The Finance Ministers of the EU Member States will finally not meet in Luxembourg on Tuesday 6 October, as was envisaged for a while, but still by videoconference, due to the health conditions linked to the Covid-19 pandemic.
On the agenda of their virtual meeting: – a public discussion on the ‘Recovery and Resilience Facility’, the budgetary instrument at the heart of the Next Generation EU action plan; – a discussion on the lessons learned from the budgetary process of the ‘European Semester’ in 2020; – an exchange of views on the recent initiatives of the European Commission on digital finance and the Capital Markets Union.
Recovery and Resilience Facility. In the EU Council, the Member States are currently working on the German Presidency’s 6th compromise proposal on the Recovery and Resilience Facility.
This text sets to music the agreement on the Multiannual Financial Framework (MFF) reached at the EU summit on 21 July, which provides for an allocation of €390 billion in grants and €360 billion in loans. It sets out, step by step, the procedure for accessing this financial windfall to help the EU27 get their economies back on track after the Covid-19 pandemic.
Each State will have to present a national recovery plan identifying the investments and measures it intends to take. The EU Council will play a leading role, at ministerial or technical level, in the adoption of national plans, which will be assessed in advance by the European Commission, and decisions on the disbursement of financial assistance (see EUROPE 12554/3).
According to several experts, a political agreement in principle between the Member States is close. “The German Presidency is reasonably confident that the text will be concluded quickly”, a national source said on Monday 5 October.
There is still a debate on how to orient national plans according to the priority themes chosen. To ensure that 30% of the 2021-2027 MFF is dedicated to climate, each plan will have to mobilise 37% of its allocation to the green transition. While this threshold is not controversial, the questions raised by several Central and Eastern European countries relate more to the definition of ‘green’ investment and, in particular, the use of financial taxonomy, although this has not yet been fully finalised.
Accepted by the European Summit in October (see EUROPE 12573/2), the target of 20% investment in digital transition is consensual, although the appropriate legal language still needs to be found.
On the other hand, the provisions recently introduced to protect the EU’s financial interests in the event of fraud or conflicts of interest in the context of the European Recovery Plan seem to be the subject of a compromise (see EUROPE 12559/16).
Once the text has been agreed in the EU Council, negotiations will begin with the European Parliament, which is calling for decision-making powers on the recovery plans and hoping for an interinstitutional agreement before the end of 2020. The objective is to allow the approval of national recovery plans in February-March 2021 to facilitate the first disbursement of financial aid in the first half of 2020.
On Tuesday, ministers will also discuss the ‘European Semester’ budget process, which sets non-binding guidelines for Member States’ socio-economic policies. The rate of implementation of recommendations by country remains low (see EUROPE 12552/14). The Commission will assess the national recovery plans against these recommendations.
In mid-September, the Commission also anticipated the launch of the 2021 ‘European Semester’ exercise to help Member States draw up their plans. Priority is given to health spending to defeat the coronavirus and stimulus measures for sectors hit by the crisis (see EUROPE 12562/12).
The question of re-establishing European fiscal rules remains premature due to uncertainty about the persistence of the pandemic.
Digital finance. The Commission will then present its digital finance package, unveiled on 24 September. This will be an opportunity for ministers to give their first impressions and to underline their priorities, in an exchange of views which should be public.
The Commission’s package of measures includes a comprehensive strategy (see EUROPE 12562/10), a new regulatory framework tailored to crypto-assets (see EUROPE 12567/2), a detailed strategy on payments (see EUROPE 12567/1), as well as legislative proposals on the digital operational resilience of the financial sector (see EUROPE 12567/4).
According to one diplomatic source, the discussion is expected to focus on payments and on the importance of the package of measures for European sovereignty and competitiveness in the digital age.
There is no doubt that the subject of crypto-assets will come up. At the informal meeting in Berlin in September, the German, French, Italian, Dutch and Spanish finance ministers had already called for strict regulation of asset-backed crypto-assets, such as ‘stablecoins’, in order to preserve the monetary sovereignty of the EU (see EUROPE 12558/2).
CMU. The Commission will also present its action plan containing 16 actions (see EUROPE 12562/9) to accelerate the establishment of the Capital Markets Union (CMU).
Ministers will then be invited to express their overall views on the action plan, as well as to indicate which initiatives should, in their view, be given priority.
According to the same source, the results of this discussion are intended to feed into the drafting of EU Council conclusions, which the German Presidency intends to have adopted at the Ecofin Council in December.
ECB. The Ecofin Council could act on the Eurogroup’s recommendation to the European Council on the appointment, from mid-December, of Yves Mersch’s successor to the Executive Board of the European Central Bank (see EUROPE 12572/7).
Finally, the German Council Presidency will inform the ministers about preparations for upcoming international meetings, including the video conference meeting of G20 finance ministers and central bank governors on 14 October. It is also expected to address the response to the Covid-19 pandemic and the reform of international taxation (see EUROPE 12565/19). (Original version in French by Mathieu Bion and Marion Fontana)