The Czech Presidency of the Council of the European Union, in the second half of 2022 will have its work cut out for it in trying to find a compromise at European level on two thorny issues it would have preferred not to have inherited: finding a unanimous agreement on the directive transposing the OECD agreement on minimum taxation of multinationals into the EU, and facilitating what are likely to be difficult discussions on how to alleviate the socio-economic impact on citizens of the Russian invasion of Ukraine.
Taxation. Following the failure of the previous French Presidency on the directive implementing Pillar II of the OECD agreement on minimum company taxation, the Czech Presidency will have to resume negotiations with Hungary, which had vetoed the directive (see EUROPE 12974/8). Pillar I of the agreement, which concerns digital taxation and the reallocation of taxing rights, will be discussed in December if an agreement is reached at the OECD.
On Tuesday, 4 October in Luxembourg, the Ecofin Council will be asked to revise the EU list of uncooperative jurisdictions for tax purposes (see EUROPE 12975/30). Ministers will also discuss the fiscal and non-fiscal role of customs (see EUROPE 12957/10).
In November, ministers will try to reach agreement on the revision of the vehicle tax directive, and in December, the Czech Presidency plans a policy debate on the revision of the energy taxation Directive (see EUROPE 12981/26).
Money Laundering. In December, the EU Council will consider the progress report on the Directive on the prevention of the misuse of shell entities. It is also expected to adopt a position on the latest ‘anti-money laundering’ legislative package. Its position had already been partially decided, but the question of where the headquarters of the AMLA will be remains open (see EUROPE 12982/17).
Next Generation EU. Over the next six months, the 25 Member States whose National Recovery Plans have been adopted by the EU Council will continue to implement the planned investments and reforms.
Negotiations with the Commission on the Hungarian recovery plan remain blocked at this stage. Budapest seems to be adopting the Polish strategy of vetoing the proposed directive transposing the OECD agreement on minimum taxation of multinationals into the EU until its recovery plan is adopted. On the Hungarian side, negotiations are mainly focused on the fight against corruption and the protection of the EU’s financial interests, while negotiations on the Polish side have long been blocked due to Warsaw’s refusal to bring the Polish judicial system into line with European case law.
The Dutch authorities have not yet submitted their draft recovery plan. If Hungary and the Netherlands fail to get the plan adopted by the end of 2022, they will lose 70% of their Next Generation EU allocation.
The Czech authorities will also have to complete discussions on the revision of the Regulation establishing the Recovery and Resilience Facility (RRF), the budgetary instrument at the heart of the European Recovery Plan, to include the chapter to finance measures from the REPowerEU strategy to reduce European dependence on Russian hydrocarbons (see EUROPE 12960/9). An agreement could be envisaged at the October Ecofin Council.
Socio-economic impact of the war. In the budgetary field, the Czech Republic will continue discussions on the socio-economic impact on the EU of the Russian invasion of Ukraine.
Record inflation and rising ‘spreads, (difference between the interest rate of the German Bund and that of countries in the eurozone) higher financing conditions and slower growth will weigh on national public finances as Member States prepare their budgets for 2023 by mid-October for the eurozone countries.
After the summer, the economic issue is expected to return to the top of the economic agenda as states prepare for the winter by helping vulnerable citizens pay their energy bills.
There is talk of discussions on the creation of a European budgetary instrument for loans to Member States based on the success of the SURE initiative to support national short-time working schemes. This idea is openly promoted by Italian Prime Minister Mario Draghi, but the ‘frugal’ countries are not convinced and prefer that the budgetary means already decided upon are fully consumed (see EUROPE 12979/1). The case for a coordinated European approach to the introduction of a national tax on energy firms’ windfall profits is being put forward in the European Parliament, which will debate it on Wednesday.
Stability Pact. In parallel, the Czech Presidency could initiate discussions in the EU Council on the reform of the European economic governance framework. A first round of discussions could even set the tone for the informal ministerial meeting on 9 and 10 September in Prague, before the European Commission presents its options on the reform of the Stability and Growth Pact.
This reform would have time to be negotiated early enough to be in place at the moment the Pact’s general escape clause, in place since the outbreak of the Covid-19 pandemic in the spring of 2020, is deactivated in late 2023.
Finance/Banking The Czech Presidency will try to reach an agreement, possibly in November, on finalising the integration of the ‘Basel III’ agreement on banking prudential requirements into the EU.
In the financial field, it will take the lead on all financial texts already on the table and not subject to Interinstitutional Agreement. Trilogues on several proposals from the legislative package presented at the end of 2021 to deepen the Capital Markets Union (alternative investment funds, ELTIF funds, ESAP window) will be on the agenda (see EUROPE 12982/18), if the European Parliament adopts its negotiating position. (Original version in French by Anne Damiani and Mathieu Bion)