green Deal, Frans Timmermans, responsible for the transport portfolio, and Mr. Jan-Christoph Oetjen, Member of the European Parliament (Renew Europe) and Vice-Chair of the Committee for Transport and Tourism took part in the panel discussion and shared their views on the subject.

 

The main takeaways from the webinar are:

  • The Commission is working on a coordinated exit strategy in which all modes of transport are covered, including practical advice on how to restart operations while ensuring the safety of the passengers;
  • It is crucial that the transport sector returns to its old strength and becomes even more resilient. It is a joint effort by the EU and its Member States to ensure the European transport sector remains competitive on a global level;
  • Mr. Mes highlighted the need for political guidance when national measures are taken to ensure consistency in sectoral investments. The transport sector will be dependent on both public as well as private investments, which the Commission will aim to mobilize;
  • Both speakers highlighted that transport will be one of the main pillars in the green recovery of the European economy. Mr. Oetjen emphasized the need for using a mix of transport modes based on their characteristics and respective advantages. Mr. Mes stated that it is key to ensure that the recovery of the transport sector is green recovery, and conditions can be attached to financial aid received by the sector.

As the webinar was recorded, please find the playback link here.

As a next step, the Commission is expected to publish a follow-up to its ‘European roadmap towards lifting coronavirus containment measures on Wednesday 13 May, which will entail a broad package of recommendations aimed at reinstating connectivity and tourism. The package will include a Communication on tourism, protocols on health and safety for main tourism locations, guidance on safe and healthy resumption of passenger transport and guidance on lifting of international borders. The package is also expected to include an assessment of the application of the temporary restriction on non-essential travel to the EU.

COVID-19 services

The fight against the spread of COVID-19 has unprecedented consequences for the daily life of almost everyone and puts pressure on the global economy. The crisis leads to questions and uncertainty, while companies try to anticipate and mitigate the impact on their daily business operations. Dr2 Consultants offers clarity to companies during the COVID-19 crisis. Please check out our webpage to explore the possibilities for your company.

Bold sustainability ambitions in the European Union

Already in July, Ursula von der Leyen made clear that the new European Commission has bold ambitions to tackle climate change: The European Union must become an example of how to live sustainably. In this regard, energy efficiency and circular economy are central to the European way of life.

Frans Timmermans and the European Green Deal

The European Green Deal will be the guide for this ambitious transition, targeting among other things, an emission reduction of 50% to 55% by 2030. This target is about 10-15% higher than the current 2030 climate and energy framework. The Commissioner in charge of the Green Deal will be the Dutchman, Frans Timmermans, who also holds the position of first Executive Vice-President of the next European Commission. In his hearing in the European Parliament on 8 October, he urged the European Parliament to be ambitious and lead by example in the world. To make a real difference with regards to global warming, the EU needs to focus on talks with its global partners, according to Timmermans. He feels like he has got a strong mandate, since according to statistics, 9 out of 10 European citizens want the EU to act decisively on climate change.

Concretely, Timmermans will propose a draft Climate Law within the first 100 days of his mandate. This law will put into legislation the EU’s climate ambitions, but most importantly determine the in between steps to be taken to reach these goals. Timmermans is strongly considering using infringement procedures against Member States not complying with the EU’s upcoming climate laws and its ambitions. Furthermore, the Climate Pact will engage citizens with the EU’s climate policy which would make legislation seem less ‘top-down’.

Virginijus Sinkevičius and the European Circular Economy

Three years after its adoption, the Circular Economy Action Plan can be considered fully completed. Its 54 actions have now been delivered or are being implemented. Together with Timmermans, Lithuanian Virginijus Sinkevičius will however increase the ambitions in the field of the circular economy. Sinkevičius stated during his hearing in the European Parliament on 3 October that if the EU ensured the complete circular use of just four materials (steel, aluminum, cement and plastic) – which goes further than the existing Circular Economy Action Plan – EU’s industrial emissions would be cut in half.

Sinkevičius believes that a new action plan can involve three major areas:

  • First, by examining the ways in which the EU produces and consumes. He mentioned particular further action on eco-design and more focus on reuse and repair. This strand could also integrate circularity in other sectors such as textiles, construction, food and ICT.
  • Second, by helping consumers make informed choices.
  • Third, by moving beyond recycling. Waste should not only be minimized, but prevented completely in areas such as textiles and construction.

Environment Council

Not only the European Commission wants to increase the European ambitions regarding climate change and sustainability, but also the Council realizes their importance. On 4 October, Environment Ministers held a debate on the EU’s strategic long-term vision for a climate neutral economy and adopted conclusions on climate change, which set out the EU’s position for the UN climate change meetings (COP25) in Chile in December 2019. The Council called for action to promote circularity systemically across the value chain, including from the consumer perspective, in key sectors including textiles, transport, food as well as construction and demolition. The Council also stressed the need for more measures on batteries and plastics.

 

 

 

 

What will be the digital agenda of the next European Commission?

Between early leaks from DG CONNECT to the individual grilling of Commissioners-designate, the digital agenda of the next European Commission is slowly taking shape – even if key questions remain.

 Digital policies: who does what?

The cross-checking of somewhat blurry portfolio titles, mission letters, the Commission’s new organizational chart, the attribution of DGs and finally the Commissioners-designate hearings shed some light on who will do what to set the digital agenda in motion.

Margrethe Vestager’s hearing set the tone, with a number of questions and declarations on expected digital files (a chance Sylvie Goulard, Commissioner-designate for the Internal Market, did not get). The Vice-President for Digital and Commissioner for Competition also used this occasion to clarify (though without going into details) that the execution of the digital portfolio will be in the hands of her colleagues – allowing her to keep separate her two jobs – and avoid any clash between possible conflicting objectives.

So, who are the Commissioners in charge of digital policies?

Goulard’s rejection today by the European Parliament might lead to some reshuffling, but as it stands, the following Commissioners will contribute to the EU’s digital agenda:

  • Didier Reynders, Commissioner-designate for Justice, on topics such as GDPR and Artificial Intelligence;
  • Věra Jourová, Vice President-designate for Values and Transparency, on issues like illegal content and disinformation – possibly contributing as well to the Digital Services Act;
  • Mariya Gabriel, Commissioner-designate for Innovation and Youth, who also mentioned AI in her hearing, in addition to the importance of investing in education, research and innovation, and ensuring synergies between the three;
  • Paolo Gentiloni, Commissioner-designate for the Economy, that will inherit the work on the Digital Tax;
  • Valdis Dombrovskis, Executive Vice-President for “An Economy that works for people”, that will continue the work on Fintech, cryptoassets, cybersecurity…;
  • And of course, now, there’s a big question mark on who will take on the files assigned to Goulard, including the groundwork on the Digital Services Act, Artificial Intelligence, cybersecurity, digital education and so on.

On what topics?

The new Digital Services Act – which will include a revision of the 2000 Ecommerce Directive, has been high on the agenda of the tech sector, and is clearly high on the Commission’s agenda as well. For anyone that has been closely following these developments, the hearings did not reveal anything. The new act will “upgrade” the existing liability rules for platforms and try to find the right balance to avoid hindering a growing European platform economy. Jourová added to the discussion by focusing on the fight against illegal content and disinformation and the responsibility of platforms.

Artificial Intelligence has been mentioned many times, but not in great details. Vestager highlighted again what should be the EU’s approach to AI, and Reynders argued in favor of a very horizontal, “ethics-by-design” approach. Vestager also confirmed that something will come in the first 100 days, without concretely saying what will come and under which form – since a legislative proposal seems relatively improbable under such deadline.

Access to data was briefly mentioned, with Vestager highlighting that the EU might need to regulate the way that companies collect, use and share data, so it can benefit the entire society.

Digital Tax remains on the agenda, with Gentiloni supporting an international solution, but not excluding a European one if an agreement cannot be reached.

On competition, Vestager highlighted that competition rules needed to adapt to digitalization, especially with the development of the platform economy and technologies such as AI, where access to data is crucial. Vestager also declared, after her hearing, that “she will move beyond fines in her second term […] to look at other measures to ensure a fair playing field”.

Remaining on the topic of Big Tech, Valdis Dombrovskis also announced that the Commission was looking into Facebook’s Libra, and that a legislative proposal on such cryptoassets was to be expected.

Beyond policy, the hearings confirmed that the European Commission will have to deal with a fragmented and vocal European Parliament, especially on digital matters.

Download our infographic on Margrethe Vestager’s hearing here.

Brexit: state of play of the no deal scenario

That a no deal Brexit will damage the British and European economy was already clear. The Catholic University of Leuven even calculated that a no deal Brexit would cost the European Union 1.54% of GDP and 1.2 million jobs. The effect for the UK: a 4.4% reduction in GDP and 525,000 job losses, this only in the short term. In terms of sectors, a hard Brexit would have especially a severe effect on the European Food and Beverages sector. A hard Brexit would also have a big impact on the European textile industry and in addition, services sectors would be heavily affected.

Due to the severe economic consequences of a no deal, Members of Parliament (MPs) from both the Conservative Party as the Labour Party tabled an amendment on the parliamentary estimates bill that would deny funding to four government departments in the event of a no-deal Brexit without explicit parliamentary approval. The amendment concerned the departments for International Development, Work and Pensions, Education, and Housing, Communities and Local Government. However, the Speaker of the House of Commons, John Bercow, said on 1 July that he had not selected this amendment. Grieve and Beckett have, therefore, re-submitted their amendment on 2 July, but 10 Downing Street has strongly condemned this amendment to shut down the government as very irresponsible.

Not only the MPs are concerned, but also Brexit Secretary, Stephen Barclay, asked last week to accelerate the preparations for a no deal Brexit. Barclay said: “Time is of the essence and we can’t be complacent. I do not want to be in a situation when we get to November and there were things we could have been doing at this time and we didn’t do them.”

Key players in a possible no deal Brexit are of course Boris Johnson and Jeremy Hunt, the remaining contenders in the Conservative Party leadership race. In his bet to become the next leader of the Conservative Party, Foreign Secretary Jeremy Hunt presented his ten-point plan for delivering Brexit in case he wins. Hunt proposes to speed up the no deal preparations, the establishment of a No Deal Cabinet Task Force and the appointment of a new negotiating team. A Government under his leadership would prepare for a No Deal Brexit Budget, and the Treasury would prepare a No Deal Relief Programme including a £6 billion fund for the fishing and farming sectors.

Boris Johnson, on the other hand, has said that he believes there is only a “very, very small possibility” that the UK will have to leave the EU without a deal. However, he also said that when he is elected as new Prime Minister, every member of his Cabinet should have to live with the possibility of leaving the EU without a deal. This is also in line with the fact that Johnson is preparing an emergency budget for such a scenario. More concretely, this budget will consist of a tax cut and a revision of stamp duties to safeguard the economy after a hard Brexit.

What’s next?

Conservative Party members will receive their postal ballots between 6-8 July. The final deadline to return the ballots is Sunday 21 July. Boris Johnson and Jeremy Hunt participate in hustings until 17 July. It is widely believed, however, that a majority of voters will immediately cast their vote when they receive their ballot. The next few days will, therefore, be key for Hunt to get his message across and for Johnson to avoid any gaffes. In the week of 22 July, Britain’s new Conservative Party leader and Prime Minister will be announced.

Brexit: End of May, start of June

Despite loud protest and prior insults on both sides, the President of the United States Donald Trump visited the UK for a state visit on 3 and 4 June. After a state banquet on Monday, Trump met Prime Minister Theresa May on Tuesday. On Brexit he recommended the UK to walk away from talks with Brussels and to refuse to pay Britain’s agreed divorce bill. Furthermore, Trump said that a big trade deal with the UK would be possible if the UK will eventually leave the EU during a business breakfast meeting with five top companies each from Britain and the United States.

This will be the last state visit for May because she will leave Number 10 this Friday 7 June. The leadership race has already started with more than 10 Conservative MPs indicating their wish to succeed May. Normally, the whole process would take a few months but due to the lack of time to find a Brexit deal, the Conservative Party introduced new rules, including measures to eliminate candidates more quickly. The Conservative Party wants to finish the leadership race before the end of July so the new Prime Minister will have (only) three months before the Brexit day on 31 October. A new Prime Minister and new leader of the Conservative Party is expected to be announced in the week of 22 July. Boris Johnson seems to be the leading contender and already said that the UK will leave the EU on 31 October with or without a deal.

On the other side of the Channel a document was leaked this week with the new priorities for the next Finance Commissioner. A new strategy for the capital markets union, fintech, financial stability, sustainable economy and Brexit are key points for the next 5 years. Concretely for Brexit, the Commission officials recommend looking into the right balance between the EU and non-EU financial services. This would include the monitoring of the recognition of non-EU financial frameworks (equivalence decisions). The EU executive will also assess the autonomy of the EU financial infrastructure and important European financial players.

What’s next?

In the coming weeks UK politics will mainly focus on the Tory leadership race, and therefore also on their specific positions regarding Brexit. The question is, will the new leader of the Conservative Party and Prime Minister be a moderate Brexiteer as May or a hard Brexiteer and, therefore, even determined to leave the EU without a deal.

At the end of June there is also an EU Summit. French President Emmanuel Macron has already made clear that he wants to move on with the EU and, therefore, reopening negotiations on Brexit will not happen. 31 October remains the final deadline.

 

Brexit: Searching for a new leader

The resignation of Prime Minister Theresa May last week could not save the Conservative Party in the European elections. It was quite clear that the Brexit Party of Nigel Farage is the winning party, gaining 29 seats. The Liberal Democrats took 16 seats, the Labour Party 10, the Green Party 7, the Conservative Party 4, the Scottish National Party 3 and Plaid Cymru 1.

As the election results were devastating for the traditional parties, Labour deputy leader, Tom Watson, indicated that the Brexit stance of Labour costed Labour a lot of votes. In particular, the unclear position of Labour towards a second referendum. In addition, shadow chancellor John McDonnell, one of Labour leader Jeremy Corbyn’s closest political allies, told the BBC another referendum may be the only way to break the Brexit deadlock in Parliament.

But Brexit did not only had a huge effect on the elections in the UK, but actually in the whole European Union, at least that is what President of the European Council Donald Tusk claimed at yesterday’s informal European Council summit. Tusk argued that Brexit acted as a “vaccine” against Euroscepticism and, therefore, helped to limit the profit of anti-EU parties. Tusk also added that he is not optimistic about the future of Brexit, because “we are all aware of the state of things in London.” A no-deal scenario or the UK revoking Article 50 remains likely. Influential Tories, Boris Johnson and Dominic Raab, are for example still willing to leave the EU without a deal.

In the meantime, the European Union is preparing itself for Brexit, with or without a deal. When Theresa May offered her resignation last week, EU leaders already warned that nothing had changed in Brussels. The Dutch Prime Minister, Mark Rutte, is one official who said the EU would never reopen negotiations on the Brexit divorce deal, whoever succeeded May. Furthermore, a spokeswoman for the President of the European Commission, Jean-Claude Juncker, said that “Brussels’s position on the withdrawal agreement has been set out, there is no change to that.” In addition, Sabine Weyand, Deputy Chief Negotiator and right hand of Michel Barnier within the European Commission’s Article 50 Taskforce, has been appointed today as the new Director-General of Directorate-General Trade. This indicates that the European Union is preparing itself for the next step in the Brexit process as Weynand will lead the EU’s negotiations with the UK on its future trade relationship in the post Brexit phase.

What’s next?

It is still unclear if there will be a vote on the Withdrawal Agreement Bill next week as Theresa May announced earlier. For the time being the focus is more on the possible successor of May. Tory MPs have until 10 June to put their name forward, and the party hopes a new leader will be in place by the end of July. In addition, a possible general election seems unlikely. Foreign Secretary, Jeremy Hunt, already said that the Conservative Party would commit “political suicide” if a general election was held.