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30 October 2013

EU Summit October 2013 No news is …BAD news!

Digital and Migration usurped by Spying Scandal

The ‘hot’ topics on the agenda at last week’s Brussels EU Summit were expected to be digital economy and migration.

The former in order for the EU to regain ground against its competitors, which are already a step ahead in developing digital technology, and the latter to avoid tragedies such as that which took place recently off the Italian island of Lampedusa.

Shift in focus

However, the outbreak of the scandal involving the US NSA spying on EU citizens & leaders disrupted

the Council’s agenda by shifting the focus of the Summit towards data protection, which became the focal point for a disagreement on an issue close to the heart of many Member States, namely the entry into force of the EU’s Data Protection Regulation.

Reflecting the divergent views within the Council, individual Member State statements and positions

were incorporated into the final Council Conclusions at the end of the two-day Summit. A sure sign that all was not well during the 2-day pow-wow.

Postponing

Despite the high number of pressing matters requiring immediate action by EU governments, the main

takeaway from the Summit was one of postponing final deliberations to the next Summit in December and setting long-term deadlines, thereby leaving significant room for manoeuvre – and, of course,

possible delays.

Time is running out with the EU elections in May 2014, and by March MEPs will begin to mentally switch off and start focusing on getting re-elected. Hence, time is of the essence, which makes it even more frustrating that critical issues are continually being put on the backburner

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A. US Spy scandal: Clash of the Titans?

The main scoop of the Summit was the alleged scandal of the

United States spying on EU leaders, including Chancellor

Merkel.

The news was launched by the French newspaper, Le Monde,

which reported that the US’ National Security Agency (NSA)

had collected tens of thousands of French and German phone

records.

Renegotiating intelligence relations

During the Summit Member States released a Statement

expressing concern about the possible negative repercussions

on intelligence cooperation between the EU and US, and the

intention of Germany and France to re-negotiate their intelligence relations with the US.

The position of the French and German governments was supported by the vast majority

of EU Member States, with the UK a notable exception, no doubt due to its supposed

“special relationship” with the US.

The EU Institutions also got involved, with Martin

Schulz, President of the European Parliament,

calling for a suspension of EU-US trade talks and

President Barroso saying that the revelations had

“shaken trust in privacy and data security.”

B. Digital Economy: A bridge towards new growth and job opportunities The discussions on the digital economy fell flat.

The aim of creating more job opportunities and instituting a trained workforce of young

professionals in the ICT sector sounds promising, as do Member States’ attempts to

develop digital infrastructure and new technologies.

For the strategy to be successful, it is key to gain the trust of citizens and businesses in

the digital system, as they are the main users.

In this respect, Member States said that they aimed to adopt a strong EU General Data

Protection framework and Cybersecurity Directive.

2015: Adoption of Data Protection Regulation

However, EU leaders postponed the timing for adoption of a regulation on data protection

until 2015, mainly due to differences within the Council.

“The revelations over recent

months and days have shaken

trust in privacy and data

security.” President Barroso

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“Europeans must be able to trust their online

providers, and know they are in control of their

own data and ‘digital lives’”. EU Council

President, Herman Van Rompuy

Again, the UK, perennial bête noire, fears a European data protection regime would put

additional burdens on business, whilst other Member States are opposed to any

perceived watering down of their strict national rules.

Prime Minister Cameron achieved one of his key objectives by delaying the timeframe of

implementation of the new EU data protection legislation to after the next UK General

Election.

According to the amended final

Council conclusions, the Data

Protection regulation is expected to

be completed “by 2015” instead of

“by the end of 2014”.

US tech giants Google, Facebook,

and Yahoo see this as a significant victory against the EU’s attempt to restrict costumers’

data sharing.

Tax Fraud and Tax Evasion

Two other issues discussed were tax fraud and tax evasion. Member States committed

to combat these illegal practices and welcomed the recently published European

Commission proposal for uniform VAT return, aimed at simplifying EU law. The proposal

addressed specific issues crucial for the functioning of digital economy, such as

differentiated tax rates for digital and physical products.

However, in another example of kicking the can down the road, no final decisions on

taxation-related issues were taken, as the Council postponed them to the next meeting in

December.

C. Youth Unemployment: a short-term problem or a long-term tragedy?

The fight against unemployment remains a key objective of the EU strategy with a

specific focus on youth unemployment, which is twice as high as adult unemployment.

The Council strategy is based on strengthening quality education at the national level

dispensing key skills to meet labour market needs, on supporting youth entrepreneurship

and on establishing apprenticeships and traineeships as important tools for getting young

people into the labour market.

Member States to “mobilise all efforts”

Initiatives such as the Youth Guarantee scheme as well as the Youth Employment

Initiatives are considered to be the main tools to succeed in this plan, with the support of

the European Structural and Investment Funds (ESIF), and in particular the European

Social Fund (ESF).

The European Council recalled the need for the Youth Employment Initiative to be fully

operational by January 2014 and calls on the Member States to mobilise all efforts

necessary to this end.

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“Once supervision is European, we

cannot leave failures to the national

level”.

An important part of the employment plan and the goal of reaching an optimum currency

area is to promote free workers’ mobility by granting them equal treatment in all

European markets.

In order to achieve this, the Council extensively discussed the enforcement of the Posting

of Workers Directive, which aims to improve the protection of posted workers and

facilitate provision of the services across borders, without, however, reaching an

agreement on the final version of the proposal.

D. Fiscal, Financial and Social: ‘Three’ sides of the same coin

The EU leaders focused on three different

aspects of the European Monetary Union: fiscal,

financial and social.

As far as the fiscal aspect is concerned, the

European Council has been actively promoting

the process of establishing the Banking Union,

which aims to place Eurozone banks under the

overarching supervision of the ECB, followed by

the creation of a bank resolution scheme for the

block and, eventually, a common deposit

scheme.

The next crucial step for the banking union will be the Single Resolution Mechanism,

which is set to centralise key competences and resources for managing the failure of any

bank in the Euro Area and in other Member States participating in the Banking Union,

because, as the President of the Council Hermann Van Rompuy stressed:

Member States have committed to reach a Political Agreement on the Commission

proposal by the end of the year, so that it can be adopted before the end of the

parliamentary term. It remains to be seen if Member States will be able to respect this

deadline.

SMEs hardest hit

On the theme of economic financing, the discussions mainly focused on small and

medium enterprises (SMEs), many of which have been hard-hit by the crisis.

The Council also called for greater involvement of the Member States, claiming that in

order to promote inclusive and sustainable growth, the coordination of economic policies

needs to be further strengthened by Member States.

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The last aspect, the social dimension of the EMU, is necessary to ensure that economic

growth and social cohesion are mutually reinforcing and strengthening processes – yet,

even on these matters, the European Council put back its final decisions for the next EU

Summit.

E. Migration: Mediterranean Sea as the graveyard for hundreds of people.

Specific attention was paid to the topic of migration after the recent deaths of more than

300 African migrants in a shipwreck off Lampedusa on 3 October.

Member States responded at the Summit by enhancing cooperation with countries of

origin and transit in order to address the root causes of massive migratory flows.

In addition, the Council emphasised the urgency of implementing the new European

Border Surveillance System (EUROSUR) and to reinforce FRONTEX activities in the

Mediterranean.

The Council invited the newly established Task Force for the Mediterranean, led by the

Commission, to identify priority actions to tackle the issue promptly.

However, no operational decisions are expected to be taken before December

and once again, no concrete immediate policies have been put forward.

Furthermore, the Council committed to revise its asylum and migration policies in June

2014, when strategic guidelines for further legislative and operational planning in the

area of freedom, security and justice will be defined.

In the meantime, in the strong words of President of the European Parliament Martin

Schultz, Europe's migration policy has

F. Eastern Partnership: EU between gains and challenges.

Treaties between the European Union and non EU-countries, the so

called Association Agreements, are currently interesting countries in

the eastern regions of Europe where the Vilnius Summit, the third

high-level meeting between EU and Eastern Partners, will take place

on 28-29 November.

EU leaders are very optimistic that Association Agreements will be

signed with Ukraine, and initiated with Moldova and Georgia.

However, despite the optimism, in the case of Ukraine there are still

major challenges to be addressed that may threaten the finalisation

of the signing process, not least whether Yulia Tymoshenko, former

"turned the Mediterranean into a graveyard".

Tymoshenko holds the key

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Prime Minister of Ukraine, who the EU describes as a victim of ‘selective application of

justice dictated by political motivation’, will be released from detention.

The success of such an agreement depends on how Ukraine proceeds with its most

famous prisoner, who still appears to wield considerable influence even whilst behind

bars.

What they said:

On the digital economy:

"Europe has been a global leader in this sector, but it has lost

ground to key competitors. We are simply not using the full

opportunities offered by the digital economy."

José Manuel Barroso, President of the European Commission

On cutting EU red tape:

“It’s not just a British concern. We need wealth creation, we

need jobs, we need enterprise, and we are not going to get it

if we over-regulate.”

David Cameron, UK Prime Minister

infobrussels@grayling.com

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