On 1 July, Germany took over the presidency of the EU Council, the body that represents the governments of the member states and where ministers from each country meet to adopt legislation and co-ordinate policy in their areas of responsibility. In this blog we look at what the presidency means for Germany in terms of its political leverage, discuss the main items on its agenda over the next six months (from competition and trade to taxation and employment), outline the challenges it is likely to face as a result of the COVID-19 pandemic and explain what the change in leadership means for business.
1. The Council presidency - key political leverage
Taking over the Presidency of the Council of the EU hands key political leverage to Germany. Already an influential member state, it will be able to drive forward its own initiatives and put national issues on the EU agenda. This is because, along with representing the Council in dealings with other EU institutions, a fundamental element of the Council Presidency is the organisation of the Council’s work, which includes chairing and leading the meetings of national ministers at EU level and leading a number of various preparatory bodies. Such bodies include the particularly influential Permanent Representatives Committee (Coreper) at ambassadorial level and the over 150 Council working groups on various issues at an advisory level.
2. Agenda – Digitisation and climate change in the spotlight
The Presidential Programme, adopted on 24 June 2020, offers a guide to what issues Germany intends to focus on. Along with the main overarching issues – dealing with the COVID-19 pandemic, negotiations on the Multiannual Financial Framework and Brexit – the political agenda is being shaped by climate control policy (in the form of the EU’s Green Deal) and digital transformation.
a. Competition and trade
Reform of EU state aid law and the consideration of global competition in merger control
Germany’s key aim is the reform of EU state aid law. This is being driven by a desire to make it easier to build national infrastructure for things like broadband and mobile phone networks. A revision of the guidelines for certain state aid measures in the context of the greenhouse gas emission allowance trading scheme post-2020 is also being targeted in order to support the implementation of the Green Deal. In addition, the temporary adjustment of the state aid framework, a key tool in managing the economic crisis, is set to be continuously reviewed and revised, where appropriate.
Prompted by national and EU industrial strategies, Germany’s federal government wants global competition to be considered during merger control proceedings. According to the EU Commission, an assessment of the market definition notice has already been initiated.
Regulation of online platforms and advancement of abuse control under competition law
In keeping with the national plans for a German Competition (Digitisation) Act (GWB-Digitalisierungsgesetz), another aim is the advancement of abuse control under competition law with an eye on platform markets. The plans build on the EU Commission’s Digital Services Act package, which is set to contain, among other things, an instrument for ex ante regulation of major online platforms that act as gatekeepers.
Further, Germany is seeking a modern digital regulatory policy that:
- supports an accelerated digital transition via economic policy; and
- structures the transition in line with competition law, and in a consumer-friendly, social and sustainable way.
Promoting data sharing, liability and security for the platform economy and digital services
In relation to data policy, the focus will be on the responsible use of high-grade datasets for digital services. Germany also plans to promote data sharing, for instance in the agricultural sector, the transport sector and in the context of the circular economy. The EU Commission gave initial impetus in this area on 19 February 2020 via its European data strategy. In addition, the introduction of improved rules on liability and security for the platform economy and digital services is also set to be discussed. In this way, Germany is once again building on the Digital Services Act package, which includes amendments to the e-commerce directive.
Shaping the new consumer agenda
Germany intends for the Council to be included in the development of the new consumer agenda at an earlier stage. The EU Commission has been consulting on the relevant timetable since 23 June 2020. It is of particular importance to Germany that the agenda contributes to adjusting consumer protection in the EU to current digital and ecological challenges, to protecting consumers and to improving the enforcement of the existing consumer law.
Supporting the regulation of state-controlled and state-subsidised businesses from third countries
With an eye on the global economy in general and China in particular, Germany wants to counter protectionist and targeted renationalisation measures, and to counteract any distortions of competition by state-controlled and state-subsidised businesses from third countries. The EU Commission’s June white paper on levelling the playing field as regards foreign subsidies offers a good starting point.
Improving international investment protection and the creation of a multilateral investment court
The rules on international investment protection are set to be improved and attempts to create a multilateral investment court are set to be given renewed impetus. (Member states gave the EU Commission the negotiating mandate required to do so back in 2018.)
Consolidation of the banking and capital markets union
Along with the continued development of the banking union – see Finance Minister Scholz’s November 2019 interview with the Financial Times – the capital markets union is also set to be consolidated further, with capital market-based financing being promoted and the European capital market becoming more integrated in the process. The EU Commission is planning to present its action plan in the fourth quarter of 2020.
Supporting the digital finance strategy and regulatory approach to crypto assets
Germany is fully behind the creation of a digital financial markets union, which aims to remove existing roadblocks to cross-border digital financial services and enable technology neutrality.
A regulatory approach to crypto assets has been discussed for some time, and this is popular with Germany. The German Ministry of Finance recently spoke out in favour of adjusting the existing legal framework in this context and opposes the creation of a completely new regulation. A specific proposal from the EU Commission is currently planned for the third quarter of 2020.
Implementation of global minimum level of taxation at EU level and a financial transaction tax
Once OECD negotiations on the introduction of an effective global minimum level of taxation end, currently scheduled for October 2020, the EU plans to implement the results without undue delay.
Alongside this, the German Ministry of Finance in particular is pushing ahead with the introduction of a financial transaction tax (FTT) at European level. Finance Minister Olaf Scholz is in talks at national level with industry representatives on how banks would administer the FTT. Should an EU-level FTT not be achievable, the Ministry intends to introduce a national tax instead.
Revision of the directive on administrative co-operation, and combating money-laundering and the financing of terrorism
Also on the tax-law agenda are revising the directive on administrative co-operation to combat tax evasion, and intensifying the fight against money laundering and the financing of terrorism. On the latter point, the EU Commission presented its action plan back in May and identified important projects.
Advocating an EU action plan on global supply chains
Regarding international supply chains, Germany is advocating an EU action plan to heighten corporate responsibility and transparency in relation to human rights, and social and environmental standards, taking into account the experience and learnings from the COVID-19 crisis. Appropriate legislative proposals are expected to follow the plan.
Framework for national minimum wages and seasonal work
Germany favours an EU framework for national minimum wages. The relevant proposal from the EU Commission is to be discussed by the Council and follows on from the consultation process with social partners. In addition, conclusions are sought for improving the enforcement of working conditions for seasonal workers based on the guidance note announced by the Commission.
Gender equality in the workplace
Germany will push for equality between men and women. The requirement of equal pay for equal work between men and women is set to be realised. In order to achieve equal participation of women in the workforce, Germany is advocating a partnership-based distribution of gainful employment and homemaking between men and women by means of Council conclusions.
Implementation of EU strategy for the digital age
When implementing the EU strategy for the digital age, Germany wants to focus on:
- strengthening citizens’ participation in the digital world;
- ensuring good working conditions and job security, particularly for platform-based work; and
- ensuring workers have the skills they need for jobs in the digital age.
e. Intellectual property and technology
Europe-wide use of tracing and warning apps
Germany is seeking to secure an EU-wide coronavirus contact tracing and warning system with the aid of cross-border interoperable and low-data tracing and warning apps. Use would be on a voluntary basis, and the apps must comply with data protection law and high IT security standards.
Advocating responsible and human-centric AI in the interests of the common good, and common European standards and rules for new technologies
According to Germany, the development and use of artificial intelligence (AI) in the EU should be managed in a responsible and human-centric manner and in the interests of the common good. AI is set to play a special role in the health sector, in particular. In this context there is deemed to be a need for common EU standards and rules for developing new technologies.
Legal framework for standardised secure elements, minimum IT security standards and intellectual property protection
According to German plans, EU citizens should be able to store data securely on their smartphones without third parties being able to access them. To this end, a legal framework should be put in place to enable secure storage options in all smartphones, known as standardised secure elements. Member states are also set to work closer together in order to strengthen network and data security, in particular with the aim of protecting critical infrastructure. Germany intends to advocate a minimum level of IT security in all devices available on the market and a coherent EU strategy for the protection of intellectual property.
Evaluation of European data infrastructure, governance of European data rooms, resilience of network capacities and broadband targets
Based on experience from the COVID-19 pandemic, member states are set to discuss initiatives such as ‘Gaia X’, and how crises might affect network capacities and roll-out targets. Germany will seek to press ahead with the EU data strategy-driven discussion on rules and guidelines for the governance of shared European data rooms.
f. Sector-specific regulation and environmental issues
Development of a position on the EU strategy for sustainable and intelligent mobility
In the transport sector, Germany is supporting the sustainable, innovative and networked design of the mobility of the future, without losing sight of the competitiveness of the European transport sector in the process. In the Council, a position is to be developed for the EU strategy for sustainable and intelligent mobility announced by the Commission. Negotiations on additional legislative projects in individual transport fields are also to be driven forward.
Measures to ensure the supply of pharmaceuticals
In the health sector, specific measures are to be agreed to help member states secure supplies of pharmaceuticals from within the EU. Central to this are ensuring the quality of active ingredients, having more transparent and diverse supply chains, and expanding the production of active ingredients for critical drugs. There are also moves to ensure fair access, aligned particularly along epidemiological criteria, to COVID-19 diagnostic products, vaccines and therapies, and the transparent distribution thereof. The EU Commission is currently developing a new pharmaceutical strategy for Europe that addresses all these issues.
Sharing and using health data, and the creation of a health data room
To improve the handling of future pan-EU health crises, work is to be done on improving EU access to and the sharing of health-related data. The foundations are to be laid for a transparent and legally secure European health data room and, using Council conclusions, a code of conduct is to be developed on the data protection-compliant use of health data.
Adapting EU provisions on public procurement
The Council will discuss how EU provisions on public procurement can be oriented more sustainably and more precisely around future health emergencies and economic crises.
Conclusions on food labelling
Council conclusions are planned for food-labelling issues.
Concluding consultations on climate control legislation and negotiations on the eighth environment action programme
During its Council Presidency, Germany wants to bring discussions in the Council on the draft of a European climate law that will make the EU carbon neutral by 2050 to a close. Moreover, negotiations on the eighth environment action programme are to begin.
Conclusions on eco-design and the circular economy action plan
Germany is striving for Council conclusions on eco-design and the Commission’s new circular economy action plan.
Conclusions in the energy sector, including in the area of offshore wind
The rapid expansion of offshore wind power is key to helping the EU reach its goals in relation to renewable energy and the security of supply. Council conclusions are being sought on the European framework conditions for joint renewable energy projects by the member states, particularly in the area of offshore wind.
Discussions on the hydrogen market and carbon pricing
During the Council Presidency, the German federal government wants to lead discussions on the market for the supply of carbon-neutral/-free gases, for example hydrogen from renewable energy. This is intended to contribute to the development of corresponding markets and infrastructure in the EU and tie in with the EU's hydrogen strategy.
In addition, discussions will be held on how to achieve climate and energy goals, in particular the expansion of carbon pricing to all sectors and the introduction of minimum pricing in the context of the EU emissions trading system.
Advocating a level playing field on avoiding carbon emissions and preventing carbon leakage
Internationally, Germany wants a level playing field in relation to avoiding carbon emissions and to reduce incentives for transferring carbon to third countries (‘carbon leakage’). In doing so, it ties in with the initiative for a carbon border adjustment system, which provides for a carbon price to be set when importing certain goods from third countries.
3. The extraordinary challenge posed by COVID-19
Tackling all these projects in the space of six months is going to be demanding. But the expectations surrounding the German presidency have increased due to the way Germany has so far handled the COVID-19 crisis. During the presidency, Germany must continue to react flexibly to the crisis and its economic and social effects while still pushing forward with other important and urgent issues.
The crisis also means that Germany will have to adjust its planning for the Council Presidency from an organisational perspective. Although Germany will try to increase the Council’s working capacity, the ability of all EU institutions to function will remain limited for some time yet. And due to social distancing measures and travel restrictions, meetings will be conducted via videoconference for the foreseeable future, with physical meetings only possible to a very limited extent.
4. Opportunities for the economy
Despite these adverse conditions, economic stakeholders with activities in Germany in particular have a rare opportunity – the last German Council Presidency was 13 years ago – to promote their interests to significantly more decision-makers than is otherwise the case, and to benefit from Germany’s aforementioned political leverage.
Further, several ministries at national level will enjoy increased relevance during the Council Presidency, meaning that additional contacts are also available there. For example, the German Foreign Office (FO) and Federal Ministry for Economic Affairs play an important role in co-ordinating European policy, with the FO responsible for the co-ordination of the EU Council Presidency. In addition, the German Federal Ministry of Finance is set to be involved in all matters with a financial angle.
It may also be beneficial that overcoming the COVID-19 crisis requires the Council (along with other EU institutions) to prioritise the issues it will tackle immediately and which ones can wait for 2021 and beyond. For stakeholders, this may mean at least temporary relief.
In addition, several political stakeholders are rethinking their positions. Projects that six months ago were considered by many to be irrevocable are now being rethought in the light of the extraordinary strains on the economy.
Finally, with the EU and member states offering financial support on an unprecedented scale, there will be opportunities for businesses as national economies try to get themselves back on the road to recovery.