Issue #6
FIRST, SOME SOLID INTEL:
Emergency Plan for the EU Budget
Discussions regarding the EU budget and recovery plans are omnipresent these days (as we have reported several times).
First, some E(U)xplaining: The EU operates on a 7-year-budget, called the Multiannual Financial Framework (MFF). The MFF is due to be prolonged this year – a traditionally difficult topic, not only in the EU. If one budget period ends and there is no agreement on a new one, then the old budget ceilings remain in place. However, together with the budget, EU spending programs also end, creating uncertainty for farmers, companies, students, regions, cities and so on.
Enter, the EU Parliament urging the EU Commission to come up with an emergency plan for the EU budget in case Member States cannot agree to a new one by 1 January 2021. In this case, spending programs could remain in place even if the new budget is ready in time. A proposal on this by the Commission must come by 15 June 2020. The Commission has announced a plan by 27 May, but, again, this has to be agreed upon by the Member States and the EU Parliament and there is no certainty WHATSOEVER that this will actually happen and then they will require an emergency plan… you get the point.
Progress on the Recovery Fund
The EU wants to build its recovery fund not just based on current but primarily on future challenges. This was made clear by EU Commission President Ursula von der Leyen.
Thereby, the EU is trying to account for a conflict area that might only be visible on second glance. The debt of governments all over the world is increasing significantly because of expenses linked to the handling of the virus. However, taking up huge debts to support businesses with not climate friendly business models will result in two big problems.
First, and straight forward: it is bad for the environment. Second, and more of a long-term effect: money spent to save unsustainable companies is money lost when the companies will have to stop operations because of climate protection. Just as you wouldn’t take a loan to buy a soccer player for €100 million for you team if you know he can only play for one more year (unless it’s Zlatan Ibrahimović, of course). So, while the amounts are still tbd, investment focus areas are determined: climate protection and digitalization.
LEAK: Regulation on crypto assets to come?
This week, we got an eye on a leaked EU Commission non-paper on crypto assets, a Commission-provided basis for discussion with the Member States. Crypto assets have been quite popular for a while – at least when you tend to mingle with the kind of people who are not deterred by complex technology and the accompanying risks (a.k.a. nerds). In the EU, all crypto assets matching the qualification of a financial instrument are regulated within the existing legal framework. However, not all crypto assets (e.g. stablecoins) qualify for that definition and remain unregulated.
By now, the Commission has realized the significance of stablecoins: they can enable faster, cheaper and more efficient payment. However, when scaled to a global level, they might well present a real challenge to financial stability and monetary policy. While usually mom and dad try to regulate the new hot stuff, this time the issuers of crypto assets and people participating in crypto markets are the ones asking for regulation. Clear obligations and also a common framework for trading are certainly helpful in building trust with consumers. The non-paper provides options for new legislation but also possible amendments to the existing legislation. For more, as always, just ping us.
For more on German E-Government achievements and a Brexit update, check out the PDF:
WHAT’S ON OUR MINDS
Legal pun(ch)
A German tabloid seems to have started it when calling on China to pay Germany $ 165 billion for the repercussions Germany had to face due to the pandemic.
President Trump was inspired: “Germany is looking at things, we are looking at things”. On Wednesday, republican attorneys general in 14 states asked President Donald Trump to hold China accountable for the damages of the Covid crisis in the US.
Traditionally, EU diplomats try and stay out of clashes between the US and China. This applies now, more than ever before to Angela Merkel who is trying to flatten the diplomatic curve and keep doors open for a planned EU summit with China this autumn in Germany.
When this week, re-inspired by the US and backed by some professors of international law, politicians and journalists in Germany found legal actions against China worth considering, Merkel must have felt like:
And a legal assessment by the scientific service of the German Parliament confirms: It is not that easy to drag China to court. Not only would the chain of causation to all our damages be hard to prove, it would be even harder to successfully ask China for its appearance in front of the International Court of Justice. Ultimately the report says, that action “in the case of China, legally but also politically, would be downright delicate.” Which is Diplomatic for “nonsense”. One of the legal obstacles to suing China over Corona: State immunity. What a pun.