JUSTICE COUNCIL COMPANY LAW EU/US Small advance possible on data protection Page 5 Fight against money-laundering: Negotiations continue Page 7 Obama coming to Europe to boost military alliances Page 12 THE EUROPEAN AFFAIRS DAILY europolitics.info Analytical, Comprehensive, Independent Tuesday 3 June 2014 N° 4878 42nd year FOCUS EPP group expected to elect Manfred Weber as its chief By Jorge Valero By Ophélie Spanneut The European Commission published, on 2 June, its policy recommendations for 26 economies of the EU (all except Cyprus and Greece). Against the backdrop of “political discontent,” - to quote Economic Affairs Commissioner Olli Rehn - and the advance of anti-austerity parties in the European elections, the Commission’s “priority is clear: growth and jobs,” said President José Manuel Barroso. But he added that “there is no contradiction between austerity and growth,” since fiscal consolidation is essential to boost confidence and thus attract investment to Europe. Barroso underlined that “the most important” task now is to boost private investment, which is hampered by “unacceptable” financial fragmentation. He believes that this challenge goes beyond fiscal policy and the Commission’s powers a veiled reference to the decisions the ECB is expected to adopt later this week to restore lending in the eurozone. The country-specific recommendations (CSRs) focus mainly on labour market and tax system reforms. The Commission recommends the closure of excessive deficit procedures against Austria, Belgium, the Czech Republic, Denmark, the Netherlands and Slovakia. Regarding France Barroso said it is “on track” to meet its fiscal goal, although the CSR calls on Paris to specify further fiscal measures for this year and 2015.. T he Germans in the EPP can count on the group’s strategic chairmanship, but will secure fewer influential positions Weber stands to lead the EPP group The European People’s Party (EPP) group in the European Parliament will elect its new chair on the morning of 4 June. French national Joseph Daul, who has headed the group since January 2007, will be passing on the torch. He did not stand for re-election to the EP but will continue to be involved in European politics in his role as president of the EPP party. Barring an unexpected turn of events, Manfred Weber (Germany) is expected to be elected to head the EPP group. He currently has no declared rivals although challengers do officially have until 11:00 on 3 June to present their candidacy. A member of the CSU, the Bavar- Sold by subscription only © reproduction strictly prohibited in any language © PE Barroso: Austerity supports growth Table of Contents ian sister party to the powerful Christian Democrat CDU party, Weber has been a member of the EP since 2004. He would be the first CSU member to hold an important position in the European Parliament. Until now, the CDU has always dominated (with the exception of Hans-August Lücker, CSU, who headed the EPP group from 1970 to 1975). The EPP is still the largest group in the European Parliament after the 25 May elections, but it has lost ground. The centre-right group slipped from 273 to 214 members. This figure is subject to change since negotiations are under way to draw in new members. The six Romanians of the PNL – who have been part of the ALDE group until now – may join the EPP benches, along with the Poles of the PiS (Law and Justice), who are bargaining with the ECR, where they have sat since its establishment in 2009. The EPP’s first place is safe: its lead is too great for the S&D to surpass it (25 seats), especially because the Social Democrats cannot hope to swell their ranks significantly through negotiations with newly elected members. But widening the gap is always useful due to the existence of the d’Hondt rule. For strategic or prestigious positions, such as vice-presidents of Parliament, quaestors and committee chairs, the d’Hondt rule applies between groups. The more members a group has, the greater its chances of obtaining the positions it seeks. (continued on page 6) www.europolitics.info about EU policies at your door. 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ISSN 1811-4121 3 EUROPOLITICS N° 4878 Tuesday 3 June 2014 Contents N° 4878 Top stories JUSTICE COUNCIL COMPANY LAW EU/US Small advance possible on data protection Page 5 Fight against money-laundering: Negotiations continue Page 7 Obama coming to Europe to boost military alliances Page 12 Institutions EPP group expected to elect Manfred Weber as its chief...................... 1 Economic & monetary affairs, taxation Youth unemployment: Exec targets all member states.......................... 4 Sectoral policies Circular economy, key theme of Green Week 2014................................ 4 Small advance possible on data protection.................................... 5 Member states split over air passenger rights................................... 6 Financial services, banks, insurance Fight against money-laundering: Negotiations continue............................. 7 States urged to improve their tax governance................................. 7 Business & competitiveness Facebook said to have notified WhatsApp buy to Commission................ 8 Telecoms package and network security on Council’s agenda................... 8 Open forum Nascent solar energy sector totally undermined in Ukraine?.......................16 Trade policy US Congress more amenable to having financial services in TTIP........ 9 Member states unite against De Gucht over TDIs.............................10 EU businesses in China ‘feel the blues’........................................11 ENERGY PREMIUM On europolitics.info n Despite energy security focus, single 2030 target is enough: UK n Greece interested in South Stream again External relations Obama coming to Europe to boost military alliances......................12 Gas conflict: Ukraine pays US$768 mn to avoid escalation.............12 EU agenda...........................................13 Sold by subscription only © reproduction strictly prohibited in any language www.europolitics.info 4 Tuesday 3 June 2014 N° 4878 EUROPOLITICS Youth unemployment: Exec targets all member states By Sophie Petitjean For the first time, the EU executive has based its country-specific recommendations on the results of its scoreboard of social indicators In its country-specific recommendations, published on 2 June, the European Commission calls on all member states to improve their employment markets and social situations. It highlights the deterioration of the social situation in 11 member states, and recommends that some of these countries should improve their social security safety nets. It also calls on states with a surplus (Germany and the Netherlands) to boost domestic demand. The publication of country-specific recommendations is provided for under the ‘European semester’, which coordinates economic policy across the Union. This year, the Commission has evaluated the situation in 26 member states (Greece and Cyprus, which are still receiving financial assistance from the EU, were not included in the assessment). For the first time, it has based its recommendations on the results of its scoreboard of key employment and social indicators. The non-binding scoreboard, published in November 2013 and adopted by European ministers in March 2014, details imbalances in each country in relation to the European average on unemployment, inactivity, poverty, inequality and household income. Based on the scoreboard, the Commission has targeted all countries regarding youth unemployment. It has called on 18 member states to improve the transition between education and employment, suggesting specific measures, and recommended that eight member states should improve the implementation of their ‘youth guarantee’, a system adopted at European level to provide all young people under 25 with a job, apprecenticeship, internship or ongoing training within four months of leaving education or losing their job. Regarding wages, the Commission says more needs to be done on wage indexation (in Belgium and Luxembourg), while minimum wage developments in Bulgaria, Romania, Slovenia, Portugal, Germany and France are highlighted. Employee training systems are also emphasised (Portugal, Spain, Italy and Croatia), while the Netherlands is invited to make its system of fixing salaries more flexible in order to allow for increases. The relevant Councils will now discuss these recommendations, with a view to their being adopted by finance ministers in July. Belgium and Luxembourg could once again take umbrage at recommendations targeting their system of wage indexation, and other sensitive matters may also be discussed: for example, the fact that the Commission has asked Germany to monitor the impact on employment of implementing a minimum wage (called for at European level), as well as to ensure that its pensions reform does not threaten the sustainability of public finances. n Circular economy, key theme of Green Week 2014 By Anne Eckstein Participants will debate how Europe can become more competitive by boosting its resource efficiency Europe’s largest annual environmental conference, Green Week 2014, hosted by the European Commission (DG ENVI) in Brussels from 3 to 6 June, will focus on the ‘Circular economy – Saving resources, creating jobs’. “Europe’s competitiveness will be determined by its ability to use resources efficiently and there will be no place for waste. We need to move away from our throwaway culture and switch to a more circular model, cutting waste and turning it into a resource,” explained Environment Commissioner Janez Potocnik. The conference aims to show that in a world with finite resources, the logical solution for Europe is to move to a more circular economy where almost www.europolitics.info nothing is wasted, where the re-use and remanufacturing of new products becomes standard practice and where sustainability is built into the fabric of society. There will be special emphasis on how better waste management can become a way for the EU to use scarce resources more efficiently. NEW ENVIRONMENTALISM This 14th Green Week will open with a special summit on ‘New environmentalism’, the main objective of which will be to understand why environmental campaigns are no longer working, and why, despite popular support in large segments of society, investment in clean technologies and political discourse in favour of a shift to greener economic models have not really become mainstream. This special session will bring together celebrities, intellectuals, activists, entrepreneurs, leaders and film makers. Each speaker will draw on personal experience to describe what has worked and what has failed over the last 40 years and to suggest where the environmental movement should go from here. n Background The Commission will present, on 18 June, new proposals to help Europe adopt a more circular model. In addition to a general communication on the circular economy, its package will include legislative proposals to update three waste directives: the waste framework directive, the packaging and packaging waste directive and the directive on landfilling of municipal waste. Sold by subscription only © reproduction strictly prohibited in any language 5 EUROPOLITICS N° 4878 Tuesday 3 June 2014 Small advance possible on data protection By Nathalie Vandystadt Athens will try, at the 6 June Justice Council, to secure a tentative agreement on international data transfers A ‘partial general approach’ by the 28 justice ministers on a single chapter - transfers of the personal data of European citizens to third countries like the United States - may be in the offing. The stakes are subtle, limited and above all not binding on the member states, which at this stage will not be giving the Greek EU Council Presidency a mandate to negotiate with MEPs. On this issue, which has divided the states for two and a half years, “nothing is settled until everything is settled”. But if Athens manages to take this step at the 6 June Justice Council in Luxembourg, at least it will be able to say that it secured a small advance on the draft regulation on personal data protection. The Greeks are not aiming too high and are expected to rally a qualified majority in the Council despite determined opposition, most notably by the UK, which disputes the entire regulation – aimed at improving the protection of Europeans’ privacy, especially online – and is pressing for a directive, a less binding measure. The 28 first have to confirm a key point of this legislation: it will apply to all companies operating in the EU, which therefore includes firms headquartered outside the Union, like US-based Google. Under the Greek proposal, which does not overhaul the initial proposal of January 2012, future rules on data transfers will more strictly regulate transfers by non-European commercial companies operating on European territory. CRITERIA Criteria would have to be met and the European Commission would play a decisive role in this respect (in the framework of comitology, under the oversight of states and the European Parliament). If it should decide that a non-EU country, a territory, an economic sector or an international organisation “guarantees adequate protection,” then “transfers will not require specific authorisation”. While this general rule already exists in the 1995 directive on data protection, the Czech Republic, Germany and Slovenia are reluctant to give the Commission such power. The UK “very strongly” doubts whether the new criteria for assessing the reliability of a third party - respect for human rights and fundamental freedoms, data protection rules, including on other transfers, citizens’ rights, including the right to judicial and administrative remedy – can be met. The Commission may also decide that a third party no longer meets the criteria and then cancel, amend or suspend its decision without retroactive effect. It would have to contact the third party to remedy the problem. Under another change, multinationals like Coca-Cola that transfer data within the company in different countries would have to set up mandatory rules. These will require approval by the European data protection authorities concerned. Certain transfer contracts may thus be accepted by these national regulators. n Google and the right to be forgotten Google’s steps to implement the right to be forgotten (after a major ruling by the EU Court of Justice against the US search engine giant) will be examined on 3 and 4 June by European data protection authorities meeting in the so-called Article 29 Group (in reference to the 1995 data protection directive). Justice Commissioner Viviane Reding has already welcomed the response, which takes the form of an online questionnaire available to Europeans alone, enabling them to apply for the deletion of search results. Sold by subscription only © reproduction strictly prohibited in any language www.europolitics.info 6 Tuesday 3 June 2014 N° 4878 EUROPOLITICS Member states split over air passenger rights By Isabelle Smets Financial compensation for flight cancellations or delays and missed connection flights is still a sore spot How will air passengers who have fallen victim to significant flight delays or cancellations be compensated in the future? The question is worth its weight in gold for airline companies but is still dividing member states. The Council’s Greek Presidency, which would have liked to come to an agreement at the Transport Council on 5 June, has had to lower its expectations. There will be no official agreement in Luxembourg on the review of the regulation on air passenger rights, but simply a progress report. One thing that remains clear is that the new rules will explicitly plan for passengers who experience significant delays to be financially compensated, even though the current regulation only enforces this in the event of cancellations. However, the threshold is still up for debate. The last compromise text submitted by the Greeks kept the thresholds proposed by the European Commission – 5-9-12 hour delays according to the flight distance. This falls short of MEPs’ demands (whose threshold is set at 3-5-7 hours) and should make airline companies very happy, especially as the Presidency has proposed to dump all flights longer than 3,500 km in the “12- hour delay before right to compensation” category, while the Commission believes the “3,500 km-6,000 km” slot should be compensated after nine-hour delays. In other words, delayed flights between 3,500 km and 6,000 km, including a delayed arrival of between 9 and 12 hours, would not be compensated if it were up to the Greek compromise. The fact remains that the compromise still has a long way to go before adoption. Several member states are against the regulation containing provisions on missed connecting flights Between those who are against the 5-9-12 hour thresholds (Germany, Austria, Finland), those who propose a single five-hour threshold without taking the distance into account (Denmark and Slovakia), those who propose new combinations (3-7-10 for Malta, 3-5-9 for Belgium and Spain) and those who agree with the 5-9-12 but not the proposed distances (Romania), it is understandable that for now, the Greek Presidency has given up on trying to get everyone on the same page. Several member states also do not agree with the fact that the regulation includes provisions on missed connecting flights. This could really affect regional companies that often operate the initial flight towards a hub because, according to the Commission, it would be responsible for paying compensation in the event of a delay to the final destination. Under this approach, a two-hour delay, which would make someone miss a connecting flight and ultimately result in becoming a ninehour delay, would give rise to compensation paid by the first carrier (even though the two-hour delay would usually protect them from having to compensate). Nevertheless, the Greek Presidency proposes that nothing should be paid if the connecting flight’s delay was relatively short (90 minutes in its current proposal) and the passenger was fully aware that a slight delay of the initial flight would mean a missed connecting flight. However, many member states would prefer to see simpler calculations for compensations based on every step of the flight. Almost all member states unanimously agree that the rule on airlines being expected to find accommodation for their passengers in case of flight delays or cancellations due to extraordinary circumstances should be limited to three nights. As it stands, there are no limitations with the time – but there was a certain Icelandic volcano. On the other hand, the €100 per night limit proposed by the Commission could be accepted, which would not go down well with the airline companies. n EPP (continued from page 1) In all the countries where it is represented (all 28 member states except the United Kingdom), the EPP suffered losses (in 14) or remained stable at best (in the small countries). Only in Malta, the Czech Republic and Slovenia did EPP member parties register gains. Losses were greatest in the large member states: the number of Spanish MEPs dropped from 25 to only 16. There are also only 16 Italian members, down from 34 in the outgoing Parliament, ie less than half. The number of French members is also down sharply – from 30 to 20 - due to the surge in www.europolitics.info the Front National vote. The Poles limited the damage, dropping from 28 to 23 members, and thus become the second largest delegation in the EPP group. The Germans still make up the largest delegation, but on a smaller scale: 34 members, compared with 42 previously. They are expected to hold fewer strategic positions than in the outgoing Parliament since the EPP group chair will cost the CDU-CSU members in the EPP a lot of points under the d’Hondt rule.n For the full list of MEPs europolitics.info (bit.ly/1pMbpz0) see Election of ten vice-presidents After the election by secret ballot of the chair of the EPP group, the ten vicechairs will be elected on the afternoon of 4 June. Under its statutes, at least one third must be women. Sold by subscription only © reproduction strictly prohibited in any language 7 EUROPOLITICS N° 4878 Tuesday 3 June 2014 Fight against money-laundering: Negotiations continue By Manon Malhère In absence of a compromise, the dossier will once more be on Coreper’s agenda before the Ecofin Council The Greek EU Presidency could soon be on the home strait in the fight against money-laundering: it hopes that the permanent representatives (Coreper) will reach an agreement (general approach) on new rules on money-laundering before finance ministers meet on 20 June. Member states have made progress on the matter, but still need to agree on certain aspects, explained a source at the end of Coreper’s meeting on 28 May - adding that any changes to the Presidency’s latest compromise should be relatively minor. Proposed by the Commission in 2013, the negotiated text revises and repeals Directive 2005/60/EC, the third anti money-laundering directive. It imposes a series of obligations on financial institutions, as well as on other sectors, such as cash games and gambling. These concern, for example, identification and verification of clients’ identities. Each member state has its own concerns, and member states must finalise their positions on the storage of data on who really controls companies (actual beneficiaries), when a transaction is carried out or an activity developed on their behalf. The possibility of exempting cash game services – except casinos and online gambling, for now at least – is also being discussed. According to a source, some member states - including Germany and Malta - also hope to apply these derogations to online cash games. Another sensitive subject is the sanctions to be applied to entities subject to diverse obligations in case of a violation of the directive. Overall, the compromise on the table imposes fines on non-financial entities equivalent to a maximum of two times the profits obtained through the infraction, or one million euro. This amount can be up to five million euro for financial institutions. A minority of states considers these amounts too high, while another minority wants to increase them. Also under discussion is cooperation between financial intelligence units (FIUs) and the possibility for entities subject to diverse obligations to not apply certain measures on electronic money instruments which cannot be recharged. The UK only intends to oppose this if risk is low, says a well-informed source. n States urged to improve their tax governance By Tanguy Verhoosel The Commission’s recommendations stress the need to strengthen the drive against aggressive tax planning by multinationals Easing taxation on labour, limiting the use of reduced VAT rates and improving tax governance: these are the three priorities for taxation policy set by the European Commission, on 2 June, in its country-specific recommendations to the 28. All the member states are concerned expect Denmark, Estonia, Finland and Slovenia. In what has become a well-known refrain, Taxation Commissioner Algirdas Semeta once again urged the 28 to lessen the tax burden on labour as a way of boosting the EU’s competitiveness. The Commission notes that there has been progress. However, «much remains to be done,» continued Semeta, who singled out for criticism 12 countries: Germany, France, Italy, Spain, the Netherlands, Belgium, Austria, the Czech Republic, Hungary, Latvia, Lithuania and Romania. For the executive, it is essential that these states shift taxation away from labour and compensate for the resulting loss of revenues by raising taxes on environmental protection, property and consumption. Semeta repeated his criticism of the many VAT exemption schemes and reduced rates applied by states, which put a strain on public finances and «create administrative nightmares for companies». This is especially the case in Germany, France, the United Kingdom, Italy, Spain, Poland, Belgium, Ireland and Luxembourg, he added. These states – as well as Hungary and Croatia – are asked to broaden their tax base. According to the Commission, this measure would enable some of Sold by subscription only © reproduction strictly prohibited in any language them to reduce their normal VAT rate. The idea is to simplify things for companies but also to ensure that they pay their fair share, notes the Commission. In its recommendations, it also – for the first time – calls on 16 countries (Belgium, Bulgaria, the Czech Republic, Germany, Spain, France, Croatia, Hungary, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania and Slovakia) to improve their tax governance in order to tackle tax evasion and avoidance more effectively. Many multinationals exploit differences between national tax systems to reduce their taxable base, states the Commission. But some states contribute to the use of aggressive tax planning strategies by developing short-term schemes designed to attract companies to their territory, accused Semeta. The commissioner mentioned Ireland, the Netherlands, Malta, Luxembourg and Cyprus. n www.europolitics.info 8 Tuesday 3 June 2014 N° 4878 EUROPOLITICS Facebook said to have notified WhatsApp buy to Commission By Sophie Mosca The EU executive denies notification of the deal approved by US competition authorities in April The world’s largest social network, US-based Facebook, bid €14 billion in February for WhatsApp, a free instant messaging service for mobile devices that boasts 500 million users. This is the largest amount in its history for a corporate takeover, the equivalent of NASA’s annual budget. Facebook is thus about to bring a sizeable competitor into its ecosystem, a move similar to its 2012 takeover of Instagram, a photo and video application and sharing service for mobile phones and tablets. The deal was approved by the US competition authority, the Federal Trade Commission (FTC), in April, but it warned Facebook about its use of customers’ personal data, which will remain under control. The FTC reiter- ated at the time the obligations imposed on Facebook since 2012 (notably to carry out audits over a 20-year period). On the European side, according to Facebook, the deal could raise concerns about dominant position in several states, allegedly Cyprus, Spain and Germany. The Wall Street Journal and AFP have both quoted sources stating that the social network giant has notified the transaction to the Commission. Contacted by Europolitics, the spokesman’s office for the competition commissioner denied such notification, on 2 June. The deal could well be notified considering the amounts and competition concerns in the single market. If so, the Commission would no doubt alert national anti-trust authorities and then announce whether or not it planned to analyse the case or to refer it to the states concerned. The EU executive approved Microsoft’s takeover of Skype in 2011 and the EU General Court, to which Cisco and Messagenet brought the case, upheld its decision in December 2013. If the transaction appeared to pose a problem, it could impose remedies, as it has done with Google and others. The takeover is not exactly to the liking of European mobile telecoms operators. They see it as unfair competition since they invoice SMS and MMS, provided for free by WhatsApp. European operators have criticised the takeover on a number of occasions and chances are that they would intervene as stakeholders to defend their market. The threat is relative, however: for now, they are still leaders on the EU market worth €113.2 billion in 2013 for the five leading markets, compared with €3.7 billion for internet service providers, the over-the top (OTT) players, namely Facebook, Skype or Google. Despite their strong growth, these OTTs are expected to hold only 5% of the global market in 2017. n Telecoms package and network security on Council’s agenda By Nathalie Steiwer On 6 June, the Greek Presidency will present reports on negotiations underway on the single digital market and cyber security The Greek EU Presidency will pass the baton to Italy – which will take over at the helm of the EU in July - at the Telecoms Council, on 6 June in Luxembourg. Greece will present two reports on progress made in negotiations currently underway, while Italy will lay out its main priorities on telecoms under its upcoming Presidency. The first two debates will be public. Network security: The current Presidency will present a progress report on negotiations underway on the adoption of the directive on network and information security in the EU, proposed by the Commission in February 2013. In prin- www.europolitics.info ciple, the member states support this text, which would oblige operators of networks essential to the economy and security to report cyber attacks. In practice, the member states are calling for much greater flexibility, and have not yet taken a position on the list of sectors covered. The European Parliament took a position in March. Digital single market: The Presidency’s progress report on the Council’s negotiations on the adoption of the regulation on the digital single market, known as the telecoms package, is much more pessimistic. Member states oppose the proposed measures on the attribution of radio spectrum, single authorisation for telecoms operators and access to wholesale markets (virtual access) for operators without their own network. Only the chapter on users’ rights has survived the negotiations, and here again the member states hope for minimal har- monisation, so that they may adopt more binding standards at national level. The sensitive subject of net neutrality has not yet been discussed in depth by member states, and neither has roaming. Parliament adopted its position in first reading in March. Digital scoreboard: The Commission will present its inventory of Europe’s digital landscape, adopted last week, which shows that while access to broadband is improving, the digital ‘gap’ in Europe is still wide: one in five Europeans never connects to the internet, while one in two lacks the necessary professional qualifications. Work programme: The Greek Presidency will take stock of texts adopted (reduction of engineering costs for broadband, electronic signing, accessibility of public websites), while Italy will present its planned work programme on telecoms. n Sold by subscription only © reproduction strictly prohibited in any language 9 EUROPOLITICS N° 4878 Tuesday 3 June 2014 US Congress more amenable to having financial services in TTIP By Brian Beary MEP believes that US lawmakers take a different view than the US Treasury, which does not want the trade pact to cover banking regulation A “competing voice” is how British MEP Peter Skinner (S&D) described the US Congress, asked if it agreed with the US administration that banking regulation should be excluded from the EU-US free trade pact. Speaking exclusively to Europolitics, on 29 May on Capitol Hill, he noted that the chair of the House Financial Services Committee had already urged the US administration to allow financial services to be included. From his talks with US lawmakers, he felt that this pro-inclusion argument was “getting traction” in Congress. Skinner himself backs inclusion, believing that divergent standards on accounting, for instance, are hampering transatlantic investment. The MEP was in Washington for two days of seminars that were organised by the Transatlantic Policy Network, in which a dozen MEPs and congressmen participated. Their agenda covered the impact of the European Parliament’s elections, regulatory parts of the Transatlantic Trade and Investment Partnership (TTIP), financial services, digital data flows and energy. Commenting on how the anti-TTIP camp has been bolstered by the elections, he said “the sins of all old trade deals are being visited on TTIP» by its opponents, but that in reality the “I may be alone in some part of my political family by saying this, but I believe it is more appropriate for us to talk about how we can make ISDS better than to get it out” TTIP trade negotiations were much more transparent than past trade deals. On whether his political group, the centre-left S&D, supported having an investor-state dispute settlement (ISDS) mechanism in the TTIP, he said: “I may be alone in some part of Sold by subscription only © reproduction strictly prohibited in any language my political family by saying this, but I believe it is more appropriate for us to talk about how we can make ISDS better than to get it out”. The TTIP may be a hot topic for MEPs, but Congress is much less preoccupied with it. Skinner explained this difference, saying “Europe, given its economic doldrums right now, is looking for international answers to economic growth,” while the US “has got wider economic interests and its economy is slightly better balanced than many of the European ones”. Again on the TTIP, he said there was a «clear connection» between this trade deal and the EU’s demand that the US improve its data privacy regime. The data protection talks may run in parallel but they “they will impact the TTIP itself,” he said. As for the energy chapter, he underscored how there were “two different things”. Having more liberalised rules on importing US liquefied natural gas to Europe was “not a problem”. But the EU would be tightening, not easing, environmental rules on extracting natural gas within Europe, referring to the controversy over fracking, he said. n www.europolitics.info 10 Tuesday 3 June 2014 N° 4878 EUROPOLITICS Member states unite against De Gucht over TDIs By Joanna Sopinska The main bone of contention is the content of draft guidelines which, according to member states, leaves too much room for misinterpretation Faced with the continuing stalemate in the battle among member states over the reform of the EU’s trade defence instruments (TDIs), Karel De Gucht, the commissioner for trade, decided to take things in his hands. Despite strong opposition from the majority of the member states in the Council, he decided to dismantle the TDI reform package presented back in April 2013 and push for the separate adoption, before the summer break, of draft guidelines clarifying the European Commission’s practice in four areas related to the reform. Addressing the Competitiveness Council on 26 May, De Gucht defended the move as an attempt to enhance the transparency of the EU’s trade defence proceedings “for the benefit of all stakeholders”. But his argumentation did not go down well with the ministers. Virtually all the member states, except for Sweden, criticised the idea of the separate approval of the guidelines before the legislative proposal amending the EU’s basic anti-dumping (AD) and anti-subsidy (AS) rules receives the green light from the Council and the European Commission (co-decision). Meanwhile, despite one year of discussions, the Commission’s blueprint on TDIs remains blocked in Council. In a statement issued after the meeting, the www.europolitics.info French Minister of Economy, Arnaud Montebourg, expressed his “strong opposition” to De Gucht’s plans, arguing that the adoption of TDI guidelines would weaken the protection of EU industry in the fight against unfair practices from third states and companies. “The minister received almost unanimous support from his colleagues in the Council, especially the British, German, Spanish, Italian and Polish ministers,” the statement said, pointing to Sweden as the only supporter of the Commission. On more general terms, Montebourg called on the Commission to terminate its activities in the field of trade until the new European Parliament is installed following the elections of 25 May. French EPP group member Tokia Saifi issued a similar call, suggesting that all decisions concerning the TDI package should be suspended until after the new Parliament formally takes up its duties in July. The Commission hit back, accusing the French minister of ignorance. “Over the past four years, the European Commission has adopted a very firm stance against unfair competition,” De Gucht’s spokesperson said in a statement issued shortly after the Council meeting. “To state that codifying Commission practice would weaken EU industry is simply ignoring the Commission’s strong record under the tenure of Trade Commissioner De Gucht,» he added. The Commission also rejected the claim that the guidelines were supposed to be adopted together with the legislative proposal. “The commissioner explained that he had presented the draft legislative proposal together with the draft guide- lines back in April 2013, but always stressed that joint presentation does not mean joint adoption,” the statement said. SUBSTANCE, MAIN STICKING POINT The spat between the Commission and the Council, supported by the European Parliament, is not so much about the timing of the approval of the guidelines but rather about the substance of the draft. According to sources, most member states have had “serious reservations” about the text, which includes, as one of the diplomats put it, “more exceptions than rules”. The main bone of contention is the so-called ‘Community interest clause’ and its broader interpretation proposed by the Commission, which is taking into account “other policies (eg development policy)” rather than focusing on pure economic assessment. “Nobody in the Council likes this idea as it paves the way for misinterpretation and a less objective decision making process,” a diplomatic source told Europolitics. n Background Following the failure of the last attempt to reform the EU’s trade defence instruments (TDIs) made in 2006 by Peter Mandelson, the European Commission proposed, on 10 April 2013, a series of amendments to the EU’s basic anti-dumping (AD) and anti-subsidy (AS) rules. The package included a legislative proposal for a regulation on TDIs and draft guidelines. Sold by subscription only © reproduction strictly prohibited in any language 11 EUROPOLITICS N° 4878 Tuesday 3 June 2014 EU businesses in China ‘feel the blues’ By Sébastien Falletti European companies operating in China are becoming pessimistic, according to a fresh survey by the EU chamber The ‘golden age’ appears to be over. The world’s second largest economy is not the land of spectacular expansion and hefty profits for EU companies any more, according to a fresh survey conducted by the EU Chamber of Commerce in China (EUCCC). Amid slowing growth, European businesses operating in China are seeing their profitability erode and are scaling back their investments, says the annual ‘Business confidence survey’ for 2014, released on 29 May in Beijing. For the first time in the history of the survey, more companies noted that their Chinese profit margins were lower than their companies’ global averages than the other way round. The decline in profitability is apparent, with only 63% of the EUCCC’s members making profits last year, while the respec- tive figure was 74% in 2010. Some 63% of the companies have failed to increase their profitability last year. These declining figures cause pessimism among major European firms, even leading some to rethink their strategy. “A Chinese economic slowdown is a gamechanger that will fundamentally and necessarily alter corporate business strategies. With costs rising and regulatory issues continuing, European companies are starting to put expansion plans on hold,” said Jörg Wuttke, the president of the EUCCC. Growth expectations are at their lowest level since the financial crisis and prospects are gloomy. Only 31% of the companies are optimistic about profitability in their own sectors over the next two years. Recent data showed that China’s economic growth this year could miss the government target of 7.5%. The new leadership, which took over in 2013, welcomes this slower growth. Its aim is to upgrade the country’s economy through productivity gains and domestic consumption. Yet, many analysts remain Sold by subscription only © reproduction strictly prohibited in any language concerned that Beijing will not be able to meet its ambitious goals. Persistent discrimination against foreign companies in the regulatory field is a key factor behind this ‘China blues’, according to the EUCCC. In 2013, its members missed out on €21.3 billion in revenues due to regulatory barriers and a lack of market access. “Most European companies feel that domestic Chinese companies continue to receive favourable treatment. The unpredictable legislative environment and the discretionary enforcement of regulations are identified as the two most significant regulatory challenges,” stressed the survey, conducted with Roland Berger Strategy Consultants. The Chinese leadership promised ambitious reforms during its last plenum in October 2013, including opening up key sectors to foreign competition. Yet, the EUCCC is losing patience and calling for tangible improvements. “European firms are yet to be convinced that real changes will take place in the coming one to two years,” said Wuttke. n www.europolitics.info 12 Tuesday 3 June 2014 N° 4878 EUROPOLITICS Obama coming to Europe to boost military alliances By Brian Beary Russia’s actions in Ukraine have injected new impetus into EU-US defence cooperation The crisis in Ukraine “has given new energy and impetus to the transatlantic alliance,” Ben Rhodes, US deputy national security advisor said, briefing journalists on President Barack Obama’s trip to Poland, Belgium and France on 3-6 June. A key goal of his trip will be bolstering US military aid to Central and Eastern European countries, which remain on edge following Russia’s annexation of Crimea in March. The other top agenda items are increasing US gas exports to Europe to make it less reliant on Russian gas, and injecting momentum into the ongoing EU-US talks for a free trade agreement, the Transatlantic Trade and Investment Partnership (TTIP). The leaders of Poland, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovenia and Slovakia will meet with Obama in Warsaw, on 3 June. The timing and location are no accident: they will mark the 25th anniversary of Poland’s multi-party elections that helped usher in the end of Soviet, Communist domination in Eastern Europe. Obama has bilateral meetings scheduled with the president of Poland and the newly-elected President of Ukraine, Petro Poroshenko. On 4 June, the presidents of the European Commission and Council will join the leaders of France, Germany, Italy, the United Kingdom, Canada, Japan and the US for a G7 summit in Brussels. Russia has been excluded from this summit, which was originally scheduled to take place in Sochi, because of its annexation of Crimea. France’s President Francois Hollande and UK Prime Minister David Cameron will have bilateral meetings with Obama. A final gathering of transatlantic leaders will occur in Normandy, on 6 June, to commemorate the 70th anniversary of D-Day. Russian President Vladimir Putin will attend these ceremonies too. However, the White House’s Rhodes insisted that Obama would not meet with Putin individually. US Secretary of State John Kerry will accompany Obama for the trip. Asked by Europolitics if the renewed focus on transatlantic defence signalled a US ‘pivot back to Europe’, Rhodes stressed that the so-called pivot policy that Obama announced in early 2012 was never intended as a pivot away from Europe, but rather out of Iraq and Afghanistan after a decade of fighting wars there. Earlier in the week, Obama announced that he was cutting US troop levels in Afghanistan from 32,000 to less than 1,000 by the time he leaves office in January 2017 - just enough to secure the US Embassy there. While in Europe, Obama will discuss with Poland and the Baltic nations how to boost US military presence there. “We seek to reaffirm our commitments with our European allies,” said Rhodes. Asked for specifics, he said “we don’t want to get ahead of discussions”. In recent months, the defence ministers of Poland, Estonia and Norway have each, while in Washington, urged the US to augment its military presence in Europe in response to Russia’s increasingly robust military manoeuvres in their neighbourhood. Some on Capitol Hill, such as Republican Senators John McCain (Arizona) and Bob Corker (Tennessee) support such calls, while others, weary of a decade of the costly wars in Iraq and Afghanistan, are less keen. n US military in Europe - 30,000 army, 30,000 air force, 7,000 navy = 67,000 total. At the end of the Cold War in 1989, the US had 213,000 soldiers in Europe - The troops are based mainly in Germany (40,800), Italy (10,700), and the UK (8,700) - The US also has 747 troops serving with the NATO mission in Kosovo - Missile defence assets in Europe include radars in the Netherlands, two ships in Spain, and interceptors planned for Poland and Romania Gas conflict: Ukraine pays US$768 mn to avoid escalation By Jakob Schlandt Talks continue in Brussels, Energy Commissioner Oettinger is optimistic An immediate escalation of the conflict about the settling of the gas conflict between Ukraine and Russia has been avoided by a partial payment made by Ukraine. According to Moscow, US$768 million was transferred early on 2 June from Ukrainian Naftogaz to Gazprom of Russia. According to Russian media reports, Gazprom’s CEO Alexei Miller said the introduction of a prepayment scheme for deliveries from Russia to Ukraine www.europolitics.info would be postponed until 9 June, leaving more time to find an accord in the three-way talks that include the European Commission. The negotiations continued at 14:00 om 2 June in Brussels, according to Energy Commissioner Günther Oettinger. On 30 May, Oettinger stressed, after the last round of talks in Berlin, that all the parties involved showed “discernible goodwill” to enable them to find a solution, but a “breakthrough” had not been reached. Ukrainian Energy Minister Yuriy Prodan said that “we feel there might be a compromise” to be reached. Alexander Nowak, the Russian energy minister, said that Russia and Gazprom were prepared to “make a goodwill step” towards Ukraine. On 1 June, Naftogaz announced that it had sent Gazprom a proposal for a supplementary agreement to the gas delivery contract that was signed in 2009. The press release did not provide details. The US$768 million paid by Naftogaz is substantially lower than the US$2 billion proposed by the Commission last week. But so far, Ukraine has been unwilling to clear its gas payment arrears that have accumulated since November in absence of an agreement on the price of the deliveries. The sum now transferred settles Ukraine’s arrears for February and March at a price of US$268 per thousand cubic metres. n Sold by subscription only © reproduction strictly prohibited in any language 13 EUROPOLITICS N° 4878 Tuesday 3 June 2014 EU agenda Tuesday 3 June COUNCIL OF MINISTERS POLITICAL AND SECURITY COMMITTEE (PSC) Brussels EXERCISE EU PROMETHEUS 2014 31 May – 4 June, Athens CEPOL CONFERENCE ON COMBATING ILLEGAL IMMIGRATION 2 – 4 June, Athens EUROPEAN SPATIAL PLANNING OBSERVATION NETWORK (ESPON) 2 – 5 June, Nafplion, Greece EUROPEAN COMMISSION TRAVEL AND VISITS nJosé Manuel Barroso receives a delegation of the European Youth Parliament nJanez Potocnik delivers a speech at New Environmentalism Summit (EGG, Bxl) nJanez Potocnik delivers speech at Opening Session of Green Week (EGG, Bxl) nAndris Piebalgs receives Achim Steiner Executive Director of the United Nations Environment Programme (UNEP) nNeelie Kroes gives speech at Automatica 2014 (International Trade Fair for Automation and Mechatronics), Munich, Germany nKristalina Georgieva is in Rome for the World Food Programme Executive Board Session nJohannes Hahn in Turku: gives an opening speech at the 5th Annual Forum of the EU Strategy for the Baltic Sea Region; meets with Jan Vapaavuori, Minister of Economic Affairs of Finland; gives a Press Conference with Jan Vapaavuori, Minister of Economic Affairs of Finland, and Aleksi Randell, Mayor of Turku; visits Turku Science Park Concept; goes on a cruise through the archipelago to Turku centre; visits ERDF project: Bio Refine Tech, Molecular Plant Biology; attends the Logomo Networking party in Forum Marinum where Jyrki Katainen, Prime Minister of Finland, will unveil, on a new landmark sculpture devoted to Saving the Sea nMichel Barnier receives Jeremy Darroch, CEO of British Sky Broadcasting plc nConnie Hedegaard receives Achim Steiner, UNEP Executive Director nLászló Andor in Paris: participates in the conference “L’Europe s’engage en France: Initiative pour l’Emploi des JeunesProgrammes 2014-2020” ; meets with François Rebsamen, Minister of Labour, Employment and Social Dialogue of France nDacian Ciolos receives representatives of Forum for Agricultural Research in Africa nNeven Mimica receives Kurt Eliasson, President of Cecodhas Housing Europe and Sven Bergenstrahle, President of International Union of Tenants nAndroulla Vassiliou meets Jeremy Darroch, CEO of British Sky Broadcasting plc. nAndroulla Vassiliou delivers opening speech at the International Sport and Culture Association (ISCA) conference on “Crosssector Action for Sport & Physical Activity Participation” (Microsoft Centre) COURT OF JUSTICE 09:30 Grand Chamber nHearing C-196/13 Law governing the institutions Commission v Italy 09:30 Fourth Chamber nOpinion C-328/13 Social policy Österreichischer Gewerkschaftsbund 10:30 Grand Chamber nHearing C-378/13 Law governing the institutions Commission v Greece Sold by subscription only © reproduction strictly prohibited in any language ECONOMIC AND SOCIAL COMMITTEE 09:00-16:00 Madi Sharma, Ivan Kokalov & Ákos Topolánszky, 1st meeting for the pilot project on ‘Better inclusion of Roma’, Ministry of Social Affairs and Health, Kirkkokatu 14, Helsinki and visit to Vantaa Finland, Vantaa (FI) 09:45-13:00 Quaestors meeting, JDE 4041 14:30-17:30 Online communication and social media, BvS 221 COMMITTEE OF THE REGIONS 09:00-17:00 Joint Consutative Committee EU - former Yugoslav Republic of Macedonia, MK Skopje CONFERENCES AND SEMINARS MASTERCLASS IN EUROPEAN TELECOMMUNICATIONS REGULATION 17 - 19 June, Brussels This 3-day masterclass provides a comprehensive overview of regulatory issues and developments in the telecommunications sector, using reallife examples and case studies from the European Union. Topics covered include next generation access, roaming, market reviews, radio spectrum policy and net neutrality. Organiser: Cullen International www.cullen-international.com > Regulatory Training > Masterclass in European telecommunications regulation www.europolitics.info DISCOVER OUR NEW WEBSITE www.europolitics.info Follow us Rue d’Arlon, 53 | B-1040 Brussels – Belgium | T: +32(0)2 737 77 09 EUROPOLITICS_SA 16 Tuesday 3 June 2014 N° 4878 EUROPOLITICS Nascent solar energy sector totally undermined in Ukraine? Inaction simply isn’t an option Few countries need an alternative to fossil-based fuel more than Ukraine. So four years ago, when the first commercial solar energy plant was built, it wasn’t just environmentalists who cheered. Since then, Ukraine has been plunged into political turmoil, and energy has become a highly politicised issue. The country needs to wean itself off gas from Russia more than ever. Yet a law is being debated in the Ukrainian capital Kyiv that could totally undermine the nascent solar energy sector, and if adopted would cost investors and the European Union tax payer billions of euro. The law was drafted before this May’s presidential elections. It will be high on the agenda of the new parliament in Kyiv. Growing tensions between pro and anti- Russian factions during the past week may in fact hasten the adoption of this law. The problem is partly to do with personal enmity, but ultimately it’s a question of money. Feed-in tariffs set in 2009 under the Tymoshenko regime priced solar energy at 46 eurocents per kilowatt hour – but the last government put in a gradual reduction whereby in 2013 it was tapered to the now 33 eurocent rate for new installations, but this is still higher than the price paid for energy produced by burning Russian gas (18 eurocents). The goal of feed-in tariffs is to offer cost-based compensation to renewable energy producers, providing price certainty and long-term contracts that help finance renewable energy and encourage investors. The Ukrainian draft law aims to cut the solar tariff sharply for large-scale solar energy parks, and to apply the reduced rate retroactively. The main motivation appears to be revenge, and Lanphere: “The EU will foot the bill in the end” the belief that officials in the previous government set artificially favorable conditions for solar. Recently the Ukrainian press has accused Andriy Klyuev, a politician and businessman closely linked to former President Yanukovich, of exploiting the feed-in tariff scheme. Clamping down on the tariffs has been portrayed as a clamp down on corruption. Of course, Ukraine must crack down on corruption, but this is a matter for the country’s courts, not its lawmakers. Slashing the feed-in tariff for solar completely ignores Ukraine’s longterm interests and punishes all investors before there has been any due process of law. It is very short-sighted, and it will have a chilling effect on future investment in Ukraine’s vital renewable energy sector. The bill under consideration in Kyiv aims to halve the current feed-in tariff, and in the process erase all the assurances the government gave to investors that their investment would be fairly treated. If the law goes through then companies like CEE, which generates nearly 38% of the solar energy produced in Ukraine from large solar parks, would be put out of business. CEE is based in Austria. It would incur losses of over €2 billion. Banks and private investors from Europe, China, the Middle East and from within Ukraine itself would lose a similar amount. But it will be the European Union that foots the bill in the end. EU loans intended to prop up Ukraine’s perilous economy will be diverted to bail out the local banks that would face massive losses. What is more, the loss in energy from solar will effectively need to be picked up by more gas imports from, among others, Russia. Again, a further diversion of EU loans. So far, the EU doesn’t appear to be too bothered by what is happening to Ukraine’s solar sector. It is ploughing billions of euro of aid into Ukraine to stop the country from reaching a financial meltdown. Yet the enactment of this new law would only hasten that outcome. Europe must engage with the companies investing in Ukraine’s energy future, and sit down with the Ukrainian government to help shape its energy policy. Inaction simply isn’t an option. n © Clean Economic Energy AG By Scott Lanphere (*) (*) Scott Lanphere is managing director of Clean Economic Energy AG Europolitics is offering a platform for outside comment and opinion by opening a regular Open forum section. All contributions are welcome, up to 4,500 characters (including spaces). They should be sent in to [email protected] and, if possible, accompanied by a translation into English or French along with a photo of the author in jpg format (300 dpi). The final decision on whether to publish these contributions or not remains solely with Europolitics. www.europolitics.info Sold by subscription only © reproduction strictly prohibited in any language
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