Welcome to Better Europe’s weekly update on EU Affairs.
NATIONAL GOVERNMENTS WANT TO PAUSE THE EU SAUSAGE MACHINE
“Thanks for the plans for 2027, Ursula. But on second thought, let’s not do any EU regulation at all in the coming years”. Sounds like a deregulation dream? Well, it’s actually reality. This week, Austria and 11 other countries suggested that the Commission should impose a one-year moratorium on new legislation, aka a “regulatory pause”. It’s nothing new — the concept has been suggested and applied a few times in the EU’s past. Commissioner Charlie McCreevy even insisted on his regulatory pause until May 2008, well after a massive crisis hit the financial sector that he was responsible for. What is different this time, is that pausing the EU’s legislative machinery for a year would effectively move the Commission into lame duck mode for the rest of its mandate, at the end of 2029. Because laws need a few years to travel through the sausage factory, next year is the last year for significant initiatives ahead of the elections in June 2029. And this deprives the EU from its main policy tool, because unlike its member states, the EU cannot tax or send the army, as one senior Commission official put it. Directives and Regulations is what Brussels does, baby. Without them, the EU is a talking shop. Exactly what half of its member states want it to be?
BUDGET: LEADERS CAN LOOK FORWARD TO A DECEMBER SLEEPOVER
And if there are no laws to be made, perhaps the EU could do with a little less staff too? This week, General Affairs Ministers met for their traditional budget negotiation ritual, whereby they divide themselves between the “Frugals” and the “Friends of Cohesion”. It’s bubble speak for those who want to reduce and retain/increase the EU budget, respectively. Germany, the Netherlands, Sweden, Denmark, Finland and Austria, who now call themselves the “modernisers“, say the proposed cuts are not deep enough: hundreds of billions of euros must go from the 1.7 trillion euros potentially available to the EU over the next seven years. At that level, the cuts go beyond the flesh. Finding a few extra “own resources” here and there such as CBAM and ETS or not replacing retiring EU staffers will not suffice. The cuts would have to come from the spending side: cohesion policy, agriculture subsidies, and fisheries — exactly what the Friends are trying to avoid. So as always, it’s time to bring in the real politicians. A first try-out is taking place 15-16 October, as the fight escalates to national leaders. But don’t expect results until the Presidency locks up leaders in the Council building in December, forcing their hand to find an agreement.
THE SLOW-BURN CLIMATE RISK NOBODY NOTICES UNTIL ITS EXPLODES
Europe is good at dealing with fast-burning crises, the theory goes. Whether it’s natural disaster, terrorist attacks or a pandemic — suddenly everything becomes fluid and political momentum just falls from the sky. The Recovery and Resilience Facility, the Digital COVID Certificate, things previously unthinkable were agreed under record-speed negotiations. But slow-burning crises seem to be a lot harder. Think demographic change, geo-economic fragmentation, or why not, the climate transition? Even the European Central Bank admits that while the long-term financial impact of the climate transition is well integrated into bank rules on paper, banks will only “eventually” be required to hold extra capital to deal with the financial impact. As a study for the European Parliament published this week notes: the methodology is there, but is not yet requiring banks to take it into account. Say again? Banks know their bottom line will eventually be impacted by climate change, but as long as the music is still playing, we can keep dancing around the chairs. The EU’s bank supervision structure only integrates climate impact in individual bank-by-bank rules, which structurally under-prices sector-wide, slow-moving threats. By the time these threats hit the financial system, they will be fast-burning. And that’s something European politicians know how to deal with.