State of the Union - Week 51 - Three successes and three failures on the EU stage in 2020

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Three successes in 2020: common debt, the common vaccine programme and the Conditionality Mechanism

1. The EU Recovery Package NextGen EU: Common Debt Issuance ‍

The NextGen EU is an unprecedented policy response to mitigate and stimulate the European economy in the wake of the pandemic. During the sovereign debt crisis 10 years ago, Member States chose to establish the European Stability Mechanism, an intergovernmental fund, leaving no role to the Commission. This time, the solution is a common European one: the issuance of common debt with backing as part of the 7-year Multi Financial Framework. As the credit will be issued as loans and subsidies to Member States by mid-2021, the effects on growth and economic resilience are yet to be seen, but this is a clear victory for the Commission, as it managed to place itself at the centre of financial crisis management for the european economies. This could establish a precedence for future economic crisis management. 

2. Vaccine Purchase Programme
   

As the pandemic swept across the continent, multiple pharmaceutical companies announced their research and development efforts to develop potential vaccines to combat the virus. The fact is that the EU has little, or no, formal coherence on health policy, but the Commission, in agreement with Member States, secured itself a key role in developing Advance Purchase Agreements with vaccine producers via the Emergency Support Instrument. It has sought to secure the reservation of vaccines for EU citizens and guarantee the fair distribution of vaccines across Member States. 

3. The Conditionality Mechanism and Rule of Law‍

Despite being heavily disputed by advocates both for and against the Conditionality Mechanism, the new mechanism comprises a breakthrough in securing compliance with Rule of Law principles in the EU. The biggest proponents of the mechanism, Poland and Hungary, have during the last decade been subject to several accusations of breaches on the Rule of Law and for years blocked any progression in article 7 proceedings in the Council. The new Conditionality Mechanism, however, despite its flaws and shortcomings, will now circumvent this veto by effectively introducing qualified majority voting. The victors of this include the European Parliament, which made the Mechanism one of its key demands during the MFF negotiations, as well as the Member States in the so-called Rule of Law Friends alliance. 

We described the negotiations and challenges surrounding the conditionality mechanism in our blog in November. Read these insights here

Three shortcomings in 2020: climate goals, Brexit and the Apple lawsuit

1. Arbitrary Climate Goals
   

Introducing a common CO2 reduction target for 2030 has proven to be difficult and it was only this month that Heads of States and Governments found common ground and agreed on a 55% target. The agreement is vague in detail, however, and it doesn't stipulate any concrete measures and tools for achieving the target. Critics of the agreement say that it is not in line with the Paris Agreement’s 1.5°C temperature target. The reduction target has met especially pronounced resistance from Poland. The EU and all Member States have agreed to reach carbon neutrality by 2050, but without ambitious milestones to map the progress towards this objective, its final realisation seems increasingly implausible. 

2. Brexit Negotiations
   

Brexit has been a foreseeable reality since the referendum in 2016 but after three years of negotiations a future EU-UK partnership has still not been agreed upon. Striking an agreement on such politically heated and contentious ground was never going to be easy, but the brute fact remains that with less than two weeks before an agreement should enter into force, there is still no text to be voted on and ratified. This has created immense uncertainties for business and citizens, leaving no time for a calm and relatively predictable transition into the new reality. 

Last week, we elaborated on the major points of division in the negotiations. More on that here

3. Apple Tax File
   

The long anticipated ruling by the European Court of Justice in June was a significant blowback for the Commission in their fight against multinational tech companies’ tax agreements. The Commission argued that Member States, such as Ireland, which offer so-called ‘sweetheart tax deals’, are acting contrary to EU state aid competition rules. However, the Court sided with Apple, dismissed the Commission's claims and rejected its effort to link state aid and tax policy together. This is widely seen as a major step back for the Commission as the Apple case was highly visible in the media and was symbolically vital for the Commission moving forwards. The loss in court could, however, be used as an argument for those in favour of stricter regulations on tax policy showcasing the inadequacy of the current rules.