View from Brussels

Welcome to the View from Brussels which is a monthly blog by Edward Simpson, FLA Head of  Government Affairs, on developments from across The Channel.

24 July 2020

Earlier this week EU leaders agreed a budget for 2021-2027, the first time the Multi-annual Financial Framework has excluded the UK. In one of the longest set of negotiations lasting over 90 hours (falling 25 minutes short of the record-breaking Treaty of Nice deliberations), a budget settlement of €1,074 billion plus a €750 billion recovery fund was agreed by the EU-27.

The principal bone of contention was the EU’s approach to coronavirus recovery. The “Frugal Four” consisting of Austria, Denmark, the Netherlands and Sweden, and belatedly joined by Finland, initially opposed the creation of a fund to, in effect pool debt, and later, argued against direct transfer to specific economies.Those hardest hit by the pandemic, notably Italy and Spain, see the support as the EU’s version of the post-war Marshall Plan. The €750bn will consist of €390 billion in grants and €360 billion in loans. This was a minor triumph for the Northern Member States given the original plan for twice as much in handouts (€500 billion) than loans (€250 billion). The biggest winner is Italy which is set to draw on €127 billion in loans and more than €82 billion in grants.

The compromise includes rebates – the mechanism established to placate the UK in the 1980s – for Germany and the Frugal Four. At Dutch insistence, the European Commission will assess whether applications for funding comply with European Semester recommendations (country-specific measures to ensure consistent EU-wide approaches to economic policy). Attempts to link the package to respect for the rule of law were largely defeated as Hungary and Poland stood firm.

As for the general budget, the big winner was for environmental campaigners who ensured that 30% would be set aside for climate objectives. A new Just Transition Fund will help polluting regions fund a shift to cleaner industries. Digital investment also benefited from an increase in investment (but it was not regarded as sufficient by the tech lobby). The biggest losers were research and innovation funding and to a lesser extent, the Common Agricultural Policy. Much to Ireland’s delight, €5 billion was set aside for a special Brexit Adjustment Reserve that will go to countries and industries “that are worst affected.”

The EU is taking baby steps towards collecting income directly with a levy based on non-recycled plastic waste to be applied as of 1 January 2021. Proposals for a carbon border tax and digital tax should come early next year – with the aim of introducing the taxes by 2023. Leaders promised to “work towards” other levies “which may include a Financial Transaction Tax.”

The success of the recovery fund and new taxes levied at EU level will be a litmus test for the future pooling of sovereignty in fiscal matters.

 

 

View from Brussels -June 2020

24 Jul 2020
As governments and regulators across Europe consider how they use recovery from the Covid-19 as a force for progress, one of the central components will be the drive towards a greener economy.
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View from Brussels - May 2020

28 May 2020
The deadline for the UK and Brussels to reach agreement on a future relationship is fast approaching.
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View from Brussels - April 2020

30 Apr 2020
Just as countries around the globe have introduced measures to mitigate the impact of Covid-19, on 28 April the European Commission announced a banking package to facilitate lending to households and businesses in the EU.
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View from Brussels - March 2020

31 Mar 2020
Just as the UK Government has put in place measures to mitigate the fallout of the coronavirus on businesses and households so this has been the case on the other side of the English Channel.
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View from Brussels - February 2020

26 Feb 2020
Earlier this month, colleagues and I visited Brussels to better understand the lie of the land post-Brexit.
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View from Brussels - January 2020

28 Jan 2020
As we enter the last few days before the UK leaves the EU, talk has turned to what the future relationship holds.
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