Weekend Edition Nº36 by eulawlive

Nº36

NOVEMBER 7

2020

weekend

edition stay alert keep smart

NATIONAL AND EUROPEAN PARLIAMENTARY INVOLVEMENT IN THE EU’S ECONOMIC RESPONSE TO THE COVID CRISIS SPECIAL ISSUE EDITED BY

BRUNO DIAS PINHEIRO & DIANE FROMAGE

CRISTINA FASONE

NATIONAL PARLIAMENTS AND THEIR (LIMITED) ROLE IN THE EU IN A CRISIS: THE EXAMPLE OF SURE

THE EUROPEAN PARLIAMENT FACES UP TO THE RECOVERY AND RESILIENCE FACILITY

TON VAN DEN BRINK

NATIONAL PARLIAMENTS AND THE NEXT GENERATION EU RECOVERY FUND

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Introduction 1

Bruno Dias Pinheiro and Diane Fromage

Even if the common European response to the pandemic was originally subject to some criticism on the ground that it was not adequately coordinated and insufcient, it remains that the EU institutions and Member States alike were swift in adopting measures to counter the economic downturn provoked inter alia by the numerous lockdowns Member States had to introduce from one day to the next. The European response took different forms including, for instance, relaxation of the State aid rules by the European Commission, the activation of the ‘escape clause’ applicable to the rules contained in the Stability and Growth Pact, and several actions, such as the launch of the Pandemic Emergency Purchase Programme, taken by the European Central Bank (ECB).

These instruments, to be funded by the issuance of bonds on ﬁnancial markets, are outstanding on several accounts Unemployment Risks in an Emergency (SURE) instrument introduced in May 2020 and from which the rst disbursements have recently been approved. The second instrument – Next Generation EU – is yet to be introduced formally, pending a nal agreement on its content, and a nal agreement on the next EU Multiannual Financial Framework, to whose successful negotiations it was tied in July. But its main features were approved by the European Council in July.

An agreement on two instruments was also reached at – for EU standards – remarkable pace in the area of scal policy. The rst one of these is the temporary Support to mitigate

These instruments, to be funded by the issuance of bonds on nancial markets, are outstanding on several accounts. The rapidity with which they were approved is clearly exceptional and only commensurate to the economic and health crises caused by the pandemic. More remarkably perhaps both instruments represent largely unprecedented levels of solidarity among Member States, since SURE will allow Member States with more limited resources to continue supporting shorttime work schemes and will grant them ac-

An agreement on two instruments was also reached at – for EU standards – remarkable pace in the area of ﬁscal policy

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

ro and D. Fromage) and the negotiations surrounding the main instrument of Next Generation EU, the Recovery and Resilience Facility (RRF) (C.Fasone). A third Long Read considers the role played by the European Parliament in the latter negotiations (T. van den Brink).

cess to loans at favourable interest rates. Next Generation EU is even clearer proof of solidarity among Member States, as it provides that support to them be distributed in the form of both loans and grants, and it is additionally of a huge size (750 billion euros as opposed to 100 billion euros for SURE). There is thus little doubt that these instruments will have important consequences on Member States’ economies and budgets in the coming years: especially in the ‘Eurozone periphery’, the impact on national GDPs is expected to be very signicant, and the use of the European Semester as a vehicle to guide the implementation of part of the European investment fund may be expected to be conducive of increased European inuence on national budgetary plans.

The role of parliaments in the adoption of SURE remained limited, that is more limited than could have been expected perhaps, owing in part to the legal basis used in the case of the European Parliament. The parliaments of the ‘friends of the cohesion’ Member States conducted very limited scrutiny while the parliaments of the ‘frugal’ States were much more actively involved, although they did not set any condition to their consent. These parliaments did not engage with the European Commission in the framework of the negotiations of the Recovery and Resilience Fund, contrary to the Spanish and the Portuguese parliaments which were, this time, more active. The ‘frugals’ focused their efforts on their governments instead.

In such a context, the issue of adequate (national and European) parliamentary involvement appears to be of key importance. The series of Long Reads included in this Weekend Edition analyses how some national parliaments, representative mostly of two sets of countries (the so-called ‘frugals’ and the socalled ‘friends of the cohesion’), have scrutinised the adoption of SURE (B. Dias Pinhei-

As regards the role of the European Parliament, its involvement varied as it did not acti-

The role of parliaments in the adoption of SURE remained more limited than could have been expected

The European Parliament's involvement varied as it did not actively participate in adopting SURE

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

ded. A new step in this direction could prove difcult to achieve, especially if the symmetric and exogenous character of the current crisis vanishes, that is if and once some of the Member States have recovered and others have not. In any case, should new instruments be adopted, adequate national and European parliamentary involvement both in the design and in the implementation of the adopAlthough this time around the burden in acted solutions would be all the more pressing. ting to ght the crisis has been more equally Regardless of how the situation evolves and spread among EU institutions, especially betwhether new measures are required, parliaween the ECB and the Member States, as was mentary involvement in the implementation also the case during the euro crisis, the Euroof the Recovery and Resilience Fund should pean Council did play a key role leading to be enhanced and, by parliamentary control the same token, this being hindered owing to could be used to reinthe fact that no accountaParliamentary involvement force their role in the bility channels exist that framework of the Eucould ensure the collectiin the implementation of the ropean Semester geve accountability of this Recovery and Resilience nerally, since large institution, but this was at asymmetries still least mitigated by the exisFund should be enhanced exist in this regard tence in some of the Memacross the different ber States of accountabiMember States, and lity mechanisms applicasince the European ble to the individual Head Parliament is still only marginally involved. of State or Government. More problematic in Greater involvement appears all the more neterms of accountability has been the key role cessary in view of the importance of the Recoplayed by the Eurogroup which has convevery and Resilience Fund and of the ensuing ned in inclusive format and signicantly conimpact on national policies, but also because tributed to the denition of SURE for instanthe European Semester as it has been implece, whilst its informal character makes it difmented so far presents important shortcocult for parliaments to guarantee accountamings, inter alia as a result of very limited nability and leads to additional issues of transtional ownership, an issue which only a cloparency. ser involvement of the national parliaments may resolve. As the second wave hits Europe and as the economic impact of the pandemic is still unknown, the likely importance of the European response is only increasing, and the question may soon arise again whether new or more permanent support instruments might be neevely participate in the adoption of SURE, but is a co-legislator in some of the procedures that will (hopefully) lead to the establishment of some of the instruments that compose the Next Generation EU Plan. It has indeed used its political inuence in trying to shape the content of the RRF.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

National parliaments and their (limited) role in the EU in a crisis: the example of SURE 1

Bruno Dias Pinheiro and Diane Fromage

In parallel, the European Commission proposed the adoption of a temporary instrument: ‘Support to mitigate Unemployment Risks in an Emergency (SURE)’ in April 2020, which was approved and adopted by the Council of the European Union in May 2020. SURE allows the EU to provide loans (under favourable terms) worth up to a total of 100 billion euros to its Member States to support them in their implementation of short-time work schemes. As such, SURE is a clear sign of solidarity among EU Member States. EU funding is set to complement national resources mobilised to this end, and not substitute them. Accordingly, Member States rst have to introduce short-time work schemes – leading to an increase in their public expenditure – and then they may apply to the European Commission for support under the auspices of SURE. The European Commission will raise funds on international capital markets on behalf of the EU to nance SURE, backed up by the EU budget, and by guarantees provided by the Member States. After all the Member States provided guarantees, SURE became operative. The total amount of the guarantees would then be 25 billion euros.

Introduction: the COVID-19 pandemic and the SURE instrument The coronavirus pandemic that spread across the European Union as ofcially recognised in March 2020 led EU Member States to introduce drastic lockdown measures. From one day to the next, millions of EU citizens had to stay at home, work remotely where possible, and the brakes were suddenly applied to national economies, raising concerns that an increase in unemployment would soon be sparked. To try and avoid those negative developments, Member States had to quickly adopt measures to support their economies. The measures came in several forms including State aid or nancial support to companies and the self-employed to avoid workers being immediately laid off or losing income (so-called short-time work schemes). At the EU level too Member States sought to coordinate and adopt common measures. Indeed, owing to the differing levels of scal space available, some of the Member States were likely to be able to support their economies only to a limited extent.

1. Bruno Dias Pinheiro is the Permanent Representative of the Portuguese Parliament to the EU institutions (Brussels) and Diane Fromage is Marie Sklodowska-Curie Individual Fellow at the Law School of Sciences Po (Paris). The views expressed here are strictly personal and do not bind or reect in any way the political and institutional position of the Portuguese Assembleia da República.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

us to offer a (brief) reection on the role of SURE does not require any upfront cash connational parliaments in the EU in times of tributions from Member States. To back the crisis, based, inter alia, on a comparison lending scheme, Member States would comwith the role they had played at the peak of mit irrevocable and redeemable guarantees the Great Financial Crisis. worth 25 billion euros to the EU budget, with each guarantee calculated on the basis of their respective share of EU gross national income (GNI). Such a system should enNational parliaments’ scrutiny of sure a high credit rating, enabling the EuroSURE and their role in its adoption pean Commission to borrow on the nancial markets under favourable The legal basis proposed by conditions, with the purthe Commission for the pose of lending them on to SURE instrument is Article the Member State. Consi122(1) and (2) of the Treaty dering, therefore that MemThe ‘power of the purse’ on the Functioning of the ber States have to commit European Union (TFEU), is one of parliaments’ part of their budget to back which states that the CounSURE, the question of core prerogatives cil of the European Union the involvement of natiomay adopt, by qualied manal parliaments arises: jority, measures for the EU the ‘power of the purse’ to provide nancial assisis one of parliaments’ cotance to Member States fare prerogatives. ced with severe difculties caused by exceptional occurrences beyond their control. In this Long Read, we examine the role plaThis means that the European Parliament is yed by some representative parliaments not involved in this legislative procedure, from the (a) self-proclaimed ‘frugal’ Memnor does it fall within the remit of the usual ber States (those which are most reluctant to scrutiny or subsidiarity procedures as proviagree any form of nancial transfers across ded for by the Treaty of Lisbon regarding nathe EU (Austria, The Netherlands) and need tional parliaments. Therefore, and bearing in less support in the current crisis, and from mind the far-reaching impact of such initia(b) the often-described ‘friends of thetive, not only in terms of the above mentiocohesion’ Member States (mostly southern ned ‘power of the purse’ of parliaments, but countries, which have the least scal space also in the medium-term political priorities to manoeuvre in and, ironically, will most of the EU (2), legislatures were faced with insneed support post-COVID) with the adoptitutional and political challenges to be able tion of SURE. This sets the background for to develop ownership of this le, and posi-

2. E.g. the idea of a European Unemployment Benet Reinsurance Scheme (EUBRS) has been discussed in the aftermath of the 2008 nancial and economic crisis since 2012 and the European Commission's 2020 work programme announced the Commission's intention to put forward a proposal for a EUBRS (in the fourth quarter of 2020). To tackle the resistance from some Member States, it is noted however that SURE in no way precludes the establishment of a future permanent EUBRS. The SURE instrument is the emergency operationalisation of the EUBRS and is specically designed to respond immediately to the challenges presented by the coronavirus pandemic.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

specic debates were organised either. By contrast, in Portugal, the Assembleia da República decided that, despite the time constraints to scrutinize the draft Regulation, an opinion by the relevant Committees (Labour and Social Security and EU Affairs) was to be issued within the Political dialogue, and which was supportive of the instrument and its main features. The decision to do so was mostly to acquire knowledge on the dossier, based on the information gathered by the Parliament’s representative in Brussels, and develop ownership on this important piece of legislation, that would then enable the MPs to have a more informed discussion with other political actors (such as the Government, MEPs, Commission), as we detail below.

tion themselves in the context of the response to the pandemic. Before delving into the scrutiny conducted by the individual parliaments, it is worth noting that the self-proclaimed ‘frugals’ have been signicantly more active in following this legislative le than the ‘friends of the cohesion’. As a matter of fact, no specic debates were organised in the Italian and the Spanish parliaments. Yet, it is remarkable that no conditions by the ‘frugals’ were set for approval in the form of a binding motion or resolution. Indeed, in the Italian Chamber of deputies, SURE was only incidentally discussed in the framework of the discussion on the Commission Work Programme and the debates organised on the occasion of European Council meetings. In the Spanish Parliament, no

For the self-proclaimed ‘frugals’, SURE triggered far more debate. The Austrian Bundesrat examined the proposal, and a favou-

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

States, even if Finland would not benet hugely from SURE.

rable motion was adopted. It is interesting to note in this context that for the Austrian Government the temporary character of SURE as shown by it having an end date was of particular importance, as well as that it clearly set out its commitment to inform the Bundesrat of the instrument’s operation every trimester (in conformity with its duty of information towards parliament). In the Dutch Tweede Kamer too, the proposal was scrutinised, and a motion to reject SURE was even proposed (though it was eventually unsuccessful); the other Dutch chamber did not approve any formal position on SURE. Interestingly, a list of questions were submitted by MPs to the Dutch government, and the question was asked under what conditions the Netherlands could avail itself of SURE, thus pointing to the fact that on this occasion, the Netherlands might need to take advantage of the EU measure itself. The Dutch contribution to SURE’s backing was approved as part of a revision of the state budget for 2020 carried out to respond to the consequences of COVID-19. The Swedish parliament’s Committee on nances approved the Government’s position in early April, which, like the Austrian and the Dutch positions, was characterised by scepticism. In particular, Member States were seen as having to have strong nances with a view to being able to support their labour market, and the risk was, for instance, identied that instruments similar to SURE would be needed again in the future. Finally, the Finnish parliament approved the government’s position as well. Member States’ scal responsibility and for the measures to remain temporary and conditional were stressed, as was the need to act to secure funding for Member

We thus observe limited scrutiny in the Member States most likely to benet from SURE, and more activism in those likely to be net contributors which, generally, conditioned their approval on the inclusion of specic safeguards.

Assessment and comparison with their role during the Great Financial Crisis It is worth having a closer look at the institutional dimension of the EU’s response to the COVID-19 pandemic, since it also sheds some light into the challenges that parliaments face when scrutinising measures. From the very beginning of the outbreak in Europe, it was up to the European Commission to coordinate a common European response to the coronavirus pandemic, across multiple sectors (health, travel, procurement, and so on). However, the main decisions taken in the immediate aftermath of the COVID-19 outbreak were taken at the Council level, driven by the European Council. In this context, the feature we would like to highlight for our analysis was the key role played by the Eurogroup. In fact, at their third video conference on COVID-19, held on 26 March, European Council members assessed the EU's response to the COVID-19 pandemic and, on the response to the economic fallout, specically ‘invited the Eurogroup to present proposals within two weeks’ (3). This mandate led to the adoption by the Eurogroup, on 9 April, of a Report on the comprehensive eco-

3. In fact, prior to that, the Eurogroup had already adopted a statement on the economic policy response to the COVID-19 outbreak on 16 March.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

nomic policy response to the COVID-19 pandemic, putting forward a 500 billioneuro support package, comprising three immediate safety nets for workers, businesses and Member States. One of those safety nets, endorsed by the Eurogroup, was SURE (4). Hence, not only did the legal instrument chosen for SURE exclude direct involve-

budgetary consequences. One could argue that the formal decisions were then to be ratied by the ECOFIN and the European Council, but the fact is that the preparatory work and all the political negotiations were made outside of the formal scope of intervention of (most) parliaments.

ment of parliaments (the European Parliament and national parliaments), but the main negotiation forum was also the Eurogroup, an informal body where the ministers of the euro area-Member States discuss matters relating to their shared responsibilities related to the euro. This format poses serious limits to the capacity of parliaments to access the information, hold Ministers to account (it is often more difcult for a Parliamentary Committee to get a debrieng from a Minister about exchanges held by an ‘informal body’) and ensure the adequate oversight and transparency in a negotiation with

On a comparison with the Eurozone crisis of 2010-2014, there is a striking institutional difference with political signicance: during that period, virtually all the negotiations were held at the highest level, at the European Council. Observers lost count of how many summits took place at the height of the crisis, with the Eurogroup playing an important but more discreet role. One could argue that, given the commonly existing obligation of governments to debrief their parliaments after each (European) Council meeting, this warranted closer scrutiny and also favoured an enhanced politicisation of the process.

4. The other two were a precautionary credit line by the ESM and an EIB Group pan-European guarantee fund to support EUR 200 billion of nancing.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

The challenges parliaments are facing are both institutional and political as well as operative Another interesting aspect worth noting was that all the SURE-related proceedings of the Eurogroup were held in the so-called inclusive format with the 19 euro area Finance Ministers, but also with the presence of the eight non-euro area Member States, which adds yet another layer of complexity to the process. In fact, how can parliaments, from both euro area and non-euro area Member States, monitor and assess the Eurogroup’s proceedings: is it a systemic issue of economic and monetary stabilisation for EMU19? Is it an enhanced feature of the European Semester with regard to employment for EU-27? Is it a decisive step towards new paths, such as common debt issuance or a deepened social EU with an unemployment insurance scheme? All these dimensions are relevant for national parliaments, whether they are from the self-proclaimed-frugals or from the ‘friends of the cohesion’. In fact, not only do all of them have to approve several pieces of legislation throughout the COVID-19 crisis, including the short-time work schemes or the budgetary changes needed to accommodate the guarantees required by SURE, but they will also have to play a role in the more medium-term strategy to overcome the difculties caused by the pandemic. Actually, if we look globally at the EU’s response to

COVID-19, and consider the outcome of the European Council of 17 to 21 July, one of the key aspects is that Member States, in the framework of the Recovery and Resilience Facility of the Next Generation EU programme, will have to adopt National Recovery and Resilience plans for 2021-2023, to be negotiated with the European Commission (see also the contributions by C. Fasone and T. van den Brink in this Weekend Edition). These plans will cover a wide range of issues (competitiveness, productivity, environmental sustainability, education and skills, health, employment, and economic, social and territorial cohesion) and, as such, they represent an innovative exercise of governance and public policy formulation that are the core of parliaments’ interests. For that reason, it appears that the challenges parliaments are facing are both institutional and political (where are the decisions being made? How can the Eurogroup be scrutinised?), as well as operative (how can parliaments adapt to working methods and new ways of doing business in a renewed context of interparliamentary cooperation, probably with fewer possibilities to gather physically?). Regarding SURE, whereas some of the parliaments assessed here were quite active (Austria, Finland, the Netherlands, Sweden) in following the discussions and trying to assess the outcome of the negotiations, even though no binding motions were formally adopted, parliaments of the most affected countries (such as Spain and Italy) did not carry out particular scrutiny of SURE nor adopt any motions on this instrument. This seems to reect a broader and long-lasting trend of how different parliaments are more

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

plans. Will they set up specic parliamentary committees only for this purpose? How can inter-parliamentary cooperation help foster a more informed scrutiny? It is worth mentioning that, even prior to the pandemic, parliaments were already striving to adapt to the fast pace of EU business, namely by drafting, at the level of the Conference of Speakers of EU Parliaments, a Report and recommendations on Enhanced interparliamentary cooperation through modern technology.

or less active in their EU scrutiny, with a stronger hold on Council proceedings from Austria, Finland, the Netherlands, and Sweden, and a looser monitoring of the interinstitutional developments from Spain and Italy. In Portugal, for instance, the approach followed – mostly by the European Affairs Committee – was twofold: (i) to hold regular (digital) hearings with the Members of the Government involved in the overall negotiations, including SURE; and (ii) to seize the opportunity to engage in a structured dialogue with many EU institutional counter-

There is a trend of different parliaments being either more or less active in EU scrutiny Ten years after the entry into force of the Lisbon Treaty – which strongly and directly empowered national parliaments, and after the EU has gone through several (economic and ‘quasi-existential’) crises, it thus appears that parliaments have become more active than they had previously been, but that important differences remain even where their budgetary prerogatives are at stake. They are constantly challenged, and are called to adapt at a fast pace. This situation, combined with large asymmetries in terms of political culture, relationships to governments and (human and nancial) resources, should encourage them to cooperate more closely with their counterparts, and with the European Parliament.

parts, namely by promoting (digital) hearings with 12 of the 21 Portuguese MEPs and with the Portuguese Commissioner, Elisa Ferreira. This enabled MPs with rsthand information on the negotiations, which surely contributed to a more informed and thorough ownership of the EU response to the COVID-19 pandemic, including SURE. Now that SURE is operational (in fact, the rst disbursements were recently approved (5)), and that agreement on the other instruments of the EU’s response to the crisis may soon be expected, it will be interesting to see how these parliaments will work and position themselves to oversee the implementation of this comprehensive package of the mandatory national reforms and recovery

5. About the rst bond emission, see here. So far, support under SURE has been approved for 17 Member States. The rst disbursements were made to Italy, Spain and Poland (see here).

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

The European Parliament faces up to the Recovery and Resilience Facility Cristina Fasone

From a procedural standpoint, similarly to many other legislatures worldwide (2), the European Parliament had to face the immediate challenge of continuing to work and vote during the pandemic, with the further difculty of being composed of MEPs - in theory travelling from 27 Member States in order to attend committee meetings and plenary sessions. Online meeting and voting, even in the plenary, have been promptly activated to this end so that law-making and democratic scrutiny have continued without particular disruption.

The European Parliament’s powers in the framework of the approval of Next Generation EU: A brief overview In the midst of the COVID-19 outbreak the European Parliament has demonstrated once again a considerable degree of adaptation to the changing context and the ability to react quickly by providing crucial input for the adoption of ‘Next Generation EU’. As is well-known, this is an ambitious EU stimulus package, of a temporary nature, meant to provide the Member States with the resources needed to manage the economic and health crisis triggered by the pandemic through the launch by the Commission of unprecedented – in size, scope and duration of EU borrowing on the nancial markets. The issuance of European common debt, linked to the EU nancial instruments and procedures, to be repaid by the end of 2058 at the latest, is mainly targeted to a redistributive effort, through grants and loans, and to contribute to existing and new EU funds and programmes.

From the perspective of policy-making and in relation to the adoption of Next Generation EU, the situation has proved to be far more complex for the European Parliament for two reasons. A rst challenge is represented by the number of legislative acts entailing essential budgetary measures for the recovery to be adopted in a comparatively short period of time, in between the end of July 2020, when the European Council sealed the agreement on Next Generation EU and, hopefully, the end of the year in order for the measures to be

1. Cristina Fasone is an Assistant Professor of Comparative Public Law, Department of Political Science, Luiss University (Rome), and Visiting Professor, Faculty of Law, University of Toruń. 2. Maria Diaz Crego & Rafał Mańko, Parliaments in emergency mode. How Member States' parliaments are continuing with business during the pandemic, European Parliamentary Research Service, European Parliament, PE 649.396 – April 2020, and I. Bar-Simav-Tov, Covid-19 meets politics: the novel coronavirus as a novel challenge for legislatures, in Theory & Practice of Legislation, 8, 2020, pp. 11-48.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

operational as of 1 January 2021. Time constraints run in contrast to the possibility for the Parliament to carefully scrutinize and amend at least some of the measures. On the other hand, from a political perspective, for the Parliament to delay the approval of such measures when they are desperately needed would potentially mean to act contrary to the interest of million European citizens. A second challenge for the Parliament relates to the powers it can exploit, depending on the legal bases of the several measures featuring Next Generation EU. For example, when looking at the sectoral draft legislation that is underway, all the new funds expected to be established – such as the Just Transition Fund (COM(2020)460 nal), the Technical Support Instrument (COM(2020) 409),InvestEU (COM(2020) 403,The European Social Fund Plus (COM(2020)447), and, notably, the Recovery and Resilience Facility (COM(2020) 408) – will be adopted under the ordinary legislative procedure and, thus, the European Parliament is a colegislator. The relevant legislative procedures are ongoing and, as of writing, they are awaiting either the European Parliament’s decision at rst reading, the result of interinstitutional negotiations at this stage, or the adoption of the Council’s position. Much of the public attention is catalysed by the approval of the Recovery and Resilience Facility (RRF), given the size of this ‘Fund to be’, by no means comparable to the others: 672.5 billion euros (out of the total 750 billion foreseen for Next Generation EU on the whole), to be transferred from the EU to the Member States in the next three years.

Although the role of the European Parliament in relation to the RRF will be the main focus of this contribution, the functioning of the RRF and of the other funds will never be possible without the contextual approval of other measures, like the European Union Recovery Instrument (COM(2020)441), which will enable the EU to borrow the money needed for these Funds to work; the Multiannual Financial Framework (MFF) 20212027 setting the expenditures’ ceilings for the next seven years (the amended proposal, COM(2020)443); and the new Decision on own resources laying down the basic provisions for the nancing of the EU budget (also in this case, as amended, COM(2020) 445). The choice, made by the European Council in July, to link Next Generation EU to the existing European nancial procedures and, in particular to the seven-year budgetary cycle, was somewhat mandatory, both for the overlapping timing – the MFF not having being adopted since it was rst presented in 2018, but due by the end of 2020 –and for the need to respect the EU Treaty provisions (Articles 310 and 312 TFEU) and the Financial Regulation (Regulation EU, Euratom 2018/1046, Articles 7, 17 and 33), in particular the principles of unity of the budget, of equilibrium, of sound nancial management and of ordered development of the expenditures within the limits of the own resources (3). The European Parliament has also convincingly argued in favour of this choice (see the next section), yet on these three landmark measures it is in a much weaker position than the Council, and its potential op-

3. Although it has been argued that the temporary common borrowing to nance EU expenditures envisaged by Next Generation EU bypasses the prohibition of debt-nanced decit spending in the Union: P. Leino-Sandberg, Who is ultra vires now? The EU’s legal U-turn in interpreting Article 310 TFEU, in Verfassungsblog, 18 June 2020.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

States and to x together with the Council in an inter-institutional agreement, by January 2021, a detailed schedule for the introduction of new own resources (6). Finally, on the new MFF, within the special legislative procedure set out in Article 312 TFEU and still The European Parliament, for example, has at an early stage following the postno say in the approval of the draft regulation pandemic amendments (7), the European Paron the European Union Recovery Instruliament has a veto power and has threatened ment. Indeed, as already happened with on several occasions to use SURE this year for a much it (see next section). Howesmaller amount (and with ver, as it will be argued in the European Financial Stabilisation Mechanism in The legal basis is Article 122 the conclusion, it remains to be seen whether this wea2010), (4) the legal basis is TFEU, for which the Council pon is really (politically) Article 122 TFEU, for which the Council is the is the only decision-maker worth using by the Parliament in the present politionly decision-maker, while cal and socio-economic the Parliament only has to context. be informed by the Council on the decision taken (and provided that the second paragraph of Article 122 TFEU apThe European Parliament’s political plies) (5). In the long process leading to the directions adoption of the Own Resources Decision (Article 311 TFEU), instead, within the EuroSoon after the Eurogroup meeting, in a vipean stage of the procedure, the European deo conference of 9 April 2020, which preParliament is simply consulted, even though sented the idea of a Recovery Fund for the in its opinion it typically includes a long serst time, to tackle the economic effects of ries of proposed amendments to the text. In the pandemic, the European Parliament was the legislative resolution approved by the the rst institution to provide clear indicaPlenary on 16 September 2020, for example, tions on how this proposal should be implethe Parliament has proposed to eliminate mented. In its resolution of 17 April 2020 (8), any rebate and correction for the Member position to certain contents of the MFF, while certainly legitimate in principle, can become politically highly controversial, as detailed further below.

4. A Zoppé & C. Dias, The European Financial Stabilisation Mechanism: Main Features, Brieng, European Parliament, Economic Governance Support Unit, Directorate-General for Internal Policies, PE 645.718 - April 2020. 5. On the contested interpretation of the choice of this legal basis, in particular between the rst and the second paragraph, according to the level service of the Council and the legal service of the Bundestag, see F. Schorkopf, Next Generation EU. Worum es wirklich geht, in Cicero, 27 August 2020. On the possibility to use also the passerelle clause (Article 352 TFEU) in this context, thus allowing the Parliament to exercise a veto power, see G.L. Tosato, The Recovery Fund: Legal Issues, in LUISS School of European Political Economy, Policy Brief 23/2020, 1 May 2020. 6. See European Parliament legislative resolution of 16 September 2020 on the draft Council decision on the system of own resources of the European Union (10025/2020 – C9-0215/2020 – 2018/0135(CNS)). 7. The trilateral meetings between the Parliament, the Commission and the Council only started on 27 August. 8. European Parliament resolution of 17 April 2020 on EU coordinated action to combat the COVID-19 pandemic and its consequences (2020/2616(RSP)).

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

The European Parliament was the ﬁrst institution to provide clear indications on how this proposal should be implemented

the Parliament made a plea for a ‘massive recovery and reconstruction package for investment’ beyond the instruments already deployed – the European Stability Mechanism’s pandemic credit line and the European Central Bank’s pandemic emergency purchase programme – and to be part of the new MFF as indeed happened later (paragraph 19). According to the European Parliament, this package should have been nanced through a substantive increase in the MFF’s size and through recovery bonds guaranteed by the EU budget (without involving the mutualisation of the existing debt). Aware of the difculty in getting the new MFF approved on time, it also called on the Commission to put forward a contingency plan extending the duration of and revising the present MFF 2014-2020, an indication that the Commission followed in May (see the Proposal amending Council Regulation 1311/2013 laying down the 2014-2020 MFF, COM(2020) 446). The European Parliament’s warning to the Commission to introduce new own resources (paragraph 22), instead, went substantially unheard both by this institution and by the European Council

(see the vague references to new own resources in EUCO 10/20, Annex, A29, although needed for the ‘early repayment of NGEU borrowing’). Even more precise were the political directions given by the European Parliament in its resolution of 15 May (9). The Parliament made clear that it would have opposed a revised MFF where the resources allotted for the recovery would have impinged upon the nancing of existing EU programmes, thereby affecting their size, and the enforcement of budgetary tools devised by the Commission without the involvement of the Parliament (paragraph 5). To this end, Article 324 TFEU - calling for regular trilateral meetings of the Presidents of the Parliament, the Commission and the Council to reconcile their positions along the budgetary procedures - had to be applied. The nancing of what was subsequently labelled as the Recovery and Resilience Facility (RRF), for the Parliament, was to be based on ‘long-dated recovery bonds’ (paragraph 14), the Fund had to be managed by the Commission – thus refusing a resort to intergovernmentalism – and

9. European Parliament resolution of 15 May 2020 on the new multiannual nancial framework, own resources and the recovery plan (2020/2631(RSP)).

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

plans reviewed by the Commission, but approved by qualied majority in the Council through an implementing act, and the exceptional involvement of the European Council The European Parliament’s stance on the upon the request of one or more Member StaRRF was eventually dened on 23 July (10)– tes in case of deviation from the milestones before the relevant legislative procedure starand targets requested for the payment ted – only once the European Council had (EUCO 10/20, Annex, A.19). As a budgeagreed on the design and functioning of this tary authority placed on an equal footing fund within Next Generation EU (11). While with the Council, the Parthe endorsement of the liament asked to be involRRF was assessed as a hisThe position of the Parliament ved in the ex ante demotoric move for the EU, the Parliament: (i) deplored in the negotiation brings back cratic scrutiny, also by the lack of clear reference memories of its struggle in the means of delegated acts, and ‘in the ex post vericato rule of law conditionareform of the economic tion that money provided lity and the multiple cuts envisaged by the European governance from 2011 to 2013 under the RRF is well spent’. To counter the weaCouncil to education, digikened democratic legitital transformation, remacy of the RRF, the Parliament also proposearch, innovation, asylum, migration and sed to monitor and ensure the full transpaborder management, and to the implementarency of the nal list of beneciaries. tion of the Green Deal; (ii) considered that the European Council had not addressed the The adoption of the draft Regulation on issue of the repayment of the EU debt, which the Recovery and Resilience Facility: the Parliament wants to see tackled through déjà vu? the introduction of a basket of new genuine own resources as of 1 January 2021 - otherIn the ongoing ordinary legislative proceduwise it will deny consent on the MFF; (iii) re for the adoption of the draft Regulation on criticised the reduction of the grant compothe RRF, to some extent, at rst, the position nent in the disbursement of the RRF; and of the Parliament in the negotiation brings (iv) raised objections on the proposed manaback memories of its struggle in the reform gement of the RRF. of the economic governance from 2011 to 2013. The connection is apparent also beThe main concern of the Parliament, indeed, cause the European Council and the Council referred to the European Council’s decision (the latter in its position at rst reading) (12) to follow an intergovernmental approach in made compulsory, for the eligibility of the the governance of the RRF (paragraph 21), national recovery and resilience plans to be with the national recovery and resilience the disbursement had to be made up mainly of grants.

10. European Parliament resolution of 23 July 2020 on the conclusions of the extraordinary European Council meeting of 17-21 July 2020 (2020/2732(RSP)). 11. Ivi, para 2. 12. See Council of the European Union, Proposal for a Regulation of the European Parliament and of the Council establishing a Recovery and Resilience Facility- Mandate for negotiations with the European Parliament, 11538/20, Brussels, 7 October 2020.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

nanced, consistency with the countryspecic recommendations, with the most recent Council recommendation on the economic policy of the euro area, and with the information provided by the Member States in the National Reform Programmes (Article 14 of the draft Regulation). Moreover, these plans have to explain how they are expected to address the national challenges and priorities identied in the context of the European Semester, including scal aspects and the potential risk of macroeconomic imbalances (Article 15). In other words, the recovery and the resilience plans are seen as instruments to better enforce the European Semester’s provisions, to full the Member States’ mediumterm budgetary objectives and to prevent imbalances. During the Eurozone crisis, the ability of the European Parliament to be involved in the governance of the European Semester has remained limited. The RRF now may provide this institution with a new opportunity to participate more actively in the scal and macroeconomic surveillance via the control of the recovery and resilience plans, should the Parliament manage to get some (strategic) amendments to the draft Regulation approved. However, most of the European Parliament’s claims already expressed in the nonlegislative resolutions over the last few months and conrmed in the parliamentary debates on this legislative proposal so far not have not been taken into account by the Council. For example, besides incorporating in the text proposed by the Commission the conclusion of the European Council’s meeting of 21 July, in its position the Council removed any reference to the respect of the rule of law to benet from the RRF. To date the Parliament appears only in three articles and in a very

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

marginal position: as a recipient of the Commission’s assessment of the recovery and resilience plans approved by the Council (Article 21), of the Commission’s Annual Reports on the RRF’s implementation (Article 24), and of the Commission’s independent ex post evaluation three years after the entry into force of the Regulation (Article 25). The parliamentary BUDG and ECON Committees, acting under the Joint Committee procedure (Article 58 EP RoP), are expected to adopt their report for the plenary in the coming weeks, but some of the issues that are likely to emerge there are rather easy to foresee, based on the draft report of 1 September and on the opinions of other Committees, in particular AFCO. The Parliament is willing to include in the draft Regulation as mandatory the evaluation of the consistency of the national plans with the European added value, with the objective of the green transition, with gender mainstreaming and with the European Pillar of Social Rights. Moreover the Parliament is keen to condition access to the Facility on respect of Article 2 TEU values, and especially to the rule of law. In addition to this, resorting to implementing acts of the Council to approve national plans should be replaced by delegated acts to enhance parliamentary participation, the Parliament should be given access to a database with electronic information on all RRF recipients, and spending under the RRF should be subject to discharge by the Parliament (Article 319 TFEU) – a politically salient procedure, which the Parlia-

ment controls – separated from the general Commission discharge procedure. As anticipated, the European Parliament’s position with regard to the RRF recalls this institution’s stance on the ‘six-pack’ and the ‘two-pack’ which it contributed to shape, to a large extent, as a co-legislator, but with a very limited margin of manoeuvre in the implementation. Whereas from a democratic perspective the sidelining of the European Parliament both in the European Semester and on the RRF is of equal concern, from a constitutional standpoint, the parliamentary marginalisation on the recovery and resilience plans and on their payments is more problematic. Indeed, the European (and national) Semester(s) are featured by recommendations and opinions and by a rather exible interpretation of the European standards and of the national objectives. By contrast, the decisions about the approval and execution of the recovery and resilience plans can deny their eligibility and the transfer of resources, thereby entailing signicant consequences for the EU spending – as things stand - without letting one of the two budgetary authorities to have a say (Articles 14 and 16 TEU) (13). The involvement of the European Parliament in the scrutiny of the draft plans, on their approval, and on their management besides the Council could enhance the transparency and accountability of the national policy-makers’ action, also with regard to the way they comply with the European Semester’s rules for the reasons highlighted above (14). The Parliament seems willing to propose, on the model of the ‘econo-

13. B. Crum, How to provide political guidance to the Recovery and Resilience Facility?, In-depth analysis requested by the ECON Committee, European Parliament, PE 651.371 –October 2020, p. 15 ff. 14. See T. Wieser, What Role for the European Semester in the recovery plan?, In-depth analysis requested by the ECON Committee, European Parliament, p. 22.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

pean Parliament has to be equipped with demic dialogue’, a sort of ‘RRF dialogue’ (15), cision-making powers on the national recoallowing it to gather information, on an very and resilience plans and on the impleequal footing with the Council, both in wrimentation of the RRF in general. If the ting and by inviting Member States’ and amendments to the draft Regulation are Commission representatives for an hearing going to second this option, then the Parliaor an exchange of views in front of the comment could gain also in terms of enhanced petent committees before and after the apcontrol on the European Semester, via the proval of the plans. However, in addition to RRF and the national the ‘dialogue’, to really plans. counter the asymmetry created between the two budgetary authorities the The European Parliament has The Parliament has some use of delegated acts and of to be equipped with decision- weapons to use to this end, the discharge procedure on making powers on the national starting from the veto on the MFF, but the dilemma the RRF’s implementation recovery and resilience plans it faces is whether it is apwould probably prove mopropriate to act as a strong re effective. and on the implementation veto player in the present of the RRF in general dramatic context. As antiConclusion: Between cipated, the adoption of the Realism and PrinciRegulation on the RRF is pled Decisions necessary, but not sufcient to make the Facility operational. As amended by the Council To a large extent, on the prospective implethis draft Regulation has large margins for mentation of the RRF the same problems of improvement on the conditions set to appromarginalisation of the European Parliament ve the plans, on the rule of law conditionawithin the European Semester, to which the lity, on the democratic procedures for the apgovernance of the RRF is linked, are replicaproval, on the control of the plans and of ted. However, compared to the case of the their implementation: all weaknesses that economic governance, on the RRF the Counthe Parliament has clearly identied. It has cil is not ‘simply’ endorsing recommendastressed that the ‘Parliament will not rubbertions on the Member States’ economic and stamp a fait accompli and is prepared to withscal policies, but is going to authorise the hold its consent for the MFF until a satisfacdisbursement of EU money and to do this tory agreement is reached’ (16). This comes without the involvement of the other budgeon the top of the fact that the European Partary authority, the European Parliament, liament has already been forced to accept a could be highly controversial both from an proposed MFF well below the size it had asinter-institutional and a democratic standked for if Next Generation EU is excluded point. To rebalance this asymmetry the Euro-

15. See the amendments proposed within the draft Report of the BUDG and ECON Committees, 1 September 2020, 2020/0104(COD) 16. See European Parliament resolution of 23 July 2020, cit., para 7.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

from the count, as it will provide resources just for the rst half of the seven-year cycle, unless the proposal to make it permanent prevails at the end (17). The European Parliament could just take note of the Commission’s withdrawal of the proposal of the Budgetary Instrument for Convergence and Competitiveness for the Euro area (18), which it considered as a crucial macroeconomic stabiliser for the Eurozone, able to equip it with a real budgetary capacity. In light of these developments, will the Parliament be willing to delay the approval of the Next Generation EU package for a principled (and right) position to protect democracy and rule of law as well as its own institutional interests without being blamed by the other EU institutions and the public of not making the resources needed available to millions of EU citizens? Indeed, the European Parliament’s rst task is to represent

EU citizens, their common interests, and to prevent them from being undermined. The spread of the second coronavirus wave in Europe and the adoption of new lockdown measures as of writing are probably making the availability of the resources to be mobilised through the RRF even more compelling as an evident pan-European interest. National governments and parliaments have already taken action to prepare the national recovery and resilience plans, while the disbursement of SURE has just started, but it will not be sufcient, alone, because of its scope and reach, nor in combination with the present EU budget, to face the multiple challenges the pandemic triggers. Perhaps in the course of the legislative procedure these elements can make the position of the European Parliament more accommodating without giving up on certain non-negotiable conditions, like the introduction of new own resources and compliance with the rule of law.

17. See C. Lagarde, Interview with Le Monde, conducted by M. Charrel and E. Albert, 19 October 2020, available here and K. Regling, Europe’s Response to Covid-19, Unicredit European Conference online, 21 October 2020. 18. See European Commission, Explanatory Memorandum to a Proposal for a Regulation establishing a Recovery and Resilience Facility, COM (2020) 408, 28 May 20202, p. 2.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

National Parliaments and the Next Generation EU Recovery Fund 1

Ton van den Brink

Next Generation EU

Introduction

Unusual times call for unusual measures. The EU’s ‘Next Generation’ plan is one of The EU’s economic recovery plan Next Gethe EU’s major responses to the COVID-19 neration EU, one of the EU’s major responcrisis to date. Bold in scope and in impact – ses to the COVID-19 crisis, is certainly an especially in diverging from what used to be unusual measure. It takes the form of an amorthodoxies in EU law – Next Generation bitious investment plan EU is yet another example (worth 750 billion euros) of how crises fundamenbacked by a substantial recotally reshape the design of very fund. Developed in EU economic governance combination with the new and the EU more broadly. Next Generation EU Multiannual Financial FraIt would be unrealistic, however, to expect this to is certainly an unusual mework, Next Generation EU consists of three pillars happen without contromeasure – support for Member Staversy and without being tes; support for the private challenged. The fault lines sector; and measures to stirun mostly between Memmulate the learning of lesber States: the coalition sons from the crisis – of that has come to be known which support to the Memas the ‘Frugal Four’ (Ausber States is by far the most signicant. tria, Denmark, the Netherlands and Sweden) Apart from economic recovery, Next Genehave opposed plans for the mutualisation of ration EU is also instrumental for achieving debts and for a recovery fund to be based on Europe’s Green Deal and digital transformaloans rather than grants. Much was thus at tion objectives. In terms of governance, it stake, but it seemed that most of the deciwill be embedded in other EU policies, such sion-making was in the hands of the Comas Horizon 2020, but importantly also in the mission and national governments. What European Semester. Thus, the national recovoice – if at all – did national parliaments havery and resilience plans Member States ve? This question will be addressed in this will have to prepare to avail themselves of contribution. 1. Ton van den Brink is a Professor of EU legislative studies at the Utrecht Centre for Shared Regulation and Enforcement in Europe (RENFORCE) at Utrecht University.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

the funds available under the Resilience and Recovery Facility will for instance be related to national reform plans and be assessed in the light of Country Specic Recommendations (CSRs). Recovery and Resilience Facility: the Corona Recovery Fund

The ‘Corona recovery fund’ is the centrepiece of the recovery plan

The Recovery and Resilience Facility (RRF), or the ‘Corona recovery fund’, is the centrepiece of the recovery plan. It is the primary mechanism of support for the Member States and of the Next Generation EU plan more generally. Member States may submit recovery plans to the Commission. The Commission assesses these and proposes a decision on these plans to the Council of the European Union which may then adopt an implementing decision on the awarding of the loans/grants (Article 17 of the current Council position on the draft regulation). The Corona recovery fund accounts for 672.5 billion euros (out of the total of 750 billion) and will be based on a regulation (2). What has been much debated – and still is – is the division between loans and grants: the position of the Council now includes a total of grants worth 338 billion euros and a remaining 385 billion euros in loans. These numbers are included in the European Parliament’s draft report by its committees on Budget and on Economic and Monetary Affairs, but no compromise has been reached at this point in time.

2. Proposal of the Commission for a Regulation establishing a Recovery and Resilience Facility, COM/2020/408 nal.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Decision-making at the EU level The Commission presented its proposal for the Recovery Facility on 27 May in the European Parliament. Following a conclusion of the European Council in April, the Commission had carried out a comprehensive assessment of the effects of the COVID-19 crisis on the Member States which it also presented. In this so-called ‘Needs Assessment’, the Commission concluded that the impact of COVID-19 would differ greatly across the Member States in the way Member States are hit by the virus, but also in the way their economies are affected. Also the ability to adequately address the crises would differ, as some countries would be able to provide far more generous support to their economies. Lastly, COVID-19 risked harming the least resilient and stillconverging Member States the most. This would increase divergence, tilt the economic playing eld and undermine the Single Market. These arguments provided strong support for an EU response in the form of the corona recovery fund. Subsequently, the European Council agreed in July on the main aspects which was in turn followed by the above mentioned position in ECOFIN in early October. This consists of the basis for negotiations with the European Parliament which has not yet adopted its position (3). The aim of the Commission (and the German Presidency) is for the regulation to enter into force on 1 January 2021. The European Commission has issued guidance documents to structure the decision-making on the reco-

very plans and the substantive reforms and investments which these should reect. Meanwhile, following a call from the Commission to this end, various Member States have started submitting rst drafts of their recovery plans. Perhaps unsurprisingly, these plans demonstrate a relatively higher demand for grants, although for specic reforms and investments Member States have requested loans as well.

Impact In size the Corona recovery fund is comparable to the European Stability Mechanism. Apart from this substantial size, the RRF must equally be considered as a particular high-impact measure in departing from what hitherto seemed ‘no-go’s in EU law and policy. Based – at least to a considerable extent – on grants, the RRF derogates from the classic model of the Economic and Monetary Union (EMU) in which Member States’ individual nancial responsibility is the key principle. In other words, Member States should fund themselves. The impossibility of the EU issuing debt was another sacrosanct element of EMU. The RRF derogates from this as well and will thus not be nanced from increasing national contributions to the EU budget. This would put even more pressure on national budgets. Instead, the corona recovery fund will be nanced through borrowing funds on the capital markets. Furthermore, these funds would eventually be repaid – at least in part – from new ‘own resources’. As a shorthand for EU taxes, this opens up yet another highly contentious debate. The RRF draft regulation con-

3. See the analysis provided by Cristina Fasone in this Weekend Edition.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

ropean Affairs Committee of the Portuguese tains no concrete proposals in this regard, hoAssembleia da República assessed the prowever (4). The Commission simply referred posal in this light. The Spanish joint comto earlier plans, including the ‘EU plastic mittee rather straightforwardly, and without packaging waste tax’ (which would in reagoing into the specics of the Commission lity be a levy to be paid by Member States inproposal, observed that it would be unrealisto the EU budget); the plan for a levy on tic to expect individual Member States’ resMember States’ emissions trading system ponses to the COVID-19 crisis to be suf(ETS) revenues; the ‘Digital Services Tax’ cient. A collective response would be neeand its proposal for an own resource based ded as the crisis impacts all citizens, econoon the Common Consolidated Corporate mies and all societies of the Union. The inTax Base (CCCTB). How the borrowed terconnectedness of European economies funds will be repaid obviously concerns an would add to the need for a important element of the collective response accorproposed regulation, but ding to the committee. the real discussion on this How the borrowed funds With similar consideraissue is still pending. tions, its counterpart in the will be repaid obviously Portuguese Assembleia da National parliaments concerns an important República arrived at a positive assessment of the subIn light of all this, it would element of the proposed sidiarity of the proposal as be reasonable to expect naregulation well (6). tional parliaments to have the proposal for the RRF Other parliaments have ashigh on the political agensessed the proposal from da. It seems, however, that perspectives other than that of subsidiarity. the Early Warning Mechanism for the conThe Czech Chamber of Deputies generally trol of the respect of the principle of subsiendorsed the proposal (7), whereas the Czech diarity has not been a key instrument to scruSenate voiced some critical points on the subtinize the proposal. No reasoned opinions hastance of the proposal. The assessment of the ve been issued. In the context of the political French Senate has been generally positive as dialogue with the European Commission, a well. limited number of parliaments have adopted resolutions to conrm compliance of the proStrikingly, none of the parliaments of the posal with the subsidiarity principle. In par‘Frugal Four’ Member States issued a reasoticular the Joint Committee (5) for EU Affairs ned opinion or indeed provided for any subof the Spanish Cortes Generales and the Eu4. The proposal for the new Own Resources Decision includes the increase in budgetary ceilings and the authorisation to borrow. 5. See here. 6. See here. 7. Czech Chamber of Deputies.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

stantive input into either the Early Warning Mechanism or the political dialogue with the Commission. This does not mean, however, that the proposal has not been assessed. On the contrary, as the Dutch example demonstrates, it has been the subject of quite an intensive exchange between its Parliament and Government. The government has issued a series of letters, some in response to questions from members of parliament, in the period from May-October 2020. Thus, parliamentary involvement has been based on the classic government/parliament accountability chain at the national level.

like-minded Member States and promised to regularly update the Parliament. Later communications with the Tweede Kamer included a report and assessment of the European Council of July (the Government expressed satisfaction in creating guarantees that the recovery fund would directly bring about the necessary reforms in the Member States) and responses to parliamentary questions on the nancing and the governance of the recovery fund. All in all, the proposal has been the subject of a quite elaborate exchange of information and views between the Dutch Parliament and the Government.

The Dutch Government committed in May to inform the Tweede Kamer, before the European Council in early July, of its assessment of the proposal. By letter of 9 June, the Government considered that the package (the assessment included the proposal for the Multiannual Financial Framework 2021-2027 as well) was in line with the Dutch position ‘on some points’ (such as the need for reforms in the Member States), whereas in others it was quite far removed from that (in particular the nancing of the fund). It announced it would seek cooperation with

The substance of parliamentary input The substantive issues raised by national parliaments (or which have been the subject of exchange with their governments) have been diverse in scope. The nancing of the Recovery Fund and equally the grants/loans ratio has been the rst issue which has attracted attention, just as these nancial aspects have been discussed in relation to the EU’s other investment measure, SURE (8). The Dutch Government informed the Tweede Kamer that it had supported a greater emp-

The ﬁnancing of the Recovery Fund and equally the grants/loans ratio has been the ﬁrst issue which has attracted attention.

8. See Bruno Dias Pinheiro and Diane Fromage’s Long Read in this Weekend Edition.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

hasis on loans, a position which was endorsed by the Parliament. Members of the Dutch Socialist Party (SP) (9) expressed their discontent as they considered that ‘future generations must repay the loans’, considering that ‘it is unclear whether the investments will actually contribute to goals that benet those generations’.

Council and the possibility for Member States to trigger an emergency brake procedure to halt the release of funds when a recipient Member State has made too little progress were other issues that have eventually been included in the Council’s position. The Dutch Parliament in particular has raised concerns on enforcement, on how to secure structural reforms and in particular on how

Issues of governance of the RRF have equally been the subject of parliamentary activities Various issues of governance of the RRF have equally been the subject of parliamentary activities. The French Senate expressed its concerns on the concentration of the spending commitments over a relatively short period (2021-2024). Although it considered the short spending period justied in light of the need to quickly restart the economy, concerns on the capacity to implement, engineer and absorb the volumes of spending would call for vigilance (10). The position of the Commission in the system of RRF governance was a cause for concern for the Czech Senate as it considered its decision-making discretion too wide as a result of the lack of specicity of the terms to be applied (11). The nal say on the release of the funds for the

Conditionality has been the third major substantive issue to avoid risks of illegitimate spending and how to ensure auditing control (12). Also, the alignment of the decision-making on recovery plans with, and in, the European Semester has raised questions from the Christian Democratic party, as structural economic reforms are indeed part of them as well. Conditionality has been the third major substantive issue. This involves rst the temporary and exceptional nature of the recovery fund. Apart from compliance with structural reform objectives, rule of law-compliance has also been put forward, such as by the Czech Chamber of Deputies, as a condition that should be imposed. Both the Chamber of Deputies and the Senate from the Czech

9. Verslag van een schriftelijk overleg over o.a. de geannoteerde agenda Eurogroep en Econraad 5 en 6 oktober 2020 (Kamerstuk 21501-07-1719). 10. French Senate. 11. Czech Senate . 12. Verslag van een schriftelijk overleg over o.a. de geannoteerde agenda Eurogroep en Econraad 5 en 6 oktober 2020 (Kamerstuk 21501-07-1719), p. 20.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Republic submitted that nuclear energy projects would count towards achieving Europe’s Green Deal objectives. The involvement of national parliaments in the governance system of the RRF has been completely neglected. Indeed, the proposed governance system of the RRF raises questions of parliamentary involvement and democratic decision-making similar to those that emerged when the European Semester was designed. The risk that executive decision-making will also dominate within the context of the RRF may not be ignored. What is observed before in this contribution on the involvement of national parliaments in the design of the RRF gives no indication of their involvement in the actual operation thereof. The formal steps in the governance of the RRF are all in the hands of executive institutions: national governments adopt recovery plans and the Commission and Council decide on these. This means that national parliaments will have to rely on existing mechanisms at the national level to ensure their involvement. And they indeed have a distinct interest to be involved, especially in the design of national recovery plans. They concern important decisions of economic policy: which public investments and which reforms are needed? Decisions on applying for loans from the RRF, moreover, directly impact parliaments’ budgetary rights.

Ways forward It is an interesting observation that national parliaments such as that of the Dutch have relied on the classic accountability chains (control over their government) to shape their involvement in the construction of the RRF.

Perhaps this is the more natural approach, especially when the political cleavages run between (groups of)- Member States. In any case, the Early Warning Mechanism and the Political Dialogue have contributed little in this dossier. This inevitably also has to do with the limited relevance of the subsidiarity principle. Indeed, even from the perspective of the ‘Frugal Four’ it would be difcult to argue that the Member States would be better equipped than the EU to adopt suitable measures to recover from the pandemic and to do so in a way that does not result in a further diverging of European economies. This is indeed not what the Frugal f=Four have argued. Still, quite a range of concerns – some quite key for the design of the RRF – have been voiced, but these are difcult to qualify as subsidiarity concerns. Indeed, it has been observed before that parliaments tend to continue focusing on their own governments when it comes to EU affairs, but it seems that this tendency manifests itself in a quite exceptional way. Inter-parliamentary cooperation is another avenue that may be explored to enhance the democratic quality of the decision-making. In this context, however, the asymmetries between Member States’ positions under the RRF may create obstacles thereto. Not all Member States may submit recovery plans (this is only mandatory when they seek support – Article 15(1) of the proposal). Moreover, the decision-making procedure is – as is the case in the European Semester – individualised as it involves the adoption and scrutiny of separate recovery plans. This may indeed incentivise parliaments to make use of the classic government-parliament accountability channels. Also the relationship to the

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

European Parliament warrants attention. To the extent that the RRF involves debt issuance and scal risk-sharing at the EU level (and indeed in the future possibly tax collection), the European Parliament should have a central role – based on appropriate powers to this end (13). Whereas the two-tier representative democracy (Article 10 TEU) may seem a rather straightforward basis for the functioning of the EU, the creation of the

RRF demonstrates the difculties of putting this principle into practice, especially in this area of economic policy making which – as a coordinating competence for the EU - has a rather indeterminate position in EU law anyway.

13. See Cristina Fasone’s Long Read in this Weekend Edition.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

News Highlights Week 2 November to 6 November 2020

Reasoned Opinion: UK’s failure to terminate bilateral investment treaties

Commission alleges Czech Railways engaging in predatory pricing

Monday 2 November

READ MORE ON EU LAW LIVE

The European Commission sent a reasoned opinion to the United Kingdom for failing to terminate bilateral investment treaties to which it is a contracting party alongside the Member States, as announced in its October infringements package.

The European Commission informed the Czech stateowned railway operator České dráhy (ČD) of its preliminary view that ČD charged prices below costs: unlawful predatory pricing behaviour prohibited by EU competition law under Article 102 TFEU.

General Court Judge seeking legal secretary: vacancy published

Independence of judges in Poland and rule of law: Reasoned Opinion

Monday 2 November

READ MORE ON EU LAW LIVE

Judge Constantinos Iliopoulos of the General Court at the Court of Justice of the European Union published an announcement seeking a legal secretary (référendaire) to join his Cabinet. The deadline for applications is 13 November 2020.

READ MORE ON EU LAW LIVE

The European Commission sent a reasoned opinion to Poland concerning the so-called ‘muzzle law’, for undermining the independence of Polish judges, incompatibility with the primacy of EU law, and for preventing preliminary rulings being requested.

The Netherlands taken to court over res- ECB’s legal response to the COVID-19 pandemic and the limits of ECB’s comtrictions to EU’s free movement rules petences READ MORE ON EU LAW LIVE Monday 2 November The Commission decided, as part of its October infringements package, that it would be commencing legal proceedings against the Netherlands for alleged breaches of the EU’s free movement rules relating to its rules on cross-border transfers and pensions.

Tuesday 3 November

READ MORE ON EU LAW LIVE

A keynote speech on the ECB’s response to COVID-19 stressed that it has exclusive but narrow competence to dene EU monetary policy for the purpose of maintaining price stability, and that exceptional measures must be targeted and temporary.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Council of Europe: 2020 Report on efﬁciency and quality of justice in Europe Tuesday 3 November

READ MORE ON EU LAW LIVE

CEPEJ (the European Commission for the Efciency of Justice) of the Council of Europe published its eighth Evaluation Report on the efciency and quality of justice in CoE countries.

Google and Alphabet breached competition rules in respect of their ad agreements Tuesday 3 November

READ MORE ON EU LAW LIVE

Satabank plc brings ECB decision not to take over direct supervision before the General Court Tuesday 3 November

READ MORE ON EU LAW LIVE

Ofcial publication was made of an annulment action (T-494/20) brought by Satabank plc (St. Julians, Malta) against the ECB’s refusal to take over to ensure that Satabank is no longer denied access to its ofces, information, systems, les, staff and resources.

ESMA’s fast-tracked Peer Review Report on Wirecard case identifies deficiencies in German supervision of financial reporting

The decision by the European Commission to ne Google and Alphabet for their anti-competitive behaviour in the Google Search (AdSense) case was ofcially published.

Tuesday 3 November

Council of Europe’s actions to address education challenges posed by COVID19

ESA Board of Appeal dismisses case against EIOPA on alleged nonapplication of EU law

Tuesday 3 November

READ MORE ON EU LAW LIVE

The Ministers of Education of the Council of Europe (CoE) endorsed a Political Declaration on the education response to COVID-19. This was accompanied by a Roadmap for Action on the education response to COVID-19, which shows how the CoE will adapt its Education programme to assist CoE countries.

READ MORE ON EU LAW LIVE

The European Securities and Markets Authority published the results of its rst-ever Fast Track Peer Review, concerning the events leading to the collapse of Wirecard AG and the supervisory response by the German National Competent Authorities.

Wednesday 4 November

READ MORE ON EU LAW LIVE

The Joint Board of Appeal of the European Supervisory Authorities dismissed, on the grounds of manifest inadmissibility, a case brought against EIOPA on the alleged non-application of EU law by six national competent authorities.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Eurogroup meeting: main takeaways Wednesday 4 November

READ MORE ON EU LAW LIVE

The Eurogroup discussed the Euro area and postCOVID-19 global economy, the banking union format and the euro as a digital currency. Ministers were also briefed on the epidemiological evolution of COVID-19.

Commission proposes simplifying export controls to the UK at the end of transition period Wednesday 4 November

READ MORE ON EU LAW LIVE

The European Commission adopted a proposal for a simplication of export controls to the UK at the end of the transition period, by adding it to the list of destinations covered by EU General Export Authorisation EU001 under Regulation 428/2009.

Commission approves German State aid scheme to support single wagon rail freight transport

Council adopts recast regulations digitalising taking of evidence and service of documents

Wednesday 4 November

READ MORE ON EU LAW LIVE

Under Article 93 TFEU and the Guidelines on State aid for railway undertakings, the European Commission approved a 600 million euro-German scheme to support single wagon rail freight transport.

The Council of the European Union adopted (at its rst reading) two recast regulations that digitalise how evidence is taken and how legal documents can be served on defendants and other parties. The objective is to modernise and speed up cross-border exchanges between authorities.

ECtHR: admission in criminal proceedings of evidence obtained through illtreatment inﬂicted by private individuals breaches human rights

Request for an Advisory Opinion from the EFTA Court regarding criminal proceedings

Thursday 5 November

READ MORE ON EU LAW LIVE

Today, the European Court of Human Rights (ECtHR) handed down its judgment in Ćwik v. Poland (application no. 31454/10), ruling that Polish courts breached the right to a fair trial (Article 6(1) of the European Convention on Human Rights, ECHR) by admitting evidence obtained through ill-treatment in the context of criminal proceedings for drug-trafcking against the applicant.

Thursday 5 November

READ MORE ON EU LAW LIVE

A request for an Advisory Opinion from the EFTA Court by the Norwegian Supreme Court (Norges Høyesterett) in Case E-8/20, Criminal Proceedings against N, was ofcially published, concerning whether making a work allowance conditional on notifying stayings in a Member State is compatible with EEA law.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Draft Directive on collective consumer actions: Council adopts position at ﬁrst reading Thursday 5 November

READ MORE ON EU LAW LIVE

European Chemicals Agency annuls decision ﬁnding that data-sharing rules cannot be waived under Biocidal Products Regulation

A draft directive enabling consumers to bring collective actions (‘representative actions’) for redress over EU law disputes that has been under negotiation between the co-legislators the Council of the European Union and European Parliament was approved by the Council.

Thursday 5 November

EFSA accepts Ombudsman’s solution to grant partial access to document relating to pesticides matter: inquiry closed

Rule of law conditionality and EU budget: provisional agreement reached by Council Presidency and Parliament's negotiators

Thursday 5 November

READ MORE ON EU LAW LIVE

The European Chemical Agency’s (ECHA) Board of Appeal has annulled a decision of 6 May 2019 on procedural grounds, as sought in an appeal before it made by Solvay Solutions UK Limited concerning a dispute with Dow Benelux B.V.

READ MORE ON EU LAW LIVE

The EU’s Ombudsman closed an inquiry into the European Food Safety Authority’s refusal to grant access to documents related to the approval of a reasoned opinion on maximum residue limits for pesticides in food (pursuant to consumer exposure and risk assessments).

The German Presidency of the Council and the European Parliament's negotiators reached a provisional agreement on a new general regime of conditionality to protect the EU budget, which is linked to the next Multiannual Financial Framework (MMF) and the postpandemic recovery plan.

European Convention of Human Rights turns 70 (1950-2020)

New Scottish National Investment Bank: Scottish government’s support approved under State aid rules

Thursday 5 November

READ MORE ON EU LAW LIVE

The 70th anniversary of the European Convention on Human Rights was celebrated on 4 November, the rst instrument to crystallise and give binding effect to the rights set out in the Universal Declaration of Human Rights.

Thursday 5 November

READ MORE ON EU LAW LIVE

The Scottish government’s plans to create and fund a new national development bank – the Scottish National Investment Bank – were approved by the European Commission under EU State aid rules (Article 107(3)© TFEU).

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Third states exceptionally given a way to participate in EU Member Statedefence projects

Companies advised by European Chemicals Agency to ‘act now’ to deal with end of Brexit period

Friday 6 November

READ MORE ON EU LAW LIVE

Ofcial publication was made of CFSP Decision 2020/1639, by which the Council of the EU establishes a means for non-EU countries and even entities to exceptionally participate in the EU’s own defence projects under the framework of PESCO (Permanent Structured Cooperation) projects.

The European Chemicals Agency issued advice to companies as the UK-EU transition period draws closer, as EU law (REACH, CLP, the BPR, PIC and POPs) will no longer apply in the UK – except in Northern Ireland under the Ireland/Northern Ireland Protocol.

Ethics framework of European Central Bank amended

Commission publishes Report on the implementation of Consumer Credit Agreements Directive

Friday 6 November

READ MORE ON EU LAW LIVE

An amended version of the ethics framework of the European Central Bank was ofcially published. The new version of the text introduces provisions on the whistleblowing tool and on the protection of whistleblowers.

European Environmental Agency: preliminary ﬁndings on impact of COVID19 on the environment in Europe Friday 6 November

READ MORE ON EU LAW LIVE

The European Environmental Agency (EEA) made public a brieng on the impact of the COVID-19 pandemic on the environment and on the EU’s environmental policy. The brieng assesses consequences on EU efforts to shift to a low-carbon future.

Friday 6 November

READ MORE ON EU LAW LIVE

The European Commission issued a Report to the European Parliament and the Council on the implementation of Directive 2008/48 on credit agreements for consumers, assessing its effectiveness, efciency, coherence, relevance, and EU added value over the past 10 years.

Council agrees to collaborate in ongoing Ombudsman inquiry on transparency of decision-making during COVID-19 crisis Friday 6 November

READ MORE ON EU LAW LIVE

In the context of its ongoing examination of the transparency of the Council of the EU’s response to the COVID-19 crisis, the European Ombudsman made an inspection request and submitted questions to the Council. Now, the Council has replied to the Ombudsman, agreeing to the inspection request, and setting out a list of documents which will be made available.

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

SRB Chair: speech on Europe and the COVID-19 crisis Friday 6 November

READ MORE ON EU LAW LIVE

Chair of the Single Resolution Board Elke König delivered a speech at the 2020 Policy Conference of the European Banking Institute, assessing the current regulatory environment for resolvability of banks in Europe, measures adopted over the crisis, and the measures to put in place in the medium term to ensure nancial stability in the EU.

Insights, Analyses & Op-Eds Slow but Steady: The Expansion of EU Law on Procurement in Special Sectors

Calculating toll rates for heavy goods vehicles under EU law

By Daniele Gallo and Giacomo Biagioni READ MORE ON EU LAW LIVE

By Alejandro García Heredia

Op-Ed on Pegaso and Sistemi di Sicurezza (C-521/81) explaining why this judgment of the Court of Justice will be at the core of future case law regarding the content, the scope and the extent of Directive 2014/25 on procurement by entities operating in the water, energy, transport and postal services sectors.

Op-Ed on BY, CZ v Bundesrepublik Deutschland (C321/19), and the Court of Justice’s ndings on direct effect and the calculation of toll rates under Directive 1999/62, particularly important for all carriers using the trans-European road network.

The proposal for the European Union Single Window Environment for Customs

Rule of law conditionality for the EU budget: agreement is there

By Darya Budova

READ MORE ON EU LAW LIVE

Analysis of a new proposal made by the European Commission for a European Single Window Environment that would allow economic operators to submit all the information for customs and non-customs purposes through a single point on a ‘reporting only-once principle’.

By Aleksejs Dimitrovs

READ MORE ON EU LAW LIVE

Analysis on the provisional agreement reached on 5 November 2020 by the European Parliament and the Council of the EU on the general regime of conditionality for the protection of the EU budget. Aleksejs Dimitrovs explains the meaning, implications, and scope of the envisaged conditionality mechanism, a key element of the EU’s post-pandemic economic recovery plan.

The EU Strengthens its Trade Retaliation Powers By Yves Melin and Jin Woo Kim

READ MORE ON EU LAW LIVE

Op-Ed on the agreement reached by the European Parliament, the Council and the Commission to amend the EU Trade Enforcement Regulation 654/2014. Once those changes enter into force, the EU will be able to impose retaliation measures against third countries breaching their international obligations vis-à-vis the EU under the World Trade Organization, despite the paralysis of the Appellate Body of the WTO dispute settlement body.

EULAWLIVE stay alert keep smart

Nº36 · NOVEMBER, 7 2020

weekend

edition stay alert keep smart

Library - Book Review Christos Gortsos

By Diane Fromage

READ MORE ON EU LAW LIVE

European Central Banking Law: The Role of the European Central Bank and National Central Banks under European Law A review nding that whilst publications on European Central Banking Law have been numerous following the establishment of the European Banking Union, that Christos Gortsos’s recent book undoubtedly stands out for a number of reasons, among which are its comprehensiveness and structure.