Welcome to Better Europe’s weekly update on EU Affairs.
BIG ON BIG THINGS: STOP KILLING VIDEO GAMES (AND GIVE ME A BLUE PASSPORT)
Big on the big things, and small on the small things. That’s what Europe should be, right? Packaging waste? Small thing, so simplify. Sustainability reporting for companies? Small thing, so simplify. High-risk AI use? Small thing, so simplify. Planned obsolescence of video games? Big thing. HUGE thing actually. Well, if you believe the 1.3 million citizens who signed a petition to Stop Killing Videogames. On paper, it makes sense. You buy a video game, which rewards the makers but also finances some of the operating costs if it’s an online game — think the servers that host multiparty games, or simply an anti-piracy check that requires the game to “phone home” every now and then. But if the game manufacturer thinks it’s enough after a decade, or goes out of business, you are stuck with a piece of software that cannot be used any more, pretty much like a VHS movie that you have no player for and cannot legally transfer to another medium. Next week, the Commission will explain whether it will do anything with this European Citizens Initiative. Our bet? Potentially yes — the idea could fit in the Digital Content and Digital Services Directive and doesn’t step on the toes of the largest firms in the digital industry. But then there’s a graveyard full of ECIs that have been brushed aside, decisions that were often challenged in court. With increased pressure on civil society, citizens initiatives could become more relevant as a tool to at least get some public attention to topics that for some citizens are not “small things”. So, if you think a blue passport cover to show your sympathy for the EU is a big thing, vote here.
CYPRUS PRESIDENCY OPENS EU FUNDING PANDORA’S BOX
With a bit of delay, the Cyprus Presidency this week finally presented the Negotiating Box, the high-level framework for budget negotiations between Member States and ultimately with the Parliament. With two blocks on either side of the fence when it comes to increased EU spending, team “friends of cohesion” has clearly scored it first goal against team frugals. However, the frugals still get a modest 33-billion-euro reduction compared to what the Commission proposed, which won’t be enough to convince them but is enough to upset the European Parliament. The frugals insist the EU should spend more on defence, security, Ukraine and competitiveness, and less on cohesion, agriculture and its own administration could be cut to refocus the budget, as Dutch MEP-turned-minister Tom Berendsen said a few weeks ago. Parliament thinks the difference could be bridged by new EU income: on online gambling, digital services, and crypto assets — but the ideas are nowhere to be found in the Presidency’s box. And, the EU will still have to pay back the post-Covid recovery debt, unless it is “rolled over” and become a permanent feature of the EU budget, something that anti-federalists believe is the start of a transfer union. The return match is next week, when leaders are meeting for a Summit in Brussels. The price to pay? Probably a revision of the rebates that five countries still have — give them their money back.
OMNIBUS IV AGREED: BEWARE OF THE SMC
Who doesn’t love SMEs? When politicians talk about SMEs, most of us think about the mom-and-pop street corner flower shop. But those are actually the smallest ones, known as micro-enterprises. Companies can benefit from SME status as long as they have fewer than 250 staff, and a limited turnover (under 50 million) or a modest balance sheet (less than 43 million). Why is this so relevant? Because many EU legislative instruments rely on the definitions to carve out small businesses, either from the rules as a whole or from the most burdensome parts of it. It is a blunt tool to ensure proportionality, one of the conditions for EU intervention. But this kind of proportionality looks at the input, not the output of legislation: some small firms can have a huge impact on what the legislation is trying to address — think hedge funds asset managers who manage billions of investments with a few hundred staff. If the legislative purpose of legislation is to address the impacts of those investments, cutting out certain firms based on staff numbers doesn’t seem the most sensible way forward. Yet this is exactly what the EU is doing again with the Omnibus IV adopted this week — creating a new category for Small Mid-Caps (SMCs), almost 40 000 “companies that have outgrown the SME definition” but are still “small”. It means they are excluded from certain reporting requirements, from battery due diligence, tracing back supply chains and keeping privacy records under GDPR. A great achievement, as it will help these firms to avoid the “regulatory cliff” companies face when hiring their 250th staffer.