European Union

Committees meetings, Brussels

Source : © European Union, 2015 - EP

Juncker, left, with Moscovici at Thursday's hearing, before he ducked out early

Ten months ago, amidst the recriminations of the LuxLeaks scandal, the prospect of Jean-Claude Juncker appearing before a European Parliament inquiry into whether the European Commission president acted improperly while Luxembourg’s premier may have seemed to promise high political theatre.

In the event, however, Juncker’s testimony on Thursday before MEPs probing hundreds of sweetheart tax deals handed down to multinational companies in Luxembourg during his 18-year tenure as the country’s prime minister was anything but.

It featured a round of applause for his opening statement, plenty of softball questions, and the sight of Juncker ducking out before the end, citing an overrunning timetable and other commitments. Pierre Moscovici, the political savvy EU commissioner in charge of tax policy, was left to field the second and last round of questions.

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The Council adopted the decision on the creation of a market stability reserve (MSR) for the EU greenhouse gas emission trading scheme (EU ETS). This new reserve aims at tackling structural supply-demand imbalances in the EU ETS.

How it works

When in a given year the total of emission allowances exceeds a certain threshold, a percentage of allowances will be automatically withdrawn from the market and placed into the  reserve. In the opposite case, allowances will be returned from the reserve to the market.

Why it is needed

 In 2013, there was a significant surplus of allowances in the EU ETS, which was expected to grow over the following years. This  resulted from an imbalance between the supply and demand of allowances, since demand is flexible and affected, for instance, by economic cycles.

The presence of a large surplus lowers the prices of allowances and reduces the incentives for low-carbon investment. Therefore, if not addressed, the current market imbalance would affect the ability of the EU ETS to meet its targets in a cost effective manner in the future.

Main elements of the final text

• A market stability reserve will be established in 2018 and operational from 1 January 2019
• "Backloaded" allowances (the 900 million allowances whose auctioning was postposed from the years 2014-2016 until 2019-2020) will be placed in the reserve
• Unallocated allowances from phase 3 of the EU ETS will be placed in the reserve in 2020
• The MSR review will take into account the reserve's impact on growth, jobs, industrial competitiveness and the risk of carbon leakage.

Timeline

The Commission presented its proposal for a market stability reserve in January 2014, starting the legislative ordinary procedure. An informal agreement on a compromise text between the European Parliament and the Council was reached in May 2015. The Parliament endorsed the reform in July 2015. With the approval of the Council, the decision is now adopted in first reading.

The EU ETS

The EU ETS, launched in 2005, aims at delivering the EU's  greenhouse gas emission reduction goals in an economically efficient manner. It is based on the so-called "cap-and-trade" approach: each year the EU establishes a limit (cap) for overall emissions from power plants, energy-intensive industry and commercial airlines covered by the system.

Within this limit, companies can buy and sell emission allowances. Each allowance gives the right to emit one tonne of CO2, the main greenhouse gas, or the equivalent of another greenhouse gas.

From 2013 to 2020, the cap is reduced annually by 1.74%. From 2021, the annual reduction will increase to 2.2%, reflecting the EU's new 2030 target for emission reductions.

EU ETS review

The establishment of the market stability reserve is the fist step of a wider review of the EU ETS proposed by the Commission this year.

DRAFT REPORT on the Annual report on human rights and democracy in the world 2014 and the European Union’s policy on the matter
Committee on Foreign Affairs
Cristian Dan Preda

Source : © European Union, 2015 - EP

OPINION on Towards a European Energy Union
Committee on Foreign Affairs
Francisco Assis

Source : © European Union, 2015 - EP

This post presents my research paper submitted within the framework of the Russian Politics course at KU Leuven (January 2015). Scenario thinking is based on the assumption of a possible political situation in year 2020.

Scenarios presented were created through the SWOT analysis which constitutes one of the most popular heuristic method of analysis, helping to sort the collected information. It allows to examine the internal and external factors affecting studied phenomenon. In my analysis, I have examined the possible scenarios for Russia and Eastern Partnership countries relations, which are part of EU’s European Neighbourhood Policy (the ENP). The SWOT analysis has been examined and performed from the Russian perspective.

Both sides, the EU and Russia have a strong commitment and strategic interest in the Eastern region, which strongly influence their mutual contacts. Nevertheless, the future situation of this region is currently one of the most important issue on the foreign affairs agenda on both sides. Therefore, it is important to address the greatest importance of Russian future strategic scenarios towards Eastern Partnership countries- Armenia, Azerbaijan, Georgia, Moldova, Belarus and Ukraine, with the relation to EU’s Eastern policy.

The ENP was launched in 2004 with an aim to support partner countries in their political, economic and institutional reforms; to strengthen democracy, good governance, the rule of law and human rights along with economic modernization and liberalization. The main goal of the ENP is to establish a closer relation with non-EU countries and integrate them more with European market and EU sectoral programmes and policies[1]. Within the framework of the ENP, The Eastern Partnership project (the EaP) was launched in 2009 towards six post-Soviet countries, thus it is not hard to imagine that Russia do not support and agree with EU’s actions in Eastern Europe and South Caucasus. These countries, countries of “strategic importance”, are part of Russian increasing assertive foreign policy, with Russian leaders and a Russian public opinion that wanted and strived to stop the Western influence and regain control over its “Near Abroad”[2].

Factors taken into account in the SWOT analysis for Russia were given the weight from - 3, which are the biggest threat and the weakest side, to 3 being the greatest opportunity and the strongest side of the Russian situation. I have removed 0 from the scale, because as a neutral result of studied phenomena, it has no effect on the assessment of the examined situation. Taking into consideration a page limit, the below table presents only part of the key internal and external factors, which were considered as the most relevant for Russia- Eastern Partnership countries relations.

Strengths

Weaknesses

1)      Large country (1)

2)      Common historical and cultural heritage in the Eastern region (2)

3)      Geographical proximity (3)

4)      Energy dependency of Eastern and EU countries from Russia (3)

1)      Authoritarian government (-1)

2)      High rates of unemployment and poverty in many areas (-2)

3)      Crisis on the Russian financial market (-3)

4)      No influence on the EaP policy on the EU level (-1)

Opportunities

Threats

1)      Annexation of Crimea  (3)

2)      Russian minorities in Eastern countries (2)

3)      Economic instability of the EU and Eurozone (1)

4)      Eurasian Economic Union (3)

5)      Armenia and Ukraine did not initial association agreements with the EU (2)

1)      Dependence on oil and gas (-3)

2)      EU’s sanctions (-3)

3)      International conflict with West (-2)

4)      Organized crime and terrorism towards Russians from Eastern countries (-1)

5)      Georgia and Moldova had successfully negotiated Association agreements with the EU (-2)

 Table 1  SWOT analysis of Russia- Eastern Partnership countries relations

Total result of included factors is positive (20-18=2), which means that there is more strengths and opportunities for Russia to develop its policy towards Eastern Partnership countries. It may also be a reason why Russia still intensively develop different incentives for Eastern countries.

The internal factors can be seen as strengths and weaknesses of the current situation and factors coming from outside the country are defining threats and opportunities. Hence we can create four strategies derived from four SWOT quadrants.

 

  Opportunities Threats Strengths Aggressive strategy Conservative strategy Weaknesses Competitive strategy Defensive strategy

Table 2 Four SWOT strategies. Source: http://pl.wikipedia.org/wiki/Analiza_SWOT

 

Because of the positive result of SWOT analysis, it seems that Russia would most probably use aggressive strategy towards Eastern Partnership countries and undermine EU’s policy towards this region. Aggressive strategy is a strategy of strong expansion and development of both factors, strengths and opportunities. It is not without significance that Crimea issue is the strongest factor of Russian external factors within opportunities quadrant. The success in the Ukraine conflict and Russia’s annexation reinforced belief that countries of the “strategic importance” would not be easily given up by Putin. Moreover, Russian previous conflicts with Chechnya, Georgia and now with Ukraine can be counted among Russian successes. Putin tries to soothe the loss of Empire and this strategy seems to work at this moment. Hard power versus EU’s soft power in the long-term is the insufficient protection for Georgia’s and Moldova’s frozen conflicts with Russia. According to Raik, “the Eastern Partnership reflects the general tendency of the EU to play down issues of hard security and geopolitics and pursue economic integration as an instrument for enhancing stability and peace[3].” Russia will do not stop with its efforts to attract Eastern countries with the Eurasian Economic Union. Russia’s project is based on common legislation and supranational institutions, in which it resembles European integration. Russia will offer member countries various benefits, mainly of an economic nature, including easier access to the Russian market, financial support and preferential prices for energy resources[4]. The Eastern countries depend on Russian energy, their governments currently more and more decide on some subservience toward Russia: Azerbaijan’s recent article[5], Moldova’s last parliamentary election, Georgian authorities’ new policy and recent events within the government[6], Armenia’s threat of its energy security and joined the Eurasian Economic Union, Belarus pro-Russian approach. Hence, Russia will not be threaten by EU’s policy and will continue with an invasion in Eastern countries. Frozen conflicts, unsolved problems with Georgia, Moldova and Armenia, will be used to achieve Russian interests and gain necessary support from pro-Russian population. The necessary support would be given also for domestic governments- Russia will propose deeper and more comprehensive Eurasian Union’s economic agreements, than the free trade agreements that the EU has already negotiated. The Eastern Partnership countries will not confront themselves with the Russian army and risk their energy and human security. The Ukraine crisis show them that Western countries were not able to hold back Putin, and it is better to join Kremlin, than reject closer integration.

Russia still continues to define the post-Soviet area as its sphere of influence. The main objectives of this policy is to maintain the status of the Kremlin’s power confronted with the growing power of China and a stable position of the US as a world leader. The confrontation with the EU on the disputed East area is inevitable, but on the other hand, Russia cannot afford EU’s sanctions and to back out from the economic and modernization cooperation with the EU. Through well-defined economic incentives Putin will go toward Eastern countries and undermine the EU’s policy using state-controlled media not only to deliver messages, but rather to spread rumours and create confusion.

Conservative strategy- the studied subject is not able to develop intensively in the existing external environment, because the strengths factors do not correspond with the opportunities of the external environment, thus it is necessary to wait for the improvement in external conditions. This strategy was true before Putin’s first presidential elections. Currently, Russia does not want to wait for the improvement of external affairs, but to create them.

Competitive strategy in case of Russia is not a perfect solution. This strategy comes up when there is an advantage of weaknesses over strengths, but the studied subject acts in a friendly environment, which allows him to maintain his position. Competitive strategy should in that case focus on the elimination of internal weaknesses and use opportunities from the external environment. But Putin does not see any weaknesses in Russia. Russian identity and civilization are the greatest value in the society, and Russia is exceptional because it is not coming from the West. Vladimir Putin wrote in 2012 in a government newspaper, that Russia is not just an ordinary country but a unique “state civilization”, bound together by the ethnic Russians who form its “cultural nucleus”[7]. He will not cooperate with the external West environment which do not understand and tolerate Russian identity. In Putin’s view, it is the West’s intention to interfere with Russia’s historic mission and to thwart the rightful “integration of the Eurasian space”[8].

Defensive strategy: weaknesses are strongly linked to external threats, there is a high risk of state’s collapse. This strategy is focused on the internally and externally survival. Russia is not a state which would collapse, so this strategy can be rejected. Although, if economic and demographic problems will prevail, Russia as a result of the increasing difficulty of administering such a large territory and a lack of adequate resources for investment, slowly begins to give up its colonial heritage in the east of the Urals and the Caucasus.

In 2020 we cannot excluded that the Eastern Partnership Policy may change its current shape and Armenia, Belarus and Azerbaijan would withdraw from the cooperation with the EaP. The EU is not able to forbidden Eastern countries to resign from this policy. Moscow, without strong pressure from the West, strengthens the cooperation with China in Central Asia. Also puts bigger effort on the cooperation in the BRIC group. In fulfilling this scenario, I assume that Moscow will seek to restore its sphere of the influence in the Eastern Europe (Caucasus, Belarus, Moldova), and even head to recover some impact on countries in the Central Europe. Even because of economic problems, Putin will not change his course in the Eastern region and the EU’s widespread condemnation would not change his mind. Instead of military actions, which constitute the last possible option of Russian influence, the economic incentives will gradually undermined the strategic planning in Eastern countries.

[1] Delreux, T. and Keukeleire, S. (2014). “The Foreign Policy of the European Union.” Palgrave Macmillan, p. 251.

[2] Delreux, T. and Keukeleire, S. (2014). “The Foreign Policy of the European Union.” Palgrave Macmillan, p. 260.

[3] Raik, Kristi (2013). “Eastern Partnership as Differentiated Integration: The challenges of EaP Association Agreements.” The Post-Vilnius Challenges of the Eastern Partnership in The Eastern Partnership Review No. 15.

[4] Sadowski, Rafał (2013). “Partnership in Times of Crisis. Challenges for the Eastern European countries’ integration with Europe.” Point of view No. 36. Warsaw: Centre for Eastern Studies. pp. 44-45.

[5] On 3 December the Azerbaijani media published an article, by Ramiz Mekhtiyev, the head of the presidential administration and de facto the second most important person in the state. Among other statements, Mekhtiyev blamed the USA and the EU for trying to create a fifth column in Azerbaijan and stoking a desire to cause a ‘colour revolution’, and also specifically named individuals and organisations supported by the West. The article promotes the idea of a multipolar world consistent with the Russian vision, and emphasises the right of sovereign Azerbaijan to conduct a foreign policy which focuses on the development of bilateral relations. Source: http://www.osw.waw.pl/en/publikacje/analyses/2014-12-10/azerbaijan-closer-to-russia-further-west

[6] Some Georgian politicians stress that Prime Minister Irakly Garibashvili is dismissing some ministers due to politically motivated reasons and is trying to undermine supporters for better relations with the West.

[7] Aron, Leon (2014). “Why Putin Says Russia Is Exceptional.” The Wall Street Journal, http://www.wsj.com/articles/why-putin-says-russia-is-exceptional-1401473667.

[8] Ibidem.

The post Scenario thinking: Russia-Eastern Partnership countries appeared first on Ideas on Europe.

Margrethe Vestager, the EU's antitrust chief

Margrethe Vestager seems to be preparing for a marathon court battle.

At a parliamentary committee on Thursday, she gave a clear sign that she had the political will to issue tough landmark decisions on the sweetheart tax deals that EU countries have been issuing to multinationals.

But she also gave away a tell-tale clue that her officials are steeling themselves for a firestorm of litigation in what will become some of the defining cases of the Juncker commission. She won’t be rushed into a verdict before she has a “quality” case, she told the committee.

The Danish commissioner was appearing before the Brussels parliamentarians to give an update on four landmark tax investigations – Apple in Ireland, Starbucks in the Netherlands and Fiat and Amazon in Luxembourg.

Most critically, she robustly defended the commission’s revolutionary approach of treating “comfort letters” as state aid – effectively defining the letters (which are pre-emptive tax rulings, intended to reassure multinationals about whether their corporate structures aimed at to avoiding high tax bills are legal) as illegal subsidies.

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On 18 September 2015, the Council appointed the members of the European Economic and Social Committee (EESC) for the period from 21 September 2015 to 20 September 2020. 

The EESC is the European Union body which represents employers, workers and other groups and associations of civil society, notably in socio-economic, civic, professional and cultural areas. 

The Committee has 350 members from the 28 EU countries. 

Members are nominated by national governments and appointed by the Council for a renewable 5-year term of office. The latest renewal was in October 2010 for the mandate 2010-2015.

"The current system of corporate tax rules is unfit for purpose and unjust. Some companies are losing out, whereas others win by hiding behind a variety of national rules", Commission President Jean Claude Juncker told MEPs at a joint meeting of the committees for Tax Rulings and for Economic and Monetary Affairs on Thursday. "We need a better insight into how multinational companies behave and how they make use of the differences between countries. Then we should create some order!", he added.
Committee on Economic and Monetary Affairs
Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect

Source : © European Union, 2015 - EP

"The current system of corporate tax rules is unfit for purpose and unjust. Some companies are losing out, whereas others win by hiding behind a variety of national rules", Commission President Jean Claude Juncker told MEPs at a joint meeting of the committees for Tax Rulings and for Economic and Monetary Affairs on Thursday. "We need a better insight into how multinational companies behave and how they make use of the differences between countries. Then we should create some order!", he added.
Committee on Economic and Monetary Affairs
Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect

Source : © European Union, 2015 - EP