Week in Europe 24-30/09/03

EU news in brief

Mobilisation of the EU Solidarity Fund agreed in principle

Representatives of the Council led by the Italian State Secretary Mr Magri, the Parliament represented by the Chairman of the Budget Committee Mr Wynn, and rapporteur for the budget 2003, Mr Färm, and European Commissioner for Budget, Ms Michaele Schreyer, met on 23 September in Strasbourg to agree on the principle of mobilising the EU Solidarity Fund. This decision will award €47.6 million to Italian regions hit by earthquakes, €8.6 million to Spanish regions that have suffered from the Prestige disaster and €48.5 million to Portugal for fire-related disasters. This decision confirms what has been proposed by the Commission. Two amending budgets , n° 5 and 6 of 2003, should consequently be approved, according to the regular procedure on 8th October.

Commission wants EU role in strengthening global health threat defences

The European Commission is calling for the EU to play a central role in World Health Organisation (WHO) negotiations to reinforce international rules on the control of infectious diseases and other health threats. The WHO has proposed a major overhaul of its International Health Regulations (IHR) and wants to open talks on this early in 2004. The Commission adopted a Communication in which it fully supports the WHO's proposals. The reinforced system of international cooperation on infectious diseases proposed by the WHO is similar to the system that already exists within the EU (see MEMO/03/155). The Commission also endorses the WHO's proposals for international cooperation on all major public health events of international concern: for example, natural disease outbreaks and deliberate release of chemical or biological pathogens (bio-terrorism), as well as food safety threats. At present the IHR covers only three diseases: cholera, plague and yellow fever. Outbreaks or incidents of these three diseases must be notified to WHO and control measures taken at ports, airports and land borders. The Commission envisages developing a common EU negotiating position on those aspects of the IHR, which falls within the EU's competence. The WHO aims to have the revised IHR adopted in 2005, and to implement them shortly thereafter under the framework of the Global Alert Network on health threats. The EU will be in the forefront in helping to strengthen the IHR and could have an even more significant input into this process, if Council and Parliament back the Commission's proposal to create a European Centre for Disease Prevention and Control (see IP/03/1091).

[Background paper IP/03/1289]

Agricultural reform continued: Commission proposes sustainable agricultural model for Europe's tobacco, olive oil and cotton sectors

The European Commission has put forward proposals for a fundamental reform of the common market organisations (CMO) for olive oil, raw tobacco and cotton in line with the reform of the common agricultural policy (CAP) decided by the Council in June 2003. For these 3 sectors, it is proposed to transfer a significant part of the current production-linked payments to the decoupled single farm payment scheme, the key feature of the future CAP. As was the case in the June 2003 CAP Reform, this payment as well as other direct payments will be linked to the respect of environmental and food safety standards through cross-compliance. To facilitate a sustainable policy for the raw tobacco sector in the future, the Commission proposes a phasing out of the current regime over three years, a decoupling of the existing tobacco premium, a phasing out of the Community Tobacco Fund and the setting up of a financial envelope for restructuring tobacco-producing areas. In the olive oil sector 60% of the production-linked payments for the reference period would be converted into new entitlements to the single farm payment scheme. Member States would retain the rest for the granting of an additional direct payment for low output and marginal olive groves and for quality policy. For cotton, 60% of the producer-support expenditure per Member State would be transferred as new entitlements to the single farm payment scheme whilst Member States would retain 40% for a new direct area payment to producers. The balance with the cotton expenditure for the reference period would finance inter-branch organisations and restructuring in cotton-producing areas. The reform is expected to bring better market orientation, environmental benefits, enhanced competitiveness and more stable income for farmers, due to the higher transfer efficiency of decoupled payments. The Communication "Accomplishing a sustainable agricultural model for Europe through the reformed CAP - the tobacco, olive oil, cotton and sugar sectors", adopted by the Commission is available on the internet at:

http://europa.eu.int/comm/agriculture/capreform/com554/index_en.htm

[Background paper IP/03/1285]

Investment services: Commission welcomes European Parliament backing for proposed Directive

The European Commission has welcomed the European Parliament's vote approving at first reading the proposed Investment Services Directive. The Parliament has endorsed the main principles of the Commission's November 2002 proposal (see IP/02/1706 and MEMO/02/257), which aims to overhaul existing legislation in response to the far-reaching structural changes in EU financial markets over the last decade. The proposed Directive would increase harmonisation of national rules and give investment firms an effective “single passport”, which would allow them to operate throughout the EU on the basis of authorisation in their home Member State. It would also make sure investors enjoyed a high level of protection when employing investment firms, wherever in Europe they were located. It seeks to establish, for the first time, a comprehensive regulatory framework governing the organised execution of investor transactions by exchanges, other trading systems and investment firms. The text as agreed by the Parliament will now be forwarded to the Council for consideration.

[Background paper IP/03/1291]

Prodi rejects responsibility in Eurostat fraud case

Commission President Romano Prodi has presented three reports on the Eurostat affair in a closed hearing with the European Parliament's leaders: one by the Commission's internal auditors, one by the EU's anti-fraud body OLAF and one by a special Commission taskforce. The reports confirm serious fraud at Eurostat which is reported to have cost the EU around 6 million euro. Mr Prodi told the Conference of Presidents of the European Parliament on Thursday, 25 September, that there was no reason to ask any Commissioner to resign over the Eurostat affair. "On the basis of the facts I have outlined, after careful thought and in full awareness of the issues, I consider there is no reason to ask any Commissioner to assume political responsibility and resign," he stated at the opening of the hearing on the Eurostat case. In recent days, several members of the Parliament have called for the resignation of Commissioner Pedro Solbes, responsible for Eurostat. While recognising mismanagement at Eurostat, Mr Prodi argued that the present Commission should not be expected to bear political responsibility for what went on at Eurostat before 1999, i.e. before the time of Prodi's Commission. He told the Parliament's leaders that his Commission had initiated radical reforms of the institution; in 1999, a series of scandals led to the resignation of the former Santer Commission in 1999. "We left not a single stone unturned," he said, but added that "this work of reform is not finished yet". Mr Prodi underlined that "the Commission is not a little sailing boat that can tack on a pull of the tiller. It is a big ship that takes time and distance to come about". For more information see:

http://www.euractiv.com.

Enlargement news

Malta starts structural fund talks

All the acceding states are now in the throes of discussing their use of EU structural funds in 2004-2006. Malta too has opened talks with the European Commission last week in Valetta.

Altogether Malta is entitled to more than €87 million for promoting environmental sustainability, competitiveness and social and economic growth. €65 million will come from the EU Structural Funds and some €22 million from the Cohesion Fund.

Loose ends tidied up for acceding states' us trade agreements

Some of the outstanding questions from the European Union accession arrangements were satisfactorily resolved last week. The bilateral investment treaties that most of the future member states have with the US the subject of intense discussion for over a year - are to be made compatible with the EU's laws and regulations.

The solution takes the form of a memorandum of understanding signed by the European Commission, the US, and Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia. The deal ensures a favourable environment for investors in future member states without provoking conflict with EU rules.

Some provisions in these bilateral treaties give the same favourable treatment to the US as to current EU member states, in areas such as agriculture, th,e audio-visual sector, transport, financial services, fisheries, and energy. Without modification, these provisions would distort the operation of EU policies on trade and investment with non-EU members. The memorandum now agreed will guide the process of amending the individual treaties. It will also enable the EU to limit capital movements and payments destined for or coming from non-EU countries.

One issue still remains to be resolved: the possibility for the EU to take safeguard measures to preserve the functioning of the economic and monetary union which could be invoked, for example, if pressure were exercised on the currency of one of the new member states at the time it was preparing its entry into the Euro zone. The memorandum provides for further bilateral discussions to seek a solution here, too.

Latvia's treaty is not due to expire until 2006, Estonia's not until 2006, and Lithuania's not until 2011 but even for the other future member states, whose treaties have expired or are on the point of doing so, the acquired rights of established investors remain for ten years, even if the treaty is denounced.

The European Commission said after the signature ceremony that the deal showed that "EU enlargement can be beneficial to third countries". It "proves again that openness and non-discrimination are among the key pillars of the EU", and recognises "the positive contribution of foreign investments to the economic development of Europe".

Enlargement as "a benefit to Japan too"

"Japan will benefit from the enlarged European Union", European Enlargement Commissioner Günter Verheugen told a symposium on enlargement, at Waseda University in Tokyo, last week. Verheugen reassured his audience that "the European Union will continue to remain a reliable partner. The bigger and more united Europe becomes, the greater its global interest will be". The EU is already the largest source of foreign direct investment in Japan, he remarked.

The Commissioner depicted the impending enlargement as "an enormous challenge and an enormous chance for stability and growth." With a prospect of 4.5% yearly growth over the next decade, the ten acceding countries "provide one of the soundest investment climates in emerging markets", he said. And "the benefit of stability of market access and competitive exposure in an EU-25 internal market generates a pro-growth environment." Full text of the speech.

Verheugen sets out his Wider Europe aims

European Enlargement Commissioner Günter Verheugen has just been put in charge of the new EU policy concept of the "Wider Europe", and he took the opportunity last week to set out his views on how it should develop. He described it as offering "a response to the questions posed by proximity and neighbourhood, distinct from EU accession. It concerns our neighbours in Eastern Europe and the Southern Mediterranean, from Russia and Ukraine to Egypt and Morocco. It aims to develop new, sophisticated ways to share with our neighbours the stability, security and prosperity we have created within the enlarged Union. It seeks to do so through a differentiated approach to each individual partner country concerned", he said during a visit to Japan.

"In practical terms we will work with our neighbours towards creating the conditions for the free movement of goods, services, capital and persons. To strengthen the co-operation in the fight against common threats, to strengthen our co-operation in conflict prevention and crisis management; to integrate transport, energy and telecommunication networks and to create a wider research area; to promote human rights, step up dialogue between cultures and stimulate people-to-people contacts."

The Commissioner insisted that "to achieve these objectives, we want to develop with each country an agreed action plan, which sets out the path we intend to pursue together. Of course, sharing prosperity means calling on our neighbours to make progress towards the high standards we have set ourselves within the European Union. This refers to human rights, the rule of law as well us the regulatory framework of the internal market. Economic rules and regulatory structures need to be aligned to the acquis in order for markets to inter-connect. The offer therefore is to achieve closer economic relations with the EU in exchange for better political and economic governance."

Romania's president offers reassurance to European Parliament

Romania is now in a position to overcome all the challenges that face it, Ion Iliescu, President of Romania, assured the plenary session of the European Parliament in Strasbourg where he gave a formal address last week. The EU will gain a trustworthy, reliable and democratic member of the international community when Romania accedes, he stated. "The EU would not only gain the strength of over 22 million people, but also a strong democracy and a pro-European nation." Romania shares the common values of democracy, justice and respect for the rule of law within and among nations that the EU stands for, insisted Iliescu.

But he admitted that economic reform would take more than a decade to complete, even though Romania had achieved around 5% growth in GDP over recent years. He recognised clearly Romania's need to increase its administrative capacity before accession, and to clamp down further on corruption. But a political consensus in favour of EU accession exists among all political parties, and a national forum has been established to back the process, he went on.

And with a glance towards a more distant future, he said he "looked forward to the day when the countries of the Black Sea region and the Southern Caucasus would join the European Union". Romania is a fervent support of accession by its small northern neighbour Moldova.

Lamy talks trade with the Czech Republic and Hungary

European Trade Commissioner Pascal Lamy discussed the trade implications of EU enlargement with government, business community and civil society in the Czech Republic and Hungary last week. "Next year we will be enlarging the EU family to ten new members and like any family, we should take the time to prepare this event together", he said. In Prague he met Prime Minister Vladimir Spidla, foreign affairs minister Cyril Svoboda and industry and trade minister Milan Urban, and took part in a workshop with Czech businessmen on how EU trade policy works in practice. In Budapest he met Prime Minister Peter Medgyessy and minister of economy Istvan Csillag, and met representatives of business, trade unions and local non-governmental organisations. And as Lamy pointed out during his visit, acceding countries are already well integrated in EU trade and trade policy discussions. The Czech Republic is the EU's eighth largest trading partner, centred on transport material, machinery, and telecoms equipment, and Hungary is the EU's ninth largest trading partner, with the focus on transport material, machinery, and chemical products.

An enlarged EU more involved in inland navigation matters

The European Commission last week started moves to ensure that the enlarged European Union will have a bigger say in navigation on Europe's two key inland waterways, the Danube and the Rhine. It asked EU ministers to authorise it to negotiate EU accession to the Central Commission for Navigation on the Rhine and the Danube Commission. "This would enable the EU to improve preparations for enlargement and to be actively involved in these important international organisations in the field of inland waterways", said the Commission. The initiative was prefigured in the Commission's 2001 White Paper on transport policy, which pointed out that the forthcoming enlargement of the EU would increase difficulties over the status of the EU in intergovernmental organisations responsible for navigation on the Rhine and the Danube. Joining the Rhine Commission will ease regulation in fields such as the issue of certificates, protection of crews and gaseous emissions, and also ensure representation for six of the acceding countries which otherwise would not be able to obtain Rhine navigation certificates. And for the Danube, EU membership of the river's supervisory body is the only way of maintaining consistency in the rules that apply over the Danube waterway as a whole, the Commission says.

Underwriting Prague's underground

The European Investment Bank is to lend €75 million to the city of Prague to build a 4 kilometre extension of its metro system. Prague is investing heavily in public transport modernisation, so as to reduce congestion and pollution. The extension the continuation of an earlier EIB-backed project now nearing completion - is expected to catalyse the economy of the developing areas in the north-east of the city, and make the residential quarters in the areas served more attractive. Since 1990, the EIB has lent more than €21 billion in central and Eastern Europe to finance projects fostering European integration. Loans to the Czech Republic since 1993 exceed €4 billion, including €480 million for rebuilding infrastructure after the 2002 floods, and €292 million for a new passenger terminal at Prague international airport to meet requirements under the Schengen border regime.