Finance Minister on Hungary + Regulation against deforestation + Western Balkans Summit

Dear reader,

A lot of money is at stake in the dispute with Budapest. The Commission wants to withhold a total of more than €13 billion from EU funds for Hungary in the dispute over the rule of law. At the same time, Hungary is increasing the pressure by blocking the planned European budget support for Ukraine. The finance ministers have now passed the ball back to the Commission. They say the authority should reassess the current measures in Hungary. Because Brussels is hoping for a compromise, as Eric Bonse reports.

Beef, cocoa, coffee, palm oil, soy, wood, and rubber – these products can soon only be sold on the European market if importers can prove that no forests have been converted into arable land for cultivation and production. In a night session, the EU Parliament, Council, and Commission agreed on the cornerstones of a new regulation against global deforestation. But this required “painful” compromises, according to S&D shadow rapporteur Delara Burkhardt. Timo Landenberger provides an overview.

The EU’s position has not always been so clear: At the Western Balkans summit, the EU heads of state and government clearly declared their support for the accession prospects of the six countries. In Tirana, the international community demonstrated that it is finally taking the geopolitical importance of the region seriously, writes Stephan Israel in his analysis. But it demands reforms – and support for sanctions against Russia. Serbia, in particular, is having a hard time with this.

High energy prices and the US government’s Inflation Reduction Act have sparked a debate in the EU about an industrial policy response. At next Thursday’s summit, EU leaders are expected to call for “common European level solutions” against the threat of industrial exodus. Read more in the news section.

Your
Sarah Schaefer

Rule of law dispute with Hungary: finance ministers call for new assessment

By

Eric Bonse

Now the ball is back in the Commission’s court: It was said on Tuesday after the Ecofin Council in Brussels, that the authority is to review Hungary’s anti-corruption measures again before a decision is made on freezing billions of euros in funds. At the same time, there was criticism of Hungary’s blockade of aid to Ukraine.

In both cases, a lot of money is at stake. Ukraine is to receive a loan of €18 billion, which the Commission wants to finance with new EU debt. In the case of Hungary, more than €13 billion of EU funds are at stake. The money has been on hold since the EU Commission found at the end of November that the agreed “milestones” to fight corruption and protect the rule of law had not been implemented sufficiently.

“Today, we asked the European Commission once again to assess the current developments in Hungary,” said German Finance Minister Christian Lindner (FDP). He said there were still newer developments in Hungarian politics after the EU authority submitted its report. The report only covered measures up to Nov. 19. The new assessment should be ready in “a few days,” Lindner said.

Ukraine aid in need without Hungary

At the same time, the minister criticized the Hungarian blockade on Ukraine aid. “Regrettably, we have not decided on the indispensable financial aid to Ukraine today,” he said. He added that the responsibility lies with the government in Budapest. It is also blocking the global minimum tax for companies. Both issues were taken off the Ecofin Council agenda because of Hungarian opposition.

“The approval of the package depends on the development of the measures Hungary is taking to protect the EU budget,” said Czech Finance Minister Zbyněk Stanjura, who led the talks. However, the finance ministers do not want to agree on a junket. If need be, they want to find a solution to provide Ukraine with the promised financial aid even without Hungary.

EP: Commission must stand firm

To this end, the “willing” countries must create a new financing instrument. The European Stability Mechanism (ESM), founded as an intergovernmental organization in Luxembourg in 2012 after British resistance, is considered a model. However, such a foundation on an intergovernmental basis is time-consuming and complicated. Brussels thus favors a compromise with Budapest.

Now the EU Commission has to build a bridge – with a new assessment of the situation in Hungary. But there is not much time left. The Hungarian parliament plans to adopt new measures that could help meet the controversial “milestones” as early as Wednesday. However, the finance ministers expect the new assessment of the Brussels authority as early as Friday. This could be very tight, EU circles said.

If the reassessment comes in time and is positive, Hungary could get the money after all. Otherwise, a special meeting of finance ministers is to be convened. The European Parliament called on the Commission to stand firm. “The European Union must not allow itself to be blackmailed,” said Green MEP Daniel Freund. “There must be no giving in on the rule of law sanctions now.”

Deforestation: Parliament and Council agree on due diligence obligations

By

Timo Landenberger

Actually, on Monday, the EU Parliament and Council positions were too far apart on too many points to reach a final agreement in an overnight trilogue session. But those involved wanted to set an example before today’s start of the UN Biodiversity Conference in Montréal (Europe.Table reported) and lead by a good example with a set of rules against global forest destruction, according to Brussels.

S&D shadow rapporteur Delara Burkhardt speaks of “painful compromises” but also of a “gold standard for due diligence for deforestation-free supply chains.” Similar laws are under discussion in the US and UK, she said, but are less ambitious. In this way, the EU can act as a credible pioneer in Montréal, says the MEP.

After all, the destruction of forests is one of the biggest drivers of biodiversity loss. According to the EU Parliament, between 1990 and 2020, a total forest area the size of the EU was lost around the world, and another ten million hectares continue to disappear every year.

Deforestation for animal feed

Through our consumption behavior, we are responsible for around ten percent of global deforestation in the EU alone. According to a WWF study, the figure is as high as 16 percent, putting the EU behind China (24 percent) but ahead of the USA (nine percent). The main import commodity in this context is soy, which is grown in deforested rainforest areas in South America, for example, and is used in Europe primarily as animal feed. But coffee and chocolate also contribute to global deforestation.

As a result of the new regulation, this is to change. Beef, cocoa, coffee, palm oil, soy, wood, and rubber can soon only be sold on the European market if importers can prove that no forests have been converted into arable land for cultivation and production. The same is to apply to products made from raw materials, including car tires or printed products.

Regulation includes EU forests

The Parliament was unable to get its way with the demand to include corn in the regulation. The cereal is used mainly as animal feed and has experienced a price explosion in recent months. Some EU countries thus feared an additional burden for agriculture.

The definition of forest degradation and deforestation was particularly contentious. The EP was successful on this point. Thus, in addition to the large-scale clearing of virgin forests, the conversion of smaller and so-called secondary forests is also to be covered by the regulation. This means that European forests and forestry and agriculture within the EU are also affected by the regulation. Because of this, forest-rich countries, in particular, announced resistance.

Other ecosystems, such as other wooded lands, were not included in the text. This was not envisaged in the Commission proposal but was demanded by the Parliament. For example, not only forests but also the already threatened South American Cerrado savannah were to be protected from destruction by agricultural use. Environmentalists had also lobbied for this.

EP wants to involve financial sector

Deutsche Umwelthilfe (DUH), for example, welcomed the agreement in principle but speaks of “partial success.” Without the protection of the savannahs, “a large part of the deforestation caused by EU consumption of soy feed and beef falls under the table,” says DUH Managing Director Sascha Müller-Kraenner. He adds the situation is more likely to get worse as companies move from protected to unprotected areas.

The exclusion of the financial sector is also criticized by environmentalists. The Parliament had called for the inclusion of banks and insurance companies to prevent investments in deforestation risks but had to back down in the trilogue, at least for the time being. First, the EU Commission will examine whether an expansion of the regulatory framework is necessary. “The financial sector will have to be included in some form. Otherwise, approval of the overall package by the European Parliament is hardly conceivable,” says Delara Burkhardt.

Western Balkans Summit: ‘new impetus’ for accession process

By

Stephan Israel

The location for the summit between the EU heads of state and government and the six states of the Western Balkans alone was a first. It was “historic” that the EU was meeting outside its borders, the host and Albanian Prime Minister Edi Rama stressed in Tirana on Tuesday. Both sides demonstrated that they needed each other. With the first meeting in the region, “history” is being made, said EU Council President Charles Michel.

“I am absolutely convinced that the future of our children will be safer and more prosperous with the Western Balkans within the EU,” the Belgian reiterated the accession perspective for Serbia, Montenegro, Bosnia-Herzegovina, Northern Macedonia, Albania, and Kosovo.

This has not always been a matter of course. At a previous Western Balkans summit, the EU states had successfully resisted the word “enlargement” even appearing in the final declaration. A meeting in June ended in a scandal because the EU could not agree on the start of accession negotiations with Albania and northern Macedonia.

Good chances for visa-free access for Kosovo

The discord should now be a thing of the past. EU Commission President Ursula von der Leyen spoke of a “new impetus” for the accession process. The EU is now again clearly committed to the accession prospects of the six countries. Since Russia’s invasion of Ukraine, even enlargement skeptics like France and the Netherlands have recognized that accession of the Balkan countries is in the EU’s geopolitical interest.

Next week, EU member states will discuss the EU Commission’s proposal to grant candidate status to Bosnia and Herzegovina. Now that Ukraine and Moldova have been granted status, there is little argument for not considering the former Yugoslav republic. How the decision will turn out is still open. Kosovo’s President Vjosa Osmani announced at the summit in Tirana that she would also apply for membership before the end of the year. There is a good chance that the EU will grant Kosovo visa-free access from January 1, 2024, the last state in the region to do so.

Serbia resists Russia sanctions

So there is movement, but shortcuts on the road to the EU are not envisaged. According to a statement, rapid progress can only be made on the basis of credible reforms. The EU also insisted in Tirana that the Balkan states fall in line with sanctions policy toward Russia. “You have to decide which side you are on,” Ursula von der Leyen said, referring to Serbia’s President Aleksandar Vučić. The latter also refused to adopt the EU’s sanctions against Russia at the summit. Serbia, he said, is an independent country that protects its national interests. Serbia’s largest energy company, NIS, is majority-owned by Gazprom.

Russia and China are trying to exert influence in the Balkans, the Commission chief warned. The EU, however, is the largest investor and closest partner of the Balkan states. After the summit, German Chancellor Olaf Scholz conceded that the dispute remained unresolved for the time being: “As far as the question of sanctions is concerned, we disagree with Serbia,” Scholz said.

EU exerts pressure in the area of migration

Progress has been made on the migration issue. The EU is pushing for the Balkan countries to adjust their visa policies. In recent months, many migrants from countries to which Serbia grants visa-free travel have entered the country, especially via Belgrade. The migrants then usually try to cross the green border into the EU. Under pressure from Brussels, Serbia has already reintroduced visa requirements for Tunisia and Burundi. By the end of the year, India, whose citizens have recently been heavily represented on the Balkan route, is also expected to follow.

The EU is also exerting pressure regarding the difficult dialogue between Belgrade and Pristina. At the summit, the EU presented a revised proposal for normalizing relations based on a Franco-German plan. According to this plan, Serbia would not have to formally recognize Kosovo, which was formerly controlled by Belgrade, for the time being. However, Belgrade would no longer block Kosovo’s membership in international organizations and would receive substantial financial assistance from the EU in return.

No more roaming charges

However, the Western Balkans summit was also expected to produce concrete results: To kick things off, mobile network operators from the EU and the Balkan states signed a joint declaration to gradually reduce each other’s roaming costs from October 1, 2023. By 2027 at the latest, the additional costs for cross-border cell phone use are to be eliminated altogether. The EU wants to export its “Roam like at home” success story and tie the Balkan states more closely to it altogether.

Host Edi Rama highlighted as a success that students from the six Balkan countries will be fully integrated into the Erasmus plus exchange program. The region’s universities should also be able to participate in partnerships with European universities. The College of Europe in Bruges is also to open a campus in Tirana in the foreseeable future, following an offshoot in Warsaw.

The EU is also helping the region with €1 billion to mitigate the consequences of the Russian war. The states can use part of the money to support families and companies suffering from the sharp rise in energy prices. In addition, investments in renewable energy production are to be supported.

Summit calls for ‘European solutions’ for industrial policy

EU leaders are expected to call for “common European level solutions“ to the threat of industrial exodus at next Thursday’s summit. That’s according to the latest draft of their conclusions, obtained by Europe.Table. In it, they stress the importance of a “coordinated policy response mobilizing all relevant tools at national and EU level to enhance the resilience of our economies.”

High energy prices and US government funding under the Inflation Reduction Act have sparked a debate in the EU about an industrial policy response. Commission President Ursula von der Leyen spoke on Sunday in favor of relaxing state aid rules and proposed to set up a new “sovereignty fund” to be financed from new EU funds. In doing so, she was echoing demands from France in particular.

Constitutional Court: EU debt only exception

But there is opposition to this from other member states, in Germany, especially from the FDP. German Finance Minister Christian Lindner feels that the Federal Constitutional Court’s concerns about joint debts in the EU have been confirmed. It is “good news” that the Covid reconstruction fund is compatible with the Basic Law according to the ruling of the Karlsruhe judges. However, the ruling also emphasizes the exceptional nature of the program. A joint borrowing for the general financing of political projects is not permissible.

German Chancellor Olaf Scholz expressed optimism that the EU and the US will be able to settle their dispute over the IRA. “I am confident that we will find a solution that everyone can live with,” the SPD politician said in the Albanian capital Tirana. There, Scholz had discussed the issue with French President Emmanuel Macron and Dutch Prime Minister Mark Rutte on the sidelines of the EU-Western Balkans summit. Macron had previously held talks in Washington with US President Joe Biden on the so-called Inflation Reduction Act (IRA). tho/rtr

Council wants flexible gas price cap

The EU member states want to place a tighter limit on the European gas price while allowing an automatic, daily increase in the price cap. On the one hand, the limit for bids is to be lowered further – to €220. That’s according to the Czech presidency’s second revision, which was available to Europe.Table yesterday. The Commission had proposed €275; in a first revision, the Council wanted to lower the limit only slightly to €264.

The decisive change compared to the Commission’s proposal, however, is the dynamization of the cap, which is to be more in line with the conclusions of the European Council at the end of October. The cap is to rise automatically to a higher limit if it exceeds €220. The dynamic maximum bid is then to be €35 above an LNG reference price.

Dynamic maximum price occurs alongside deactivation

“The publication of a daily settlement price will allow the cap to remain in line with developments in the LNG market,” the recitals state. The background is likely to be the fear that the EU will no longer receive LNG supplies if bids on the world market are no longer competitive.

To this end, the Council wants to adjust the LNG reference price. Thus, in addition to two LNG indices for Southern and Northern Europe and a price assessment by ACER, the Japan Korea Marker (JKM) is also to be taken into account.

The Commission, on the other hand, did not want to ensure international competitiveness by automatically raising the cap but by deactivating the market correction mechanism. This was to allow higher bids if the price on the European spot market fell below the LNG reference price for a certain number of days. According to the Council version, on the other hand, the mechanism is to be deactivated if it falls below €220 for five days.

State leaders want ‘complete’ electricity market reform

Another tool for limiting prices is to be joint gas purchasing in the EU. To this end, the EU energy platform should quickly become operational, according to the draft conclusions for the European Council in mid-December, which was available to Europe.Table yesterday. Other points include the early preparation of contingency plans for gas supply for the winter of 2023/24 and the rapid adoption of renewable energy and energy efficiency directives.

The governments of the member states are also exerting pressure on the reform of the electricity market design, which the Commission announced for the first quarter under pressure from the Council. The reform is intended to make the electricity market “fully fit” for a decarbonized energy system. According to information from Europe.Table, however, the Commission has not yet made a final decision on whether it will present a proposal for a long-term reform of the electricity market or only for a temporary adjustment for the duration of the energy crisis. ber

Pieper criticizes Commission proposal for green hydrogen

A step in the right direction, but not yet what is needed, says Markus Pieper (CDU), rapporteur of the EU Parliament for the Renewable Energy Directive, about the Commission’s proposal to define green hydrogen. Even with this, he says, “the targets for the shares of green hydrogen in industry and transport will not be achieved and the majority will be left to fossil-based hydrogen production for no real reason.”

A draft of the Commission’s delegated act has been available since last week (Europe.Table reported). It states that liquid or gaseous renewable fuels of non-biogenic origin (RFNBOs) must be produced with additional renewable electricity instead of electricity from fossil fuel power plants. Hydrogen products may only be considered green if the electricity needed to make them comes from additionally built plants. However, there is to be a transition period with easier conditions for hydrogen production.

Pieper criticizes the Commission for insisting on the principle of additionality from 2027. He calls for an extension of the facilitated conditions until at least 2032. In his view, there should be no production restrictions for plants built by then.

He sees it as positive that, according to the new draft, producers of green hydrogen no longer have to prove their energy production on an hourly basis but now every quarter. This will also allow electricity to be drawn from the grid during prolonged wind lulls, making production cheaper, says Pieper. luk

Partnerships on raw materials: EU relies on Global Gateway

The EU wants to use the Global Gateway strategy to create greater investment incentives for raw materials projects in partner countries and secure access for industrial customers. Alongside the Critical Raw Materials Act announced for March, which focuses on the internal market, and EU diplomacy, this approach is intended to secure supplies for European industry in the global competition for critical raw materials, said Kerstin Jorna, Director General of DG GROW, yesterday at an event organized by the European Council on Foreign Relations in Berlin.

The Global Gateway strategy, through which the EU aims to mobilize investment of up to €300 billion in global infrastructure projects by 2027, is intended to provide a bridge in the commodity partnerships to align the interests of both sides, Jorna said.

“What we bring to the table has to be more attractive to our partners in the Global South than what they can get from others,” added Koen Doens, Director General of DG International Partnerships (DG INTPA). The Global Gateway Initiative, he said, serves to work with a range of actors on the European side (member states, development finance institutions, the private sector) to offer partner countries a strategic partnership that is also beneficial to them.

Partnership with Namibia: focus on entire ecosystem

Such a partnership is emerging between the EU and Namibia. In recent months, both partners have negotiated a broad package that covers not only the mining of raw materials but the entire ecosystem, Doens said. Part of the package, in addition to resource extraction, includes:

the production of green hydrogen
the construction of transport corridors
the expansion of ports
the capacity development
the creation of a legal framework
increasing the value added in Namibia
the training of skilled workers

On the European side, the European Investment Bank (EIB) offers government loans and loans for companies wishing to become active in Namibia. The EU has also pledged €47 million from the European Fund for Sustainable Development (EFSD) and is also supporting sector reform in Namibia with €4 million.

EU Commission President Ursula von der Leyen had signed a memorandum of understanding for the Partnership for Sustainable Raw Materials and Green Hydrogen with Namibian President Hage Geingob on the sidelines of COP27 in Egypt.

At the event, Franziska Brantner, Parliamentary State Secretary at the German Federal Ministry of Economics, also called for a collaborative approach to creating green value chains. “We’re going to need a lot of production capacity globally for the transformation,” she said. “It’s an offer: let’s create these green value chains together – not just within the EU, not just within the US but together and with our partners globally.” leo

Carbon storage: first approval for project in Denmark

A pilot project to store up to 15,000 tons of carbon in a former oil field in the North Sea has received regulatory approval in Denmark. It is the first time that approval has been granted for a carbon storage project in the Scandinavian EU country, the energy authority (Energistyrelsen) said Tuesday. It said the approval thus represents an important milestone for the country.

The project called Greensand reportedly involves the injection and storage of carbon in the former Nini West oil field in the Danish North Sea. In the pilot phase, carbon will be pumped into a sandstone reservoir located about 1800 meters below sea level, according to the agency. According to the report, the reservoir is located under a series of shale layers, so the carbon will be trapped in the sandstone cavities.

The main purpose of the project is to gather empirical data. The goal is to provide a storage capacity of 0.5 to 1.5 million metric tons of carbon per year in the former oil field starting in 2025. dpa

EU Telecom Council reaches agreement on AI Act and eID

Under the Czech presidency, ministers in the EU Telecoms Council advanced several digital dossiers on Tuesday. The agenda included the adoption of the Council’s General Orientations on the draft of the AI Act and the European digital identity (eID).

Progress reports on the Data Act and Cyber Resilience Act were also discussed. For the Data Act, the council presidency announced a third compromise paper for December 13.

AI Act: Germany demands improvements

Although the Council reached its general approach on the AI Act on Tuesday, Germany has issued a protocol statement. According to this statement, the German government supports the submitted text but sees room for improvement in individual aspects and refers to its statement of November 8 (Europe.Table reported).

For example, Germany would still like to see exceptions for law enforcement agencies in the restrictions on remote biometric identification. Further exceptions for AI applications in the areas of law enforcement, migration, asylum, and border control, on the other hand, are still controversial within the German government.

The important issues in the trilogue for the Ministry of Economics, which is the lead ministry in Germany, concern the scope of the regulation (included AI systems, for example, machine learning, knowledge and logic systems, autonomy) and consistency with other regulatory areas (such as with medical devices and in the transport, finance and insurance sectors).

eID: important tool for German digital strategy

With the revised regulation for a European digital identity (eID), the EU wants to give people and companies universal access to secure and trustworthy electronic identification and authentication. This access is to be provided via a personal digital wallet on cell phones.

The proposal calls for member states to issue a digital wallet under a notified eID system based on common technical standards, following mandatory certification. For this purpose, an EU toolbox is planned in which the technical specifications will be defined.

The eID is very important for Europe, said Volker Wissing (FDP), Germany’s Federal Minister for Digital Affairs and Transport. It advances digitization and strengthens Europe’s sovereignty, he said. He added that the most recently introduced amendments still addressed some important points. Germany could therefore agree to a general orientation in the proposed form. The eID is also “an essential instrument of our national digital strategy,” Wissing said. vis

Europe’s data protectors take tougher approach to Meta

Europe’s data protection regulators are stepping up the pace in their dealings with US corporations. Yesterday’s decision by the EU Data Protection Committee caused a stir. Whether Meta Group’s Facebook, Instagram, and WhatsApp are in breach of the General Data Protection Regulation (GDPR) is now hardly debatable. But the method is legally decisive – among other things, for the amount of a penalty and the legal consequences.

Several data protection supervisory authorities disagreed with the path taken by the Irish data protection authority DPC. For such cases, a decision by the European Data Protection Board (EDPB) on how the GDPR should be interpreted is provided. Precisely this decision was made on Tuesday.

There had been criticism from the other supervisory authorities, among other things, about the assessment of consent to personalized advertising. The points of contention are among the fundamental questions of interpretation of the GDPR: What data processing is legally permissible for an advertising-supported provider? Do users have to accept behavioral evaluations? In the case of WhatsApp, the supervisory authorities had to consult whether a provider can rely on the fact that data would be needed for service improvements.

Rapid clarification not within sight

In both cases, the data protection committee opted for a harsher interpretation of the GDPR than the Irish supervisory authority. In addition, the supervisory authorities of other EU states had considered the level of punishment envisaged by the Irish authority to be too low, as a result, Facebook Ireland flatly denied the Data Protection Committee competence.

Within a month, the DPC must now revise its orders in line with the EDPB decision and send them to Meta. The company can appeal and thereby postpone the clarification. A quick end to the dispute, which could mean the end of Facebook, Instagram, and WhatsApp in the EU and could entail fines in the billions, is therefore still not to be expected.

Probably the most obvious legal consequence depends on another development: If the EU Commission does not certify that the EU-US data privacy framework offers an adequate level of protection in accordance with the GDPR, Meta would probably no longer be able to transfer data to the US with legal security once the decision takes effect. However, should the EU-US-DPF come to the proceedings against Meta before the final decision, the data protection supervisory authorities would have to initiate new proceedings in some cases. fst

What is it with politicians and their bikes? After we reported about Jean Asselborn’s passion for sweaty bike rides yesterday, another hobby cyclist is now on a mission.

Jens Gieseke (CDU) is known to have a heart for the combustion engine. By wanting to keep alive the technology with which the German automotive industry has achieved world fame, the man from Emsland has made a name for himself in parliament. The 51-year-old is one of the Car Guys, as enthusiasts of the good old car are known in the industry. They are said to have gasoline running through their veins.

In Gieseke’s case, it may well be of non-fossil origin: Gieseke fought as passionately as he did in vain for e-fuels to give the combustion engine a second life.

Secret career as cycling policy spokesman

What is lesser known is that Gieseke likes to pedal. He is even the cycling policy spokesman for the EPP Group. And he pedals for Ukraine. Just before Christmas, he will put on his functional clothing, fill his water bottle, and climb the saddle. He plans to start his tour in his hometown of Sögel – and cycle all the way to Brussels. That’s something the Greens will have to do, too, if they want to keep up with him.

375 kilometers through wind and weather. He plans to reach his destination within three days. He is using the tour to collect donations for the Helping Hands association from Lathen, which wants to use the proceeds to transport heating equipment and warm clothing to families in Ukraine.

There’s no question about it: Gieseke is relying entirely on muscle power for his #cycleforUkraine tour. Whether on four or two wheels – the North German doesn’t have much interest in battery-electric energy. He has a particular horror of that kind of human species, which primarily engages in close combat with motorists in urban traffic on electric cargo bikes. He’s unlikely to meet many of them on his ride across the country. Markus Grabitz

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

A lot of money is at stake in the dispute with Budapest. The Commission wants to withhold a total of more than €13 billion from EU funds for Hungary in the dispute over the rule of law. At the same time, Hungary is increasing the pressure by blocking the planned European budget support for Ukraine. The finance ministers have now passed the ball back to the Commission. They say the authority should reassess the current measures in Hungary. Because Brussels is hoping for a compromise, as Eric Bonse reports.

Beef, cocoa, coffee, palm oil, soy, wood, and rubber – these products can soon only be sold on the European market if importers can prove that no forests have been converted into arable land for cultivation and production. In a night session, the EU Parliament, Council, and Commission agreed on the cornerstones of a new regulation against global deforestation. But this required “painful” compromises, according to S&D shadow rapporteur Delara Burkhardt. Timo Landenberger provides an overview.

The EU’s position has not always been so clear: At the Western Balkans summit, the EU heads of state and government clearly declared their support for the accession prospects of the six countries. In Tirana, the international community demonstrated that it is finally taking the geopolitical importance of the region seriously, writes Stephan Israel in his analysis. But it demands reforms – and support for sanctions against Russia. Serbia, in particular, is having a hard time with this.

High energy prices and the US government’s Inflation Reduction Act have sparked a debate in the EU about an industrial policy response. At next Thursday’s summit, EU leaders are expected to call for “common European level solutions” against the threat of industrial exodus. Read more in the news section.

Your
Sarah Schaefer

Rule of law dispute with Hungary: finance ministers call for new assessment

By

Eric Bonse

Now the ball is back in the Commission’s court: It was said on Tuesday after the Ecofin Council in Brussels, that the authority is to review Hungary’s anti-corruption measures again before a decision is made on freezing billions of euros in funds. At the same time, there was criticism of Hungary’s blockade of aid to Ukraine.

In both cases, a lot of money is at stake. Ukraine is to receive a loan of €18 billion, which the Commission wants to finance with new EU debt. In the case of Hungary, more than €13 billion of EU funds are at stake. The money has been on hold since the EU Commission found at the end of November that the agreed “milestones” to fight corruption and protect the rule of law had not been implemented sufficiently.

“Today, we asked the European Commission once again to assess the current developments in Hungary,” said German Finance Minister Christian Lindner (FDP). He said there were still newer developments in Hungarian politics after the EU authority submitted its report. The report only covered measures up to Nov. 19. The new assessment should be ready in “a few days,” Lindner said.

Ukraine aid in need without Hungary

At the same time, the minister criticized the Hungarian blockade on Ukraine aid. “Regrettably, we have not decided on the indispensable financial aid to Ukraine today,” he said. He added that the responsibility lies with the government in Budapest. It is also blocking the global minimum tax for companies. Both issues were taken off the Ecofin Council agenda because of Hungarian opposition.

“The approval of the package depends on the development of the measures Hungary is taking to protect the EU budget,” said Czech Finance Minister Zbyněk Stanjura, who led the talks. However, the finance ministers do not want to agree on a junket. If need be, they want to find a solution to provide Ukraine with the promised financial aid even without Hungary.

EP: Commission must stand firm

To this end, the “willing” countries must create a new financing instrument. The European Stability Mechanism (ESM), founded as an intergovernmental organization in Luxembourg in 2012 after British resistance, is considered a model. However, such a foundation on an intergovernmental basis is time-consuming and complicated. Brussels thus favors a compromise with Budapest.

Now the EU Commission has to build a bridge – with a new assessment of the situation in Hungary. But there is not much time left. The Hungarian parliament plans to adopt new measures that could help meet the controversial “milestones” as early as Wednesday. However, the finance ministers expect the new assessment of the Brussels authority as early as Friday. This could be very tight, EU circles said.

If the reassessment comes in time and is positive, Hungary could get the money after all. Otherwise, a special meeting of finance ministers is to be convened. The European Parliament called on the Commission to stand firm. “The European Union must not allow itself to be blackmailed,” said Green MEP Daniel Freund. “There must be no giving in on the rule of law sanctions now.”

Deforestation: Parliament and Council agree on due diligence obligations

By

Timo Landenberger

Actually, on Monday, the EU Parliament and Council positions were too far apart on too many points to reach a final agreement in an overnight trilogue session. But those involved wanted to set an example before today’s start of the UN Biodiversity Conference in Montréal (Europe.Table reported) and lead by a good example with a set of rules against global forest destruction, according to Brussels.

S&D shadow rapporteur Delara Burkhardt speaks of “painful compromises” but also of a “gold standard for due diligence for deforestation-free supply chains.” Similar laws are under discussion in the US and UK, she said, but are less ambitious. In this way, the EU can act as a credible pioneer in Montréal, says the MEP.

After all, the destruction of forests is one of the biggest drivers of biodiversity loss. According to the EU Parliament, between 1990 and 2020, a total forest area the size of the EU was lost around the world, and another ten million hectares continue to disappear every year.

Deforestation for animal feed

Through our consumption behavior, we are responsible for around ten percent of global deforestation in the EU alone. According to a WWF study, the figure is as high as 16 percent, putting the EU behind China (24 percent) but ahead of the USA (nine percent). The main import commodity in this context is soy, which is grown in deforested rainforest areas in South America, for example, and is used in Europe primarily as animal feed. But coffee and chocolate also contribute to global deforestation.

As a result of the new regulation, this is to change. Beef, cocoa, coffee, palm oil, soy, wood, and rubber can soon only be sold on the European market if importers can prove that no forests have been converted into arable land for cultivation and production. The same is to apply to products made from raw materials, including car tires or printed products.

Regulation includes EU forests

The Parliament was unable to get its way with the demand to include corn in the regulation. The cereal is used mainly as animal feed and has experienced a price explosion in recent months. Some EU countries thus feared an additional burden for agriculture.

The definition of forest degradation and deforestation was particularly contentious. The EP was successful on this point. Thus, in addition to the large-scale clearing of virgin forests, the conversion of smaller and so-called secondary forests is also to be covered by the regulation. This means that European forests and forestry and agriculture within the EU are also affected by the regulation. Because of this, forest-rich countries, in particular, announced resistance.

Other ecosystems, such as other wooded lands, were not included in the text. This was not envisaged in the Commission proposal but was demanded by the Parliament. For example, not only forests but also the already threatened South American Cerrado savannah were to be protected from destruction by agricultural use. Environmentalists had also lobbied for this.

EP wants to involve financial sector

Deutsche Umwelthilfe (DUH), for example, welcomed the agreement in principle but speaks of “partial success.” Without the protection of the savannahs, “a large part of the deforestation caused by EU consumption of soy feed and beef falls under the table,” says DUH Managing Director Sascha Müller-Kraenner. He adds the situation is more likely to get worse as companies move from protected to unprotected areas.

The exclusion of the financial sector is also criticized by environmentalists. The Parliament had called for the inclusion of banks and insurance companies to prevent investments in deforestation risks but had to back down in the trilogue, at least for the time being. First, the EU Commission will examine whether an expansion of the regulatory framework is necessary. “The financial sector will have to be included in some form. Otherwise, approval of the overall package by the European Parliament is hardly conceivable,” says Delara Burkhardt.

Western Balkans Summit: ‘new impetus’ for accession process

By

Stephan Israel

The location for the summit between the EU heads of state and government and the six states of the Western Balkans alone was a first. It was “historic” that the EU was meeting outside its borders, the host and Albanian Prime Minister Edi Rama stressed in Tirana on Tuesday. Both sides demonstrated that they needed each other. With the first meeting in the region, “history” is being made, said EU Council President Charles Michel.

“I am absolutely convinced that the future of our children will be safer and more prosperous with the Western Balkans within the EU,” the Belgian reiterated the accession perspective for Serbia, Montenegro, Bosnia-Herzegovina, Northern Macedonia, Albania, and Kosovo.

This has not always been a matter of course. At a previous Western Balkans summit, the EU states had successfully resisted the word “enlargement” even appearing in the final declaration. A meeting in June ended in a scandal because the EU could not agree on the start of accession negotiations with Albania and northern Macedonia.

Good chances for visa-free access for Kosovo

The discord should now be a thing of the past. EU Commission President Ursula von der Leyen spoke of a “new impetus” for the accession process. The EU is now again clearly committed to the accession prospects of the six countries. Since Russia’s invasion of Ukraine, even enlargement skeptics like France and the Netherlands have recognized that accession of the Balkan countries is in the EU’s geopolitical interest.

Next week, EU member states will discuss the EU Commission’s proposal to grant candidate status to Bosnia and Herzegovina. Now that Ukraine and Moldova have been granted status, there is little argument for not considering the former Yugoslav republic. How the decision will turn out is still open. Kosovo’s President Vjosa Osmani announced at the summit in Tirana that she would also apply for membership before the end of the year. There is a good chance that the EU will grant Kosovo visa-free access from January 1, 2024, the last state in the region to do so.

Serbia resists Russia sanctions

So there is movement, but shortcuts on the road to the EU are not envisaged. According to a statement, rapid progress can only be made on the basis of credible reforms. The EU also insisted in Tirana that the Balkan states fall in line with sanctions policy toward Russia. “You have to decide which side you are on,” Ursula von der Leyen said, referring to Serbia’s President Aleksandar Vučić. The latter also refused to adopt the EU’s sanctions against Russia at the summit. Serbia, he said, is an independent country that protects its national interests. Serbia’s largest energy company, NIS, is majority-owned by Gazprom.

Russia and China are trying to exert influence in the Balkans, the Commission chief warned. The EU, however, is the largest investor and closest partner of the Balkan states. After the summit, German Chancellor Olaf Scholz conceded that the dispute remained unresolved for the time being: “As far as the question of sanctions is concerned, we disagree with Serbia,” Scholz said.

EU exerts pressure in the area of migration

Progress has been made on the migration issue. The EU is pushing for the Balkan countries to adjust their visa policies. In recent months, many migrants from countries to which Serbia grants visa-free travel have entered the country, especially via Belgrade. The migrants then usually try to cross the green border into the EU. Under pressure from Brussels, Serbia has already reintroduced visa requirements for Tunisia and Burundi. By the end of the year, India, whose citizens have recently been heavily represented on the Balkan route, is also expected to follow.

The EU is also exerting pressure regarding the difficult dialogue between Belgrade and Pristina. At the summit, the EU presented a revised proposal for normalizing relations based on a Franco-German plan. According to this plan, Serbia would not have to formally recognize Kosovo, which was formerly controlled by Belgrade, for the time being. However, Belgrade would no longer block Kosovo’s membership in international organizations and would receive substantial financial assistance from the EU in return.

No more roaming charges

However, the Western Balkans summit was also expected to produce concrete results: To kick things off, mobile network operators from the EU and the Balkan states signed a joint declaration to gradually reduce each other’s roaming costs from October 1, 2023. By 2027 at the latest, the additional costs for cross-border cell phone use are to be eliminated altogether. The EU wants to export its “Roam like at home” success story and tie the Balkan states more closely to it altogether.

Host Edi Rama highlighted as a success that students from the six Balkan countries will be fully integrated into the Erasmus plus exchange program. The region’s universities should also be able to participate in partnerships with European universities. The College of Europe in Bruges is also to open a campus in Tirana in the foreseeable future, following an offshoot in Warsaw.

The EU is also helping the region with €1 billion to mitigate the consequences of the Russian war. The states can use part of the money to support families and companies suffering from the sharp rise in energy prices. In addition, investments in renewable energy production are to be supported.

Summit calls for ‘European solutions’ for industrial policy

EU leaders are expected to call for “common European level solutions“ to the threat of industrial exodus at next Thursday’s summit. That’s according to the latest draft of their conclusions, obtained by Europe.Table. In it, they stress the importance of a “coordinated policy response mobilizing all relevant tools at national and EU level to enhance the resilience of our economies.”

High energy prices and US government funding under the Inflation Reduction Act have sparked a debate in the EU about an industrial policy response. Commission President Ursula von der Leyen spoke on Sunday in favor of relaxing state aid rules and proposed to set up a new “sovereignty fund” to be financed from new EU funds. In doing so, she was echoing demands from France in particular.

Constitutional Court: EU debt only exception

But there is opposition to this from other member states, in Germany, especially from the FDP. German Finance Minister Christian Lindner feels that the Federal Constitutional Court’s concerns about joint debts in the EU have been confirmed. It is “good news” that the Covid reconstruction fund is compatible with the Basic Law according to the ruling of the Karlsruhe judges. However, the ruling also emphasizes the exceptional nature of the program. A joint borrowing for the general financing of political projects is not permissible.

German Chancellor Olaf Scholz expressed optimism that the EU and the US will be able to settle their dispute over the IRA. “I am confident that we will find a solution that everyone can live with,” the SPD politician said in the Albanian capital Tirana. There, Scholz had discussed the issue with French President Emmanuel Macron and Dutch Prime Minister Mark Rutte on the sidelines of the EU-Western Balkans summit. Macron had previously held talks in Washington with US President Joe Biden on the so-called Inflation Reduction Act (IRA). tho/rtr

Council wants flexible gas price cap

The EU member states want to place a tighter limit on the European gas price while allowing an automatic, daily increase in the price cap. On the one hand, the limit for bids is to be lowered further – to €220. That’s according to the Czech presidency’s second revision, which was available to Europe.Table yesterday. The Commission had proposed €275; in a first revision, the Council wanted to lower the limit only slightly to €264.

The decisive change compared to the Commission’s proposal, however, is the dynamization of the cap, which is to be more in line with the conclusions of the European Council at the end of October. The cap is to rise automatically to a higher limit if it exceeds €220. The dynamic maximum bid is then to be €35 above an LNG reference price.

Dynamic maximum price occurs alongside deactivation

“The publication of a daily settlement price will allow the cap to remain in line with developments in the LNG market,” the recitals state. The background is likely to be the fear that the EU will no longer receive LNG supplies if bids on the world market are no longer competitive.

To this end, the Council wants to adjust the LNG reference price. Thus, in addition to two LNG indices for Southern and Northern Europe and a price assessment by ACER, the Japan Korea Marker (JKM) is also to be taken into account.

The Commission, on the other hand, did not want to ensure international competitiveness by automatically raising the cap but by deactivating the market correction mechanism. This was to allow higher bids if the price on the European spot market fell below the LNG reference price for a certain number of days. According to the Council version, on the other hand, the mechanism is to be deactivated if it falls below €220 for five days.

State leaders want ‘complete’ electricity market reform

Another tool for limiting prices is to be joint gas purchasing in the EU. To this end, the EU energy platform should quickly become operational, according to the draft conclusions for the European Council in mid-December, which was available to Europe.Table yesterday. Other points include the early preparation of contingency plans for gas supply for the winter of 2023/24 and the rapid adoption of renewable energy and energy efficiency directives.

The governments of the member states are also exerting pressure on the reform of the electricity market design, which the Commission announced for the first quarter under pressure from the Council. The reform is intended to make the electricity market “fully fit” for a decarbonized energy system. According to information from Europe.Table, however, the Commission has not yet made a final decision on whether it will present a proposal for a long-term reform of the electricity market or only for a temporary adjustment for the duration of the energy crisis. ber

Pieper criticizes Commission proposal for green hydrogen

A step in the right direction, but not yet what is needed, says Markus Pieper (CDU), rapporteur of the EU Parliament for the Renewable Energy Directive, about the Commission’s proposal to define green hydrogen. Even with this, he says, “the targets for the shares of green hydrogen in industry and transport will not be achieved and the majority will be left to fossil-based hydrogen production for no real reason.”

A draft of the Commission’s delegated act has been available since last week (Europe.Table reported). It states that liquid or gaseous renewable fuels of non-biogenic origin (RFNBOs) must be produced with additional renewable electricity instead of electricity from fossil fuel power plants. Hydrogen products may only be considered green if the electricity needed to make them comes from additionally built plants. However, there is to be a transition period with easier conditions for hydrogen production.

Pieper criticizes the Commission for insisting on the principle of additionality from 2027. He calls for an extension of the facilitated conditions until at least 2032. In his view, there should be no production restrictions for plants built by then.

He sees it as positive that, according to the new draft, producers of green hydrogen no longer have to prove their energy production on an hourly basis but now every quarter. This will also allow electricity to be drawn from the grid during prolonged wind lulls, making production cheaper, says Pieper. luk

Partnerships on raw materials: EU relies on Global Gateway

The EU wants to use the Global Gateway strategy to create greater investment incentives for raw materials projects in partner countries and secure access for industrial customers. Alongside the Critical Raw Materials Act announced for March, which focuses on the internal market, and EU diplomacy, this approach is intended to secure supplies for European industry in the global competition for critical raw materials, said Kerstin Jorna, Director General of DG GROW, yesterday at an event organized by the European Council on Foreign Relations in Berlin.

The Global Gateway strategy, through which the EU aims to mobilize investment of up to €300 billion in global infrastructure projects by 2027, is intended to provide a bridge in the commodity partnerships to align the interests of both sides, Jorna said.

“What we bring to the table has to be more attractive to our partners in the Global South than what they can get from others,” added Koen Doens, Director General of DG International Partnerships (DG INTPA). The Global Gateway Initiative, he said, serves to work with a range of actors on the European side (member states, development finance institutions, the private sector) to offer partner countries a strategic partnership that is also beneficial to them.

Partnership with Namibia: focus on entire ecosystem

Such a partnership is emerging between the EU and Namibia. In recent months, both partners have negotiated a broad package that covers not only the mining of raw materials but the entire ecosystem, Doens said. Part of the package, in addition to resource extraction, includes:

the production of green hydrogen
the construction of transport corridors
the expansion of ports
the capacity development
the creation of a legal framework
increasing the value added in Namibia
the training of skilled workers

On the European side, the European Investment Bank (EIB) offers government loans and loans for companies wishing to become active in Namibia. The EU has also pledged €47 million from the European Fund for Sustainable Development (EFSD) and is also supporting sector reform in Namibia with €4 million.

EU Commission President Ursula von der Leyen had signed a memorandum of understanding for the Partnership for Sustainable Raw Materials and Green Hydrogen with Namibian President Hage Geingob on the sidelines of COP27 in Egypt.

At the event, Franziska Brantner, Parliamentary State Secretary at the German Federal Ministry of Economics, also called for a collaborative approach to creating green value chains. “We’re going to need a lot of production capacity globally for the transformation,” she said. “It’s an offer: let’s create these green value chains together – not just within the EU, not just within the US but together and with our partners globally.” leo

Carbon storage: first approval for project in Denmark

A pilot project to store up to 15,000 tons of carbon in a former oil field in the North Sea has received regulatory approval in Denmark. It is the first time that approval has been granted for a carbon storage project in the Scandinavian EU country, the energy authority (Energistyrelsen) said Tuesday. It said the approval thus represents an important milestone for the country.

The project called Greensand reportedly involves the injection and storage of carbon in the former Nini West oil field in the Danish North Sea. In the pilot phase, carbon will be pumped into a sandstone reservoir located about 1800 meters below sea level, according to the agency. According to the report, the reservoir is located under a series of shale layers, so the carbon will be trapped in the sandstone cavities.

The main purpose of the project is to gather empirical data. The goal is to provide a storage capacity of 0.5 to 1.5 million metric tons of carbon per year in the former oil field starting in 2025. dpa

EU Telecom Council reaches agreement on AI Act and eID

Under the Czech presidency, ministers in the EU Telecoms Council advanced several digital dossiers on Tuesday. The agenda included the adoption of the Council’s General Orientations on the draft of the AI Act and the European digital identity (eID).

Progress reports on the Data Act and Cyber Resilience Act were also discussed. For the Data Act, the council presidency announced a third compromise paper for December 13.

AI Act: Germany demands improvements

Although the Council reached its general approach on the AI Act on Tuesday, Germany has issued a protocol statement. According to this statement, the German government supports the submitted text but sees room for improvement in individual aspects and refers to its statement of November 8 (Europe.Table reported).

For example, Germany would still like to see exceptions for law enforcement agencies in the restrictions on remote biometric identification. Further exceptions for AI applications in the areas of law enforcement, migration, asylum, and border control, on the other hand, are still controversial within the German government.

The important issues in the trilogue for the Ministry of Economics, which is the lead ministry in Germany, concern the scope of the regulation (included AI systems, for example, machine learning, knowledge and logic systems, autonomy) and consistency with other regulatory areas (such as with medical devices and in the transport, finance and insurance sectors).

eID: important tool for German digital strategy

With the revised regulation for a European digital identity (eID), the EU wants to give people and companies universal access to secure and trustworthy electronic identification and authentication. This access is to be provided via a personal digital wallet on cell phones.

The proposal calls for member states to issue a digital wallet under a notified eID system based on common technical standards, following mandatory certification. For this purpose, an EU toolbox is planned in which the technical specifications will be defined.

The eID is very important for Europe, said Volker Wissing (FDP), Germany’s Federal Minister for Digital Affairs and Transport. It advances digitization and strengthens Europe’s sovereignty, he said. He added that the most recently introduced amendments still addressed some important points. Germany could therefore agree to a general orientation in the proposed form. The eID is also “an essential instrument of our national digital strategy,” Wissing said. vis

Europe’s data protectors take tougher approach to Meta

Europe’s data protection regulators are stepping up the pace in their dealings with US corporations. Yesterday’s decision by the EU Data Protection Committee caused a stir. Whether Meta Group’s Facebook, Instagram, and WhatsApp are in breach of the General Data Protection Regulation (GDPR) is now hardly debatable. But the method is legally decisive – among other things, for the amount of a penalty and the legal consequences.

Several data protection supervisory authorities disagreed with the path taken by the Irish data protection authority DPC. For such cases, a decision by the European Data Protection Board (EDPB) on how the GDPR should be interpreted is provided. Precisely this decision was made on Tuesday.

There had been criticism from the other supervisory authorities, among other things, about the assessment of consent to personalized advertising. The points of contention are among the fundamental questions of interpretation of the GDPR: What data processing is legally permissible for an advertising-supported provider? Do users have to accept behavioral evaluations? In the case of WhatsApp, the supervisory authorities had to consult whether a provider can rely on the fact that data would be needed for service improvements.

Rapid clarification not within sight

In both cases, the data protection committee opted for a harsher interpretation of the GDPR than the Irish supervisory authority. In addition, the supervisory authorities of other EU states had considered the level of punishment envisaged by the Irish authority to be too low, as a result, Facebook Ireland flatly denied the Data Protection Committee competence.

Within a month, the DPC must now revise its orders in line with the EDPB decision and send them to Meta. The company can appeal and thereby postpone the clarification. A quick end to the dispute, which could mean the end of Facebook, Instagram, and WhatsApp in the EU and could entail fines in the billions, is therefore still not to be expected.

Probably the most obvious legal consequence depends on another development: If the EU Commission does not certify that the EU-US data privacy framework offers an adequate level of protection in accordance with the GDPR, Meta would probably no longer be able to transfer data to the US with legal security once the decision takes effect. However, should the EU-US-DPF come to the proceedings against Meta before the final decision, the data protection supervisory authorities would have to initiate new proceedings in some cases. fst

What is it with politicians and their bikes? After we reported about Jean Asselborn’s passion for sweaty bike rides yesterday, another hobby cyclist is now on a mission.

Jens Gieseke (CDU) is known to have a heart for the combustion engine. By wanting to keep alive the technology with which the German automotive industry has achieved world fame, the man from Emsland has made a name for himself in parliament. The 51-year-old is one of the Car Guys, as enthusiasts of the good old car are known in the industry. They are said to have gasoline running through their veins.

In Gieseke’s case, it may well be of non-fossil origin: Gieseke fought as passionately as he did in vain for e-fuels to give the combustion engine a second life.

Secret career as cycling policy spokesman

What is lesser known is that Gieseke likes to pedal. He is even the cycling policy spokesman for the EPP Group. And he pedals for Ukraine. Just before Christmas, he will put on his functional clothing, fill his water bottle, and climb the saddle. He plans to start his tour in his hometown of Sögel – and cycle all the way to Brussels. That’s something the Greens will have to do, too, if they want to keep up with him.

375 kilometers through wind and weather. He plans to reach his destination within three days. He is using the tour to collect donations for the Helping Hands association from Lathen, which wants to use the proceeds to transport heating equipment and warm clothing to families in Ukraine.

There’s no question about it: Gieseke is relying entirely on muscle power for his #cycleforUkraine tour. Whether on four or two wheels – the North German doesn’t have much interest in battery-electric energy. He has a particular horror of that kind of human species, which primarily engages in close combat with motorists in urban traffic on electric cargo bikes. He’s unlikely to meet many of them on his ride across the country. Markus Grabitz