EU UPDATE JUNE 2021 | A PATH FOR EUROPE

IN THIS EDITION June marks the end of ’s Presidency of the Council of the EU. As prepares to take the role, it is clear that momentum is building behind many key geopolitical topics: the upcoming German federal election, the re- newed coordination between the EU & the US, multilateral talks following the G7 ahead of the COP26 in November and increasing discussion around topics concerning China and Russia. The EU Update covers specific elements of these topics and provides insight into the implications for the EU. The Migration section covers a new initiative to match skilled workers from third countries with areas of EU skills shortages. The Foreign Affairs & Security section covers the discussions and joint statement on EU—US relations and topics covered at the 24—25 June meeting. The Environment section covers the monumen- The Democracy & Governance section covers tal approval of the European Climate Law. the adoption of ’s legislation pertaining The Finance and Trade section covers, amongst to the portrayal of sex changes & homosexuali- others, the NextGenerationEU and the Digital ty to minors. .

KEY FIGURE

In 2020, energy demand fell as COVID-19 lockdown measures spread across Europe. Electricity generation by fossil fuel and nu- clear power stations fell sharply, but genera- tion from renewable sources continued to rise, and for the first time in 2020 overtook fossil fuels as the #1 source of energy pro- duction across the EU.

MIGRATION Michela Pellegata—Research Associate

On June 11th, the Commission launched Talent gards the internal security fund, through which Partnerships, an initiative under the New Pact on measures to improve the exchange of infor- Migration and Asylum aimed at addressing skills mation, intensify cross-border cooperation, and shortages in the EU and, at the same time, strengthen capabilities to prevent and combat strengthening mutually beneficial partnerships of crime will be implemented. The texts should now migration with third countries. In other words, the be adopted by the . This in- objective of the plan is to match the skills of work- crease in the scope of the EU’s funding in the ers from countries outside the EU with the labour fields of asylum and migration, integrated border market needs inside the EU. This initiative repre- management and internal security represent an sents a fundamental advancement in the fight important positive policy development. It demon- against irregular migration and smuggling, as it strates the rising attention that these issues are will provide safe, legal opportunities for migration receiving at the European level, and it should help to Europe. Further, it represents a win-win situa- address the growing challenges in these areas. tion for European countries while also reducing However, these positive advancements are not the pressure on the EU labour market caused by a reflected in the actions of European Member shrinking work population and skills shortages. States, which are showing more and more an anti- On June 14th, the European Council adopted three migrant attitudes. passed a law that en- sectoral proposals for the funding of home affairs ables the transfer of asylum seekers to detention policies under the 2021-2027 multiannual finan- centres in partnering countries, potentially outside cial framework, for a total €18 billion. The first Europe, to have their cases considered. This anti- proposal regards the asylum, migration and inte- migrant measure, strongly criticized by IOs, NGOs gration fund, which will equip the EU with the nec- and European institutions, was proposed by the essary tools to respond to evolving migration chal- Social Democrat-led government and passed by lenges, both within the EU and in cooperation with the Danish parliament on June 3rd. According to third countries. The fund has four objectives: asy- the Danish Government, it could constitute an an- lum policy, legal migration and integration, irregu- swer to Europe’s migration crisis, as it will discour- lar migration and returns, and solidarity and re- age migrants from attempting to reach Europe. At sponsibility-sharing between member states. the same time, with a new Joint Ministerial Deci- Then, the second proposal regards the instrument sion, issued on June 7th, the Greek State desig- for financial support for border management and nates Turkey as a “safe third country” for asylum visa, which should allow expansion of the Europe- seekers coming from Syria, Afghanistan, Pakistan, an Border and Coast Guard, modernise the com- Bangladesh and Somalia. According to Greek gov- mon visa policy and develop interoperable large- ernment sources, 62% of asylum applications in scale IT systems. Finally, the third proposal re- 2020 in came from those countries.

2

FOREIGN AFFAIRS AND SECURITY Polen Türkmen —Research Associate

June was an eventful month for multilateral for- operation in this framework, beginning as soon as eign affairs. Two key events were of particular im- possible”. However, the paragraph ended with the portance for the EU’s foreign and security affairs: parties’ “unwavering support” for NATO-EU coop- the EU - US summit on 15 June, 2021 and the Eu- eration. Giving the last word to NATO was an im- ropean Council meeting on 24-25 June, 2021. portant signal that furthering the European De- fence Agency and PESCO is not intended to be a On 15 June, the President of the European Coun- trade-off to the NATO framework. cil, , the President of the , and the US Furthermore, the 24-25 June Council meeting in- President Joe Biden met in Brussels to discuss EU - voked similar topics such as relations with: Turkey, US relations. The discussions focused on four Libya, Russia, Belarus, Sahel, Ethiopia, as well as a main pillars: ending the COVID-19 pandemic, pro- non-regional topic of cybersecurity. In regards to tecting the planet and fostering growth, strength- Russia, the European Council reiterated the EU’s ening transatlantic trade, investment and techno- openness “to a selective engagement with Russia logical cooperation and building a more demo- in areas of EU interest” such as climate and the cratic, peaceful and secure world. The discussions environment, health and certain foreign and secu- culminated with the adoption of a joint statement. rity policy issues such as the JCPoA, Syria and Lib- Some of the key themes included combatting dis- ya. In this way, the EU ensured that the possibility information, cooperating on a range topics re- of dialogue with Russia is not closed, despite the garding China (with emphasis on the situation in failure of the Franco-German proposal to hold a East and South China Sea) and Russia (with an in- summit with Russia. The most vocal opponents of tention to establish “a high-level EU-US dialogue“ the proposal were reportedly Russia’s EU neigh- on Russia). However, a wide range of other global bours such as and the Baltic states, who foreign and security issues were addressed, on worried that Russia would perceive a summit as a which the statement strongly emphasised and sig- reward despite its annexation of Crimea. While in nalled the joint vision and position of the EU and favour of the summit, the French President Mac- US. Most interestingly, the last paragraph men- ron reported that European unity was more im- tioned the EU’s invitation to the US to join the portant. The failure of the proposal demonstrates PESCO project titled ‘Military Mobility’. The US some of the differences in policies and threat per- committed to work towards an Administrative Ar- ceptions of European countries regarding Russia, rangement with the European Defence Agency a potential challenge in developing the EU’s strate- “with discussions, including on modalities and gic compass. conditions for a closer and mutually beneficial co-

3

DEMOCRACY AND GOVERNANCE Katrin Herrmann—Permanent Author

The month of June has been marked by the once ‘protecting children’, Commission President Von again increasing tensions between Hungary and der Leyen has vowed legal action if the bill does the EU, due to President Orbán’s new and ex- enter into force, most likely in the form of an in- tremely inflammatory anti-LBTQ+ law. Further- fringement procedure against Hungary. more, the European Commission has officially re- This conflict is only one more in the continued dis- ferred Czechia and Poland to the Court of Justice agreements between the EU and the more con- regarding the issue of electoral rights of EU citi- servative governments of Central and Eastern Eu- zens. The upcoming departure of German chan- rope; this is also marked by the referral of Poland cellor Angela Merkel has left open the question of and the to the Court of Justice in how not only the European Council, but politics an ongoing infringement procedure over electoral within the EU will be impacted. On a more positive rights. MEPs in Brussels are also keen to initiate note, the Commission has launched a European legal proceedings against Czech Prime Minister platform to combat homelessness as part of their Andrej Babiš over alleged conflicts of interest with commitment to building a more social Europe. regard to his agriculture conglomerate Agrofert, Mid-June the Hungarian Parliament adopted a as EU rules are extremely clear that this is not ac- new law banning “promotion and portrayal of ho- ceptable. With the departure of long-standing EU mosexuality or sex change to minors”. Though the leader Merkel coming in the fall, shifts in tone in bill initially began as a way to increase the conse- this new post-Merkel era were already becoming quences of pedophilia, Fidesz MPs decided to sub- apparent at the recent EU summit, with continued mit several changes to the draft, adding bans on debates occurring regarding EU values. content for minors featuring homosexuality or sex More positively, the European Commission has reassignment and sex educators no longer being launched the European Platform on Combatting able to ‘promote’ these issues to students. Moreo- Homelessness “to trigger dialogue, facilitate mutu- ver, sexual education classes can only be taught al learning, improve evidence and monitoring, and by registered organizations intending to limit strengthen cooperation among all actors that aim more liberal NGOs, as well as adding restrictions to combat homelessness”. The platform is meant on LGBTQ+ content in advertisements. As ex- to enable actors to share best practices and the pected, the passing of this legislation has caused accompanying Declaration lays out several objec- an uproar amongst many EU Member States, with tives on how to address this issue. It is a part of ’s Xavier Bettel, an openly gay man, the European Pillar of Social Rights Action Plan, speaking of his own experiences and the damages which calls homelessness one “the most extreme that stigmatization has on members of the form of social exclusion” which has unfortunately LGBTQ+ community, especially young people. been growing across the EU. Though Orbán continues to insist the bill is about

4

ENVIRONMENT Vlad Surdea-Hernea —Permanent Author

On June 24th, the European Parliament approved reaching an estimated EUR 55 for each emission a European Climate Law which sets in stone the allowance in the System. While the exact pro- previously discussed objective of reducing green- posals of the Commission will be outlined in July, house gas emissions by 55% by 2030, from 1990 many involved stakeholders believe that the main levels, and eliminating net emissions by 2050. This point of reform will regard the reduction of free approval comes after the law was heavily negotiat- allowances for sectors like aviation, and the po- ed by the Council, the Commission and the Parlia- tential introduction of a carbon-border adjust- ment in recent months. The importance of the ment mechanism (CBAM). new regulations will be seen immediately, as one Finally, in their last Environment Council under of the approved prerogatives specifies that the Portugal’s EU presidency mandate, the 27 minis- Commission is bound to create an independent ters have agreed upon a common version of the scientific advisory board which will aid interested EU strategy on climate change adaptation. While parties in the process of deep decarbonisation of not linked to specific measures, the Strategy aims the continent, and assist in the estimation of a car- to create the necessary framework for building a bon budget on which future policies will be bench- resilient , which will face the im- marked. pending effects of climate change in a manner Earlier this month, endorsed the plans that avoids as much negative disruption as possi- of the European Commission to reform and ex- ble. Further discussions on how this strategy will pand the current European Union Emissions Trad- influence major EU climate policies are expected ing System. This decision comes after the price of in July, when the Commission will present a new carbon in the EU has increased constantly in re- series of sustainable reforms. cent years, and even faster in recent months,

5

FINANCE, TRADE AND (DIGITAL) INTERNAL MARKET Henry Mau—Research Associate

The past month saw several important developments engage in discussions to allow the resolution of ex- in the domains of trade, finance and the internal digi- isting differences on measures regarding steel and tal market. From 11 to 13 June, world leaders came aluminum, as mentioned in the last EU Update (May together at this year’s G7 summit in Cornwall, and, 2021), before the end of the year. for the first time together with US President Joe To support the post-pandemic recovery of her 27 Biden, reiterated their commitment to free and fair member states, the European Union on June 28 trade. In addition, to create a fairer global tax sys- handed out the first funds from her 800 billion Euro tem, raise more tax revenue to support investment COVID-19 “NextGenerationEU” recovery fund. 800 and crack down on tax avoidance, the leaders en- million Euro, in the form of grants to create jobs and dorsed the creation of a global corporate minimum support businesses, have been disbursed to 16 tax of at least 15 per cent on a country-by-country countries, among them , Germany, Denmark, basis, through the /OECD inclusive framework. and the Czech Republic. In the upcoming The goal is to reach an agreement at the July meet- months, the recovery fund will aid 41 national and ing of G20 finance ministers and central bank gover- regional programs aimed at bridging the gap be- nors. tween emergency response measures and long-term The following EU-US summit on 15 June delivered investments, through measures to strengthen the prospect of four major new trade initiatives as healthcare systems, create jobs or offer investment part of a renewed transatlantic partnership. First, to support to businesses. To qualify for EU recovery provide for a forum for future cooperation in trade money, each government had to set out how it would matters, the high-level EU-US Trade and Technology spend its share, with a caveat that at least 37% must Council (TTC) has been established. As the current go towards fighting climate change and at least 20% global shortage of semiconductors threatens to slow to making the economy fit for the digital age. down post-pandemic economic recovery, one of the Finally, ECB board member Fabio Panetta relent- TTC’s first tasks will be the building of an EU-US lessly defended the possible introduction of a digital partnership on the rebalancing and futureproofing of Euro across newspapers in the European Union. global supply chains in semiconductors. Second, the While the exact technical specifications of such pay- summit concluded with the intent to establish an EU- ment system remain unclear, the ECB’s outspoken US Joint Technology Competition Policy Dialogue, goal is to safeguard the monetary policy sovereignty focusing on approaches to competition policy and in the . Additionally, Panetta notes that “if enforcement on the one side and increased coopera- people want to pay digitally and we do not offer a tion in the tech sector on the other. Third, the EU and digital legal tender, someone else will come up with the United States reached an understanding on a a solution.” Finally, the ECB goes so far as to outline cooperative framework for large civil aircraft, thereby the risks associated with not introducing a digital Eu- preparing the path towards the solving of a decades- ro in its report on the international role of the Euro. long trade conflict, with aircraft manufacturers Boe- ing and Airbus in its center. Fourth, the EU-US sum- mit allowed for representatives from both sides to

6