European Parliamentary Research Service Blog

Written by Clare Ferguson and Katarzyna Sochacka.

The highlight of the May II plenary session in Brussels was an address to a formal sitting of Parliament by Maia Sandu, President of the Republic of Moldova, followed by a debate on the Foreign Affairs (AFET) Committee’s annual report on progress to date with implementation of Moldova’s EU Association Agreement. Members then adopted a resolution calling for more strategic support for the country. Russia’s war on Moldova’s neighbour Ukraine again dominated the agenda. Members held two important debates: on the fight against impunity for war crimes in Ukraine, and on European solidarity and energy security in the face of Russia’s invasion and its recent refusal to supply gas to Poland and Bulgaria. Members also debated Council and Commission statements on prosecution of members of the opposition and detention of trade union leaders in Belarus.

2021 Rule of law report

The rule of law is a key element of democracy and is one of the founding values of the EU, binding on all its Member States as well as candidate countries. Parliament debated and adopted a report from the Civil Liberties, Justice and Home Affairs (LIBE) Committee, prepared in response to the European Commission’s 2021 rule of law report, which monitors the situation annually in EU countries. Covering four areas (justice systems, anti-corruption, media pluralism and freedom, and institutional checks and balances), this, the second such report, notes that there have been positive developments, despite the stress that the Covid‑19 pandemic placed on democratic systems. However, the committee repeats its view that the Commission should make country-specific recommendations and monitor their progress. The committee also criticises the latest rule of law report for failing to take account of Parliament’s previous recommendations that it should include monitoring of all key EU values: respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including for minorities.

Reports on North Macedonia and Albania 2021

Members also debated and adopted two AFET committee annual reports on the enlargement process for EU membership candidates North Macedonia and Albania – where the committee regrets the lack of progress within the Council on opening accession negotiations. North Macedonia is the more advanced candidate in terms of its accession process, and the AFET report highlights its positive record in its transition to democracy. However, Bulgaria continues to block the opening of accession negotiations due to a cultural dispute, and the report nevertheless calls for North Macedonia to continue its administrative and political reform. Negotiations on Albania’s EU membership bid have not yet begun. Indeed, Albania’s international standing on corruption has even fallen since its EU application in 2014. The AFET committee’s annual report on Albania‘s progress highlights persisting issues of judicial independence, corruption, freedom of speech and minority rights, and calls on the Albanian authorities to eliminate corruption and criminality in public life.

Minimum level of taxation for multinational groups

Parliament held a debate on a proposal in the areas of taxation of multinational companies in the globalised, digitalised world. In recent years, digitalisation has made it easy for large multinational enterprises to shift their profits to countries with preferential tax regimes, thereby putting their profit before the opportunity to pay fair taxes to the societies that host them. This strips countries of revenue on which they depend to fund social benefits, such as healthcare, and investment. Parliament has long demanded reform in this area, and the Organisation for Economic Co‑operation and Development (OECD) recently agreed a framework for a minimum corporate tax rate. Members adopted an Economic and Monetary Affairs (ECON) Committee report that introduces a clause in the proposals that will allow revision of the proposed minimum tax rate threshold of €750 million a year. Following this consultation of the European Parliament, the proposal to implement the agreement in the EU should now be adopted by the Council, where a unanimous vote is required.

Establishing the European Education Area by 2025

Members also debated the Commission’s and Council’s responses to oral questions on proposals concerning the right to education in the EU. To ensure that people in the EU have access to a quality, inclusive education for personal fulfilment, to enable them to participate fully as citizens, and to boost their employment chances, the Commission proposes to build a European education area by 2025. The aim would be to offer work-based learning to at least 60 % of recent graduates, and learning opportunities for adults up to 65 years old. Further goals should promote learning for a sustainable environment by 2030, such as ensuring a good level of education in mathematics, science and computer skills for all. Members adopted a resolution proposed by the Culture and Education (CULT) Committee supporting the proposals.

Opening of trilogue negotiations

Committee decisions to enter into interinstitutional negotiations were announced: from the Internal Market and Consumer Protection (IMCO) Committee on the proposal for a regulation on machinery products and from the International Trade (INTA) Committee on the proposal for a regulation on applying a generalised scheme of tariff preferences.

Read this ‘at a glance’ on ‘Plenary round-up – May II 2022‘ in the Think Tank pages of the European Parliament.

Written by Fearghas O’Beara.

Following the dissolution of the Soviet Union in 1991, Russia experienced a window of religious pluralism in the Yeltsin era, allowing western Christian missionaries to operate freely. The Russian Orthodox Church (ROC) resented this encroachment into its canonical territory and, when Vladimir Putin took office in 1999, worked closely with him to consolidate its power. Putin valued such close collaboration as a way to exert control over society, eliminate alternative sources of moral authority at home, and extend Russian influence abroad.

The Home Front: Consolidating Russian Orthodox Church dominance

Already in January 2000, Putin’s first National Security Concept as acting Russian President promoted ‘strengthening of society’s moral values, traditions of patriotism’ as part of what he called ‘spiritual’ national interests. During his first two terms, Putin facilitated the ascendancy of the ROC through laws returning properties seized in the Soviet era and introducing religious education in public schools, as well as tax breaks and financial advantages. In return, the ROC used its influence and resources to push Putin’s vision of Orthodox Christian national identity and gave unwavering support for a strong, militarised state, particularly after the election of Kirill as ‘Patriarch of Moscow and All Russia’ in 2009. By 2016, Putin had promulgated the ‘Yarovaya Law’ severely curtailing the activities of non-traditional churches, part of wider Kremlin propaganda efforts portraying the West as decadent and bereft of Christian values and what has been described as the ‘ethnicisation of religion‘. Kirill has proved a vital figure in ensuring support in Russian society for Putin’s invasion. This contrasts with his more neutral position following the annexation of Crimea and invasion of the Donbas in 2014 as he sought to balance his alliance with the Kremlin and his desire for ROC control of the Ukrainian church. As of May 2022, the European Commission proposed adding Kirill to the list of individuals under sanctions in the Putin regime, the EU External Action Service describing him as ‘one of the most prominent supporters of the Russian military aggression against Ukraine’.

The Eastern Campaign: Exercising influence over Orthodox churches

In partnership with the ROC, the Kremlin has sought to spread its influence in predominantly Orthodox countries in eastern Europe, including a number of EU Member States, constituting a complex landscape of autocephalous (self-governing) churches which view either Moscow or Constantinople as pre-eminent. These efforts are coordinated by the ROC’s Department for External Church Relations under Metropolitan Hilarion of Volokolamsk, working closely with the Russian Ministry of Foreign Affairs. The Department is responsible for ‘relations of the Russian Orthodox Church with Local Orthodox Churches, non-Orthodox churches and Christian associations, non-Christian religious communities, governmental, parliamentary, public organizations abroad, inter-governmental, religious and public international organizations’.

A February 2021 hearing of the European Parliament’s Special Committee on Foreign Interference in all Democratic Processes in the European Union, including Disinformation (INGE) highlighted how Russia builds links within EU near-neighbourhood countries, through ROC activities stressing religious affinity and shared goals, such as defending persecuted Christians in the Middle East, or preventing the ‘islamisation’ of Europe. Other analysts have identified a ‘highly nation-specific approach‘ to Kremlin propaganda, combining narratives of Orthodox affinity with pan-Slavic brotherhood, defence of ethnic/linguistic minorities, or preservation of Europe’s Christian values, depending on the national context.

The EU country with the largest number of Orthodox believers – 18.7 million – is Romania, followed by Greece and Bulgaria. In the EU’s near neighbourhood, among countries which aspire to EU membership, Ukraine is by far the most populous, with almost 35 million Orthodox Christians, followed by Serbia, Georgia and Moldova. A 2017 Pew Forum survey reveals a majority of Romanians support the view that ‘a strong Russia is necessary to balance the influence of the West’. The Orthodox vs. Western values – ‘freedom vs. morality‘ – narrative was used in the 2018 referendum to ban same-sex marriage, strongly supported by the Romanian church but which failed to reach the required threshold. According to some authors, many Orthodox websites within the EU covering such ‘culture battles’ portray Putin as a defender of Orthodox values. However, the Romanian Orthodox Church is not particularly close to the ROC, and there is evidence that Romanians clearly distinguish between shared Orthodox values and strategic interests, viewing Russia as the biggest threat. In Bulgaria, a key figure seeking to push the country closer to Russia through Orthodox networks was Putin associate and Russian oligarch Konstantin Malofeev, founder of the St Basil the Great Charitable Foundation. Malofeev promotes the ‘Orthodoxy vs. the Decadent West’ narrative through his Tsargrad TV channel, which portrays the EU as an imposer of satanist-globalist ideologies aimed at eliminating Christian values, and his Katheon ‘think tank’. However, Malofeev – who has been on the EU sanctions list since 2014 – was ultimately banned from entering Bulgaria for 10 years in 2010 for his involvement in corruption of Bulgarian politicians in an effort to influence that country’s foreign policy.

The nominally autocephalous Orthodox Church of the Czech Lands and Slovakia came increasingly under ROC control during the Putin era, leading to scandals in 2012 which revealed the extent of Russian infiltration. Even if the number of Orthodox believers across Czechia and Slovakia is less than 100 000, the Church has been active in seeking to shape public opinion and remains within the ecclesiastic orbit of the Moscow Patriarchate. In this sense, it forms part of a wider network of Kremlin-driven cultural and religious foundations and organisations such as the All-Slavic Union and the Coordinating Council of Russian Compatriots, as well as Putin’s chief ideological vehicle, the Russkiy Mir Foundation.

While the Orthodox Churches of Romania and Bulgaria are autocephalous, and can more easily distance themselves from the ROC, in other EU countries minority Orthodox Churches are directly under Moscow and face a more delicate balancing act. One case in point is the Latvian Orthodox Church, which formally remains under the Russian church, unlike its Estonian counterpart, which split with Moscow in recent years. The Latvian Church leader, Metropolitan Alexander, has tried to maintain that unity while condemning the Russian invasion of Ukraine: ‘We Russians in Latvia are not responsible for what other governments do’. Meanwhile, Patriarch Kirill grants this amount of leeway in order to avoid yet another church in the former Soviet sphere following a Western trajectory. Meanwhile, Greece and Cyprus are considered by some observers as vulnerable to Russian influence through both geography and shared cultural and religious histories. Russia has sought to leverage shared religious heritage with mixed results, in part due to the broader struggle for hegemony within Orthodoxy between the Patriarchates of Moscow and Constantinople, the latter based in Istanbul and strongly supported by Greece and Cyprus. Putin and Patriarch Kirill have visited Greek Orthodoxy’s holiest site at Mount Athos on various occasions, transmitting messages of ‘Orthodox values’. When Greek Prime Minister Alexis Tsipras visited Putin in Moscow in 2015, he also met with Kirill. Konstantin Malofeev has cultivated ultra-Orthodox political forces which ultimately failed to make an impact. The Cypriot Orthodox Church resisted ROC pressure and in 2020 recognised the independence of the Ukrainian Orthodox Church.

The Western Campaign: Building a network of influence in Christian groups

In EU countries with no significant Orthodox presence, the Kremlin strategy has been to infiltrate Western Christian associations and link them to Orthodox ‘allies’ to fight for a common cause to preserve ‘European civilisation’ in what have been termed ‘conservative Christian alliances‘. The agenda of this ‘new ecumenical cooperation’ is about ‘traditional values’, the ‘traditional family’, the ‘sanctity of life’ and ‘religious liberty’. A key NGO coordinating such links is the World Congress of Families, closely linked to the ROC since its creation in 1995. Its congresses are eclectic gatherings of European Christian organisations, Orthodox prelates, US Evangelicals and European political figures such as Italy’s Matteo Salvini and Hungary’s Viktor Orban; the most recent were held in Hungary (2017), Moldova (2018) and Italy (2019). Alliances were thus also built with political parties and leaders on the right who endorse strong ‘Christian values’ narratives, as in the case of Salvini and Orban, as well as Ataka in Bulgaria, or where it fits better with the local context of ‘defending Europe against Islam’, such as with Austria’s Freedom Party. Another ‘new ecumenism’ organisation is the Dialogue of Civilizations Research Institute headed by Putin associate Vladimir Yakunin, former head of Russian Railways. Yakunin’s World Public Forum conferences in Greece brought together Orthodox Church leaders with Western organisations and European politicians on the left such as Austria’s Alfred Gusenbauer and Germany’s Martin Schulz.

Read this ‘at a glance’ on ‘Russia’s war on Ukraine: The Kremlin’s use of religion as a foreign policy instrument‘ in the Think Tank pages of the European Parliament.

Written by Tambiama Madiega and Costica Dumbrava.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: The challenge and the existing gaps

The last two decades have been marked by the unprecedented development of the online world, giving rise to new ways to work, shop, socialise and spend time online. This has provided new opportunities for citizens to access political information, discuss issues, and engage in politics, as well as new possibilities for political actors to influence public opinion, mobilise people and organise electoral campaigns. Online ecosystems are thus likely to have a great impact on democratic politics and on broader democratic institutions in societies in the EU and elsewhere.

Online environments and digital technologies underpinning them, such as algorithmic decision systems, pose several key challenges to democracy, including:

• Distortion of public opinion through online filtering, ranking and moderation of content and interactions (e.g. via newsfeed algorithms, de/prioritisation or removal of content, polarisation of views, suspension of accounts). This is, at least partly, an unintended consequence of the business models and technologies supporting online ecosystems.
• Manipulation of political views and preferences through online disinformation – the deliberate use of algorithms, bots, trolls, deep fakes, etc. to spread false content. Whereas disinformation is a result of a complex interaction between people and ecosystems, manipulative algorithmic systems play a key role in amplifying disinformation.
• Distortion of electoral competition through deceiving online messages and political adverts – the use of intrusive and covert techniques to persuade, confuse, or intimidate voters from casting their votes (political microtargeting). The speed and efficiency of online political campaigns that rely on extracting and analysing troves of data to target highly specific groups increases the negative impact of disinformation and manipulative ads.
• Weakening the integrity of elections though foreign interference and cyber-attacks – concerted campaigns to distort opinions, influence election results and undermine electoral institutions and infrastructure. Cyber threats and the manipulative influence of foreign governments and media on elections in the EU is becoming a destabilising factor for EU democracies.

The EU population is well aware of the magnitude of such challenges. A 2019 Eurobarometer survey showed that more than half of Europeans who use the internet say they have been exposed to or personally witnessed disinformation online. Nearly four out of ten Europeans have been exposed to content where they could not easily determine whether it was a political advertisement or not, and nearly six in ten Europeans are concerned about the possibility of ‘elections being manipulated through cyberattacks’.

A 2019 study for the European Parliament showed how major disinformation campaigns have, in recent years, interfered with democratic processes, particularly elections and referenda. The deployment of hybrid threats by Russia, with massive disinformation campaigns and cybersecurity attacks, including more recently during the ongoing war in Ukraine, provides a live example of the potential detrimental impact of such actions on democracy. To ensure that democratic debate and future elections take place under the highest democratic standards, the EU needs to build a healthier online environment. This would require measures to fill in existing policy gaps, including: safeguarding the integrity of elections in the EU; establishing an adequate regulation and institutional oversight of how algorithms are used for political purposes; equipping citizens with skills and tools to fend off online disinformation and manipulation; increasing cyber resilience of electoral processes and infrastructures; and promoting healthy online environment standards worldwide.

Existing policy responses EU action

In recent years, the EU has made active efforts to ensure a safer online environment. The EU approach builds on four axes: strengthening digital platforms’ self-regulation; imposing a set of mandatory rules on the biggest online actors to ensure a safer online environment; regulating online political advertising; and reinforcing EU capacities to tackle disinformation and cyber threats.

Strengthening self-regulation of online platforms. In 2018, the EU published an action plan against disinformation and adopted a Code of Practice on Disinformation asking online entities such as platforms, major social networks and advertisers to address the spread of disinformation. A wide range of companies, including Facebook, Google, Twitter, Microsoft and TikTok, have implemented the EU Code and committed, on a voluntary basis, to fight disinformation. In December 2021, the Commission presented its European democracy action plan to empower citizens and build more resilient democracies across the EU, to be gradually implemented until 2023 – a year ahead of the elections to the European Parliament. In this action plan, the Commission envisages revising the Code of Practice on Disinformation to introduce new measures, including reducing financial incentives for disinformation, empowering users to take an active role in preventing its spread, and cooperating better with fact-checkers across EU Member States. The revised Code is intended to serve as part of a co-regulatory framework with the Digital Services Act to help platforms mitigate risks stemming from disinformation.

Mandatory rules on online platforms. The Digital Services Act (DSA) proposal, tabled in December 2020, aims to create a safer and trusted online environment and set EU-wide rules to ensure transparency, accountability and institutional oversight of the EU online space. A set of new rules to be imposed on online platforms includes transparency obligations to mitigate the adverse effect of online advertising for citizens. Furthermore, it is proposed that very large online platforms (or VLOP) are subject to tighter obligations, given the particular impact they have on the economy and society and their potential responsibility regarding the dissemination of illegal content and societal harms. Such companies will be required to assess the systemic risks stemming from the functioning and use of their services, and especially the intentional manipulation of their services, for instance through the creation of fake accounts and the widespread dissemination of information having a negative effect (e.g. on electoral processes). The new set of rules constitutes a step towards more cooperative and regulatory mechanisms in line with the European democracy action plan. The DSA proposal is currently the subject of protracted negotiations by the co-legislators.

Regulation of on-line political advertising. The Commission adopted a Proposal for a Regulation on the transparency and targeting of political advertising in November 2021 as a follow-up to the European democracy action plan. This initiative covers both online and offline activities and complements the proposal for the DSA. The new rules would require any political advert to be clearly labelled as such and to include information such as who paid for it and how much. In addition, political targeting and amplification techniques would need to be explained publicly in detail and would be banned when using sensitive personal data without the explicit consent of the individual.

Reinforcing EU capacities to tackle cyber threats and disinformation in an international context. The 2016 EU framework on countering hybrid threats is being complemented by a number of initiatives to better protect democratic processes from manipulation by third countries or private interests. The EU’s East StratCom Task Force, created in 2015, has been reinforced since then to counter disinformation by the Russian Federation and its affiliates throughout Europe. In December 2020, the Commission and the High Representative of the Union for Foreign Affairs and Security Policy presented a new EU cybersecurity strategy aiming to bolster Europe’s collective resilience against cyber threats and ensure that all citizens and businesses can fully benefit from trustworthy and reliable services and digital tools. In this context, two legislative proposals – a Directive on measures for a high common level of cybersecurity across the Union (NIS 2) and a Directive on the resilience of critical entities – are being finalised. In addition, Cyber Rapid Response Teams and the European Digital Media Observatory have been set up to assist Member States in order to ensure a higher level of cyber resilience and to respond collectively to cyber incidents and disinformation. The EU has also shown its ability to adopt extraordinary measures with its sanctions, recently adopted in a Council decision, to suspend the broadcasting activities of the main Russian state-controlled media outlets in the Union. However, more action is being advocated, while the efficacy of such measures in tackling disinformation on a larger scale has been questioned and recent research shows how disinformation about the ongoing conflict in Ukraine is being funded by online advertising. Furthermore, the new EU cybersecurity strategy was launched in 2020 to better address cybersecurity challenges in the EU and make physical and digital critical entities more resilient. Against this backdrop, in March 2022 the Council called for more action at EU level to ensure resilience of electronic communications infrastructure and networks in Europe, including more cooperation at operational level, the adoption of the forthcoming Cyber Resilience Act and the creation of a cybersecurity emergency response fund.

Figure 46: Key measures to ensure a healthier online environment for healthy democracies Obstacles to implementation

The development of digital environments has inevitably challenged legal frameworks that were devised to tackle pre-digital issues, e.g. traditional media, ‘paper’ advertising, TV-based electoral campaigning. The consolidation of a business model based on the accumulation and monetisation of data, along with insights from digital interactions and growing concern about the negative impact of this model on users and society, has put tremendous pressure on legislators to intervene.

However, uncertainty persists about the extent of the problem, the type of interventions that would be suitable and their broader implications, and the right balance between competing rights and interests (e.g. freedom of expression versus protection of democratic institutions). A key issue is the limited access to data and the scarcity of systematic research (in particular outside the US context) on the impact of online platforms and algorithms on individuals’ rights, social interactions and political institutions.

Tackling online disinformation has proved to be particularly difficult, requiring concerted efforts by online platforms, regulators, civil organisations, users, etc. The EU’s self-regulatory approach to tackling disinformation – based on voluntary standards and commitments – has, as the Commission acknowledged, led to limited results. The process for revising the Code of Practice on Disinformation is quite slow and was not finalised in 2021 as expected.

Furthermore, there are continuing issues with efforts to protect the democratic process and to safeguard the integrity of elections. A key challenge is that the regulation of elections in the EU consists of a patchwork of EU and national rules, which makes it more difficult to adopt a coherent response to common challenges. Increased coordination at national level (e.g. through national elections networks of relevant competent authorities) and at EU level (e.g. via the European cooperation network on elections and the Rapid Alert System) has been helpful but more needs to be done to tackle foreign interference, cyber-attacks and electoral manipulation. Uncoordinated efforts by Member States to regulate political advertising may obstruct the exercise of fundamental freedoms, with a direct effect on the functioning of the internal market. The complexity of issues and the heterogeneity of rules also create enforcement challenges, as national competent authorities struggle to monitor, discover, and sanction transgressions of rules.

Another layer of complexity concerns the transnational and global nature of online environments, which may require regulators to carefully consider the global implications of proposed interventions and to engage with other legislators around the world.

Policy proposals by experts and stakeholders

Whereas many of the suggestions offered by experts and stakeholders have been taken up in recent EU actions and proposals (such as increasing the transparency and oversight of online platforms and better regulating online ads), there are several proposals that go beyond current discussions.

1. Safeguarding the integrity of elections in the EU

There are voices arguing for a tougher stance on targeted political advertising. According to the European Data Protection Supervisor (EDPS), data protection safeguards are also a prerequisite for fair and democratic elections. The authors of a 2019 study called on data protection authorities to step up their investigations into political microtargeting practices by advertisers, digital platforms and intermediaries. This could be part of a broader approach aiming to give users more power over their data collected online. In its 2022 Opinion on the Commission’s proposal on political advertising, the EDPS recommended a full ban on microtargeting for political purposes. Such a ban has been supported by other stakeholders, such as the European Partnership for Democracy.

Together with other transparency requirements, such as those included in the proposals on the DSA and on political ads, some argued that users should have access to a repository of political and public issue ads that they are targeted with. To minimise the impact of disinformation on European democracy, a 2021 study further recommends regulating political and issue-based advertising at EU level and granting the European Court of Auditors and the European Anti-Fraud Office (OLAF) powers to pursue the investigation of campaign finances, including sponsorship of social media advertisements. Another suggestion is to make contracts between political parties and platforms open for public scrutiny. These could be part of a ‘universal advertising transparency by default’ approach, which was advocated by a large group of NGOs.

Considering the negative effects of automated disinformation, some argued for a ban on the use automated accounts (bots) to disseminate political and public issue ads. To increase cyber resilience, the European Union Agency for Cybersecurity (ENISA) recommended imposing a legal obligation on political organisations to ensure a high level of cybersecurity in their systems, processes and infrastructure. It also suggested classifying election systems, processes and infrastructure as critical infrastructure, so that they become subject to stricter EU cybersecurity requirements.

2. Enhancing regulation and institutional oversight of algorithms used for political purposes

In recent years, there have been plenty of discussions about the kind and breadth of oversight mechanism needed to ensure a healthy online environment. A 2021 study suggested establishing an accountability framework (beyond the DSA proposal) that would include a new authority for online content platforms to supervise the process and organise relations with the various stakeholders, including the community of vetted researchers and relevant NGOs. Other proposals advocating for a specific institutional oversight mechanism include establishing a new EU agency for countering disinformation to better coordinate the EU’s counter-disinformation initiative, and creating a new regulatory body for political advertising.

3. Support citizens, civil society, and research

Another set of suggestions focus on empowering citizens and promoting tools to identify and mitigate online risks. Measures in this category include awareness-raising, improving media literacy, and supporting investigative journalism and fact-checking services. An important element in this strategy is also enabling researchers more broadly to access data to research on the impact of the online environment and automated tools on democracy. Another suggestion is to increase diversity of exposure to online information by promoting a diversity by design principle, where users are encouraged to explore different kinds of information to those they usually prefer. A further suggestion is to create a common European high-quality media service transmitted by contemporary technology, with a view to enhancing EU cohesion and offering a common European perspective. The Commission launched an expert group on disinformation and digital literacy to assist it in preparing common guidelines, to be published in Autumn 2022, for teachers and educators to tackle disinformation and promote digital literacy through education and training.

4. Promote EU standards worldwide

The question of how to address the challenges to democracy in an online environment is widely discussed around the globe, and the EU could help steer a common approach at international level. In this respect, a 2020 study from the Council of Europe recommends considering the establishment of an informal intergovernmental taskforce to facilitate the regular exchange of ideas, practices and legislative and regulatory measures on the influence of foreign media on national elections. Such a taskforce could also work on a common code on political advertising to be applied to licensed services. Achieving harmonisation of standards in this area beyond the EU could contribute to the cooperation between regulators and also help to combat problems of foreign interference. A 2019 study argues for enhanced transnational cooperation with a view to establishing a coherent global framework to regulate disinformation (including at G7 and OECD level). The intensification of the US-EU dialogue on technology governance could also lead to a global oversight framework, based on various public bodies and on a multi-stakeholder approach.

Beyond intergovernmental level, a 2021 European Parliament analysis suggested that the EU support the creation of a new ‘Transparency International for Disinformation’, a dedicated civil society organisation to independently monitor and provide comparable data about disinformation campaigns from target countries.

Position of the European Parliament

Parliament has long supported EU initiatives to regulate digital platforms and political advertising and reinforce EU capacities to tackle disinformation and cyber threats. In its 2018 resolution on the use of Facebook users’ data by Cambridge Analytica, Parliament called for a range of measures, including adapting the electoral rules on online campaigning (i.e. those pertaining to transparency on funding, election silence periods, the role of the media, and disinformation) and to monitor the transparency features in relation to political advertising introduced by the online platforms.

In its 2019 resolution on foreign electoral interference and disinformation, Parliament called on the EU to create a legal framework for counter-hybrid threats, classify equipment used for elections as critical infrastructure and turn the East StratCom Task Force into a permanent structure with more funding.

In the context of the ongoing DSA negotiations, Parliament asked for more transparency over algorithms to fight harmful content and disinformation and for more transparent and informed choices for the recipients of targeted advertising. Also, on 9 March 2022 Parliament’s Special Committee on Foreign Interference in Democratic Processes adopted its final report on malicious foreign interference, asking the Commission to propose a more coordinated European strategy to counter operations by foreign governments that use disinformation. Parliament recommends the creation of a European centre to tackle interference threats, as well as stronger measures to address disinformation on online platforms such as forcing social media platforms to stop boosting inauthentic accounts that drive the spread of harmful foreign interference. Furthermore, Parliament called for the introduction of new measures to ensure cybersecurity and resilience against cyber-attacks, deterrence and countermeasures, and for the protection of critical infrastructure and strategic sectors.

In focus: reinforcing internet capacity and security
To avoid the capacity crunch and keep ahead of the growth in internet traffic, the EU’s strategy is primarily directed at boosting investment in high-capacity broadband infrastructure. To that end, in 2021 the EU set connectivity targets in its Digital Decade strategy and adopted a range of new funding instruments including CEF Digital, which is designed to support the roll out of 5G networks throughout the EU. The Commission is also putting forward an ambitious plan for a space-based secure communication system and satellite traffic management to ensure secure and resilient connectivity across Europe in the years to come.
Furthermore, in 2020 the EU adopted the new EU cybersecurity strategy to better tackle cybersecurity threats that are at the core of internet outage and to safeguard a global and open internet. The amendment of the NIS Directive that is being finalised will impose new cybersecurity requirements on essential entities, including providers of internet services such as the Domain Name System (DNS).
In addition, the EU wants to lead discussions at international level to shape the development of the internet as a space of civic responsibility. The European Commission actively engages in multilateral discussions to shape a resilient, secure and robust internet and promote democracy and human rights. The European Global Gateway initiative launched in December 2021 aims, inter alia, to boost smart, clean and secure digital links around the world. Accordingly, the EU intends to work with partner countries to invest and deploy digital networks and infrastructure (such as submarine and terrestrial fibre-optic cables, space-based secure communication systems and cloud and data infrastructure) to plug vulnerabilities and provide trusted internet connectivity around the globe. Possible action

Written by Micaela Del Monte and Maria Margarita Mentzelopoulou.

Russia’s invasion of Ukraine has forced hundreds of thousands of people to flee the country and seek shelter, mostly in neighbouring EU countries, namely Poland, Romania, Hungary, Slovakia, Czechia and Moldova. Children and women are bearing the most adverse consequences of the war. According to UNICEF, almost half of those fleeing are minors and in need of enhanced protection, as they run a bigger risk of falling victim to trafficking and exploitation. In response to the plight of Ukraine’s civilian population, which is being subjected to shelling and violence, the international humanitarian community has quickly mobilised efforts and resources to provide support. As the humanitarian situation deteriorates, children are particularly vulnerable.

Children are at high risk of falling through the cracks of the system, going missing or being subjected to violence. This includes children in institutions, unaccompanied minors, children nearing the age of transition to adulthood, children from Roma or other minority groups or who are asylum-seekers, refugees or migrants and were residing in Ukraine and were stateless before leaving their countries of origin.

In and outside of Ukraine, children are in urgent need of protection, including access to psychosocial and social support, health, nutrition, education and housing, protection against trafficking, sexual and labour exploitation and abuse. The European Parliament, as well as its Coordinator on Children’s Rights, have been active in defending the rights of the children fleeing the war in Ukraine since its beginning.

This briefing updates and expands on an ‘At a glance’ note written by Maria Margarita Mentzelopoulou and Micaela Del Monte in March 2022.

Read the complete briefing on ‘Russia’s war on Ukraine: The situation of children in and outside Ukraine‘ in the Think Tank pages of the European Parliament.

Written by Jakub Przetacznik with Simona Tarpova.

Belarus’s involvement in Russia’s invasion of Ukraine has triggered EU sanctions targeting over 700 individuals and 50 entities, as well as critical economic sectors and products in this country. The new measures, namely the trade bans on potassium chloride, have affected both the Belarusian economy and EU and global food supplies.

Earlier sanctions targeting Belarus

Belarus has been subject to EU sanctions since 2004. Initial measures comprised individual sanctions and an arms embargo adopted in response to the disappearance of four people, including two opposition politicians, a businessperson and a journalist. The EU imposed further restrictions on Belarus’s presidential elections in 2020. Despite independent exit polls reporting a victory for Sviatlana Tsikhanouskaya, Belarus’s Central Election Commission announced that Lukashenka had won the election with over 80 % of the votes. Peaceful protesters were met with police violence and detention. Thousands were tortured and some died. The EU condemned the elections as ‘neither free nor fair’ and introduced sanctions packages in October, November and December 2020.

Further rounds of sanctions followed in June 2021, after the hijacking of a Ryanair flight in order to detain Raman Pratasevich, and in December 2021, in response to the government’s attempt to instrumentalise migrants arriving from the Middle East and its continued human rights abuses. By inciting illegal migrant crossings, the government sought to destabilise the EU and divert attention from Lukashenka’s continuous violations of human rights – among them falsifying elections, arresting protesters, crushing civil society, journalists and the opposition – by creating a crisis at the EU borders. The five rounds of sanctions in 2021 comprised individual sanctions, such as asset freezes and travel bans, as well as an embargo on arms and related materials, dual-use goods, technology for military use and communication interception equipment. Sanctions also included a ban on the provision of insurance or re-insurance to the Belarusian government, public bodies and agencies; partial trade restrictions on potassium chloride (potash), petroleum and gaseous hydrocarbon products; and a limit on the country’s access to EU capital markets.

Sanctions in response to Belarus’s involvement in the invasion of Ukraine

The most recent measures, adopted on 2 March, 9 March and 8 April 2022, are an expression of the EU’s condemnation of Belarus’ involvement in ‘Russia’s unprovoked and unjustified military aggression against Ukraine’. Belarus’s involvement includes participation in strategic planning and granting permission to the transport of Russian troops and military equipment through, and the firing of ballistic missiles from, Belarusian territory. Restrictions build on existing EU sanctions by closing loopholes and introducing exhaustive bans on targeted sectors. Specific sanctions are individual, financial or trade-related.

Individual sanctions( (imposed on 702 persons):

• asset freezes and travel bans targeting regime-connected officials and elites as well as individuals in the military sector (i.e. the defence minister and his assistants, members of the respective ministries, and military commanders).

Financial sanctions:

• financial restrictions on 53 entities operating in the defence and security sectors;
• a SWIFT ban on three Belarusian banks – Belagroprombank, Bank Dabrabyt, the Development Bank of the Republic of Belarus and their respective subsidiaries;
• a prohibition on transactions with the Belarusian Central Bank concerning the management of financial reserves, trade and investment;
• restrictions on financial inflows from Belarus to the EU, specifically ‘by prohibiting the acceptance of deposits exceeding €100 000 from Belarusian nationals or residents, the holding of accounts of Belarusian clients by the EU central securities depositories’; bans on financial transactions also apply to crypto assets;
  • a prohibition on the sale of transferable securities and banknotes denominated in any official currency of the Member States to Belarus.

Trade restrictions:

• further restrictions on trade in goods used for producing or manufacturing tobacco products, mineral products (expanding on petroleum oils and gaseous hydrocarbon products) and all potash products, and the removal of exceptions for pre-existing contracts;
  • a ban on all EU exports of dual-use goods and technology that could enhance Belarus’s security and defence capacities;
  • additional bans on the direct or indirect import of wood, cement, iron and steel products, rubber tyres and a wide range of machinery originating from Belarus and the removal of exceptions for pre-existing contracts;
  • a ban on Belarus-established transport undertakings from transporting goods by road in the EU.

Impact of sanctions on trade in potassium chloride

The 2021 sanctions targeted only 20 % of Belarusian potash. Total restrictions on potash under the new measures target it as a primary income source that is the country’s second-largest export commodity (8.7 % of national exports and 18 % of the global market share) and accounts for a substantial share of GDP. Due to previous sanctions (from 2021) and curtailed access to the Klaipeda port in Lithuania, Belarus’s global potash exports plummeted from over 10.3 million tonnes in 2019 and 11.8 million tonnes in 2020 to close to 5.1 million tonnes in 2021. Belarus is currently searching for alternative export markets, but payment and transport issues continue to be an obstacle. Sanctions appear to have made an impact on Belarus’s financing, as more than half of the potash mines have ceased working, foreign companies have relocated and the country has lost 70 % of exports to the EU. Traditional importers of Belarusian potash can no longer receive shipments and are in search of alternatives from countries like Canada, Israel and Jordan.

Repercussions will not be limited to Belarus. EU Member States produce a small amount of potash, with the majority of stock located in Spain and Germany. The unavailability of potash will influence European producers and consumers, as it is an essential ingredient for the fertilisation of crops and the preservation of canned food, fruits, vegetables and processed food.

The global price surge for potash is influenced by numerous factors – sanctions, limited supply and supply chain disruption, growing energy and transport costs, high demand and lack of competition. Soaring prices will predominantly impact the top European potash importers –such as Poland, Belgium and Norway – and Middle Eastern, African and Asian countries. According to estimates, EU fertiliser companies will have to find alternative supplies as early as June 2022. The most likely source is Canada – the world’s largest potash producer. Existing free trade agreements can be used to facilitate potash import from different locations. A European Commission communication of 23 March 2022 presented a set of actions to support EU farmers and strengthen food security amid the invasion. These include enhancing the resilience of supply chains and agriculture by substituting certain fertilisers and finding bio-based alternatives. With regard to national production, an Australian company has already started exploratory drilling in Thuringia, Germany. The EU-level association of farmers, COPA-COGECA, considers that while medium-term solutions do exist, substituting 1.7 million tonnes of Belarusian and Russian potash would be lengthy and expensive.

Position of the European Parliament

In its resolution of 1 March 2022 on the Russian aggression against Ukraine, Parliament condemned Belarus’s assistance to Russia in the invasion. It underlined the security risk posed by the fabricated referendum abolishing Belarus’s neutrality and allowing the presence of Russian nuclear weapons in the country, and called for extending the sanctions targeting Belarus, excluding it from SWIFT, prohibiting Belarusian goods and services from EU public procurement, and terminating its software licences.

On 24 March 2022, Parliament adopted a resolution on the need for an urgent EU action plan to ensure food security inside and outside the EU in light of the Russian aggression towards Ukraine. The text recognised Belarus as a significant exporter of potash-based fertilisers and warned about the likely disruption of supply, increasing fertiliser prices and impact on industries.

Read this ‘at a glance’ on ‘Russia’s war on Ukraine: Sanctions targeting Belarus‘ in the Think Tank pages of the European Parliament.

Written by Matthew Parry and Ionel Zamfir.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: The challenge and the existing gaps

Democracy and the interests of democratic states face multiple threats. Increasing geopolitical competition among major powers has driven democratic and undemocratic governments apart, both in bilateral relations and in multilateral forums, and also created tensions between fellow democracies beset by the rise of populism and nationalism. Yet global military, economic, social, sanitary, environmental or other challenges require multilateral governance more than ever. After the severe blows dealt to international cooperation by the actions of then US President Trump and the 6 January 2021 attack on the US Congress, Joe Biden’s election opened a window of opportunity for democracies to work together in both informal coalitions and multilateral settings.  

The EU and other democratic players also face direct threats from non-democracies, chief among them Russia and China, which increasingly act in concert. Russia has begun a war to challenge the existing security order in Europe and democracy in its neighbourhood, and also in Africa, while China uses trade restrictions to bully democracies in Europe and elsewhere that criticise it or offer support for democratic Taiwan. Both Russia and China are leading sources of disinformation aimed at democratic societies in the EU and elsewhere. In developing economies, China challenges EU interests first by using its Belt and Road Initiative (BRI) to draw developing countries into debt traps in order to acquire rights to infrastructure and resources beyond its borders, and second by providing an alternative, authoritarian model of development. In a world in which hard power still matters and national self-interest prevails, the EU – which is centred around soft power and is bound to balance the pursuit of its own interests with respect for international values – has constantly aimed to better leverage its economic and diplomatic influence, coordinate more effectively among its members, and build strategic partnerships with other major democracies and international regional organisations such as the African Union and ASEAN, which commit to democratic principles in their founding treaties.

Existing policy responses

Cooperating with other democracies is an important axis of the EU’s engagement in multilateral settings. The EU action plan on human rights and democracy 2020-24 and the 2021 joint communication on strengthening the EU’s contribution to rules-based multilateralism highlight the need to build and strengthen coalitions of like-minded partners on key priorities in multilateral forums. The EU supports the strong pro-democracy orientation of G7 policies, as defined during the 2021 Summit and ministerial meetings. Given its weight as a trade bloc and its full membership in the World Trade Organization (WTO), the EU has an important role to play in preserving and reforming the multilateral trade system and continuing its values-based trade policy. EU cooperation with democratic partners, chiefly the United States, but also Japan, remains crucial in this respect.

Strengthening democracy is a key objective of EU bilateral engagement with both developing and industrialised countries. In 2021, the EU launched the new Global Europe Instrument for 2021‑2027. Its geographical programming covering the entire world includes an objective of strengthening good governance, democracy, rule of law and human rights in cooperation with partner countries’ governments. The thematic part – much smaller in financial terms – provides support to civil society globally, as well as direct support to democracy and human rights actions circumventing governments. In addition to this type of aid, the EU has provided substantial macro-financial assistance to fragile democracies in its neighbourhood encountering economic difficulties, such as Ukraine and Moldova, conditional on fighting corruption and respecting judicial independence. The recently upgraded European Peace Facility (EPF) provides funding to strengthen partners’ capacities in military and defence matters. The first measure adopted is directed at Ukraine. The EU includes democratic objectives in its human rights dialogues and political dialogues with partners.

The EU further cooperates with partner countries and international organisations such as the Council of Europe and its bodies, particularly the Venice Commission, as well as with the Organisation for Economic Co-operation and Development (OECD) to strengthen rule of law at home and in third countries, for example in the fight against corruption or tax evasion. Coordinated sanctions by the EU and major democracies are used to respond to human rights violations in authoritarian regimes, such as Belarus. In response to Russia’s attack on Ukraine, the EU has coordinated its massive financial and economic sanctions with its democratic partners in the world.

Under the Biden administration, the USA and the EU have together launched or revived vehicles for democracy-to-democracy cooperation on the pandemic, the climate, trade, security and democracy. A new EU-US Trade and Technology Council (TTC) met at ministerial-level for the first time in in September 2021 in Pittsburgh (USA), and is expected to meet again in France in May 2022. The TTC aims to achieve transatlantic consensus fit for the democratic world on common standards, resilient supply chains, tech regulation, global trade challenges, climate and green tech, as well as investment screening and export controls. A new EU-US dialogue on security and defence is set to launch in ‘early 2022’, while a EU-US high-level dialogue on Russia was announced in June 2021 (although has yet to meet formally, possibly superseded by events). Two high-level meetings of the EU-US dialogue on China were launched in the final months of the Trump Administration. The EU and NATO are also stepping up cooperation.

Figure 44: Key measures to consolidate strategic ties with democracies

The EU has also concluded free trade agreements (FTAs) with major democracies including Canada, Japan, South Korea and the Andean Community countries; is updating FTAs with Chile and Mexico; and is negotiating new FTAs with Mercosur, Indonesia, Australia and New Zealand. The EU is also exploring deeper trade and investment ties with Taiwan and India. Trade liberalisation with democratic partners could allow the EU to diversify its trading relationships, reducing its strategic dependence on non-democratic partners who may be unreliable and are less likely to share common interests. In Africa and the Indo-Pacific – two regions where Russia and China are increasing their influence over third countries – the EU has responded with a joint EU-Africa strategy launched in 2007, and an EU strategy for cooperation in the Indo-Pacific published in 2021. The latter strategy identifies cooperation on semiconductors with democratic Japan, Korea and Taiwan as a priority. The EU is also drawing lessons from Taiwan on combating disinformation, given Taiwan’s exemplary role in this struggle against China. In November 2021, a European Parliament delegation visited Taiwan to study its efforts to combat interference and manipulation campaigns. The Commission has also launched the ‘global gateway’ initiative to provide a source of investment in digital, climate, energy, transport, health, education and research infrastructure in developing countries, and an alternative to China’s BRI.

Obstacles to implementation

Supporting democracy in cooperation with like-minded partners in multilateral forums faces multiple obstacles. The universal values, including fundamental freedoms and human rights, on which the multilateral order is based are under virulent attack from authoritarian powers, while illiberal encroachments undermine the integrity of multilateral bodies and norms that defend human rights. To be an influential diplomatic actor, the EU needs to act as a coherent player and bring its Member States together behind the pursuit of a global liberal democratic agenda.

Global democratic alliances, such as the Summit for Democracy, must convince in terms of practical effectiveness and avoid strengthening authoritarian regimes’ resolve and coordination, particularly that of Russia and China, and endangering much-needed global collective action.

Difficult regional environments, state fragility, as well as internal polarisation and conflict, and protracted economic crises have been insurmountable obstacles in supporting transitions to democracy in Afghanistan, Mali and, to a lesser extent, in Tunisia (all countries to which the EU has provided extensive assistance). The EU makes its aid conditional on respect of democratic standards and has engaged with partners to incentivise reforms. However donors providing aid with ‘no strings attached’, such as China, undermine the effectiveness of the EU’s approach. Serious democratic backsliding in large democracies such as India and Brazil poses another obstacle to the EU’s ambitions to build values-based partnerships.

The EU-US TTC is perceived by some as a recognition of the failure of previous EU-US efforts to consolidate economic integration and set global standards jointly via the proposed Transatlantic Trade and Investment Partnership. Enduring regulatory differences between the two sides may hinder their ability to deliver ambitious common positions on such issues as data governance and technology platforms. Moreover, while the EU and the USA have made significant progress on ending or mediating disputes on the Boeing-Airbus subsidies issue, US Section 232 tariffs on EU steel and aluminium imports, and taxation of major US and EU companies, the TTC has yet to produce forward-looking deliverables from any of its sectoral working groups.

The EU has also shown itself willing to advance trade integration with democratic and non-democratic partners alike. In December 2020, a ‘political agreement’ was announced on a comprehensive agreement on investment (CAI) with China, shortly before the Biden Administration took office. Some observers argued that the CAI undercut transatlantic cooperation on the challenges China poses to the multilateral trading system. In addition, while the EU has successfully concluded FTAs with Japan and Canada (even if the latter awaits ratification by all Member States), progress on FTAs with other democratic partners is slower than might have been expected: negotiations with Australia were delayed by the diplomatic dispute between that country and France over the AUKUS announcement, while France reportedly sought to postpone the conclusion of negotiations with New Zealand and Chile until after its presidential election. Some analysts argue that the EU has taken a more protectionist turn since the failure of TTIP, just as the USA does the same.

The EU’s global gateway initiative may likewise fall short. Some have criticised its five-year €300 billion investment budget as a mere repackaging of existing initiatives, combined with ‘questionable’ assumptions about leveraging private investment. Others have compared the annual sum (€60 billion) unfavourably with China’s estimated €1 150 billion in foreign loans and outstanding export credits, and note that China has grown more sophisticated in its approach to investment in other countries, taking greater care to involve local workers in projects. If true, an overly confrontational approach to Chinese BRI lending may be less effective than allowing recipient countries to combine multiple sources of investment.

Policy proposals by experts and stakeholders

Proposals on formats of cooperation among major democracies include: extending the G7 to a G10 format, concluding a charter for an alliance of democracies, or creating a coalition of leading democracies on new technologies (a T‑12 Group). Such proposals include EU countries but not necessarily the EU itself. One area where democracies can do more together is the digital realm. Preserving a free and open internet and mainstreaming human rights in new technologies were among the priorities proclaimed at G7 ministerial meetings in 2021 and supported by the EU. Reducing EU dependency on energy imports from authoritarian states, especially Russia, has now become an urgent objective. Reaching it also presupposes reinforcing cooperation with democratic partners.

Rethinking EU democracy support after the recent democratisation failures appears unavoidable. Experts note that the EU needs to exercise self-criticism; draw lessons; better take local conditions into account; and make a realistic assessment of the situation on the ground when it provides democracy assistance. Improving the democratic record at home is also crucial for the EU’s global influence.

Stakeholders and think-tanks in the USA and EU are broadly supportive of transatlantic cooperation on multilateral trade policy reform and standards development. Many therefore welcome the EU-US TTC, though some would expand the scope of cooperation to other policy areas, such as space. Some suggest features that have not yet been incorporated in the TTC, such as structured involvement of the US Congress and the European Parliament, as well as NGOs and other stakeholders. Others stress that the EU should act with a sense of urgency, given the possibility of a less partnership-minded administration being voted into office in 2024.

On the broader EU trade agenda, observers recommend, inter alia, negotiating a new data transfer framework agreement with the USA, to help guard against nefarious data acquisition by authoritarian powers like China; and coordinating industrial policies and technology regulation with countries like the USA, Japan and South Korea, as well as with Taiwan. On the EU’s proposed global gateway, think-tank recommendations include combining new funding with addressing fragmentation in current EU development spending; integrating the global gateway with the external dimension of the European Green Deal; and downplaying the strategic aspects of the initiative, to avoid it becoming bogged down in geopolitical controversy.

Position of the European Parliament

In its 2022 resolution on the implementation of EU common foreign and security policy, the Parliament calls for the EU to promote an alliance of democracies worldwide, and insists on the need for better cooperation among democracies to counter malign interference and disinformation. The Parliament also recommends that the EU strengthens its cooperation on election observation with all relevant partners. In its 2022 resolution on human rights and democracy in the world, the Parliament calls on the EU and its Member States to ‘make more concerted efforts to address the challenges to human rights worldwide, both individually and in cooperation with like-minded international partners, including in the UN’. With regard to EU democracy assistance, in its 2019 legislative resolution on NDICI, the Parliament insisted on strengthening democracy promotion across EU aid, and on the consistent application of conditionality to beneficiary partner countries.

The European Parliament supports the establishment of a United Nations Parliamentary Assembly (UNPA) within the UN system, aiming to increase the democratic character of the global organisation, and has called for a stronger parliamentary dimension to the WTO.

In a resolution adopted on 6 October 2021, the European Parliament called on the European Commission and the High Representative of the Union for Foreign Affairs and Security Policy/Vice-President of the Commission for a Stronger Europe in the World (HR/VP) to reassert the relevance of the strategic transatlantic relationship, to reinvigorate multilateralism, strengthen democracy and promote human rights worldwide. Specifically, the Parliament called for the establishment of a transatlantic legislators assembly; regular meetings between the Parliament’s Foreign Affairs and International Trade Committees and their US counterparts; strengthened interparliamentary cooperation between Members of the European Parliament, Members of Congress, members of the national parliaments of the EU Member States and members of the 50 US State legislatures. It called for a coordinated approach in bilateral FTAs and at multilateral level to address forced labour and exploitative labour conditions and to improve respect for workers’ rights and environmental standards. The Parliament also reiterated its call to consider EU support at the WTO for a temporary waiver on the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), in line with the US position (but not yet with the Commission’s).

The same resolution also calls for: a common EU-US offer of investing in global infrastructure initiatives; for the EU and the USA to jointly provide economic, political and operational support to the African Union, the G5 Sahel Force and the Economic Community of West African States; for the creation of a Transatlantic Political Council for systematic consultation and coordination on foreign and security policy, led by the VP/HR and the US Secretary of State; integration of a parliamentary dimension into the EU-US high-level strategic dialogue on China; and for collective economic defence via collaboration with like-minded democracies against China’s economic coercion. Parliament has consistently supported proposals to negotiate FTAs with democratic partners, while underlining that negotiations should be transparent and provide for parliamentary involvement. This position is reflected, for example, in the 5 July 2016 resolution on a forward-looking and innovative future strategy for trade and investment, which included a call to launch FTA negotiations with Indonesia; and in the 26 October 2017 resolution on the negotiating mandate for trade negotiations with Australia, and the 26 October 2017 resolution on the negotiating mandate for trade negotiations with New Zealand.

Parliament called for a deeper strategic relationship with India with a strong parliamentary dimension, in a 29 April 2021 resolution. In a 21 October 2021 resolution, Parliament also called on the Commission to begin a scoping exercise on a bilateral investment agreement with the Taiwanese authorities, and for the EU and Member States to deepen cooperation with Taiwan on confronting disinformation. Parliament’s 21 January 2021 resolution on connectivity and EU-Asia relations, encourages the Commission and the European External Action Service (EEAS) to create a global EU connectivity strategy aligned with regional policies, including the Eastern Partnership, the European Neighbourhood Policy. The joint communication on relations with Latin America and the Caribbean, and the Indo-Pacific strategy should be aligned with the strategy, and it should aim to strengthen partnerships with democracies around the world which share the EU’s values.

In focus: an EU global gateway to fund infrastructure development abroad
On 1 December 2021, the Commission published a joint communication on a ‘global gateway’ (GG) infrastructure funding initiative for developing countries. Building on existing EU development aid as well as previous external connectivity strategies, the initiative is meant to fund up to €300 billion in investments in 2022‑2027 in digital, climate and energy, transport, health, and education and research projects that are socially and economically sustainable, and run according to democratic and high-quality governance norms. With its focus on sustainability and social progress, the GG stands in explicit contrast to infrastructure funding originating from China via that country’s BRI, much of it apparently in the form of lending of dubious sustainability, motive and economic impact. The GG should be seen in the context of international efforts to construct a democratic-model alternative to the BRI.
The EU, collectively with its Member States, is already the world’s leading donor of official development assistance (ODA), but GG is intended to as an explicit counter-offer, not just to Chinese public and private money, but also to China as a rival authoritarian model of development in competition with the democratic model promoted by the EU and its democratic partners. Possible action

Written by Marcin Grajewski.

Russian President Vladimir Putin used his speech at the annual Victory Day over Nazi Germany, on 9 May, to mobilise support among the country’s citizens for its 11-week-old war on Ukraine, claiming that Moscow had to defend itself against imminent attack. Recently, Russia has shifted its military efforts towards the east and south-east of Ukraine, as well as to the bombing of critical infrastructure, after it failed to capture Kyiv, the capital. In some areas abandoned by the Russian forces, Ukrainian troops and journalists found many dead civilians and other evidence of war crimes. The United States and European Union countries have increased military aid to Ukraine. Finland and Sweden are to apply for membership of the NATO military alliance. Russia has cut gas deliveries to Bulgaria and Poland, escalating its conflict with the EU, which in turn is pondering an embargo on imports of Russian energy to deprive Moscow of funds needed to finance the war, on top of a wide range of existing sanctions.

This note gathers links to the recent publications and commentaries from many international think tanks on Russia’s war on Ukraine, its implications for the two countries, for the European Union and for the world. Earlier analyses of the implications of the war can be found in a previous edition of the ‘What Think Tanks are Thinking’ series.

Will Putin use nuclear weapons in Ukraine?
Atlantic Council, May 2022

A tariff on imports of fossil fuel from Russia
Bruegel, May 2022

A phase out of Russian oil may be less effective than a tariff at reducing Putin’s rents
Bruegel, May 2022

Marking the first Europe Day of the Brave New World
Centre for European Policy Studies, May 2022

European Union prepares to ban Russian oil
Center for Strategic and International Studies, May 2022

NATO and the south after Ukraine
Center for Strategic and International Studies, May 2022

Putin’s Eurasian dream may soon become a nightmare
Chatham House, May 2022

Putin’s long game in Ukraine: The Kremlin perspective
Council on Foreign Relations, May 2022

Inside the Russian geopolitical mind: Pseudo-justifications behind the war in Ukraine
European Council on Foreign Relations, May 2022

Stop feeding the bear: The case for a smart embargo on Putin’s oil and gas
Jacques Delors Institute, May 2022

Russia’s war on Ukraine: A sanctions timeline
Peterson Institute for International Economics, May 2022

Impact of the war in Ukraine on the debate on the future of agriculture in the EU
Polish Institute of International Affairs, May 2022

Ukraine’s great need for heavy artillery
Polish Institute of International Affairs, May 2022

Climbing the ladder: How the West can manage escalation in Ukraine and beyond
Atlantic Council, April 2022

The EU’s plans to replace Russian gas: Aspiration and reality
Atlantic Council, April 2022

Biden should deploy ‘great arsenal of democracy’ to defend Ukraine
Atlantic Council, April 2022

Putin’s unholy war
Atlantic Council, April 2022

Cutting Putin’s energy rent: ‘Smart sanctioning’ Russian oil and gas
Bruegel, April 2022

EU risks letting Putin’s gas divide-and-rule strategy win
Bruegel, April 2022

Repurposing the peace dividend
Bruegel, April 2022

A sanctions counter measure: Gas payments to Russia in rubles
Bruegel, April 2022

The European Union should sanction Sberbank and other Russian banks
Bruegel, April 2022

The decoupling of Russia: European vulnerabilities in the high-tech sector
Bruegel, April 2022

Cutting Putin’s energy rent: ‘Smart sanctioning’ Russian oil and gas
Bruegel, April 2022

Bold European Union action is needed to support Ukrainian refugees
Bruegel, April 2022

The EU without Russian oil and gas
Bruegel, April 2022

War on Ukraine: The day after
Bruegel, April 2022

Early Warning Brief: China’s contorted response to Russia sanctions
Bruegel, April 2022

How Russia benefits from ill-informed social media policies
Brookings Institution, April 2022

Putin just tested a new long-range missile. What does that mean?
Brookings Institution, April 2022

Germany has a special responsibility to stop Putin’s evil
Brookings Institution, April 2022

Terror, pacification, occupation: Russia’s actions in the occupied territories of Ukraine
Centre for Eastern Studies, April 2022

China’s challenges in the Indo-Pacific in the shadow of Russian aggression against Ukraine
Centre for Eastern Studies, April 2022

To make Moscow truly suffer, the sanctions screw must be tightened even further
Centre for European Policy Studies, April 2022

Opinion on Ukraine’s application for membership of the European Union
Centre for European Policy Studies, April 2022

Low-carbon technologies and Russian imports
Centre for European Policy Studies, April 2022

Russia’s war in Ukraine identity, history, and conflict
Centre for Strategic and International Studies, April 2022

How Ukraine will change Europe’s Indo-Pacific ambitions
Chatham House, April 2022

Saving Ukraine’s art and soul
Chatham House, April 2022

Ensuring Ukraine prevails is now the only moral choice
Chatham House, April 2022

Ukraine: Xi may come to rue his ties with Putin
Chatham House, April 2022

Global conflict tracker
Council on Foreign Relations, April 2022

Ukraine: Conflict at the crossroads of Europe and Russia
Council on Foreign Relations, April 2022

Can Russia be held accountable for war crimes in Ukraine?
Council on Foreign Relations, April 2022

Does Orban’s victory in Hungary change the EU’s calculus on Russia?
Council on Foreign Relations, April 2022

How Russia’s invasion of Ukraine will impact Africa’s energy transition
Council on Foreign Relations, April 2022

The world order holds, for now
Egmont, April 2022

Tanks versus banks: Russian military versus EU geo-economic power
Egmont, April 2022

The exaggerated death of European sovereignty
European Council on Foreign Relations, April 2022

Why advanced weapons can help Ukraine defeat Russia
European Council on Foreign Relations, April 2022

Ukraine: Time for the West to prepare for the long war
European Council on Foreign Relations, April 2022

Cold reality: How Europe is adjusting to China’s support for Putin
European Council on Foreign Relations, April 2022

Laws against slaughter: The crimes that shape Russia’s war on Ukraine
European Council on Foreign Relations, April 2022

War has returned to Europe: Three reasons why the EU did not see it coming
European Policy Centre, April 2022

Look at the war through Ukrainian eyes
European Policy Centre, April 2022

Wake up, EU! We are at war
European Policy Centre, April 2022

The EU should not turn a blind eye to Putinist methods at home
European Policy Centre, April 2022

The moral cost of ‘social peace’ in Germany
European Policy Centre, April 2022

Europe after Putin’s war: EU Foreign and Defence Policy in the new European security architecture
Hellenic Foundation for European and Foreign Policy, April 2022

Welcoming Ukrainian refugees in the EU: Preliminary insights on socio-economic consequences
Jacques Delors Institute, April 2022

Which countries help Ukraine and how? Introducing the Ukraine Support Tracker
Institut für Weltwirtschaft Kiel, April 2022

Investigation of Russia’s crimes in Ukraine: A turning point for the International Criminal Court?
Institute for National Security Studies, April 2022

The weaponisation of finance and the risk of global economic fragmentation
Istituto Affari Internazionali, April 2022

The war in Ukraine and studying the EU as a security actor
Istituto Affari Internazionali, April 2022

Ukraine: Putin’s war to change the world
Institut Montaigne, April 2020

From Sarajevo to Mariupol: What the Yugoslav wars can teach us about Ukraine’s fate
Institut Montaigne, April 2020

The Ukraine crisis: Women are fighting a different kind of war
Observer Research Foundation, April 2022

Fiscal support and monetary vigilance: Economic policy implications of the Russia-Ukraine war for the European Union
Peterson Institute for International Politics, April 2022

The United States should seize Russian assets for Ukraine’s reconstruction
Peterson Institute for International Politics, April 2022

Ukraine’s wartime information strategy
Polish Institute of International Affairs, April 2022

Franco-Russian economic relations in the face of the war in Ukraine
Polish Institute of International Affairs, April 2022

Failing to deter Russia’s war against Ukraine: The role of misperceptions
Polish Institute of International Affairs, April 2022

Maintaining mobility for those fleeing the war in Ukraine
Stiftung Wissenschaft und Politik, April 2022

Ukraine: The dangers in Russia’s new offensive
United States Institute for Peace, April 2022

Russia-Ukraine: A negotiated settlement will be difficult
Brookings Institution, March 2022

Phasing out Russian gas, UK-EU relations and Hungary’s response to the war
Centre for European Reform, March 2022

Can the West stay united on Ukraine, and what will China do?
Centre for European Reform, March 2022

Europe must stop paying for Russia’s war
Centre for European Reform, March 2022

Russia’s assault on Ukraine and European security
Centre for European Reform, March 2022

Russia may ditch the dollar, but it needs the euro
Centre for European Reform, March 2022

Ukraine: Is a chemical or biological attack likely?
Chatham House, March 2022

Lessons from the Ukrainian cyber front
European Policy Centre, March 2022

Vladimir Putin’s political and strategic failure
Groupe de recherche et d’information sur la paix, March 2022

Russia’s war is Europe’s moment to defend democracy and world stability
Peterson Institute for International Economics, March 2022

Read the complete briefing on ‘The latest on Russia’s war on Ukraine‘ in the Think Tank pages of the European Parliament.

Written by Stefano Spinaci (1st edition).

Companies can play a key role in building a sustainable economy and society, and in furthering environmental goals. At the same time, their global value chains may pose risks to human rights and the environment. Civil society, governments and companies are increasingly aware of the issue.

A growing number of EU companies have taken initiatives to deploy due diligence processes, often using the existing international voluntary standards on responsible business conduct. Some Member States have started developing their own legal frameworks on corporate due diligence.

To avoid fragmentation and to provide legal certainty to business and citizens, the Commission has proposed a directive laying down rules on corporate due diligence obligations (including on climate change), directors’ duties, civil liability and protection of persons reporting breaches. Supervisory authorities designated by the Member States would be in charge of enforcing the new directive. It would be aligned with international standards on human rights and environmental protection. The Parliament had already called on the Commission to introduce mandatory due diligence legislation in a legislative-initiative resolution of March 2021. It will now examine the Commission proposal following the ordinary legislative procedure.

Versions

• May 2022: Corporate sustainability due diligence: Could value chains integrate human rights and environmental concerns? (1st edition)

Proposal for a directive of the European Parliament and of the Council on corporate sustainability due diligence and amending Directive (EU) 2019/1937 Committee responsible:Committee on Legal Affairs (JURI)COM(2022) 71
23.2.2022Rapporteur:Lara Wolters (S&D, the Netherlands)2022/0051(COD)Shadow rapporteurs:Axel Voss (EPP, Gemany)
Adrián Vázquez Lázara (Renew, Spain)Ordinary legislative procedure
(COD) (Parliament and Council
on equal footing – formerly ‘co-decision’) Next steps expected: Publication of draft report

Written by Marcin Szczepanski and Guillaume Ragonnaud.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: The challenge and the existing gaps

European industry is central when it comes to achieving the twin green and digital transition of the EU’s economy and society, and making Europe the first climate-neutral continent by 2050. While European industry has strengths (for instance in green tech), it has lagged behind in some key strategic sectors, such as batteries. China provides 93 % of the EU’s supply of magnesium (key for aluminium production), while Turkey provides 98 % of the EU’s supply of borate (central to the electric motors used in electric vehicles and wind turbines). ASML, the world leader in the production of manufacturing equipment for leading-edge semiconductors, is the only European company among the global top 20 tech companies by market capitalisation. Common weaknesses in strategic European industrial sectors include high dependency on critical raw materials (CRMs) – for instance around half of the materials needed in aircraft production come from third countries. Other weaknesses are insufficient research and development funding, technology gaps, market fragmentation, underinvestment, and lack of skills. Enhancing the strategic autonomy of EU industry means tackling these issues and reducing dependencies on third countries. The pandemic has, meanwhile, highlighted the broader vulnerabilities of global supply chains, in which EU industry is highly integrated. Disruptions in these global chains may affect critical products and inputs for the EU. The complexity of the chains and the fact that they spread throughout the globe, makes them particularly vulnerable to unforeseen and/or rapidly unfolding occurrences such as natural disasters (more frequent in the global warming era), health crises (another pandemic cannot be ruled out), accidents (such as fires in manufacturing plants) and political developments (such as the war in Ukraine). Supply risks are compounded by the changing global landscape, characterised by rising tensions among the major powers, the weakened role of the WTO, the rise of protectionism, and the increasing deployment of the economy as a geopolitical tool. Rethinking supply chains and commercial routes is therefore high on policy makers’ agenda.

Existing policy responses Domestic measures

Boosting the strategic autonomy of EU industry requires a mix of coordinated domestic and external policy actions – going beyond the scope of this paper. The Commission adopted a new industrial strategy for Europe in March 2020, seeking to make EU industry more competitive globally and to reinforce Europe’s industrial and strategic autonomy. It introduced an ‘ecosystem approach’, based on the close monitoring of strategic dependencies in 14 sensitive industrial ecosystems (e.g. aerospace and defence, electronics) in order to mitigate them. As part of this framework, the Commission adopted a pharmaceuticals strategy, to support the competitiveness, innovation and sustainability of the EU’s pharmaceutical industry.

CRMs

Securing and diversifying supply of CRMs is among the top 10 strategic issues to be addressed to ensure the EU’s freedom and capacity to act in the decades to come. In this field, the EU seeks to take an approach mixing industrial, research and trade policies with international partnerships. The Commission presented an action plan on CRMs in September 2020, aiming to make Europe’s supply more secure. The action plan seeks to bolster internal EU capacity building (e.g. by developing viable industrial projects on CRM exploration, extraction, processing and refining), and to strengthen and diversify external sources of CRMs (e.g. by sealing strategic partnerships with resource-rich third countries). Also announced in the new industrial strategy, the action plan on synergies between civil, defence and space industries of February 2021 aims to encourage more effective use of resources and technologies in these sectors, and generate economies of scale. The EU’s security and defence capabilities are fragmented, which has increased strategic dependencies over the past few years. The Commission’s February 2022 roadmap on security and defence technologies focuses on ways to bolster research, technology development and innovation (RTD&I) and to reduce the EU’s strategic dependencies. It promotes an EU-wide strategic approach to improve coordination of EU and national RTD&I programmes and instruments for critical technologies.

The May 2021 update of the industrial strategy focused on addressing the impacts of the pandemic, the evolving global competitive context, and the acceleration of the twin transitions. It put forward a range of additional actions to address strategic dependencies. The Commission identified 137 products and raw materials used in sensitive ecosystems on which the EU is highly dependent (mainly in energy-intensive and health sectors). The technologies identified as strategic areas for Europe’s industrial future are active pharmaceutical ingredients, batteries, cloud and edge computing, cybersecurity, hydrogen, IT software, photovoltaic panels, raw materials, and semiconductors.

Industrial alliances

The Commission is also supporting new industrial alliances to develop Europe’s strategic capacities in key areas, and to facilitate the identification of potential investment projects. These alliances involve a wide range of partners in specific industries and value chains. In recent months, alliances of these kind have been forged in the areas of raw materials, clean hydrogen, industrial data, edge and cloud microelectronics and cloud technologies. Industrial alliances can include specific work strands to reduce strategic dependencies for the security and defence sectors. This is being considered in the alliances for industrial data and semiconductors.

IPCEIs

Important projects of common European interest (IPCEIs) have also gained in importance recently as a way to support strategic industrial projects. IPCEIs are a state aid tool designed to overcome serious market failures concerning breakthrough innovation and key infrastructure. Initiated by Member States, they bring together key European players The Commission has recently approved two IPCEIs concerning the battery value chain (in 2019 and 2021). A new IPCEI on microelectronics was put forward in December 2021 in the context of the EU’s recovery plan. Moreover, the French Presidency of the Council of the EU announced that it would support the development of IPCEIs on hydrogen, electronics, cloud computing, and the healthcare industry.

In December 2021, under the ongoing review of EU competition tools, aimed at enhancing the resilience of the single market and enabling EU industries to lead in the green and digital transitions, the Commission reviewed its criteria for assessing potential IPCEIs. The aim was to align the criteria more closely with EU strategies, making the setting-up of IPCEIs more transparent and making it easier for small and medium sized enterprises (SMEs) to take part.

Standards

Safeguarding the EU’s capacity to set standards is also key to increasing its industrial competitiveness and strategic autonomy. The Commission adopted a new EU standardisation strategy in February 2022, aiming to leverage the impact, size and integration of its single market to set global standards.

Regulatory frameworks for key industries

The Commission has also put forward a number of regulatory frameworks targeting key industries, for instance the semiconductor (microchip) sector. Microchips are the engines of the digital transition. They are critical technologies, meaning that they are needed across the civil (including security), defence and space industries. The ‘European chips act package‘ adopted by the Commission in February 2022 includes a proposal for a regulation setting up a framework of measures to strengthen Europe’s semiconductor ecosystem (the ‘chips act’). It is based on three pillars, each focusing on a different timeframe. The first pillar (long-term measures) builds on a ‘chips for Europe initiative’, bolstering technological capacity building and innovation. The second pillar (medium-term measures) sets up a framework to boost projects aimed at improving the EU’s security of supply, by attracting investments and enhancing production capacities. The third pillar (short-term measures) establishes a coordination mechanism between the Member States and the Commission to monitor the supply of chips. Importantly, in the event of supply disruptions and shortages, a ‘crisis stage’ may be activated, allowing the Commission to implement a range of emergency measures: the Commission will ask undertakings to provide information about their production capacities, or primary disruptions, in order to gain a better understanding of the market situation. Furthermore, the Commission may oblige some foundries to accept and prioritise an order of crisis-relevant products (‘priority rated orders’). The Commission may also decide to act as a central purchasing body on behalf of some Member States for the public procurement of some crisis relevant products for certain critical sectors. Moreover, it could introduce an export control regime in some circumstances. A Commission recommendation on a common toolbox to address semiconductor shortages and an EU mechanism for monitoring the semiconductor ecosystem includes possible crisis response measures that Member States could implement before the new regulation enters into force. The Commission has claimed that the chips act would mobilise more than €43 billion in public and private investments.

The December 2020 proposal for a regulation on a new regulatory framework for batteries aims to enhance circularity and resource efficiency with increased recycling and recovery of critical raw materials, to help enhance Europe’s strategic autonomy. It sets minimum levels of recovered cobalt, lead, lithium and nickel from waste for reuse in new batteries. In December 2021, the Commission proposed a hydrogen and decarbonised gas market package – key feedstock for industrial processes. The package aims to strengthen energy security, and global industrial leadership.

Funding

A wide range of EU programmes offer funding that can be used to improve the strategic autonomy of EU industry. More specifically, within the Next Generation EU (NGEU) recovery package, the Recovery and Resilience Facility (RRF, €724 billion (in current prices), i.e. 90 % of Next Generation EU funding), is expected to improve the resilience, crisis preparedness, adjustment capacity and growth potential of Member States, contributing to the strategic autonomy of the EU. It is up to the Member States to choose the reforms and investments to be included in their national recovery and resilience plans (NRRP). These reforms and investments should help make the EU more resilient and less dependent by diversifying key supply chains.

A range of measures are possible. Member States may decide for instance to fund cross-border and multi-country projects, in particular under European flagships – e.g. ‘Scale-up’ aiming to double the share of EU companies using advanced cloud services and big data by 2025. Each Member State must dedicate at least 20 % of the expenditure for its recovery plan to measures contributing to the digital transition (e.g. investment in digital-related industrial research and innovation). One year on from the introduction of the RRF, the first implementation report shows that 15 NRRPs include measures dedicated to the hydrogen sector. Many investments address the whole hydrogen value chain. Funding for new IPCEIs – on microelectronics (12 RRPs) and cloud technologies (6 NRRPs) are among the multi-country projects with the highest take-up in the NRRPs. Other EU programmes also allow targeted research and innovation efforts to reduce the gap with global competitors and thereby reduce strategic dependencies (Horizon Europe, Connecting Europe Facility, European space programme and European Defence Fund). The European Defence Fund aims to build an integrated EU defence industrial base, investing throughout defence industrial value chains (the EU defence industry being quite fragmented).

International dimension

A major development in the area of transatlantic cooperation was the establishment of the EU-US Trade and Technology Council (TTC) in June 2021, designed to strengthen the partners’ technological and industrial leadership. In its joint inaugural statement following the meeting held in Pittsburgh (US) on 29 September 2021, the TTC prioritised areas where it intended to achieve outcomes by the next meeting, scheduled for May 2022 in France. These include work on: standardisation, in particular in artificial intelligence (AI); reduction of strategic dependencies in semiconductor supply chains; and joint tackling of global trade challenges, such as industrial subsidies, unfair behaviour of state-owned enterprises and other trade and market distorting practices, as well as export controls, including in emerging technologies, (with legitimate concerns about forced technology acquisitions). Other strands of work are climate and clean technology, secure and resilient supply chains, active pharmaceutical ingredients and raw materials.

The international dimension of industrial policy focuses on issues such as improving integration of EU companies, not least SMEs, in international value chains; mutual conformity assessments; and influencing the rules and standards affecting industry globally. The EU is also striving to stay at the forefront of the future-oriented industrial technologies that are necessary for the digital transformation and technological sovereignty. It supports cluster collaboration with the third countries, for instance on industrial ecosystems and raw materials, having concluded administrative agreements with Canada, Singapore, South Korea and the US. Negotiations with New Zealand, the UK and South Korea have begun for associated participation (on a co-funding basis) in the Horizon Europe programme.

Autonomy also means establishing a level-playing field through legislative instruments such as the carbon border adjustment mechanism (CBAM) and international procurement instrument, as well as safeguarding the single market and industry against undesirable external influences, whether in the form of foreign investment, distortive foreign subsidies or coercive practices. Another significant initiative in this aspect is the proposal for corporate sustainability and due diligence. The EU has also added disciplines removing or reducing trade barriers and export restrictions of raw materials into many of its multilateral and bilateral trade agreements.

As part of its CRM action plan, the Commission is proposing to forge strategic partnerships with resource-rich countries. It has already established such partnerships with Canada and Ukraine, and commenced other international pilot partnerships with six African countries: Democratic Republic of Congo, Mozambique, Namibia, Gabon, Zimbabwe and Senegal. These efforts, in addition to the TTC, fit into a broader picture of diversifying supply chains and commercial routes important to the EU. Relevant policy tools include: supporting open trade through free trade agreements (FTAs), reinforced with the 2021 Enforcement Regulation; and seeking to reinvigorate and reform the WTO, as experts consider a robust international trade framework to be conducive to increasing industrial competitiveness and investment in knowledge-intensive industries.

The Versailles Declaration of EU Heads of State or Government of 11 March 2022 reiterated the urgent need to secure the EU’s supply of CRMs, chips, and digital technologies. It stressed the importance of research and innovation, IPCEIs and alliances to support strategic industrial sectors, and stressed that efforts would be made to complete the EU’s trade and competition policy toolbox.

Figure 42: Key measures to establish greater strategic autonomy for European industry Obstacles to implementation

EU industrial policy is developed and implemented at both EU and Member State levels, but with the main responsibility resting with the latter. As this policy is cross-cutting, and has both horizontal and sectoral dimensions, it is complex and difficult to monitor with clear targets, indicators, measures and time scales. The multitude of interests, and the complex and dynamic environment in which industry, technology and geopolitics are intertwined mean that picking winners is risky. Furthermore, the EU lacks strong competences in some areas crucial to the digital transformation of industry, with a shortage of digitally skilled workers, for instance. Reshaping and diversifying EU supply chains and commercial routes are predominantly decisions for the private sector.

Furthermore, some observers have highlighted that the contribution of the RRF to strategic autonomy is too vaguely addressed in the RRF Regulation and in the Commission guidance for Member States. Furthermore, the RRF impact on industry will be suboptimal as NRRPs are too nationally oriented. In addition, the incentive for Member States to set up cross-border projects is too weak. Some analysts consider that the participation of the EU in the global subsidy race in the chip sector is a mistake. The chips act has many flaws – it is too vague on the type of foundries that should be supported, and on the functioning of the security of supply mechanism. In addition, the involvement of Member States in a body advising the Commission entails the risk that they might choose to advance their own national priorities rather than European ones. It has been argued that the revision of the Commission guidance in November 2021 failed to address any of the IPCEIs’ major flaws, e.g. the lack of broad-based participation of Member States and SMEs, and the lack of transparency on the decision to invest public funds and on project governance. This situation risks undermining fair competition within the single market.

The TTC may fail to deliver on its ambitious cooperative agenda if the differences between the Member States on issues such as the creation of national industrial champions or a chips manufacturing ecosystem prevent the EU from speaking with one voice and as an equal with the US. Furthermore, important developments outside of the scope of the TTC, such as the EU’s ambitious efforts to regulate global digital markets, which sometimes cause concerns in the US, may make it harder to reach a transatlantic consensus. There are also important nuances on approach of both sides to China, which may diminish the TTC’s effectiveness. At this stage it is impossible to predict whether the TTC will establish meaningful cooperation – a sort of strategic interdependence of industries to create synergies – or if it will end up delivering only minimal results, such as making sure industrial projects on one side are not unintentionally hampered by another.

Attempts at forming meaningful alliances on raw materials may be hampered by a tightening of the commodities markets and global scarcities arising from Russia’s invasion of Ukraine.

Policy proposals by experts and stakeholders

On a conceptual level, strategic autonomy is not precisely and uniformly defined in EU industrial policy. Establishing a dedicated governance system based on common definitions and criteria would help to avoid national priorities from clashing with EU level priorities. To increase Europe’s strategic autonomy in rare earth elements, stakeholders have recommended: creating a level playing field with rare earth producers worldwide (such as China) that have lower production costs owing to state subsidies and lower social, labour, and environmental standards; encouraging downstream industry to diversify its supply chains, work with European and local suppliers, and support the development of capacities for a circular economy of electric motors; ensuring that end-of-life products and waste materials containing rare earths stay in Europe, by facilitating the re-processing and recycling of products through regulations and standards; and leveraging private investments in the emerging European rare earths value chain using all financial levers, including state aid tools (e.g. a dedicated IPCEI).

To increase EU industry’s resilience to shocks along its value chains, some analysts have stressed that it is necessary to improve the governance and transparency of strategic value chains. In addition, public-private partnerships (PPPs) could help to deliver on strategic projects. Importantly, it is necessary to ensure that measures taken at EU, national, regional and local levels to support industry are taken in a coherent way. Industry representatives have highlighted that better resilience of supply chains can be achieved through a combination of approaches, ranging from finding substitutes, encouraging diversification, forging strategic relationships with suppliers, stockpiling, or encouraging domestic production. Industrial strategic autonomy needs to be rooted in digital and green transformation. To boost the latter, the EU could consider establishing a European Climate and Sustainable Development Bank, aiming to export the European Green Deal policies. This would allow EU industry to enter new, rapidly growing markets, and use the gains to further improve its standing as a champion of environmentally-friendly manufacturing. To achieve meaningful breakthroughs in green technologies, global cooperation in research and development – particularly during pre-commercial phases – can produce cost advantages, allow risk-sharing and achieve greater efficiencies from the combination of complementary knowledge and synergies. The EU could also step up transatlantic research and innovation cooperation significantly by using the reenergised relationship with the US to push for its association with the Horizon Europe programme, more specifically within the digital, industry and space cluster. EU-US collaboration includes the defence sector. To monitor digital transformation of industry at national level, the EU could develop a system in which the Council, the Commission and the Parliament monitor progress made by each Member State and the EU. This could be aligned with the goals of the digital decade. After each country designs a plan to achieve concrete results – a national decade strategic roadmap – the Commission could report annually on progress. This could also include cooperation with like-minded partners from Asia or North America. In order not to leave European SMEs behind, a dedicated digital policy for SMEs may be necessary. It would comprise targeted use of digital innovation hubs, supporting the retraining and digitalisation of the SME workforce, and dedicated financing instruments.

Looking beyond the mapping of strategic dependencies carried out by the Commission, some experts suggest that the next step would be an in-depth analysis of the strategic value chains to identify the weakest links and find credible alternatives to offset their vulnerabilities. This exercise should also include identifying missing skills and professional profiles and lead to an action plan with timed targets and urgent measures to be taken at EU and Member State level.

Position of the European Parliament

Right from the beginning of the pandemic, the European Parliament stressed that the recovery package should improve the EU’s resilience and strategic autonomy. In its resolution of 25 November 2020 on a new industrial strategy for Europe, Parliament stressed that securing the EU’s sovereignty and strategic autonomy required an autonomous and competitive industrial base, and huge investment in research and innovation in key enabling technologies, innovative solutions, and key value chains. Parliament believes that investment should make it a priority to support the security, defence, climate technology, food sovereignty and health sectors. Supply chains should be strengthened, shortened, made more sustainable and diversified. Moreover, for Parliament, Europe’s strategic autonomy cannot be achieved without a competitive and sustainable EU ecosystem for CRMs. Europe needs to bolster its position in all stages of the raw materials value chain. Parliament also called on the Commission to devise a strategy for smart reshoring, to redeploy industries to the EU, increase production and investment, and relocate industrial manufacturing.

In its resolution of July 2021 on trade-related aspects and implications of Covid-19, Parliament called for incentives, including through state aid, for EU businesses to make their value chains more sustainable and to shorten or adjust their supply chains where it could benefit the EU’s economy, resilience, geopolitical objectives and strategic autonomy.

Parliament believes that an integrated approach throughout the CRM value chain, from waste collection and product design for recyclability to material recovery, is an essential strategy to increase the EU’s CRM supply, as explained in its resolution of 24 November 2021 on a European strategy for CRMs. An active industrial policy is needed to support the value chain, supporting for instance research and innovation on the recycling and substitution of CRMs, and product design. EU support and funding is required to improve efficiency, substitution, recycling processes and closed material cycles. Parliament also called on the Commission and the Member States to set up an IPCEI on CRMs to reduce criticality and dependence, dealing with recycling, reuse, substitution, reduction of material use and mining. The projects supported under the IPCEI should unlock the unfulfilled potential in CRM-rich EU countries. Furthermore, Parliament recommended that the Commission encourage Member States to carry out strategic stockpiling as a way to reduce CRM dependencies, and propose minimum recycled CRM content targets, CRM recycling targets and a monitoring framework. Concerning CRM sourcing in the EU, Parliament supports responsible and sustainable projects, and has stressed that awareness of the environmental footprints of imported CRMs from third countries should be raised. The EU should also diversify its supply sources of CRMs to reduce third country reliance.

In focus: Impact of the conflict between Russia and Ukraine on European industry
This paper was drafted just days after Russia invaded Ukraine. Without doubt the war will have far-reaching consequences for European industry and global supply chains. CRMs can be widely found in Ukraine, which holds deposits of 20 out of 30 such materials. Ukraine is home to half of the world’s neon gas production – critical for manufacturing semiconductors. In July 2021, the EU and Ukraine had launched a strategic partnership to enhance cooperation in the field of raw materials and batteries. The EU car industry has already been affected by the closure of small but important suppliers in Ukraine.
The sanctions and disrupted trade routes are also hindering car and parts shipments to and from Russia. Moreover, parts of the European industry rely on raw materials imported from Russia. For instance, 20 % of the EU’s supply of phosphate rock, which is on the EU’s CRM list and is used to produce mineral fertilisers, comes from Russia. Although Russia has not yet included raw materials in its sanctions, their prices are skyrocketing and some – including nickel, palladium (Russia represents 40 % of the world’s production) and platinum – will not be easy to source from elsewhere. The scarcity of these products will reverberate throughout industry as they are used in multiple products.
Furthermore, as energy costs are expected to skyrocket, energy-intensive industries, such as automotive and chemical, are expected to be hard hit. This may have grave consequences for the future of EU industry as many energy-intensive industries are embedded in strategic value chains. Around half the energy that powers EU industry is based on gas. On the other hand, the conflict is expected to further bolster the EU’s efforts to reinforce its defence industry. Commentators are divided on whether the conflict will accelerate or slow down the phasing out of fossil fuels – both possibilities having significant consequences for EU industry and its competitiveness. Possible action

Written by Clare Ferguson.

Members meet in Brussels for the second plenary session of May 2022, with the geopolitical situation dominating the agenda once again. Russia’s invasion of Ukraine has highlighted the need for strong alliances. However, Ukraine’s request for European Union membership comes at a time when several other countries are still grappling with the accession process.

Parliament sees stability in the EU’s eastern neighbourhood as crucial to countering possible Russian influence in the region. The session is scheduled to open on Wednesday with Maia Sandu, President of Moldova, addressing a formal sitting, followed by a debate on the Foreign Affairs (AFET) Committee’s annual report on progress to date with implementation of Moldova’s EU Association Agreement.

Members are then expected to debate two further AFET annual reports on the enlargement process for EU membership candidates North Macedonia and Albania – where the committee regrets the lack of progress within the Council on opening accession negotiations. North Macedonia is the most advanced candidate in terms of its accession process, and the AFET report highlights North Macedonia’s positive record in its transition to democracy. However, Bulgaria continues to block the opening of accession negotiations due to a cultural dispute, and the report nevertheless calls for North Macedonia to continue its administrative and political reform. Negotiations on Albania’s EU membership bid have not yet begun. Indeed, Albania’s international standing on corruption has even fallen since its EU application in 2014. The AFET committee’s annual report on Albania‘s progress highlights persisting issues of judicial independence, corruption, freedom of speech and minority rights, and calls on the Albanian authorities to eliminate corruption and criminality in public life.

Indeed, the rule of law is a key element of democracy and is one of the founding values of the EU, binding on all its Member States as well as candidate countries. On Wednesday, Parliament is scheduled to consider a report from the Civil Liberties, Justice and Home Affairs (LIBE) Committee, prepared in response to the European Commission’s 2021 rule of law report, which monitors the situation in EU countries. Covering four areas (justice systems, anti-corruption, media pluralism and freedom, and institutional checks and balances), this second report notes that there have been positive developments, despite the stress that the Covid‑19 pandemic placed on democratic systems. However, the committee repeats its view that the Commission should make country-specific recommendations and monitor their progress. The committee also criticises the rule of law report for failing to take account of Parliament’s previous recommendations that it should include monitoring of all key EU values: respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including for minorities.

Later on Wednesday, Parliament is expected to debate the thorny issue of taxation in the globalised, digitalised world. In recent years, digitalisation has made it easy for large multinational enterprises to shift their profits to countries with preferential tax regimes, thereby putting their profit before the opportunity to pay fair taxes to the societies that host them. This strips countries of revenue on which they depend to fund social benefits, such as healthcare, and investment. Parliament has long demanded reform in this area, and the Organisation for Economic Co‑operation and Development (OECD) recently agreed a framework for a minimum corporate tax rate. Members will consider an Economic and Monetary Affairs (ECON) Committee report, introducing a clause to the proposals to allow revision of the proposed minimum tax rate threshold of €750 million a year. Parliament’s opinion on the proposal to implement the agreement in the EU will then feed into the Council decision, where a unanimous vote is required.

Returning to human rights on Thursday morning, Members are scheduled to debate the Commission’s response to oral questions on proposals concerning the right to education in the EU. To ensure that people in the EU have access to a quality, inclusive education for personal fulfilment, to enable them to participate fully as citizens, and to boost their employment chances, the Commission has proposed to build a European education area by 2025. The aim would be to offer work-based learning to at least 60 % of recent graduates, and learning opportunities for adults up to 65 years old. Further goals will promote learning for a sustainable environment by 2030, such as ensuring a good level of education in mathematics, science and computer skills for all.

Written by Ann Neville (1st edition).

Financial information is vital for the investigation of serious crime and for the freezing of the proceeds of crime, but EU investigators often lack the tools for effective investigation, especially when dealing with cross-border crime. The proposed amendment to Directive (EU) 2019/1153 would allow designated competent authorities responsible for the prevention, investigation, detection or prosecution of criminal offences to access and search Member States’ centralised bank account registers through a single access point. This would enable them to establish almost immediately whether an individual holds bank accounts in other Member States and identify to which Member States they should make a formal request for additional information.

Versions

• May 2022: Proposal to amend Directive (EU) 2019/1153: Single access point to bank account registries (1st edition)

Use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences: single access point Committee responsible:Committee on Civil Liberties, Justice and Home Affairs (LIBE)COM(2021) 429 final
20.7.2021Rapporteur:Emil Radev (EPP, Bulgaria)2021/0244(COD) – 20/07/2021Shadow rapporteur:Caterina Chinnici (S&D, Italy)
Fabienne Keller (Renew, France)
Damien Carême (Greens, EFA, France)
Tom Vandendriessche (ID, Belgium)
Joachim Brudziński (ECR, Poland)
Clare Daly (The Left, Ireland)Ordinary legislative procedure
(COD) (Parliament and Council
on equal footing – formerly ‘co-decision’) Next steps expected: Publication of draft report

Written by Luisa Antunes.

The recent coronavirus pandemic will not be the last public health emergency. To discuss future pandemic preparedness and response, the European Parliamentary Research Service (EPRS) and the European Cooperation in Science and Technology (COST) Association co-organised a roundtable on 11 May 2022. Etienne Bassot, Director of the EPRS Members’ Research Service, reminded participants of the link to the first edition of an annual EPRS publication on Future Shocks 2022, in particular the sections on ‘Another major pandemic’ and ‘Responding better to future pandemics’, written by Luisa Antunes and Clément Evroux.

Ronald de Bruin, Director of COST, introduced the association, its mission and actions. Funded by Horizon Europe, its network of researchers from 40 countries focuses on interdisciplinary, out-of-the-box thinking that transcends science and engages with policy-makers for long-term impact.

Kathleen van Brempt, Member of the European Parliament (S&D, Belgium) and Chair of the Special Committee on the COVID-19 pandemic (COVI), raised the importance of a coordinated, interdisciplinary approach to solving public health crises. COVI will base its work on four main pillars: health; socioeconomic impact; democracy and fundamental rights, and international cooperation. Preparedness for future pandemics involves rethinking vaccine production, worldwide supply, inequalities and hesitancy, finding a balance between health investment and containment strategies, and refocusing scientific advice at EU level.

Ilaria Capua, Director of the One Health Center of Excellence at the University of Florida, introduced the concept of ‘Circular Health’. This expands on the 1960s ‘One Health’ concept, which drew on the interconnectedness of animal, human and environmental health, by including macroscopic factors such as social sciences, policy, legislation and governance, food practices, conflicts, mobility and transport, population growth, refugees, international trade and gender equality, amongst others. While antimicrobial resistance (AMR) is a major threat, a possible roadmap solution could build from the United Nation’s Sustainable Development Goals (SDGs), not forgetting the importance of digitalisation and data sharing.

Jeremy Webb, Professor of Microbiology, University of Southampton, expanded on AMR as one of the major public health threats of the century. A silent pandemic, it leads to extended hospital stays, prolonged bacterial infections and 1.3 million annual deaths worldwide (equivalent to total joint HIV and malaria mortality). It is expected to kill 10 million people annually by 2050, exceeding cancer as second largest cause of death worldwide. Its causes are the misuse, overuse and spread of antibiotics in humans, agriculture and the environment. The dearth of investment in public health, including lack of rapid diagnostics and research and development (R&D) into new antimicrobials further aggravates the issue, in a context where, unlike cancer, antimicrobial R&D is not lucrative for the private sector. New models and reimbursement mechanisms are needed. The United Kingdom’s National Health Service (NHS) has developed a subscription model strategy as an incentive for the private sector to develop new antimicrobials. Multidisciplinary cooperation between academia, the industry and politicians is essential, as is education and changing the public perception.

Andrea Ammon, Director of the European Centre for Disease Prevention and Control (ECDC) introduced the importance of multisectoral and multidisciplinary crisis preparedness, acknowledging the ‘One Health’ approach and risks such as globalisation and climate change, and investing in public health and digitalisation. The amended ECDC mandate will extend the role of the agency in Member State-joint preparedness and strengthen its ties with the European Medicines Agency (EMA). Community engagement and citizens’ trust are essential and depend on good risk communication and collaboration between scientists and policy-makers.

Nicolas Collin, CEO of the Vaccine Formulation Institute (VFI), presented the VFI as an EU-funded non-governmental organisation (NGO) that develops open-source adjuvants for the benefit of the entire world. Adjuvants decrease costs, improve vaccine efficacy, prolong the immune response and augment the number of available doses in one vial. Fast vaccine development requires, ahead and in advance of a new pandemic, the existence of an established network of researchers, strong expertise and logistics, and human-validated technology. Funding is essential to maintain expertise, to ensure regular testing in clinical trials and to have many options ready prepared when a pandemic hits.

Sylvie Briand, Director at the World Health Organisation (WHO) introduced WHO’s International Health Regulations (IHR). First applied in response to the 2009 swine flu pandemic, they aim to accelerate the detection of new outbreaks and ensure global response coordination whilst minimising unnecessary economic and travel impact. The WHO is working on a new treaty for international collaboration that has so far received 131 panel recommendations, grouped in four areas: leadership and governance; systems and tools; finance, and equity. A white paper is open to consultation. Preparedness plans are, nevertheless, inadequate if not implemented; an impairment with the Covid-19 crisis was that a few countries had not consulted or updated their pandemic preparedness plans following the 2009 flu pandemic. Citizens’ trust also poses issues, especially when linked to privacy and data sharing, which require working together.

Clément Evroux, Policy Analyst at EPRS, presented the EU response to the Covid‑19 crisis, including health and economy instruments, such as the EU Health Union package and the SURE instrument to mitigate unemployment losses. EMA and ECDC mandates were updated, as well as the regulation on serious cross-border health threats. The European Health Emergency Preparedness and Response Authority (HERA) was created to carry out preparedness and decision-making on vaccines and medicines. Ways forward will involve joint efforts in public health, transport, the internal market, research, education and trade. A ‘One Health’ approach is essential to bring socio-economical stakeholders together and engage citizens, as well as to ensure a green transition and EU’s strategic autonomy in digital technologies applied to therapeutic countermeasures.

Alain Beretz, President of COST, summarised the event, identifying three transversal issues: time, multidisciplinarity and geopolitical context. A global approach to a future pandemic will have to include networking and data sharing. Scientific advice to politicians is key and strong emphasis should be placed on basic research, focusing on long-term sustainable goals and values, and addressing the technological and non-academic issues of science, including citizens’ trust.

Written by Magdalena Sapala, Alina Dobreva and Martin Höflmayer.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: the challenge and the existing gaps

Following a deep recession in 2020 of -5.9 % and further contraction in the first half of 2021, the EU economy recovered faster than expected, with growth of 5 % in 2021. However, expectations are that Europe is at an early stage of an adverse economic shock to its economy – just when the recovery from the pandemic had become more firmly entrenched – as the economic implications of Russia’s invasion of Ukraine are likely to be significant. As a consequence, the post-Covid recovery will almost certainly be significantly delayed, with a clear downside risk. While the overall economic costs are still difficult to predict, they will differ between EU Member States, whose economic vulnerability to the invasion is very unevenly distributed.

At the time of writing, growth rates vary across EU countries, as the impact of the pandemic on economic activity continues to weaken over time and supply-side constraints ease. So far, the strong economic recovery has been aided by a rapid and substantial fiscal and monetary response. That response was possible through the activation of the general escape clause in March 2020 by the European Commission and the Council, allowing Member States to undertake appropriate budgetary measures in exceptional circumstances. The clause was extended by the Commission in March 2021, and is likely to be extended to 2023 in light of the conflict in Ukraine.

The severe economic impact from the pandemic led to a substantial shift in EU fiscal policy guidance. An unprecedented budgetary package was adopted, which combined the €1 210.9 billion multiannual financial framework (MFF) for 2021 to 2027 with the €806.9 billion Next Generation EU (NGEU) instrument. This package was made possible thanks to an agreement on an unprecedented scale on borrowing at EU level to fund it. The debt will be repaid through the EU’s own resources (OR), which necessitates an expansion of the OR portfolio. Even before the NGEU-related borrowing, there had been an ongoing debate on the reform of the EU system of own resources, a key goal being to limit the share of GNI based on own resources and to align the OR system better with EU policies. Making the NGEU a permanent instrument had been mentioned as a possible option even before the outbreak of the war in Ukraine; the debate on new joint borrowing to fund common strategic goods, such as energy security or defence, is now likely to intensify.

Existing policy responses

The European economy is undergoing unprecedented transformation towards a more sustainable, green economy, while at the same time driving the digital transition. Both require ambitious investments and reforms. The recovery from the Covid-19 pandemic has been supported by new EU instruments, including the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE), the Coronavirus Recovery Investment Initiative (CRII), and NGEU. According to the 2021 stability programmes, a majority of Member States are planning to enhance the resources available for government investment as the share of public investment in GDP is set to surpass pre-pandemic levels in 2022.

The European Semester, with its broader scope and multilateral surveillance, will be at the heart of the EU’s fiscal, economic and employment policy coordination. In light of the policy changes after the Covid-19 crisis, the European Semester is being adapted to take into account new instruments and facilities to drive forward the Member States’ reform and investment agendas.

In July 2020, to help repair the immediate economic and social damage caused by the pandemic, and at the same time to bring lasting change and make Europe more resilient and sustainable, the Member States created NGEU as a temporary recovery instrument (€806.9 billion in current prices, to be paid out by the end of 2026). Together with the 2021-2027 MFF, it represents 1.8 % of EU GNI, the largest investment package ever implemented through the EU budget, and provides a much- needed catalyst for public investment. Furthermore, with the new, unfolding crisis caused by the war in Ukraine, the role of NGEU has been de facto extended, but within its agreed maximum financial capacity. The Member States were encouraged to use it as the ‘first line’ reaction, and to cover, in particular, the growing need for investment in energy security (see below).

The main advantage and innovation of NGEU is the way it is financed, and its focus on the climate and digital transformation. To finance the instrument, the Member States broke with a taboo that the EU cannot borrow on a larger scale to finance its expenditure, and agreed to base it on collective borrowing on the international capital markets. As a result, in the past 12 months the Commission has moved from being a small issuer, raising funds to finance relatively small lending programmes like the European Financial Stabilisation Mechanism (EFSM) and macro-financial assistance (MFA), to being one of the biggest issuers in euro.

The first assessments of the implementation of the Commission’s borrowing strategy were positive and recommended making it a permanent solution, mentioning among its benefits the enhancement of the international role of the euro. The optimistic views of the NGEU are amplified by estimates of its substantial macroeconomic impact. By 2024, it is expected to trigger at least a 1.5 % increase in the EU’s real GDP compared to a baseline scenario without NGEU investments, and to increase employment by up to 1 % during its period of operation.

The centrepiece of NGEU is the Recovery and Resilience Facility (RRF) (some 10 % of NGEU’s resources are channelled through six other budgetary programmes: React-EU, Just Transition Fund, InvestEU, Rural development, Horizon Europe, and RescEU). Worth €723.8 billion, the RRF is a mix of grants and loans, to be invested in line with six pillars representing policy areas of European relevance, in a package of reforms and investments based on national plans. These plans have to take into account the 2019 and 2020 country-specific recommendations of the European Semester. Thanks to the introduction of compulsory targets for spending on green transition and digital transformation under each national plan (at least 37 % and 20 % respectively) much of the RRF financing supports projects in the areas of decarbonisation, renewables, energy efficiency, resilience of key infrastructure, and sustainable transport.

At the beginning of March 2022 – i.e. less than a year since the first national recovery and resilience plans (NRRPs) were submitted for assessment – the Commission reported that RRF implementation was firmly underway. With 22 national plans approved, and with payments at the level of 18.6 % and 13 % of the approved grants and loans respectively, the Facility seemed to be operating according to the timeline agreed with the Member States.

The 2021-2027 MFF was adopted in a package that included NGEU and linked to the Own Resources Decision, whose application would secure sufficient revenues to continue existing EU programmes without limiting their funding under the next MFF and to repay the NGEU-related debt. The Own Resources Decision was ratified by all 27 Member States by 31 May 2021 and entered into force in June 2021. The Interinstitutional Agreement (IIA) that introduced the principles and criteria for new own resources confirmed the link to NGEU repayments and established an own resources roadmap with regular dialogue.

Figure 40: Ensuring economic recovery and resilience

With a delay to the roadmap established in the IIA, on 22 December 2021 the Commission proposed the next generation of own resources to establish some new resources, namely the revenues from emissions trading (ETS), resources generated by the carbon border adjustment mechanism (CBAM), and based on the recent OECD/G20 agreement on a re-allocation of taxing rights over multinational corporations (‘Pillar One’). If the proposal is adopted, the revenues included in it are projected to start flowing into the EU budget from 1 January 2023 and to generate up to €17 billion on average annually after the initial introductory period.

A proposal for a second basket of new own resources is currently planned by the Commission for the end of 2023. Other new own resources options are also included in the IIA. If these proposals are not adopted and implemented, or if they do not deliver the expected and needed revenues, some policy options are either to increase the GNI-based own resource, or to limit the funds of the next MFF compared to existing EU programmes. Furthermore, as the Russian war in Ukraine evolves, the option of further borrowing is also being discussed, including by the current French presidency.

Obstacles to implementation

In the context of heightened economic and geopolitical uncertainty, the relaunch of the review of the EU’s economic governance framework has put the spotlight on the underlying question of how the economic governance framework can ensure enough investment to support the twin transition while preserving public debt sustainability. For instance, to reach the targets set in the Green Deal and the digital transformation, the EU will need to increase annual public and private investment by around €650 billion in the coming decade (2021-2030), compared to the previous decade. As previously highlighted, the geopolitical ramifications of this investment gap, for instance through reducing the transition time towards renewable energy sources to reduce dependency on fossil fuel-based energy sources, are in a dynamic stage and will need to be reassessed.

While the economic consequences of the conflict in Ukraine are still unclear, the current fiscal framework compels Member States to adopt pro-cyclical fiscal policies. The underlying fiscal rules remain complex, rely on unobservable variables, lack transparency and have failed to sufficiently preserve the level of public investment during periods of fiscal consolidation. Furthermore, since the containment of the pandemic led to a heavy deterioration of public finances, the current framework does not sufficiently differentiate between Member States with markedly different fiscal positions, sustainability risks and other vulnerabilities.

The review of economic governance, launched in February 2020 and updated in October 2021, further raises the question of how ‘the design, governance and operation of the NGEU/RRF provide useful insights in terms of economic governance through improved ownership, mutual trust, enforcement and interplay between the economic and fiscal dimensions’. This is particularly pertinent, since potential obstacles to implementing NGEU can concern both financing and spending.

On the financing side, the provision of support under NGEU would not be possible without successful borrowing operations conducted by the European Commission on behalf of the EU. This is a relatively new and challenging role, particularly given the unprecedented scale of the issuing operations and the record time in which the infrastructure for it had to be set up. Therefore, any disruptions or delays to implementing the EU borrowing strategy could have an impact on achieving NGEU’s objectives. Although the borrowing has been successful so far, the situation could change if the war in Ukraine escalates, market conditions deteriorate, or if doubts arise regarding how NGEU funds are used and governed.

Another financing aspect, the repayment of NGEU-related debt, has been projected in the context of an upcoming reform of the OR system. Over the years, such reforms have proven to be a difficult process, which indicates there is a risk of a delay or blockage of the reform of the OR system this time as well. Apart from the complexity of the adoption process, the need for a unanimous decision by all Member States when negotiations happen in the spirit of juste retour, rather than that of common interest and European added value, makes the process inherently difficult and even more so when discussing projections of the impact of novel policies. A potential delay or blockage of the introduction of new own resources could threaten the EU’s investment and policy implementation capacity, especially at a time of additional demand for policy responses created by Russia’s war on Ukraine. It could also intensify political debates on the EU budget, as it could lead to an increase in the share of GNI-based contributions. A potential delay or blockage would be even more problematic in the event of increased interest rates on NGEU debt, considering its magnitude, or other unforeseen external shocks.

On the spending side, the risk is mainly related to the possibility of misusing or wasting resources under the NGEU. Concerns relate to the limited budgetary scrutiny over the borrowed funds, and to the transparency of the performance-based implementation and disbursement method of the RRF, which differs to the approach used for EU budgetary instruments so far. Analysts raise the issue that speedy implementation of such large amounts should not take place at the cost of quality of reforms and investments, and proper control of spending, also in the context of rule of law conditionality. They highlight a risk of fraud and corruption. These concerns are all the greater with the off-budget character of NGEU resources and, consequently, limited transparency and democratic scrutiny of spending. Treated as external assigned revenue, NGEU resources are not part of the usual budgetary procedures and are not subject to the same control as the MFF programmes. Moreover, the involvement of the European Parliament as the budgetary authority is restricted.

Policy proposals by experts and stakeholders

The required total investment levels will remain high (see ‘In focus’) to pave the way towards a green, digital and resilient economy (€650 billion a year until 2030 according to the European Commission). Hence, an effective policy framework that incentivises and enables investment is crucial to sustain the level of investment needed for the green and digital transition. The ongoing review of the European economic governance framework provides an opportunity to reform the EU’s fiscal rules to ensure that they enable Member States’ investment and reform policies, while safeguarding sound public finances.

Various reform proposals have been outlined, from simply increasing the debt ceiling to 100 %, to a country-specific debt anchor or a simplified two-tier framework that consists of an expenditure rule linked to a debt anchor, to abandoning fiscal rules entirely and instead suggesting a set of fiscal standards. Other proposals argue for a fiscal policy anchor related to government interest payments or emphasise the need for a ‘green golden rule‘ tailored towards necessary (green) public investment.

The successful launch of NGEU and the RRF is seen as a turning point for the EU. It has demonstrated that joint borrowing as a way of financing the EU’s common needs is politically and legally possible, and has added a new dimension to the debate on a fiscal capacity for the euro area, reforming the European Semester, and financing the EU’s common needs, for instance related to the green and digital transformations. Some analysts consider transforming NGEU into a permanent facility to be a key priority for reinforcing the EU’s economic policy framework. They see it as a way to solve many challenges that the EU is facing. Some experts offer scenarios on developing NGEU into a permanent instrument.

It is emphasised by some experts that a positive evaluation of the implementation of NGEU and the RRF, in particular, will be crucial for a decision on using it as a template for any future instruments. Among the aspects that need improving, analysts mention anti-fraud measures, transparency, control mechanisms, broadening the accountability of RRF management and better involvement of national parliaments, the European Parliament and social and regional partners.

The idea of extending NGEU to cover new objectives or even to resort to new joint borrowing gained even more momentum after Russia’s invasion of Ukraine put the EU on the path to a new crisis. Although controversial, and probably insufficient to cater for the needs, the issuance of new joint debt remains one of the options under consideration. In the meantime, NGEU’s unused loans (so far, only seven Member States have asked for them and some €200 billion is still available) can offer some immediate flexibility and support for action on energy security, defence, humanitarian aid or migration.

Position of the European Parliament

Whereas a substantial share of the investment will be borne by the private sector, public investment will have to increase as well. To mobilise private investment more efficiently, a functioning Banking Union and progress on the Capital Markets Union are crucial, including action on sustainable finance. On the fiscal side, the Parliament stressed in its own-initiative report on the Annual Sustainable Growth Strategy 2021 that ‘the focus should be on forward-looking policies and investments, especially in those Member States that have fiscal room for manoeuvre to invest’ and ‘that the RRF creates a unique opportunity for delivering the reforms and investments needed for the EU to get ready to cope with the present challenges’.

The European Parliament’s role in the overall management and scrutiny of NGEU is bigger than with other intergovernmental tools created in response to various crises over the last decade, such as the European Stability Mechanism. Still, it is rather limited due to the legal basis chosen for the creation of the recovery instrument (Article 122 of the Treaty of the Functioning of the EU), the treatment of the resources borrowed as external assigned revenue (see above), and in comparison with the role it has as the EU’s budgetary and discharge authority. As a result, although the Parliament is a co-legislator for the biggest part of NGEU, the RRF, the scrutiny and discharge functions over spending are compromised. The Parliament sees it as a risk to central budgetary principles and calls for more transparency in the implementation process, and for relevant changes to the financial rules applicable to the general budget, in particular making external assigned revenue an integral part of the budget.

Other key aspects discussed and monitored by Members of the European Parliament concern the quality of the reforms and investments included in the NRRPs, risks and delays in the implementation process, assessment of the payment requests and verification of the milestones and targets that are the condition for payments. Also under discussion are equal treatment of the Member States, application of rule of law conditionality, and involvement of national parliaments and regional and local authorities in implementing the RRF.

In the draft report on the borrowing to finance NGEU, the Parliament underlines that further investment in EU policies will be necessary to strengthen EU competitiveness and strategic autonomy, in particular regarding industry and climate action, and considers that NGEU is a good example of a viable architecture for funding above the MFF ceilings. Moreover, notwithstanding its reservations on the functioning and scrutiny of NGEU, as mentioned above, the Parliament calls on all EU institutions to ensure that this instrument is given a longer-term political vision.

The European Parliament has demonstrated long-term commitment to the reform of the own resources system. It has acknowledged the necessity to conduct such reform and has called consistently for the introduction of a basket of new own resources, which will diversify revenues, unload the pressure on the GNI-based resource and guarantee the EU’s capability to repay NGEU-related debt without risking limitation of existing EU policies. In its resolution on the reflection paper on the future of EU finances, the European Parliament stressed that additional political priorities should be coupled with additional financial means and not be financed to the detriment of existing EU policies. There is an ongoing debate in the Parliament over whether the revenues collected under the newly proposed types of own resources should be assigned to particular policies, or whether the fundamental principle of universality of the budget should be observed.

In focus: the European growth model
The European economy is undergoing unprecedented transformation in the context of major uncertainties linked to the global and security outlook. As outlined in European Commission’s Communication on the European Growth Model, the transformation relies on two equally important pillars: investments and reforms. On the one hand, investments are pivotal for sustained and sustainable growth. On the other hand, our economic structures and the regulatory framework, such as the fiscal framework, should support the economic transformation and be conducive to investment. Coherence between fiscal surveillance and economic policy coordination will be an integral part in this endeavour in order to align investment and reform policies in the Member States as well as national and EU instruments and objectives.
In an environment of geopolitical instability and rising global challenges, doubling down on the green and digital transition has become even more urgent to ensure the phasing out of EU dependency on Russian gas, oil and coal imports. The informal European Council in March 2022 in Versailles proposed a pathway to a new growth and investment model to make Europe independent from Russian fossil fuels well before 2030. The European Commission is invited to propose, by the end of May 2022, a REPowerEU plan that should reduce fossil fuel imports by two thirds within one year, building on the extensive work that has been done already on national recovery and resilience plans. Possible action

Written by Agnieszka Widuto.

Following Russia’s invasion of Ukraine, the EU is considering how it can rapidly reduce its dependence on Russian fossil fuels. The European Parliament has called for an embargo on Russian coal, oil and gas. The European Commission’s ‘RePowerEU’ plan will mark out the next steps.

Background

Russia’s war against Ukraine has wide-ranging implications for energy supply, with the EU dependent on Russia for approximately 45 % of its gas imports, 27 % of its oil imports and 46 % of its coal imports in 2021. Measures to address this dependency are already under way, with the EU agreeing to phase out Russian coal imports and discussing the same for oil, which is particularly lucrative for Russia.

The Commission’s RepowerEU plan, announced in a communication on 8 March 2022 (with details to follow in May), is geared towards freeing the EU from its dependency on Russian fossil fuels. This will be achieved by diversifying gas supply, e.g. by means of imports from non-Russian suppliers, and by increasing the use of liquefied natural gas (LNG). However, these steps alone will not be enough to replace supplies from Russia. The EU is therefore also aiming to bring about an accelerated shift away from fossil fuels by means of increased energy efficiency and use of renewables (wind and solar capacity, green hydrogen, heat pumps, electrification, and faster permits for renewable energy projects). The plan also suggests measures relating to energy pricing (taxes on windfall profits, price regulation, State aid) and gas storage (storage obligations, coordinated gas refilling and investigations into operators’ behaviour). The EU has meanwhile adopted a number of other measures to address energy challenges, building on the European Green Deal and the ‘fit for 55‘ package.

Current legislative proposals

Along with the RepowerEU communication on 23 March 2022, the Commission adopted a legislative proposal for obligatory gas storage rules (amending two other regulations). The proposed rules include the obligation for Member States to fill all gas storage sites to at least 80 % by November 2022 (and 90 % in subsequent years), new mandatory certification for storage system operators and a 100 % transmission tariff discount for gas storage facilities. The file is currently being negotiated by the co-legislators under an urgent procedure, so that it can take effect from summer 2022.

Already before the war, on 15 December 2021, the Commission had adopted a hydrogen and decarbonised gas markets package, modifying three key legislative acts: the 2009 Gas Regulation, the 2009 Gas Directive and the 2017 Security of Gas Supply (SoGS) Regulation. The recast proposal on the EU Gas Directive and the recast proposal on the EU Gas Regulation outline common rules for hydrogen, renewable and natural gas markets. They establish a new legislative framework for hydrogen networks, introduce new definitions for renewable gases and hydrogen, extend consumer rights, and contain new provisions on transmission and distribution systems operators, independent regulatory authorities, third-party access and integrated network planning. Furthermore, the regulation introduces a 75 % tariff discount for hydrogen and renewable gases accessing the gas grid (100 % in the first year after the regulation is adopted). Meanwhile, a targeted revision of the 2017 Security of Gas Supply Regulation would introduce a new definition of ‘strategic stock’, encourage cross-border cooperation on gas storage and LNG imports, allow a voluntary mechanism for Member States to jointly procure strategic gas stocks, and proposes a series of measures to counter cybersecurity threats to EU gas networks.

As part of the Green Deal, the European Parliament is also currently negotiating the revision of the Renewable Energy Directive (RED) and the Energy Efficiency Directive (EED).

Non-legislative initiatives

In order to tackle rising energy prices, on 13 October 2021 the Commission published a communication containing an energy prices toolbox, designed to mitigate the impact of rising prices on consumers and businesses. The immediate measures include income support for vulnerable consumers, temporary deferrals for bill payments, reduced taxation rates, and aid for companies and industries. The medium-term measures include boosting investment in renewables, energy efficiency and storage capacity.

On 23 March 2022, the Commission published a communication entitled ‘Security of supply and affordable energy prices: Options for immediate measures and preparing for next winter’, exploring options to tackle high energy prices and announcing that the Commission stands ready to establish a task force to develop common gas purchases at EU level. At the same time, the Commission adopted another communication outlining a temporary crisis framework for State aid measures following Russia’s invasion of Ukraine. In the field of energy, this enables Member States to assist companies affected by the sharply increasing gas and electricity prices, for instance through direct grants and liquidity support.

The EU has further strengthened its energy collaboration with the United States. On 25 March 2022, the Commission made a joint statement with the US on European energy security. More specifically, this EU-US energy cooperation will include increased delivery of LNG from the US, accelerate the roll-out of LNG infrastructure in the EU, pool demand through the newly established EU energy platform, and establish a joint task force on energy security. In addition, the EU-US Energy Council will continue its work on energy security, energy diversification, just transition and technology exchange.

Parliament’s position

In a resolution of 7 April 2022 on the conclusions of the European Council meeting of 24-25 March 2022, Parliament called for an immediate, full embargo on Russian imports of oil, coal, nuclear fuel and gas, and for complete abandonment of Nord Stream 1 and 2. It strongly advocated an EU plan on security of energy supply in the short term and highlighted the importance of diversifying energy resources, technologies and supply routes, including collaboration with non-Russian trading partners. Parliament also supported further investment in energy efficiency, renewable energy, gas and electricity storage solutions.

In its first resolution on Russian aggression immediately after the start of the war, on 1 March 2022, Parliament called for restrictions on Russian goods, including oil and gas, and emphasised the need to reduce dependence on Russian energy. It called for diversification of sources (e.g. by expanding LNG terminals), unbundling gas storage, increasing energy efficiency and accelerating the clean energy transition. It also called for abandonment of Nord Stream 2, monitoring of the stability of energy prices, an end to collaboration in the nuclear field and exploration of options to ensure uninterrupted gas supply.

Council and European Council position

At the European Council’s informal meeting on 10-11 March 2022, the Heads of State or Government adopted the Versailles Declaration, which focused, among other issues, on reducing the EU’s energy dependence on Russia. The declaration calls for diversification of supplies (e.g. through LNG and biogas), development of a hydrogen market, faster development of renewables, streamlined authorisation procedures for energy projects, improved interconnection of gas and electricity networks, reinforced contingency planning for security of supply, improved energy efficiency and promotion of more sustainable consumption patterns.

In its conclusions of 24-25 March 2022, the European Council reaffirmed its intention to phase out Russian gas, oil and coal imports as soon as possible and called for action to address high energy prices. It also stressed the importance of refilling of gas storage across the EU and improving interconnections.

On 2 May 2022 the extraordinary Energy Council met in Brussels, in the aftermath of Gazprom’s decision to halt gas delivery to Poland and Bulgaria. The ministers responsible for energy stressed their solidarity with Ukraine and the countries affected by Gazprom’s action. They discussed EU preparedness in the event of a supply crisis and potential emergency and solidarity measures, and welcomed the swift progress so far on the urgent gas storage regulation. They also agreed to continue their coordinated collaboration with international partners and to establish a European gas purchasing platform, with a view to guaranteeing energy supply at affordable prices.

Read this ‘at a glance’ on ‘Preparing for ‘RepowerEU’: Action for more secure, more affordable and cleaner energy‘ in the Think Tank pages of the European Parliament.

Written by Marie Lecerf.

Russia’s invasion of Ukraine has forced millions of people, amongst which Ukrainian Roma, to seek shelter in neighbouring countries. Roma fleeing Ukraine often face discrimination, segregation, deprivation and prejudice.

Risky humanitarian situation for Ukraine’s Roma

According to United Nations (UN) Refugee Agency (UNHCR) estimates, as of 10 May 2022 more than 5.9 million people, amongst whom Roma, had fled Ukraine to neighbouring countries – mainly to Poland but also to Hungary, Moldova, Romania and Slovakia. Even before the start of the invasion, Ukraine’s Roma population was already considered the country’s most vulnerable minority group, and one which also faced a high level of discrimination.

Since the beginning of the conflict, the Council of Europe (CoE) has reported discriminatory treatments against Roma when fleeing Ukraine. According to civil society organisations and the media, Ukrainian Roma have been facing increasing difficulties along the evacuation route, at border crossing points and on arrival in Europe. Not only have they had to cope with racial discrimination and segregation in transportation, humanitarian assistance and accommodation, but also with food and water deprivation and terrible living conditions as a result of this treatment. Moreover, around 10-20 % of the estimated 400 000 Roma living in Ukraine lack the documents they need to acquire or attest their Ukrainian citizenship and to prove their residence status (around 30 000 Ukrainian Roma have no form of ID). Civil society organisations have voiced concerns that this could result in additional difficulties for Roma fleeing the war. Media reports confirm the above situation, saying that Roma are often denied access to neighbouring countries because they lack the documents to prove their residence status. While the EU Agency for Fundamental Rights (FRA) has not observed incidents of discrimination or racism during its field visits, it is calling for vigilance.

International and EU response

UNHCR is working with partners and local organisations on the ground to reinforce vulnerability screening and referrals for people with specific needs, including Roma. The CoE, as well as humanitarian players and stakeholders, is stressing the need for safe and regular pathways to safety for all persons irrespective of their nationality, ethnicity and religion – including for stateless people and undocumented Roma people. The EU has stepped in to help civilians affected by the war in Ukraine with emergency aid programmes that cover some of their basic needs, and with operational guidelines on simplifying border controls for vulnerable groups at the EU borders. It has furthermore activated the Temporary Protection Directive, giving inter alia rights to a residence permit and to work. On 8 April, the Commission published a statement calling for the protection of Roma people fleeing Ukraine.

European Parliament position

Since the mid-1990s, Parliament has prioritised the fight against all forms of discrimination against Roma people. In a December 2021 resolution, Parliament stressed the need to focus on the situation of vulnerable groups at the Ukrainian border and in Russian-occupied territories of Ukraine. Parliament also recalled that when channelling its humanitarian aid, the EU must pay particular attention to vulnerable groups such as people with disabilities, minorities and other highly marginalised people. At its plenary session in April 2022, Parliament debated the situation of marginalised Roma communities in the EU with Commissioner Helena Dalli, highlighting the need for proper assistance to the Roma fleeing Ukraine.

Read this ‘at a glance’ on ‘Russia’s war on Ukraine: The situation of Roma people fleeing Ukraine‘ in the Think Tank pages of the European Parliament.

Written by Matthew Parry.

The EU has joined partners at the World Trade Organization in imposing import and export bans and other trade restrictions to punish Russian and Belarussian elites and degrade Russia’s military and industrial capacity. Now it is proposing to support Ukraine by temporarily scrapping all tariffs and quotas on Ukrainian imports.

EU trade with Belarus, Russia and Ukraine before the war Share of goods trade among partners, 2021

Of the three countries to the EU’s immediate east, Russia was by far the EU’s most important trading partner, and its fifth largest, when it launched its war on Ukraine. While it accounted for only 5.9 % of the EU’s external goods trade (exports plus imports) in 2021, Russia is nevertheless one of the EU’s most important suppliers of coal, gas and, especially, oil: in 2020, Russia provided almost 45 % of EU mineral fuel imports in euro terms, with crude oil imports accounting for more than three quarters of these imports. The EU is now phasing in a ban on Russian coal imports, however, and debating one on Russian oil imports. Belarus and Ukraine made up only very small shares of the EU’s external goods trade in 2021 – 0.03 % and 1.2 % respectively. Belarus’ main exports to the EU are wood, mineral products and base metals. Ukraine’s exports to the EU include raw materials such as iron, steel, mining products and agricultural products, chemical products, and machinery.

The EU represented a much larger share of the external goods trade of Russia (35.9 %), Belarus (19.9 %) and Ukraine (39.5 %), making the EU the most important partner for both Russia and Ukraine. EU exports to Russia in 2021 consisted mainly of machinery and equipment, motor vehicles, pharmaceuticals, electrical equipment and machinery, and plastics. The EU was also a critical source of investment in Russia, accounting for 48 % of foreign direct investment (FDI) into Russia in 2019. In 2021, the EU’s main exports to Belarus were machinery, chemicals and transport equipment. Exports to Ukraine were mainly machinery and transport equipment, chemicals, and manufactured goods. Since 1997, EU-Russia trade relations have been framed by the trade-related provisions of the bilateral Partnership and Cooperation Agreement (PCA) and, since 2012, Russia’s membership of the World Trade Organization (WTO). Belarus is not a WTO member. Ukraine joined in 2008. An EU-Ukraine association agreement, including a ‘deep and comprehensive free trade area’ (DCFTA), has been provisionally applied since 2016, during which time the EU has become Ukraine’s most important trading partner, ahead of both Russia and China.

Plurilateral joint statement at the WTO

On 14 March 2022, the EU, together with Canada, Japan, the United Kingdom (UK), the United States (US) and nine other WTO members issued a plurilateral joint statement at the WTO on Russia’s invasion of Ukraine with the support of Belarus. The statement expresses solidarity with Ukraine, condemns the invasion as a violation of international law and the UN Charter, and calls on Russia to stop its military aggression immediately and withdraw its forces. It also makes clear the signatories’ intention to disregard Russia’s rights and privileges as a fellow WTO member for the purposes of trade, including – but not limited to – ‘most-favoured-nation’ (MFN) treatment of products and services exported by Russia. In addition, the signatories say that they consider the WTO accession process for Belarus suspended in light of that country’s material support for the invasion.

Consequences under international trade law
MFN treatment is a principle that applies to trade between WTO members, and is one of the founding principles of the WTO and its predecessor agreements: it is provided for in the first article of the 1947 General Agreement on Tariffs and Trade (GATT). It also appears in the General Agreement on Trade in Services (GATS, Article 2) and the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS, Article 4). Under Article I of the original GATT agreement, ‘any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties’. This means that trade privileges granted by a member to another member, such as the elimination or lowering of customs duties or other trade barriers, must be applied universally to all WTO members, with some exceptions (such as in the case of free trade agreements (FTAs) between members, and special market access privileges granted unilaterally to developing countries). Since Russia neither identifies as a developing country nor has an FTA in place with the EU or any of the other 13 joint statement signatories, its exports depend on MFN-based market access.
Without citing it explicitly, the arguments put forward in the joint statement also refer to another important qualification of the MFN principle, namely the security exceptions under GATT Article XXI, which allow members to take trade measures to protect their security interests ‘in time of war or other emergency in international relations’, and to pursue their ‘obligations under the [UN] Charter for the maintenance of international peace and security’. The provision’s invocation in other contexts is controversial, but some analysts conclude that any WTO dispute settlement panel constituted in this case is unlikely to rule against the joint statement’s signatories. The first-ever ruling by a WTO panel on the invocation of GATT Article XXI, in 2019, concerned a dispute between Russia and Ukraine, in which Russia cited the article to justify trade restrictions affecting Ukraine. Trade measures taken by the EU and its partners against Russia and Belarus

Rather than prepare new tariff schedules for Russia and Belarus, the European Commission has applied trade restrictive measures in the form of import and export bans on the two countries under the common foreign and security policy. These include import bans on some Russian and Belarussian steel products, coal, cements, rubber products and wood; on Russian spirits, alcohol and seafood; and on Belarusian potash products. They also include export bans on luxury goods favoured by Russian elites, and on products worth an annual €10 billion for which Russia is highly dependent on EU imports, including quantum computing, advanced semiconductors, sensitive machinery, transportation and chemicals. The total value of all export sanctions imposed on Russia so far is €22.8 billion, 25 % of the EU’s pre-war exports.

A number of EU partners and co-signatories of the WTO plurilateral joint statement have imposed trade restrictions on Russia in the form of both import and export bans and tariff increases. The US, less dependent than the EU on Russian energy imports, has banned all Russian and Belarusian oil, liquefied natural gas and coal imports, and introduced export controls on technologies such as semiconductors, computers, telecommunications, lasers, and equipment for the oil and gas industries. It has also raised tariffs on certain fuels and metals. Similar measures have been introduced by Canada, Japan and the UK.

EU trade measures in support of Ukraine

On 27 April 2022, the European Commission published a proposal for a regulation suspending for one year all import duties and quotas on Ukrainian exports to the EU, including anti-dumping and safeguard measures in place on Ukrainian steel exports. The regulation would supplement trade concessions granted under the EU-Ukraine DCFTA, by immediately eliminating tariffs on, for example, agricultural products, fertilisers, aluminium articles and cars, and is aimed at bolstering Ukraine’s external trade in the face of significant wartime disruption, including Russia’s blockade of Ukraine’s Black Sea ports. The EU is working with Member States to redirect Ukraine’s exports through land-based ‘solidarity lanes‘, by liberalising conditions for truck drivers and making available EU transportation infrastructure. The day the proposal was published, the European Bank for Reconstruction and Development (EBRD), in which the EU is a shareholder, announced a €100 million increase in its trade finance assistance to Ukraine. As Ukraine is also a major exporter of cereals and cooking oils, part of the additional EBRD funding is focused on food security.

Read this ‘at a glance’ on ‘Russia’s war on Ukraine: EU trade policy‘ in the Think Tank pages of the European Parliament.

Written by Luisa Antunes and Clément Evroux.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: The challenge and the existing gaps Cases and variants of concern Cases

As of 7 March 2022, 450 million cases and 6 million deaths had been reported worldwide since the start of the pandemic. Of these, 115 million cases and 1 million deaths had been recorded in the EU. Although alarming, these numbers are still an underestimation, as vaccination and the emergence of new variants have led to an increase in asymptomatic cases and, consequently, to under-reporting and under-ascertainment. On a positive note, vaccination figures continue to grow, with 64 % citizens worldwide already having received at least one vaccine dose, and 75 % in the EU.

Variants

Four ‘variants of concern’ are currently circulating worldwide: Omicron, first identified in South Africa in November 2021; Delta, first identified in India in December 2020, and Beta and Gamma, first identified in September 2020 in South Africa and Brazil, respectively.

In addition, keeping the pandemic in check involves the constant monitoring of new ‘variants of interest‘ that could pose a future threat to global public health. At the moment, these include Mu, first identified in Colombia, and Lambda, from Peru. Both currently only show sporadic transmission in the EU and have an unknown impact on Covid-19 disease severity.

Omicron, currently the dominant variant in the EU, has emerged too recently for its epidemiology and pathogenicity to be fully understood. It seems to carry a five-fold higher risk of reinfection compared with the previous dominant variant, Delta. It is also more transmissible than Delta. This could be due to mutations in the spike protein that allow it to escape the host immunity more easily, as well as its increased ability to colonise the upper respiratory tract. In contrast, Omicron seems to show reduced disease severity compared with Delta, partly on account of slower growth in lung tissue. Four Omicron sub-lineages are currently in circulation. BA.1 is the current prevalent sub-lineage and BA.2 is steadily emerging worldwide, with the possibility of overcoming BA.1 in the coming months and delaying a current downward curve heading out to the summer. Several differences in the spike protein composition separate BA.1 from BA.2, with BA.2 reproducing twice as fast as BA.1 and seemingly more transmissible.

‘Long Covid’

Although the figures for infection cases, hospital occupancy and deaths are continuing to fall modestly in the EU, with Omicron seeming to cause less severe symptoms overall compared with previous variants, one aspect of the disease that is still not totally clear is the persistence of Covid‑19‑associated symptoms over more than three months (commonly defined as ‘Long Covid’). Reports differ depending on the methods used, but more than half of infected people have reported experiencing at least one chronic complication following Covid-19 infection, including type 1 diabetes, myocarditis and reduced respiratory capacity. In addition, many patients report extreme fatigue, memory issues, ‘brain fog’, tinnitus and depression. Research will continue to ascertain the biological causes and the full extent of the Covid-19 health impact, years into the pandemic. What is certain is that Covid-19 has the capacity to affect virtually all the organs of the body, to varying degrees of severity, and that these symptoms are a result of the viral capacity to infect the central nervous system, heart and lungs. Possible risk factors include type 2 diabetes, circulating SARS-CoV-2 mRNA fragments, Epstein-Barr virus viremia and specific autoantibodies. The differences between variants are not clear. However, vaccination has been shown to protect against ‘Long Covid’.

Medium-term scenarios

It is difficult to predict when the Covid-19 pandemic will evolve into an endemic state. The main factors involved are the parallel ‘race’ between increased immunity due to both natural recovery from infection and vaccination campaigns, and the emergence of new variants potentially able to escape acquired immunity. The World Health Organization (WHO) optimistically predicts an end to the acute phase of infection this year, if vaccination campaigns continue and the global vaccination rate reaches at least 70 % in the coming months.

Varied levels of vaccine distribution worldwide could hamper these plans, as higher topical virus circulation will serve as a hotbed for the emergence of new variants with the potential to escape immunity. In this regard, it could be argued that vaccine equity is an urgent goal that transcends local population needs and serves a common global interest of leading the way out of the pandemic.

Once it reaches an endemic state, Covid-19 could see an annual seasonal curve similar to that of influenza, with an autumn-winter peak in the EU. This tendency to seasonality has already started to emerge and is influenced by lower temperatures and intermediate relative humidity, which allow the virus to survive and remain in suspension in smaller water particles for longer periods of time, especially in closed environments with little aeration. Disease severity will depend on individual risk, affecting mostly the elderly, the immunocompromised and the unvaccinated. Of note, circulation in animal reservoirs, including domestic cats and dogs, could lead to the repeated emergence of new, immuno-resistant variants.

Preparedness and management

Crisis preparedness and management will depend on three main factors: the detection and surveillance of new variants; vaccination and therapeutic options; and voluntary protective behaviours (mask wearing, social distancing and isolation when showing symptoms or infection detected).

Surveillance

A possible solution for the under-reporting that arises with the asymptomatic cases that are more prevalent with Omicron is the surveillance of waste water. This strategy of random sampling allows continuous monitoring of viral circulation levels and the detection of new variants, while removing the logistical and socioeconomic burden of long-term active PCR (polymerase chain reaction) monitoring. It could be used in conjunction with more active monitoring in cases of sporadic local outbreaks, which will be a likely future scenario for Covid-19. In addition, it would concomitantly allow other common human pathogens to be monitored.

Vaccines and immunity

Vaccination has been shown to be successful in reducing the risk of severe and lethal Covid-19 (60‑70 % probability of protection from Omicron, with no decline). It also helps alleviate less severe symptoms, but with less probability and stability over time: protection from Omicron drops from 60 % to 10 % after five months, for both second and third doses; it is lower compared with other variants and wanes faster.

A fourth vaccine dose has been found to be useful in managing the disease, as it doubles protection against infection and quadruples protection against severe infection. However, even with variant-targeted vaccines, full protection has never been verified. Therefore, other protection measures, such as mask wearing, ventilation, and distancing, continue to be fundamental to preventing transmission and consequently dampening disease severity.

Therapeutics

A few treatment options for potential over-the-counter use are currently under review by the European Medicines Agency (EMA). Paxlovid, an antiviral pill developed by Pfizer, has received conditional marketing authorisation from EMA and is already being rolled out in the UK. It has shown 90 % efficacy in preventing hospitalisation and death. Lagevrio, a second antiviral option developed by Merck, is currently under marketing evaluation by EMA. Unfortunately, it shows only 30 % efficacy in preventing infection and could have associated mutagenic risks.

For severe and critically-ill patients requiring hospitalisation, several types of medicinal products are already available and at use in hospitals. These are classified as systemic corticosteroids, immunomodulatory agents, monoclonal antibodies against SARS-CoV-2 and antivirals.

Antibiotics will continue being prescribed for patients with suspected bacterial co-infections or secondary infections, which are quite rare.

Convalescent plasma, that is, the administration of plasma with antibodies from patients who have recovered from Covid-19, has not been recommended by the WHO, as its benefits are unproven.

Medium-term scenarios

It is difficult to predict when the Covid-19 pandemic will evolve into an endemic state. The main factors involved are the parallel ‘race’ between increased immunity due to both natural recovery from infection and vaccination campaigns, and the emergence of new variants potentially able to escape acquired immunity. The World Health Organization (WHO) optimistically predicts an end to the acute phase of infection this year, if vaccination campaigns continue and the global vaccination rate reaches at least 70 % in the coming months.

Varied levels of vaccine distribution worldwide could hamper these plans, as higher topical virus circulation will serve as a hotbed for the emergence of new variants with the potential to escape immunity. In this regard, it could be argued that vaccine equity is an urgent goal that transcends local population needs and serves a common global interest of leading the way out of the pandemic.

Once it reaches an endemic state, Covid-19 could see an annual seasonal curve similar to that of influenza, with an autumn-winter peak in the EU. This tendency to seasonality has already started to emerge and is influenced by lower temperatures and intermediate relative humidity, which allow the virus to survive and remain in suspension in smaller water particles for longer periods of time, especially in closed environments with little aeration. Disease severity will depend on individual risk, affecting mostly the elderly, the immunocompromised and the unvaccinated. Of note, circulation in animal reservoirs, including domestic cats and dogs, could lead to the repeated emergence of new, immuno-resistant variants.

Preparedness and management

Crisis preparedness and management will depend on three main factors: the detection and surveillance of new variants; vaccination and therapeutic options; and voluntary protective behaviours (mask wearing, social distancing and isolation when showing symptoms or infection detected).

Surveillance

A possible solution for the under-reporting that arises with the asymptomatic cases that are more prevalent with Omicron is the surveillance of waste water. This strategy of random sampling allows continuous monitoring of viral circulation levels and the detection of new variants, while removing the logistical and socioeconomic burden of long-term active PCR (polymerase chain reaction) monitoring. It could be used in conjunction with more active monitoring in cases of sporadic local outbreaks, which will be a likely future scenario for Covid-19. In addition, it would concomitantly allow other common human pathogens to be monitored.

Vaccines and immunity

Vaccination has been shown to be successful in reducing the risk of severe and lethal Covid-19 (60‑70 % probability of protection from Omicron, with no decline). It also helps alleviate less severe symptoms, but with less probability and stability over time: protection from Omicron drops from 60 % to 10 % after five months, for both second and third doses; it is lower compared with other variants and wanes faster.

A fourth vaccine dose has been found to be useful in managing the disease, as it doubles protection against infection and quadruples protection against severe infection. However, even with variant-targeted vaccines, full protection has never been verified. Therefore, other protection measures, such as mask wearing, ventilation, and distancing, continue to be fundamental to preventing transmission and consequently dampening disease severity.

Therapeutics

A few treatment options for potential over-the-counter use are currently under review by the European Medicines Agency (EMA). Paxlovid, an antiviral pill developed by Pfizer, has received conditional marketing authorisation from EMA and is already being rolled out in the UK. It has shown 90 % efficacy in preventing hospitalisation and death. Lagevrio, a second antiviral option developed by Merck, is currently under marketing evaluation by EMA. Unfortunately, it shows only 30 % efficacy in preventing infection and could have associated mutagenic risks.

For severe and critically-ill patients requiring hospitalisation, several types of medicinal products are already available and at use in hospitals. These are classified as systemic corticosteroids, immunomodulatory agents, monoclonal antibodies against SARS-CoV-2 and antivirals.

Antibiotics will continue being prescribed for patients with suspected bacterial co-infections or secondary infections, which are quite rare. Convalescent plasma, that is, the administration of plasma with antibodies from patients who have recovered from Covid-19, has not been recommended by the WHO, as its benefits are unproven.

Existing policy responses European health union package

The European health union initiative draws on the lessons learned from the pandemic. It aims to strengthen the EU’s health security framework, while also reinforcing the crisis preparedness and response role of key EU agencies. It is composed of a set of legislative and non-legislative acts[i] that are all directly relevant to the tasks and governance of the Health Emergency Preparedness and Response Authority (HERA).

HERA has been set up to strengthen the EU’s ability to prevent, detect, and rapidly respond to cross-border health emergencies, by ensuring the development, manufacturing, procurement, and equitable distribution of key medical countermeasures (i.e. vaccines and therapeutics). An early milestone of this cooperation is VACCELERATE, the first EU-wide network for Covid-19 vaccine trials, launched as part of the HERA incubator. Preparedness efforts also include forming resilient industrial capacities to ensure timely and commensurate supply of counter-measures. HERA will establish EU FAB, a network of ‘ever-ready’ multi-technology production capacities for vaccine and therapeutics manufacturing in the EU. The objective is to unlock a production capacity of 700 million doses of vaccine, of which 50 % within six months following the breakout of a crisis situation.

HERA activities will cover preparedness and crisis phases. This will lead to governance based on two main operation modes (preparedness and crisis). This calls for smooth interplay with other EU institutions and agencies (such as the EMA or the ECDC), Member States and stakeholders. Through their recovery and resilience plans, Member States are expected to contribute further to resilience and preparedness.

Future cross border health threats could also be of a non-infectious nature. HERA will conduct a technology review and gap analysis on antimicrobial resistance (AMR) medical countermeasures (expected towards the end of 2022). These new capabilities complement the Commission’s EU ‘one health’ action plan against AMR, which aims to promote best practices for antimicrobials and boost research and innovation. The European Food Safety Authority (EFSA) also plays a key role in fighting AMR by monitoring resistance in food and animals. For this it uses data from Member States, and provides independent scientific advice on risk assessments in collaboration with the ECDC and EMA. HERA also plans to monitor human-made threats such as a bio-terrorism, including chemical, biological, radiological and nuclear (CBRN) threats.

Tackling the infodemic

The Covid-19 pandemic broke out at a time when the profile and impact of misinformation and disinformation are facilitated by various trends, including digitalisation. The EU had already adopted initiatives to tackle the phenomenon. For instance, in 2016, the Commission and the High Representative/Vice-President of the Commission (HR/VP) set out a joint framework on countering hybrid threats. The Covid-19 pandemic magnified the global reach and risks of this trend, to the extent that the WHO adopted the concept of ‘infodemic‘ (i.e. too much information including false or misleading information in digital and physical environments during a disease outbreak). In 2021, the Commission included ‘improving the coordination and sophistication against disinformation’ as one of the top 10 lessons drawn from the pandemic.

Figure 38: Responding better to future pandemics Obstacles to implementation Beyond pandemics

It is important to bear in mind the threat of risk aggregation, between risks to health and other risks identified in this report. For example, semiconductor supply chain interruption (and in an extreme situation, collapse of the internet) could have a major impact on health systems, and vice versa, as seen during the Covid-19 pandemic. In this regard, the EU Chips Act will pool resources and provide a new framework to ensure security of supply, and HERA plans ensure the availability of critical technologies and production sites for medical countermeasures. Furthermore, the risk of extreme weather events brought about by climate change, like the floods seen across the Benelux region and Germany in 2021, could cause widespread fatalities.

This further highlights the need for a single EU approach to health, as the health of the human population and of the planet go hand in hand. Similarly, international conflicts may hamper the effectiveness of the international dimension of the EU’s vaccine strategy. Acting together as ‘Team Europe‘, the EU, its Member States, and financial institutions, in particular the European Investment Bank and the European Bank for Reconstruction and Development, is expected to invest over €3 billion to help secure 1.8 billion doses of vaccines for 92 low and middle-income countries in 2021 and 2022.

Policy proposals by experts and stakeholders

HERA has been commented on by several stakeholders’ organisations. The European Public Health Alliance (EPHA) has stressed the global relevance of HERA’s activities. According to EPHA, HERA’s results should, where relevant, reflect the public good dimension, as well as ensuring affordability, accessibility and availability. A network of 19 pan‑European organisations representing patients, consumers, health professionals, and civil society, coordinated by the European Alliance for Responsible R&D and Affordable Medicines, have voiced their preference for an inclusive and transparent governance scheme, to allow all interested actors to take part, including patients.

Under the Conference on the Future of Europe, European Citizens’ Panel 3: ‘Climate change and the environment / Health’ adopted several recommendations relevant to HERA, including for instance recommendation 43, which will be taken forward to the Conference Plenary: ‘We recommend that the European Union increases its budget dedicated for joint research and innovation projects in the area of health (without budget cuts in other EU health-related programmes). This would also strengthen European scientific and research institutions overall’.

Position of the European Parliament Health Emergency Preparedness and Response Authority (HERA)

While supporting the aims of HERA in general terms, Parliament – in its October 2021 resolution on EU transparency in the development, purchase and distribution of Covid-19 vaccines – criticised the Commission’s decision to refrain from using the ordinary legislative procedure through Article 168 TFEU in setting up HERA, thus failing to establish HERA as a fully-fledged independent agency subject to the same scrutiny requirements as other agencies, such as the EMA and the ECDC. The Parliament regretted ‘the fact that the Commission’s approach, which has led to Parliament being excluded from designing and overseeing the work of HERA, can be regarded as yet another shortcoming that has undermined transparency and accountability for public spending and decision-making in the area of public health’.

Parliament further stressed the importance of accountability, including parliamentary monitoring of HERA, in its November 2021 resolution on a pharmaceutical strategy for Europe. None of the European health union proposals and initiatives has been subject to a formal impact assessment. In this context, the Parliament’s monitoring competence, such as budgetary control, will be key to assessing the effectiveness and efficiency of the European health union’s implementation, including HERA’s activities. However, the evaluation framework developed under the health union differs significantly from that established under the US Pandemic and All Hazards Preparedness Act. While the US legislator ensures congressional oversight of the evaluation by including several provisions that require the assistant secretary for preparedness and response also to report annually to the ‘relevant committees of Congress’, the European Parliament committees are not mentioned in connection with a review of HERA. Article 8 of the Commission decision establishing HERA mentions only an obligation for the Commission to report to the European Parliament, to the Council and to the HERA Board on a review of implementation of HERA’s operations by 2025.

In terms of HERA’s mandate, Parliament has adopted various resolutions that either make direct reference to, or offer relevant guidance on, HERA. In its July 2021 resolution on trade-related aspects and implications of Covid-19, the Parliament emphasised the key role played by public sector resources, allowing pharmaceutical companies to de-risk the whole vaccine value chain; it also considered that a multilateral intellectual property rights (IPR) framework could offer the protection and incentives that are critical for preparedness against future pandemics. In its May 2021 resolution on accelerating progress and tackling inequalities towards ending AIDS as a public health threat by 2030, Parliament encouraged the Commission and the Member States to explore the decoupling of research and development spending from the price of medicines, for instance through the use of patent pools, open source research, and grants and subsidies. In its above-mentioned November 2021 resolution on a pharmaceutical strategy, Parliament considered that HERA should initiate and support the development of innovation, establish an EU-level list of medicinal products of major therapeutic interest, facilitate their production within the EU, promote their joint purchase, and build up strategic stocks of these medicines.

In November 2021, the Parliament reflected further on HERA when adopting its first reading position on the proposal for a regulation on serious cross-border threats to health. In particular, the Parliament adopted several amendments aimed at ensuring HERA’s visibility in different key processes and schemes established, and at facilitating the coordination with the set of bodies to be established under the proposal for a regulation on the emergency framework of measures for ensuring the supply of crisis-relevant medical countermeasures.

Infodemic

The European Parliament has been tackling the infodemic situation since the early phase of the Covid-19 pandemic. With the resolution of 17 April 2020, it stressed that disinformation surrounding Covid-19 is a major public health problem and that everyone should have access to accurate and verified information.

In its resolution of 24 November 2021 on a pharmaceutical strategy for Europe, the Parliament stressed the importance of strategic public information, to facilitate the dissemination of knowledge and solutions, beyond the health dimension of the ‘infodemic’.

Furthermore, with its resolution of 11 November 2021 on ‘Strengthening democracy, media freedom and pluralism’, it highlighted that independent and high quality journalism and civil society organisations play a crucial role as guardians of democracy and the rule of law by holding power to account and fighting disinformation and misinformation.

Health beyond the Covid-19 pandemic

The rising incidence of non-communicable diseases (NCDs) places a major burden on European healthcare systems, costing €700 billion in treatment each year. The development of the EU’s capabilities for health monitoring, research, and data analysis through the European health union could contribute to better understanding and coordination to combat NCDs. For example, cancer is the second leading cause of mortality in the EU (after cardiovascular diseases), with 2.6 million diagnoses and 1.2 million deaths every year. To address this, one main pillar of the European health union is Europe’s beating cancer plan, which will have a budget of €4 billion to improve early detection, ensure equal access to diagnosis and treatment, and improve quality of life of patients and survivors. MEPs on the Special Committee on Beating Cancer (BECA) considered this plan ‘a first step towards a real European Health Union’. At its final meeting, BECA Members voted overwhelmingly in favour of the rapporteur’s report, which contains over 1 500 amendments to the plan, arranged across 10 proposals.

Other NCDs, such as obesity, cardiovascular diseases, and mental health disorders, do not currently have dedicated EU action plans. Nevertheless, other proposed initiatives under the European health union, such as the pharmaceutical strategy and the European Health Data Space, will help to fight these by ensuring, respectively, access to affordable medicines, and better cross-border access and interoperability of health data that could underpin medical research and innovation.

In focus
Managing the risks of the Covid-19 pandemic remains a challenge, not least because of the emergence of new variants, and unequal worldwide vaccination distribution.
While EU vaccination rates have reached three quarters of the population, new SARS-CoV-2 variants keep emerging in the EU. Although these variants appear to be generally less severe, they still pose challenges to health systems: the risk of reinfection is enhanced and transmissibility appears to be higher than with previously dominant variants. At the same time, new variants are likely to continue to emerge until strategies for worldwide vaccination are effective.
Furthermore, the frequency and effects of ‘Long Covid’ (defined as the persistence of SARS-CoV-2-associated symptoms for more than three months) are still under evaluation, requiring further investigation.
Although several drugs to treat SARS-CoV-2 infection have been approved and show effectiveness, vaccination remains the most effective tool against the emergence of new variants and to limit the effects of long Covid. The implementation of a globally effective vaccine strategy therefore remains key to enhancing Europe’s resilience.
If measures are successful, it is expected that SARS-CoV-19 – while still present – will enter a stage of seasonality, characterised by higher case numbers in the winter months, similar to the flu.
To achieve this and manage the pandemic, rethinking present surveillance and monitoring schemes, ensuring the distribution of vaccines worldwide and implementing an action plan against disinformation and misinformation could be important milestones. Possible action

Written by Alex Wilson.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: The challenge and the existing gaps

Defined by the International Energy Agency as ‘reliable, affordable access to all fuels and energy sources’, energy security is vital to the EU’s economy. However, lacking sufficient energy reserves of its own, the EU is critically dependent on imports. In 2020, these covered well over half (57 %) of the EU’s energy needs – a figure which rises to 97 % for oil and 84 % for natural gas.

Heavy reliance on imports creates vulnerabilities. Past risks were highlighted by the 1973 crisis, when an embargo led by Arab oil producers caused oil prices to quadruple, resulting in high inflation, a deep recession and episodes of social unrest. In 2009, Russian gas producer Gazprom halted supplies through Ukraine, leaving several EU countries including Bulgaria and Romania with a severe shortfall for nearly two weeks in the depths of winter. Questions about the reliability of Europe’s main gas supplier were raised again in 2021, when Gazprom’s refusal to supply more than the contractual minimum left European reserves depleted and exacerbated a ‘gas crunch‘, in which surging prices caused hardship to consumers and put dozens of energy companies out of business. Russia’s invasion of Ukraine in February 2022 threatens to further disrupt gas supplies to Europe. The war prompted Germany to suspend certification of the Nord Stream 2 pipeline, and obliged the EU as a whole to find ways to drastically reduce their reliance on energy imports from Russia. The European Commission has proposed a reduction of two-thirds in EU energy imports from Russia by the end of 2022. Reflecting these risks, the European Parliament/Normandy Region’s Normandy Index identifies energy insecurity as Europe’s main external vulnerability.

In the longer run, a major benefit of the transition to renewable sources, together with enhanced energy efficiency measures, is that Europe should become less dependent on imported fossil fuels. Nevertheless, short- and medium-term trends are rather less favourable. In view of the need to cut carbon emissions, most EU countries are phasing out coal use in power production, while post-Fukushima safety concerns have accelerated the end of nuclear power in several Member States. Nevertheless, there is a considerable way to go in terms of developing and commercialising energy storage technologies that can accommodate the variable nature of renewable energy production (in particularly solar and wind power). This means the EU will continue to rely on gas for heating and to a lesser extent for electricity production in the coming years. The transport sector in Europe is also far from decarbonised and heavily reliant on oil based products. Gas imports have in fact been rising as the EU’s own production dries up, with the main EU producing country (The Netherlands) intent on ending its gas production in 2022. Russia has become the EU’s main energy supplier in recent years, responsible for around 45% of gas and coal imports, and around 25% of oil imports. It is likely to remain Europe’s dominant supplier in the gas sector for some time, given that Norway and Algeria (the EU’s second and third largest suppliers) do not have the capacity to replace it, and it remains unclear how much gas the EU can expect to receive from gas fields in Azerbaijan. This means future supply diversification will rely heavily on Liquefied Natural Gas (LNG). LNG offers a key advantage over pipeline supplies because it can be more flexibly shipped in from a wider range of producer countries, including strategic allies such as the USA, without the need for pipelines. However, LNG is generally more expensive than pipeline gas, especially at times of high global demand, while its production and transport system makes it more polluting. Furthermore, access to LNG requires Member States to build dedicated import terminals and integrate these into their gas networks, as well as those of neighbouring countries.

Since the invasion of Ukraine in 2022, energy dependence on Russia has been highlighted as a major geopolitical risk for Europe, which also helps to finance Russian aggression, something that the EU needs to address collectively and as a matter of priority. Over the past 15 years, the EU has made some progress in terms of diversifying gas supplies and better integrating national gas markets (e.g. through enhanced interconnection capacity), so that supply disruptions can be addressed through burden sharing, reverse flows and other tools. This progress is underpinned by EU legislation on security of gas supply, intergovernmental agreements in the energy sector, and the third gas package. Reform of the third gas package and security of gas supply regulation lie at the heart of the hydrogen and decarbonised gas markets package, proposed by the Commission in December 2021, whose primary aim is to help gas markets deliver on the clean energy transition.

Whereas EU legislation has in the past focused on market functioning and diversification of supply, the more recent emphasis has been to transform energy markets in a way that aligns with the EU’s ambitious climate goals. Rather less emphasis has been placed on the price of energy paid by consumers, with the assumption being that lower energy prices would naturally flow from sustainable, functioning and integrated energy markets. Yet as described in Chapter 3, energy prices in the EU rose sharply in 2021 due in large part to the economic recovery from the Covid-19 crisis, and have shot up even further in 2022 because of the Russian invasion of Ukraine. This has led to broader price inflation and a cost of living crisis. While guaranteeing physical energy supplies remains the highest priority, there are growing concerns about how energy is priced in the EU and the mechanisms in place to ensure that consumers (especially vulnerable ones) can afford their energy supplies. The risks otherwise are of growing energy poverty and negative impact on economic growth, as energy use accounts for a high and growing share of consumer spending.

Existing policy responses EU action

The Security of Gas Supply (SoGS) regulation constitutes the main EU framework for ensuring that Member States plan and cooperate closely on security of supply and can support neighbouring countries in the event of a supply disruption. Potential policy responses under the SoGS regulation, which was revised in 2017, include closer regional cooperation over managing energy supplies in a crisis, physical diversion of supplies to help neighbouring countries, and prioritisation of essential services and supplies to households across the EU. Gas security in Europe is further enhanced by measures to ensure the EU has a role in scrutinising intergovernmental agreements and some commercial contracts in the energy field with third countries, and ensuring that EU law also applies to pipelines with third countries. While gas is the biggest concern in terms of security of supply, the EU also has legislation to ensure all Member States develop minimum oil reserves, and takes measures to guarantee security of electricity supply in the event of an unexpected disruption.

Growing national concerns around the rise of energy prices in 2021, discussed extensively in the European Council and in meetings of energy and finance ministers, led to the European Commission adopting a toolbox (October 2021) of targeted interventions that Member States could take to counter these price rises in a way that did not undermine the single market in energy. These include temporary reductions in energy taxes, social payments to vulnerable consumers, and actions to prevent disconnections such as a temporary deferral of payments. Furthermore, the Commission proposed a revision of the SoGS regulation that included greater coordination of gas storage at EU level and voluntary joint purchasing of strategic gas stocks. These suggestions were included as part of the hydrogen and decarbonised gas markets package in December 2021.

The Russian invasion of Ukraine in 2022 has pushed the issue of energy dependency to the fore, with a growing realisation that the EU can no longer rely on Russia as its main energy supplier, and should take concrete actions to curb its energy imports immediately. The Commission proposed a joint European action, entitled REPowerEU (8 March 2022), designed to reduce fossil fuel imports from Russia by 2/3 in 2022, with the goal of making Europe independent from Russian fossil fuels well before 2030. Permitted actions include a relaxation of state aid rules for businesses affected by high energy prices, the possibility of windfall taxes on energy companies that have benefited from the price crisis, and the diversification of gas supplies through greater LNG import capacity and the delivery of alternative pipeline routes. The informal meeting of the European Council on 10-11 March 2022 issued the Versailles Declaration that seeks progress in reducing EU energy dependency on Russia in particular. On 23 March 2022, the Commission proposed an expedited and targeted revision of the SoGS regulation that would require all Member States to fill their gas storage levels to at least 80 % of capacity by 1 November 2022 (rising to 90% in subsequent winters), introduce solidarity mechanisms between Member States when it comes to accessing stored gas, and require certification of all gas storage operators, including those owned by third countries (e.g. Russia). The overarching aim is to ensure that Europe can cope with any potential interruption of Russian gas supplies over the next winter. According to a 2022 report from the Agency for the Cooperation of Energy Regulators (ACER), actual gas in storage in the EU-27 was only around 20 % of annual consumption (as at 1 October 2021), with filling-in levels of only 72 % and particularly low storage levels in sites owned by Gazprom. The ACER report lends support to the idea of urgent EU action on gas storage.

Alongside these concerns about energy dependency, Member States are increasingly alarmed at the consequences of high energy prices (also an element of security of supply, according to the IEA definition), and some now strongly object to the marginal pricing model used for the EU electricity market, which sets the energy price according to the most expensive source used in energy consumption. In normal times, marginal pricing can be a transparent tool that is useful for incentivising renewable sources, especially those like solar and wind power with low operating costs. Yet in times of great market disruption, marginal pricing can mean that electricity users have had to pay high energy bills based on the cost of gas rather than the most common source for energy generation (e.g. nuclear energy in France). This has prompted several Member States to demand a more thorough overhaul of EU energy market rules, including a new system of setting energy prices that places a lower financial burden on consumers. In the European Council meeting of 24-25 March 2022, Member States agreed to fill in gas storage sites and phase out Russian oil, gas and coal imports as soon as possible, and work together on the voluntary common purchase of gas, LNG and hydrogen. Member States also agreed on the need for new measures to combat the rapid increase in energy prices, inter alia by calling on the Commission ‘to submit proposals that effectively address the problem of excessive electricity prices’.

Figure 36: Strengthening energy security National level initiatives

EU Member States have undertaken a number of actions to help their consumers, especially vulnerable ones, cope with a period of exceptionally high energy prices. This includes reductions in energy taxes, imposing price caps on energy bills, and making financial support available for more vulnerable consumers. The Bruegel think-tank has mapped out the various national policies that Member States are taking to address energy price rises. The war in Ukraine has prompted Member States to go much further and look for ways to sharply and rapidly reduce their dependence on fossil fuel imports from Russia. Some Member States such as France and Belgium have decided to prolong the life of nuclear reactors that are currently scheduled for closure, although Germany has taken a different approach and intends to continue with closing nuclear power plants but invest more heavily in renewables. Poland is accelerating its strategy to reduce dependence on Russian energy imports, ending its gas supply contract with Russia by the end of 2022 and replacing this with gas imports via its dedicated LNG terminal. Poland could also end its supply contract for Russian oil in 2023, and make more use of its indigenous coal resources to replace natural gas in the short term. Switching to coal is an option for other countries with coal reserves or coal fired power stations, even if the highly polluting effects of coal mean that its use needs to be completely phased out in the medium term. For its part Germany has suspended certification of the NS2 pipelines, and has authorised the development of new LNG import terminals, as important steps towards reducing its dependence on gas supplied from Russia. The big and ongoing question is whether the EU as a whole will cease all energy imports from Russia, and thus follow the line taken by the USA and the UK, as well as the Baltic States inside the EU.

EU action with external partners/international organisations

The EU’s 2016 Global Strategy makes it a priority to ‘strengthen relations with reliable energy-producing and transit countries’. The Commission will adopt a new EU strategy on external energy relations in May 2022, which should take into account REPowerEU and the broader European response to the war in Ukraine. Two important multilateral frameworks for EU external energy relations are the International Energy Agency, which the EU participates in directly through the Agency’s Governing Board, and the Energy Charter Treaty (ECT), that governs commercial relations between energy producing and consuming countries. Whereas the IEA is a valuable forum for energy dialogue and research, its membership is limited to OECD countries that are mostly net energy consumers. The IEA has an important role in monitoring emergency oil stocks and releasing these to guarantee security of supply, but it does not have comparable powers to ensure security of gas supply. The ECT represents both net energy producing and consuming countries, but its membership is geographically limited and many major energy suppliers (e.g. Russia, Norway, Australia) and net consumers (China and most Asian countries) are not parties. The EU is seeking to reform the ECT in a way that would make it more compatible with the green energy transition and more effective in addressing problems relating to increasingly globalised energy markets.

Since 2006, the EU has been part of an Energy Community with neighbouring countries (currently, the six western Balkan countries that are not EU Member States together with Ukraine, Georgia and Moldova), several of which are important transit countries for EU gas supplies from Russia and Azerbaijan, and face similar challenges to the EU in terms of dependence on Russian imports. Energy Community members have adopted key European energy laws, such as the second and third legislative packages on gas and electricity markets, helping them to become more energy secure and integrate at least partially with the EU’s internal energy market. However, there is still a long way to go: as of 2021, member countries had implemented just over half of the laws included in their Energy Community commitments.

Given the tense state of relations with Moscow, the EU is now actively seeking to reduce its reliance on energy supplies from Russia. Germany has already taken an important step in this direction by not approving the Nord Stream 2 pipeline for operation (see in focus). The EU has nevertheless maintained bilateral energy dialogues with several other supplier and transit countries, such as Algeria, Turkey and Azerbaijan. The EU has significant energy cooperation with Ukraine; in 2019 it mediated a five-year gas transit agreement between Kyiv and Moscow, while Ukraine is a leading member of the Energy Community and has become more closely aligned with the EU energy acquis. In 2021, Germany committed to establish a Green Fund in support of the Ukrainian energy sector, with at least US$1 billion of investments, as part of an agreement with the US. This could be a useful template for future EU support for the Ukrainian energy sector.

Obstacles to implementation

There is no legal obstacle to strengthening energy security at EU level – this is a specific EU competence under Article 194 TFEU, which provides an explicit legal basis for EU energy policies. Yet competence over the structure of energy supply, the choice of energy sources (‘energy mix’), and the conditions for exploiting energy resources, all reside with the Member States (also according to Article 194 TFEU). Member States are therefore primarily responsible for ensuring security of supply within their territory. The focus of EU action – such as the SoGS regulation – is to ensure that Member States do not penalise neighbouring countries when they take legitimate measures to guarantee their own energy supplies, and come to their support if supplies are interrupted.

The extent to which EU energy systems are coordinated is also a matter of political will. Member States remain free not only to decide which energy sources to use (or prohibit), but also how to organise their infrastructure and secure their own (usually bilateral) contracts with supply countries. While the EU now has a scrutiny role over intergovernmental agreements and some commercial contracts in the energy field, and has developed the right to apply single market rules to pipelines with third countries, this remains far from the pooling of energy sovereignty that may now be necessary at EU level. Given the secular decline in EU fossil energy production, Member States have sometimes sought to jostle for preferential relations and contractual terms with supply countries, leading to policy choices that are not consistent with Europe’s long term interest and which has so far prevented the EU from effectively speaking with one voice in external energy relations.

Past disputes between Member States over the Nord Stream 2 pipelines highlight the extent to which Member States’ decisions on energy infrastructure could become politicised and negatively impact EU security of supply. The Russian invasion of Ukraine in 2022 brought into relief the close interdependency and common challenges faced by Member States in the energy field, as well as the common need to reduce dependency on energy imports from countries that constitute a geopolitical threat to Europe. Perhaps the Ukraine crisis will deliver the political will that is necessary for Member States to coordinate more closely on their energy mixes and supply infrastructure, take strategic decisions in close consultation with their neighbours, and map a path out of energy dependency that is compatible with the transition to climate neutrality by 2050. This will necessarily include the promotion of renewable energy sources and energy efficiency measures that can sharply curb imports of fossil fuels and promote cleaner alternatives. It is now even more evident that for the EU and its Member States, climate action and energy security are two sides of the same coin, and concerted actions to support one will in the longer run reinforce the other.

Policy proposals by experts and stakeholders

The think tank Bruegel has set out scenarios for how Europe could prepare for a winter without Russian gas supplies. Bruegel argues that even limited Russian gas imports bolster Gazprom and thus support the Putin regime. No Russian imports is a possible scenario that could be realised by maximising alternative pipeline supplies, LNG imports and storage capacity, although even this along would be insufficient to fully replace Russian gas supplies. Diversification of supply would therefore need to be accompanied by a sharp decrease in energy demand, which can be achieved by greater energy efficiency, lower heating, and prioritising certain types of energy demand above others. Similarly, Bruegel argues that cutting off Russian coal and oil imports would lead to a temporary adjustment that is painful but would ultimately be better than continued dependence.

The International Energy Agency argues that Europe can cut its dependence on Russian gas (currently at 155bcm per year) by around a third (50 bcm) within a year, according to its 10-point plan. The IEA proposes not signing any more contracts for Russian gas and doing everything possible to diversify supply routes. This must be accompanied by ramping up renewable energy production and energy efficiency actions. Minimum gas storage obligations would need to be introduced and a windfall profits taxed introduced on energy producers, consistent with the REPowerEU action proposed by the European Commission. Alongside these measures, the IEA proposes a thermostat reduction of 1C in heating that would reduce energy consumption alone by 10bcm within a year. The IEA has proposed a similar 10-point plan to end dependence on Russian oil globally, and has consistently argued for the importance of energy efficiency in curbing consumption and reducing dependence on fossil fuel imports, thus enhancing energy security.

The International Renewable Energy Agency has set out the global measures, necessary to deliver on the goals of the Paris Climate Change Agreement, in particular the ambition to limit global warming to 1.5C by 2050. This would involve a drastic reduction in fossil fuel consumption (and their imports) by means of ramping up renewable energy production and energy efficiency measures.

Ember, E3G, RAP and Bellona have produced a joint analysis, which concludes that the EU can end its dependence on Russian gas by 2025, without stalling the phase-out of coal and without having to build any new gas infrastructure. These environmental think-tanks instead suggest fully implementing the EU’s Fit for 55 plan, removing existing barriers to domestic wind and solar growth, and incentivising demand-side responses to promote energy efficiency and renewables.

Position of the European Parliament

In its December 2015 resolution on the EU’s Energy Union, the Parliament highlights the risks of over-dependence on Russia, an unreliable supplier which uses energy as a political weapon. It notes the importance of energy for the sovereignty of EU and Eastern Partnership countries. Third country suppliers must follow EU energy law. In energy relations with third countries, EU countries should negotiate with one voice, and consider mechanisms for collective gas purchasing. The EU needs a more coherent approach to external energy security, not least through coordination between the EU High Representative and the relevant Commissioners.

The September 2021 recommendation on EU-Russia political relations criticises the Nord Stream 2 pipeline as divisive, incompatible with the greenhouse gas emissions goals of the European Green Deal, and unnecessary given spare capacity in existing pipelines. It therefore calls for an immediate halt to the pipeline and a European strategy to end dependence on commodity imports from Russia.

The March 2022 resolution on the Russian aggression against Ukraine calls for imports of oil, gas and coal from Russia to be restricted, and for the Nord Stream 2 pipeline to be abandoned. Diversifying energy sources should be a priority, expanding LNG terminals and supply routes, unbundling gas storage, and increasing energy efficiency and the speed of the clean energy transition. Energy prices should be carefully monitored and appropriate measures taken to mitigate any negative economic and social impacts that emerge, while all cooperation with Russia in the nuclear field should cease.

The April 2022 resolution on Ukraine calls for an immediate full embargo on Russian imports of oil, coal, nuclear fuel, and gas, and for both Nord Stream 1 and 2 pipelines to be completely abandoned, accompanied by a plan to continue ensuring the EU’s security of energy supply in the short-term. The Parliament’s resolution also calls for common strategic energy reserves and energy purchasing mechanisms to be established at EU level, with the aim of increasing energy security while reducing external energy dependency and price volatility. The resolution also calls for work to be started on creating a gas union, based on common purchases of gas by Member States.

In focus: Nord Stream 2
Nord Stream 2 (NS2) illustrates the extent to which energy security has been a bone of contention between the EU and the USA, and a source of division among EU Member States. While the European Commission and the Parliament have been critical of NS2 since its conception, in 2019 Commission President Ursula von der Leyen also criticised US extra-territorial sanctions on the pipeline, due to the threat they posed to European companies carrying out legitimate business. However, the two sides are now in agreement that a Russian invasion of Ukraine requires a halt to the project. Despite initial hesitation, in February 2022 Germany put approval procedures on hold, pending further developments. In the same month, a large delivery of US LNG helped to address Europe’s shortfall: according to von der Leyen, EU countries now have enough gas to last them for the rest of the winter. Even when the war in Ukraine eventually ceases, it remains dubious whether NS2 can ever receive certification to operate. This represents a considerable cost of ‘stranded assets’ not only for Russia’s Gazprom but also for various EU energy companies and local governments that had invested their resources in the project. This emphasises the importance of not repeating similar mistakes in future. Possible action

Written by Monika Kiss.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: the challenge and the existing gaps

The European Union already has an outstanding level of social security compared to the rest of the world. While the EU constitutes less than 6 % of the world’s population and 20 % of global gross domestic profit (GDP), it accounts for at least 40 % of global public spending on social protection. According to Eurostat, In the EU‑27 in 2020, expenditure on social protection stood at 22.0 % of GDP, at 41.3 % of total global public spending and at €2 943 billion. While the European social model is undoubtedly a unique achievement, it has to be adapted to the challenges of the future to maintain its long-term sustainability.

The coronavirus pandemic, and the ensuing healthcare and lockdown measures taken to limit its spread had far-reaching and lasting consequences for the economy, as well as for society. Forced closures and reduced economic activities led to income losses (and, as a consequence, in-work poverty) or unemployment for a significant part of the population. In some cases, tax-benefit systems and support measures such as short-time work schemes significantly reduced losses in disposable income. However, some households lost a significant part of their income and were exposed to the risk of poverty. They also had to cope with work-life balance problems and a sudden need for adequate digital equipment for teleworking and home-schooling. Social groups who were already vulnerable before the coronavirus – such as migrants, poorer communities and disabled people – were disproportionately impacted by the lockdowns and other responses deployed to tackle the health crisis.

The pandemic has accelerated digitalisation and automation and exacerbated tendencies, problems and risks related to them. Many companies and self-employed people chose to go digital, with a rapid uptake in teleworking, which turned out to be an especially viable option for office employees, despite having its own challenges (for instance the need for technical equipment and technical support, or time management and work-life balance problems). Analysis shows that more highly educated and urban populations (in particular in capital regions), were better placed to work from home. Companies have accelerated the digitalisation of their customer and supply-chain interactions and their internal operations by three to four years. The share of digital or digitally enabled products in their portfolios has accelerated by seven years.

The rapidly increasing digitalisation raises a series of questions and brings new challenges, in terms of the need for equipment and infrastructure (such as computers and other hardware, broadband internet), but also for at least basic digital skills. In this respect, statistics show growing inequalities between areas, skill levels, age groups and sectors, further disadvantaging, for instance, workers living in rural areas, older workers with a lower level of digital skills, or those who cannot afford adequate digital equipment. According to data from the Digital Skills and Jobs Coalition, about 42 % of Europeans today still do not have a basic level of digital skills. Upskilling and reskilling of workers, especially as regards to digital skills is therefore essential. Without upskilling measures adapted to individuals’ needs and opportunities, an insurmountable gap could emerge between social and age groups, as well as between regions or among Member States.

The EU population is also ageing. The decline in the numbers of live births and increasing longevity are changing steadily the population’s age profile. Consequently, the old age dependency ratio[i] is on the rise, meaning that EU social security pension systems of the EU have to be reconsidered. The question of setting a minimum wage framework to close regional gaps is one of the most analysed and debated economic topics in recent years. The pandemic and the related healthcare and lockdown measures also accelerated the spread of new forms of work: platform work or on-call or portfolio work, for example. To protect workers in atypical work forms from higher risks of unemployment and uncertain social security during crises, stronger emphasis could be placed on the legislation for non-standard work forms and for the self-employed, who were, according to data, the most affected by the pandemic.

Existing policy responses

The European Pillar of Social Rights (or ‘Social Pillar’) was jointly proclaimed and signed by the European Commission, the European Parliament and the Council at the Gothenburg Social Summit in November 2017. It aims to uphold 20 principles and rights, structured around three categories: equal opportunities and access to the labour market; fair working conditions; and social protection and inclusion. The Social Pillar is accompanied by a Social Scoreboard, which initially had 14 headline indicators and 21 secondary indicators in 12 areas, measuring progress in the EU Member States in relation to the principles. The scoreboard was used for the first time in the 2018 European Semester, one of the main parts of the EU’s economic governance framework. In June 2019, as part of the Pillar’s roll-out initiatives, the European Parliament and Council adopted the Directive on transparent and predictable working conditions, addressed insufficient protection for workers in more precarious jobs, while limiting burdens on employers and maintaining labour market adaptability.

In November 2019, the Council adopted the Recommendation on access to social protection for workers and the self-employed. It stresses that ‘in some Member States, certain categories of workers, such as short- and part-time workers, seasonal workers, on-demand workers, platform workers and those on temporary agency contracts or traineeships are excluded from social protection schemes’.

In response to the pandemic’s impact and its implications for health policy, the social sphere and the labour market (un- and underemployment, social security system inadequacy, lack of social protection of workers on non-standard work forms), the Commission launched a new recovery plan on 27 May 2020. This plan highlighted the necessity of a fair and inclusive recovery, paying particular attention to fighting unemployment, improving skills (including digital skills), supporting pay transparency and a fair minimum wage, and taking further steps against tax evasion and avoidance.

In March 2021, the von der Leyen Commission published an action plan on the Social Pillar, setting out concrete initiatives to implement its principles. The action plan called for the mobilisation of all available EU policy tools, ranging from funding programmes and the European Semester, to legislation and policy recommendations in support of Member States’ actions. The action plan also revised the Social Scoreboard to reflect the current political priorities and the recent and upcoming initiatives. It also proposed headline targets for 2030, namely bringing the proportion of people aged 20 to 64 in employment up to at least 78 %, increasing the percentage of adults who participate in training every year to at least 60 %, and reducing the number of people at risk of poverty or social exclusion by at least 15 million. The responsibility for delivering on these targets is shared by the EU institutions, national, regional and local authorities, social partners and civil society. Funding will be ensured via the 2021‑2027 multiannual financial framework and Next Generation EU, in particular the Recovery and Resilience Facility, with monitoring under the European Semester. Concrete initiatives in the framework of the action plan include an EU strategy on the rights of the child together with a European child guarantee scheme; a recommendation on effective active support for employment after the coronavirus crisis (EASE); and a platform of collaboration against homelessness. The European Commission also published a proposal on improving the working conditions of platform workers on 9 December 2021.

The European Commission put forward several initiatives to fulfil its objective of a European education area by 2025. Following the new European skills agenda and the European education area communications, adopted respectively in July and September 2020, the Commission issued two key proposals in December 2021. These aim at improving lifelong learning and employability and reducing skills mismatch and include: a Council recommendation on individual learning accounts, which should help ‘close existing gaps in the access to training for working age adults and empower them to successfully manage labour market transitions’, and a European approach to micro-credentials, with the goal of empowering workers ‘to up- and reskill throughout their entire lives and making sure that all learning experiences are properly valued’. The new digital Europe programme will contribute to advanced digital skills development, while the updated Digital education action plan 2021‑2027 aims at improving digital skills for all − a need made clear during the coronavirus crisis, with technology used at an unprecedented scale in education and training.

The increase in telework and digital platforms also raises issues of privacy and data use. At EU level, employees’ privacy is already protected by the General Data Protection Regulation (GDPR), which requires employees’ consent for the use of tracking software or applications. The issue is also raised in the proposal on improving working conditions for platform workers, which pleads for transparency in digital labour platforms’ use of algorithms, by introducing a requirement for human monitoring to ensure fairness and accountability in algorithmic management, as well as the respect of working conditions.

In the context of the economic and social crisis engendered by the Covid‑19 outbreak, a minimum wage is increasingly considered a useful instrument to ensure fair wages and social inclusion. On 28 October 2020, the European Commission published a proposal on fair minimum wages. The proposed directive aims at promoting collective bargaining on wages in all Member States. For the countries where statutory minimum wages exist, it aims at ensuring that Member States put in place conditions to set statutory minimum wages at adequate levels, while taking account of socio-economic conditions, as well as regional and sectoral differences. Furthermore, the proposed directive aims at promoting compliance, as well as strengthening proportionate enforcement and monitoring in all Member States. The European Parliament adopted its report on 25 November 2021.Interinstitutional negotiations are ongoing.

Figure 34: Building a European social model for the 21st century National level initiatives

Social security systems can differ significantly from one Member State to another. National governments are free to determine the features of their own social security systems (benefits provided, conditions for eligibility, calculation of benefits, contributions to be paid). These systems are governed by Regulation (EC) No 883/2004 (currently under revision) on the coordination of social security systems with regard to sickness, maternity and paternity, family, invalidity, unemployment and pre-retirement benefits, and in respect of work-related accidents and diseases, and old-age pensions, as well as Regulation (EC) 987/2009 on the procedure for implementing the former regulation.

Member States can also decide on the scope of legislation on working conditions and social security coverage of workers. They decide whether and to what extent they include workers in atypical work forms, for example. Another example is the employment status of platform workers. The binary system (employed or self-employed) is challenged by the specific characteristics of platform work and bogus self-employment. Ireland, for instance, classifies workers on the basis of a series of tests laid down in case law, while Spain enacts a legal presumption that delivery platform workers are employees. The adoption of the directive on improved working conditions of platform workers will, however, unify this situation in the EU.

The implementation of the Social Pillar’s principles is also primarily a task of the Member States, carried out in close cooperation with social partners and with the support of EU policy tools. These can be ‘hard’ tools (legislation and, economic governance), or ‘soft’ tools (policy development through mutual learning and guidance). Establishing the specific amount of a fair minimum wage, for instance, is a Member State competence, even if mandatory at EU level. Measures to combat demographic decline, or measures and initiatives to provide socially vulnerable people with adequate digital tools is also a Member State competence. Concerning upskilling and reskilling, in particular in the digital area, concrete initiatives are often taken at local or regional level, but backed by a series of EU plans, such as the digital education action plan or the skills agenda, and EU-funding, such as the European Social Fund Plus or the digital Europe programme.

Obstacles to implementation

With internet and digital technologies playing an increasingly important role in our daily lives, the digitalisation of Europe has become one of the EU’s priorities for the coming decade. Yet while the EU is making good progress towards its digital transformation, progress is uneven, with clear differences visible across Europe’s regions. Even though closing this digital divide is of outmost importance, geographical conditions in some regions hinder the expansion of broadband internet or 5G, for instance in mountainous areas, on islands and in outermost regions. Peripheral regions are often also in a less financially advantageous situation, meaning digital development might be an insurmountable obstacle for them. People living in rural areas can also suffer from the paradox of the digital territorial divide: while rural areas need better digital connectivity to make up for their geographical isolation, they actually tend to have lower levels of digital connectivity, with the result that people living in these areas are less digitally connected.

Improving digital connectivity can also tackle tech poverty, (lack of access to technology, training, skills and experience needed due to lack of financial means). However, the digital upskilling of older people also encounters obstacles, such as a lack of access to digital devices or the internet, as well as a lack of skills, self-confidence, motivation and interest, and the onset of physical or cognitive impairments, making digital engagement more challenging.

Further continuing teleworking also poses some dangers. As remote work can be provided from anywhere (except for on-location services), it could lead to outsourcing and social dumping (hiring workers in Member States where wages are lower, or employing workers residing in non-EU countries). This can lead to unfair competition and could be prevented by legislative means.

Policy proposals by experts and stakeholders

Bruegel highlights that social protection arrangements vary greatly among EU countries in terms of efficiency, equity and universality, but also within Member States across different modes of work. For instance, portability of benefits between EU Member States already exists for employees under Regulations (EC) 883/2004 and 987/2009, but not for self-employed workers. Member States could therefore ensure that these entitlements are accumulated, preserved and transferable across all types of employment and different economic sectors – even when individuals accumulate several different employment statuses. The European Commission could also promote consensus and convergence among EU countries on the classification of self-employment, and could identify and promote best practices implemented by Member States. Due to digitalisation, work will be quite different from that for which academic training prepared people. According to Bruegel, this means that schools and training programmes will have to focus not only on the specific narrow skills needed for today’s jobs, but also on broader skills, such as foreign languages, which contribute to flexibility in the future, and that can be applied in many different ways.

Demographic changes mean the EU funding model for social protection is under threat, due to the declining share of the working-age population (contributing to the welfare system), compared to the increasing number of pensioners, who live longer. Under these conditions, it is difficult to expand social coverage to all forms of work (implying increased social protection costs), while there is a shrinking funding base. An unconventional solution, a ‘robot tax‘, has been considered, inter alia by Microsoft.[i] Such a robot tax could be then used to pay for the re-skilling of human workers who have lost their jobs due to automation. However, this idea is controversial, as it could also hinder innovation, reducing European competitiveness and possibly leading to distortions in relative investments in capital versus human labour.

Individual learning accounts (ILAs) are flagship actions under the new European skills agenda and important means to endorse lifelong learning. In its position on ILAs, stakeholders’ association Digital Europe stresses that: ILAs should be available for all working-age individuals, but differentiated. They are financed through four sources: individual contribution, Member States’ public funding, EU funding, and employers’ contributions. Training systems within the ILAs should be specifically designed around adults’ needs to conciliate work, private and family life.

Position of the European Parliament

The European Parliament has always been active in the development of EU action in the field of employment and social policy. Parliament has repeatedly called for a more active social policy, and has supported the Commission’s proposals in this area. On 17 December 2020, the European Parliament adopted a resolution on ‘A strong social Europe for just transitions’. It called for a key social programme, including a strategic framework for achieving a sustainable, fair and inclusive social Europe by 2030. This means incorporating the social pillar within the EU Treaties and adding a protocol providing social rights at the same level as economic freedoms within the single market. It also involved the adoption of a sustainable development and social progress pact, to ensure social and sustainable targets are mandatory, which still has to be put in practice. It also stressed the importance of a revised European Globalisation Adjustment Fund.

The European Parliament has followed the situation of workers in atypical work forms closely in recent years. On 16 September 2021, an own-initiative resolution was adopted on ‘fair working conditions, rights and social protection for platform workers – New forms of employment linked to digital development’. The resolution pleaded for improved working conditions for platform workers, who should benefit from the same rights and social protection as other workers. Parliament argues that an employment relationship should be presumed in the case of platform workers, reversing the burden of proof. Platform workers should benefit from essential and transparent information regarding working conditions and the calculation of fees, and a healthy and safe working environment, with transparent algorithms and data management. The resolution also highlights the right of platform workers to basic training to be provided by the platform and the importance of recognising their skills. The Commission proposal on ‘Improving the working conditions of platform workers’, published on 9 December 2021, includes essential points of the Parliament’s resolution.

The spread of digital technologies and related forms of work, pressures of connectivity at any time and place and high workloads can lead to increased stress levels for workers. Directives at EU level could be useful to help protect workers’ mental health, by securing a right to disconnect at specific times of the day. On 21 January 2021, the European Parliament adopted a legislative-initiative resolution, calling on the Commission to put forward a legislative proposal to secure the right to disconnect. In its resolution of 4 February 2022, on mental health in the digital world of work, the Parliament points out that the pandemic and increased use of digital technologies in the world of work exacerbated problems related to workers’ mental health and emphasises the strong need for a comprehensive EU mental health strategy, taking a cross-sectional approach to mental health issues. In its resolution of February 2019 on a comprehensive European industrial policy on artificial intelligence and robotics, the European Parliament stressed that education curricula must be adapted to automation, including through the establishment of new learning paths and the use of new delivery technologies.

In October 2019, the European Parliament adopted a resolution on employment and social policies in the euro area, calling on the Commission to put forward a legal instrument to ensure that every worker in the Union has a fair minimum wage, which can be set according to national traditions, or through collective agreements or legal provisions. Following this resolution, the European Commission published a proposal on fair minimum wages on 28 October 2020.

In focus
Digital technologies play an increasingly important role in our lives, and the Covid‑19 pandemic further accelerated this phenomenon. However, as different parts of society are not able to adapt themselves in the same way and to the same extent to these technologies, existing social inequalities are also further accentuated. People in low-income households and those belonging to vulnerable social groups are statistically less likely to possess the required technologies (such as broadband internet) and devices than people with higher and more stable incomes. From the point of view of digital connectivity (infrastructure that is needed to deliver digital services) differences between Member States, as well as between different regions in the same Member State, or between rural and urban areas, are obvious. The adequate use of digital technologies requires at least basic digital skills. Demographic breakdowns underline these differences between generations. For instance, according to the Digital Economy and Society Index (DESI), 80 % of young individuals (aged 16‑24) had at least basic digital skills in 2021. In contrast, only 33 % of those aged 55‑74 and 30 % of retired or inactive people possess basic digital skills. There is a need to tackle the risk of an even broader digital divide in these groups. The twin transitions – digital and green – are central elements of the Recovery and Resilience Fund and to Europe’s approach to recovering from Covid‑19. Digital technologies have played an essential role in maintaining economic and social life throughout the pandemic and they are a key factor for a successful transition to a sustainable, post-pandemic economy and society. The RRF Regulation therefore requires that each Member State devotes at least 20 % of the allocation received for its Recovery and Resilience Plan (RRP) to measures fostering the digital transition and/or addressing the resulting challenges. Priority areas include investment in digital public services, digitalisation of businesses, and human capital (digital skills development and online learning, including digital skills in curricula). Other EU instruments that could help narrow the digital divide are the digital education action plan, as well as several actions under the updated skills agenda related to EU support for national upskilling and lifelong learning. It is also important to develop digital connectivity at EU and Member State level. The digital part of the Connecting Europe Facility (CEF Digital) will support and catalyse both public and private investments in digital connectivity infrastructures between 2021 and 2027. It will support investments devoted to safe, secure, and sustainable high-performance infrastructure, in particular Gigabit and 5G networks across the EU. Possible action

Written by Liselotte Jensen and Stefano Spinaci.

This paper is one of 11 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war has been launched just outside the Union’s borders. The study then looks in greater detail at 11 policy responses the EU could take to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue in short: The challenge and the existing gaps

Human-induced climate change is happening, and the impacts are being felt around the globe. As presented in the risk section above, global warming is increasing the frequency and intensity of extreme weather events and altering standard seasonal climatic conditions in some regions. This results in multiple threats to people, property and society overall.

With current projections, the agreed goal of the universal Paris Agreement to limit global warming to well below 2, preferably to 1.5 degrees Celsius (˚C) compared with pre-industrial levels, will be missed. The difference between 1.5 ˚C and 2 ˚C is significant as it pertains to the threat of climate change impacts. An overshoot of the 2 ˚C goal is likely to result in long-lasting and irreversible risks, including loss of ecosystems and potentially tipping point events leading to a significant change in the world’s physical climate system.

In the sixth assessment report (2021) of the Intergovernmental Panel on Climate Change (IPCC), five emission scenarios are presented along with their associated warming projections over time. Only the low or very low emission scenarios are considered capable of keeping global warming within the 2 ˚C goal. All scenarios are expected to overshoot the 1.5 ˚C ambition in the 2041-2060 period. It is important to note that for the very low emission scenario, the overshoot is expected to be minimal and temporary, with global warming reverting below 1.5 ˚C towards the end of this century.

Considering the potential cascading effects on people, the economy and societal systems from changing climatic conditions and volatile climate phenomena, as presented in the risk scenarios on page 25, and supported by the February 2022 IPCC report on impacts, adaptation and vulnerability, the EU must ensure policy responses suitable for the challenges ahead.

Policy responses need to mitigate the root cause of the increased risks – climate change – and at the same time build resilience and preparedness at all levels of society, thereby reducing vulnerabilities.

The EU is a frontrunner when it comes to climate action and is increasingly stepping up its efforts in the field of sustainable finance; on both accounts, international cooperation is however crucial. In an interconnected global system of different players and agendas, driving forward a transition while attempting to build resilience to systemic risks is an ever-evolving challenge. The scale of the task to increase overall systemic resilience becomes evident when reading also the chapters on ‘greater strategic autonomy for European industry‘ and ‘consolidating strategic ties with democracies‘.

The turn of events currently witnessed with Russia’s 2022 invasion of Ukraine leaves the EU at a critical junction. The security risk associated with EU’s dependence on Russian energy sources has become all too evident. Many call for an immediate stop of energy imports from Russia, but how fast is it feasible to divert into other sources, and what will they be?

In a world where inaction and prolonged policy processes on climate change have been environmentalists’ main critique for years, will this sudden push to change Europe’s energy dependence fuel a green transition, or undermine it?

Existing policy responses

The types of risks that policy responses need to address can be divided into three groups: first, the physical risks connected to loss of life or property because of extreme weather events; second, the transition risk to the value held in various types of assets in an economy under transformation; and third, potential systemic risks to the economic and financial systems. As seen in the extreme weather events scenarios, physical risks can induce further transition risks and accumulate impacts that can ultimately pose a threat at the systemic level.

EU action

Climate action is established in Article 191 of the Treaty on the Functioning of the European Union (TFEU) as one of the objectives of EU environment policy. The EU and its Member States are signatories to the 2015 Paris Agreement, and major parts of the EU climate and energy legislative framework towards 2030 were revised between 2015 and 2018. As part of the European Green Deal (EGD), the EU Climate Law was adopted in July 2021, setting a new 2030 target on emissions reduction, and making climate neutrality by 2050 legally binding.

To align the climate and energy acquis to the now binding ‘at least’ net 55 % emissions reduction by 2030 compared with 1990 levels, the European Commission put forward 18 legislative proposals in its ‘fit for 55‘ package in July and December 2021. The package includes, among other things, proposals to raise 2030 renewable energy as well as energy efficiency targets across the EU, to which the co-legislators – the European Parliament and Member States through the Council – would need to agree.

In terms of mitigating climate change, the EU Climate Law Article 4 further obliges the Commission to propose in a legislative initiative, following the global stocktake on climate action planned to finalise in 2023 (see below), a binding emission-reduction target for 2040. The proposal must be accompanied by a carbon budget report indicating the total volume of net greenhouse gas (GHG) emissions expected to be emitted in the 2030-2050 period, without jeopardising European commitments in the Paris Agreement.

The climate challenge poses risks to both natural and human systems at varying levels. Natural hazards mainly pose physical risks to people’s health and security as well as to property and assets. Civil protection cooperation is enshrined in TFEU Article 196 and the solidarity clause in Article 222, under which the Union and its Member States act in a spirit of solidarity if a Member State is the victim of a disaster. The EU’s civil protection mechanism (UCPM) is a key part of Europe’s efforts in disaster preparedness and response. The Copernicus Emergency Management Service lends support, via satellite imagery and geospatial data, to civil protection interventions. Recently the Council concluded that disaster preparedness and prevention measures needed to be strengthened in view of the threat of increased extreme events due to climate change.

Increasing the resilience of the EU’s economy and society to climate change requires large investments and improved risk management. This in turn demands a financial system resilient to climate change impacts. The EU has taken significant action in the field of green and sustainable finance. Before the 2020 European Green Deal investment plan, the 2018 action plan on financing sustainable growth, integrated by the 2021 strategy for financing the transition to a sustainable economy, laid down the foundations of the EU sustainable finance framework. The framework is based on three building blocks: the EU taxonomy; disclosures; and a toolbox including benchmarks, standards and labels.

The July 2020 EU Taxonomy Regulation, is the centrepiece of the EU sustainable finance architecture; its classification system helps to both channel investment into climate action, and guide the integration of climate risks into the management of financial institutions such as banks, insurance companies and pension funds. It plays a pivotal role for legislative and non-legislative initiatives in areas such as labelling, disclosures and prudential rules. The EU taxonomy is established through delegated acts, determining which activities should be considered as sustainable and contributing to the fight against climate change, and be reported as such. The European Parliament is currently scrutinising a delegated act in which the Commission proposes to consider as eligible certain activities in the nuclear and gas sectors.

EU regulatory and non-regulatory initiatives on disclosures aim to improve transparency on risk factors, including climate risks and their effects on financial stability. In this domain, the Sustainable Finance Disclosure Regulation came into effect in March 2021, while the Corporate Sustainability Reporting Directive (CSRD), presented by the Commission in April 2021, is at an advanced stage of negotiations between the co-legislators. In the meantime, sustainability reporting is regulated by the Non-financial Reporting Directive, which entered into force in December 2014, supported by the guidelines on reporting climate-related information, published in June 2019. In the toolbox, the EU Climate Benchmarks Regulation has applied since April 2020, and the July 2021 proposal on an EU green bond standard is with the co-legislators. Both aim to ease the development of sustainable investments, while preventing greenwashing.

EU action to improve the financial sector’s resilience to climate risks also includes the review of EU banking rules (the Capital Requirements Regulation (CRR) and Directive (CRD IV)), and the review of the EU insurance rules (the Solvency II review), both proposed by the Commission in autumn 2021. The Commission proposals, currently examined by the co-legislators, ask banks and insurance companies to systematically identify, disclose and manage sustainability risks, i.e. environmental, social and governance (ESG) risks, as part of their risk management. While larger EU insurers have already had to conduct climate scenario and stress tests, the new proposal is set to embed climate risk analysis in most insurers. In April 2021, the Commission amended existing delegated regulations under Solvency II and the Insurance Distribution Directive to ensure integration of sustainability factors and risks in (re-)insurance undertaking’s management, products and services.

In the banking sector, the European Central Bank (ECB) is increasingly considering climate change in its activities of banking supervision and monetary policy. After publishing a guide on climate-related and environmental risks for banks in November 2020, and the state of climate and environmental risk management in the banking sector in November 2021, the ECB launched in January 2022 a supervisory climate risk stress test to assess how prepared banks are for dealing with financial and economic shocks stemming from climate risk. In July 2021, the ECB presented its action plan to include climate change considerations in its monetary policy strategy, which should deliver macroeconomic modelling and assessment of implications for monetary policy transmission, and statistical data for climate change risk analyses.

Given the key role played by the insurance sector for financial stability and resilience to climate risks, the European Insurance and Occupational Pensions Authority (EIOPA) has made sustainable finance a strategic priority in its 2022-2024 work-programme. Its aim is to increase the insurance sector’s climate resilience by acting in key areas of activity: prudential framework, risk assessment, disclosures, supervision, climate protection gap, use of open source modelling and data, and international convergence. In addition, EIOPA will conduct centralised climate stress tests in the (re‑)insurance sector, as tasked by the Commission.

National level initiatives

In the EU, several Member States had adopted national climate laws before the adoption of the EU Climate Law. Some have set higher 2030 targets or aim to reach climate neutrality sooner than 2050.

Member States and the sub-national levels play a key role in building resilience to climate change impacts, whether it concerns urban planning, public expenditure, construction and industrial permissions, nature conservation, or disaster preparedness and response capacities and training. To foresee risks and ensure resilience adequately requires know-how and the latest data on risk assessments, considering future climate projections. In the EU, Member States and institutions share these kinds of insights on the Climate-ADAPT platform and collaborate through the UCPM’s knowledge network and joint exercises to support national-level preparedness. Research and innovation for resilient cities and implementation of nature-based solutions often occur at national and sub-national levels, while key climate partnerships in various sectors are driven by countries in which the sectors are most prevalent. Russia’s war on Ukraine has highlighted the vulnerability of the EU’s energy supply dependency on Russia, with Denmark being the first Member State to announce its ambition to phase out Russian gas supply completely as soon as possible. On 8 March 2022, the Commission adopted the RePowerEU communication presenting the aim to wean Europe off Russian gas. It includes measures to be implemented at the national and citizen levels, such as energy savings, rooftop solar panels, and heat pump installation. Accelerating renewables, in particular hydrogen for industry, and strengthening the internal energy market interconnections while increasing gas storage are other key measures. The national level will play a pivotal role, as under TFEU Article 194(2), Member States have the right to decide on their own energy mix and supply structures, which only unanimity among Member States in the Council can affect (Article 192(2c)). Key projects would not only include accelerated renewables roll-out, but also seek to increase resilience through cross-border connections, such as from the Iberian peninsula to the continent, or gas pipeline connections for example to Poland.

Figure 32: Key measures in efforts to climate-proof the EU EU action with external partners/international organisations

The United Nations Framework Convention on Climate Change (UNFCCC) was established in 1992 to prevent dangerous climate change. Continued climate negotiations have so far not been successful in halting global GHG emissions or the associated global warming. The 2015 universal Paris Agreement – with its specific targets to limit global warming, and sections on mitigation, adaptation, and financial support and mechanisms to support the work – was a breakthrough in UNFCCC negotiations. However, only at the 26th Conference of Parties (COP26) to the UNFCCC, held in Glasgow in November 2021, was the Paris rulebook for implementation finalised.

The EU has taken significant steps to influence the transition not only internally but also externally, and actively negotiates for increased climate ambitions globally. The February 2022 Council conclusions called on EU climate diplomacy to support third countries in developing carbon markets and further step up its work to turn intentions into implementation through green partnerships and alliances. The Council repeated the EU’s intention to provide further climate finance, including through the Global Gateway initiative, to build resilience and stability in vulnerable third countries, urging partners to contribute.

Against the backdrop of the latest IPCC warnings, COP26 in the Glasgow Climate Pact named this decade the ‘critical decade’ during which accelerated action must be ensured. Under Article 14 of the Paris Agreement, a first global stocktake will be undertaken in 2023 to assess collective progress to achieving the agreement’s purpose and deliver on its targets.

In October 2019, the EU and seven third countries launched the International Platform on Sustainable Finance (IPSF) with the aim to exchange best practices, compare initiatives and enhance international cooperation. Together, the current 18 IPSF members represent 55 % of GHG emissions and global gross domestic product (GDP), and 50 % of the world population. The EU is also present in the Network for Greening the Financial System (NGFS), a group of more than 100 central banks and supervisors worldwide working to share best practices on climate risk management in the financial sector. EIOPA is also member of the International Association of Insurance Supervisors (IAIS), and of the Sustainable Insurance Forum (SIF), international networks of insurance supervisors and regulators working to integrate climate risks into their activities and into the insurance sector.

Obstacles to implementation

Geopolitical events can reframe the assessment of risks and their impacts, and may thus significantly redirect certain policies. Russia’s invasion of Ukraine has led to the RePowerEU communication, which aims to accelerate renewables, but will also heavily invest in energy security measures (see Chapter 18 on energy security). This risks further lock-ins to new gas supplies or investment to increase new pipeline capacities, or postponement of coal’s phase out, potentially creating further lock-ins, ultimately slowing the green transition. EU leaders and co-legislators will need to balance the desire to cut energy dependence from Russia with the risk of undermining the business case for future energy autonomy through renewables.

Furthermore, climate change’s threat to global food security is exacerbated by the war between two countries that together supply 29 % of global wheat exports. Disrupted food and fertiliser supply chains could weaken the environmental integrity of the expected EU taxonomy delegated act on agriculture because of food security concerns raised, while other world events could affect future delegated acts.

The EU has been a consistent actor on mitigating climate change, delivering well beyond its 20 % GHG emissions-reduction target for 2020 compared with 1990. The efficacy of the Union’s climate policies internally may however weaken its climate-diplomacy position externally. Over the past 30-year period, the EU has gone from a 15 % share of global emissions to around 8 % in 2018. Only significant global action will change the current global warming trajectory.

The EU’s share of global emissions is production-based; this does not take import-related emissions from trade into account. The need to address also consumption-based emissions becomes evident when looking at the difference in emissions reduction achieved depending on the variable chosen. Beyond the multilateral level in the UNFCCC, the EU has taken steps through its trade agreements, but also in legislative proposals such as the ‘fit for 55’ package, the carbon border adjustment mechanism (CBAM), and the proposal to limit EU-driven deforestation so as to address the overseas emissions and negative climate impacts of trade to the EU.

Energy-related investments, including transport, will need an estimated additional annual € 350 billion to meet the EU’s 2030 emission-reduction target, alongside the €130 billion needed for other environmental goals. These amounts are too big to be covered by public funding; a flow of private capital is needed to close the gap. The EU has taken significant action to facilitate this, and it is considered a global leader in mainstreaming climate factors in the financial system, thanks also to innovative sustainable finance regulations. The future success of the EU in this field will depend to a great extent on the EU taxonomy’s fate. Any possible obstacle to its development can jeopardise the implementation of many other sustainable finance instruments, strictly dependent on its pivotal role. As the European Court of Auditors has noted, the effectiveness of the EU taxonomy and labelling schemes will largely depend on their voluntary take-up, and whether their credibility is backed up by adequate verification. This may prove challenging given the number and complexity of taxonomy criteria. Competing taxonomies or other jurisdiction standards pose a risk to the EU taxonomy’s impact on global investment trends. In this, the taxonomy’s complex structure, and the need to update it continuously according to the scientific and technological evolution, could affect its usability and become its Achilles’ heel. Other challenges could come from the need to ensure alignment with sectoral regulations, and from the risk of greenwashing or potentially pursuing other policy objectives.

In focus: The role of data in climate-proofing
Data are crucial to improve climate resilience and crisis preparedness, as they enable better accuracy of climate risk assessment, forecasting and modelling, and are key to early warning systems. Some datasets provide insights on extreme climate events, shedding light on direct and indirect causes, behavioural trends and consequences, such as loss of life, damage to infrastructure, and costs of emergency response and recovery. Others can help analyse the protection gap by measuring hazard (intensity and frequency of events), exposure (assets that are present at the location involved), vulnerability (susceptibility of the objects to the impact) and insurance coverage.
The 2021 EU climate adaptation strategy announced a series of initiatives to collect more and better climate intelligence data, and to make them available to policy-makers, supervisory authorities, and financial and economic actors (including citizens). The aim is to make any new investment and policy decision climate-informed and future-proof. Among other things, the Commission will extend the scope of public access to environmental information in the INSPIRE Directive to include climate-related risk and losses data. It will promote and support the use of its risk data hub to harmonise data recording and collection, and promote national-level public-private partnership.
Insurance companies have been collecting data and developing risk-zoning mapping systems for decades, and so the Commission has tasked EIOPA with exploring – alongside the industry – how best to improve the collection of uniform and comprehensive insured loss data, not least through its catastrophe risk expert network. EIOPA aims to provide open access through a data hub for the European level.
Digitalisation and technological innovation, such as big data, artificial intelligence, machine learning, high-performance computing, geospatial mapping and the internet of things, can help to enrich the variety and quality of data available and their analysis, including through capturing and developing continuous data flows and information. The Commission is delivering on this by means of initiatives under its priority ‘A Europe fit for the digital age‘ and through financing research projects, as for example on climate intelligence. Among others, the EU data act, which the Commission proposed in February 2022, aims to provide means for public-sector bodies to access and use data held by the private sector that are necessary for specific public-interest purposes, for instance to develop insights with a view to responding quickly and securely to a public emergency. Policy proposals by experts and stakeholders

To build resilience against ‘green swan’ events as presented in the risk paper on page 26, Finance Watch proposes to use the Prudential Regulation’s pillar I – capital requirements with regard to capital reserves as the most effective tool among the three prudential pillars. More specifically, Finance Watch proposes to increase the risk weight for exposures to fossil fuels both in the banking (CRR II) and the insurance sectors (Solvency II). Finance Watch asks the Commission to promote the adoption of similar prudential requirements globally, as well.

When it comes to addressing the protection gap in the insurance sector, Insurance Europe considers it necessary to make tackling under-insurance of natural climate risks a priority for Member States. Insurance Europe suggests establishing more public-private partnerships to share insights, and having Member States actively promote insurance as a way to providing cover for natural perils.

A 2021 collaboration between Carnegie Europe and the Open Society European Policy Institute produced an in-depth report on EU climate security in a global world, exploring how the EGD’s multiple strands should link more directly with EU external action to deliver on the EU’s commitment to be a stronger geopolitical player. The report identifies various shortcoming in the EU’s approach to climate security and climate action through its external relations, and proposes ecological diplomacy adjustments in four areas, ultimately referring to the need for – and the EU’s responsibility in – bringing this about and resetting the global architecture for international cooperation.

The combined threat to food security from climate change and the war in Ukraine have led Copa-Cogeca to suggest crop cultivation on all available land as part of an EU food shield. The aim is to prevent disruptions in the food supply chain, although this would likely undermine carbon sequestration, while the increased production would increase GHG emissions from agriculture. On 23 March 2022, the Commission decided to derogate from greening obligations temporarily and allow for food crop production on fallow land that is part of the 2022 ecological focus areas.

Position of the European Parliament

The European Parliament has spoken out on the need to fight and contain the threat of global warming before it is too late. Across various resolutions, the Parliament has consistently highlighted the need for strong climate diplomacy, calling for increased global ambitions faced with the ongoing climate and environment emergency. As co-legislator, the European Parliament will have a key role in ensuring a legal framework fit to deliver the climate targets set in the Climate Law, and build resilience through other related files from the EGD. In its 2018 resolution on the Commission action plan on sustainable finance, the Parliament agreed on the financial sector’s essential role as regards sustainability, and on the need for policies to correct market failures. It pointed out that the inaccurate assessment or misleading presentation of climate and other environmental risks of financial products can constitute a risk to market stability. The Parliament also emphasised that the identification, management and disclosure of these risks are an integral part of consumer protection and financial stability, and should therefore fall under the mandate and supervisory duties of the European supervisory authorities. In its climate diplomacy resolution, the Parliament said it was ‘convinced that an EU financial system which contributes to climate mitigation and incentivises investments in clean technologies and sustainable solutions will be a role model for other countries and could help them to implement similar systems’.

Through a legislative own-initiative resolution adopted in October 2020, the European Parliament called on the Commission to propose an EU legal framework to halt and reverse EU-driven global deforestation. The legislative proposal has in the meantime been tabled, as mentioned above, and contains several of Parliament’s recommendations. In March 2021, the Parliament adopted an own-initiative resolution on the CBAM, ahead of the Commission proposal. Parliament stressed the role of the CBAM in helping to reach climate objectives and finance the delivery of EGD ambitions.

Possible action