Insights Brussels February 2015

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A regular alert se on key EU policy developments ruS Issue 24 | February 2015

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Contents

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The top ten priorities until 2019

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2015: a critical year for the energy union

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#DigitalAgenda @full speed

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Towards a healthier Europe?

Financial services’ “sticks and carrots” to support EU economy

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Boosting EU trade policy negotiations with more transparancy

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Less is more in the new EU Commission’s work programme

For Winston Churchill... ...“Politics is the ability to foretell what is going to happen tomorrow, next week, next month and next year. And to have the ability afterwards to explain why it didn’t happen.” If this is still true in national politics, it is even more so at the EU level given the complexity of the decision making process and the difference or even divergence of views that result from 28 Member States and EU decision makers needing to take decisions and translate these decisions into effective action. European Commission President Juncker and his team are introducing three compelling changes in Brussels that may reduce the risk of policy irrelevance, overpromise and under-delivery.

The first change concerns the substantial reshuffling of the new EU power map which results in a more political and higher profile executive body, strongly influenced by a multi-partisan proEuropean political coalition established after the European Parliament election in May. The second change leads to refocus EU activities on ten key priority areas (see box on next page) where the institutions can demonstrate a real added value and deliver better results than actions taken in the same area by national and regional authorities acting alone.

The third change concerns the Commission’s engagement to monitor quality and ensure transparency of the law-making process from conception to enforcement, with a much bolder emphasis on stakeholder consultation, ex-ante and ex-post evaluation of legislation and thorough assessment of the likely impact of legislation before a proposal is put forward.

The substantial reduction of the number of new legislative proposals presented in the 2015 work programme, and the withdrawal of about 80 pending

Leonardo Sforza Managing Director MSLGROUP Brussels proposals that the Commission does not consider worthy of further effort in terms of time and resources, are the most tangible signs of the new EC mantra at work. Another important political sign, in relation to greater transparency, is the public release of the negotiation mandates and related documentation referred to in the EU-US the Transatlantic Trade and Investment Partnership agreement.

In this edition of our policy brief we outline some of the key regulatory and policy developments that we can expect in 2015 in five important policy areas: the digital agenda, energy, financial services, healthcare and external trade.

Stakeholder scrutiny and pro-active contribution is crucial to ensuring that the expectations generated by these changes are satisfied. And stakeholder contribution – particularly when fact-based and far removed from rhetoric – is now genuinely in demand from EU policy makers themselves. Let’s not miss this opportunity.

Leonardo Sforza, Brussels, February 2015

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Top ten priorities of European Commission President Juncker through 2019

1. A new boost for jobs, growth and investment: by improving the investment environment and mobilising €300 billion in public and private investment in the real economy during the next 3 years. Specific attention will be paid to improving the quality and results of the law-making process, reducing administrative burdens and enhancing regulatory simplification.

2. A connected digital single market: leveraging the potential of the market in terms of job creation and growth, and establishing a legislative framework to create the digital single market during the next 6 months.

3. A resilient Energy Union with a forwardlooking climate change policy: by enhancing renewable energy and energy efficiency and reducing the EU’s dependence on third countries.

4. A deeper and fairer internal market to strengthen industrial base: to bring industry’s weight in the EU’s GDP back to 20% and ensure that the EU maintains its leadership in strategic sectors such as automotive, engineering, etc.

• A Single Supervisory Mechanism and a Single Resolution Mechanism with a Single Resolution Fund will be built up to boost investments.

• Free movement of capital will be developed.

• The Posting of Workers Directive will be reinforced (on 13 May 2014, the Council adopted new measures to better enforce EU rules on the posting of workers).

• To combat tax fraud: Juncker supports a Common Consolidated Corporate Tax Base Directive.

5. A deeper and fairer economic and monetary union: through the effective implementation of the “six-pack” for macroeconomic surveillance and the “two-pack” legislation for increased transparency on Member States’ budgetary decisions.

6. A reasonable and balanced free trade agreement with the United States: with the objective to mutually recognise product standards without sacrificing safety and protection standards and cultural diversity.

7. An area of Justice and Fundamental Rights based on mutual trust: with the objective of finalising the accession of the EU to the ECHR, avoiding any discrimination, protecting personal privacy and fighting cybercrime (i.e. EU Cybersecurity Strategy).

8. Towards a new policy on migration: with the objective of creating a European common policy on migration and a common asylum procedure.

9. Europe as a stronger global actor: with the aim of enhancing EU-bloc foreign policy role under the leadership of High Representative Federica Mogherini. Member States should also co-operate in defence procurement, avoiding individual national interventions and expenditures. Further enlargement of the EU to new candidate countries is not envisaged during the Commission’s term of office.

10. A Union of democratic change: with the objective of enhancing a political dialogue with other institutions, national Parliaments and stakeholders.

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#DigitalAgenda @ full speed The digital economy is growing at seven times the rate of the economy, but this development is currently held back by a patchy pan-European regulatory environment. Reform of the regulatory framework related to the digital agenda has emerged as one of the main sectorial policy priorities for the EU in 2015, aimed at increasing broadband investment and maximising the digital sector’s contribution to Europe’s economic recovery. Two Commissioners are in charge of digital issues: Vice-President Andrus Ansip from Estonia and Commissioner Günther Oettinger from Germany.

In 2015, the European Commission will bring all ongoing inter-institutional negotiations on proposals under one “umbrella” strategy. These include the common European data protection reform, the Regulation on a Connected Continent and new initiatives to ensure the effectiveness of the Digital Single Market. The strategy will also include methodology to monitor progress made by each Member State.

Towards a digital market strategy In its 2015 work programme the European Commission announced that it will present next May its new strategy for the digital single market, encompassing a wide range of legislative and non-legislative policy initiatives. It is expected that the first public consultation on the digital market strategy will be organised in early 2015, along with a Digital stakeholder forum on 24 February. The European Commission will then present its strategy in May, prior to a first roundtable discussion with Member States during the informal Competitiveness Council scheduled for 28 May and the digital conference on 17 June.

The European Commission will present its strategy in May Connected continent The “Connected Continent” proposal presented in 2013 originally contained twelve chapters but has been whittled down to two – roaming and net neutrality – by Member States as they struggled to bridge deep divisions among themselves. The European Commission will push to make progress on this package.

As regards roaming, several Member States resisted an agreement in the past, arguing that they wanted to wait for the European Union body that brings together national telecoms regulators (BEREC) to issue an opinion on the concrete elimination of roaming fees. One of the main issues in this dossier is identifying a solution to the wholesale prices charged between operators.

The Latvian EU Presidency already suggested postponing the abolition of roaming charges until at least 2018.

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#DigitalAgenda @ full speed As regards net neutrality and the issue of preventing internet providers from charging websites for better connections, the European Council is still divided between countries that want strong net neutrality rules and countries that want to allow telecom companies flexibility in price discrimination.

Data protection In 2012 the Commission proposed major reform of the EU legal framework on the protection of personal data. The package is now under interinstitutional negotiation but issues surrounding informed consent for the use of data, sanctions, privacy by design and red tape remain sources of friction between Parliament and EU Member States represented at the Council of the European Union. Serious differences between the European Parliament and the 28 Member States cast doubts over whether the new rules can be agreed before the end of the year.

Platform neutrality In its upcoming strategy, the European Commission is expected to tackle the issue of platform neutrality – particularly discrimination in referencing in search engines, access to online shopping platforms and products linked to applications on smartphones. In a letter to the European Commission in December, the governments of Germany and France voice strong support of the initiative and call on the Commission to prioritise the topic.

Protection of online shoppers cyber security The European Commission has anticipated the introduction of legislative proposals to improve the protection of online shoppers. It will also introduce new measures to reinforce cyber security in the EU.

Towards a copyright reform In October 2014 GĂźnther Oettinger, the new Commissioner for Digital Economy and Society, announced a comprehensive revision of European copyright law. The aim of the reform will be to adapt rules dating back to 2001 to the digital era.

The reform is expected to be presented by next summer.

The Commissioner already revealed that the EU is planning to introduce copyright levies on the use of copyright-protected works on the internet. These levies have been suggested in such a way that companies would have to pay for the online use of works regardless of whether their headquarters are located within the EU. In Germany, copyright rules already require search engines and content aggregators to pay publishers in order to display snippets of their content in certain circumstances.

Another anticipated issue concerns the removal of restrictions on access to digital content, and particularly to stop blocking online consumers based on their location or residence. The Commission intends to remove unjustified curbs on transfer and access to digital assets. Debate on this critical issue already promises to be intense.

2015 EU DIGITAL AGENDA Early 2015: Consultation on upcoming strategy for the digital market (Brussels) February: #Digital4EU stakeholder forum May: Presentation of the strategy for the digital market (Brussels) 28 May: Meeting of EU ministers in charge of Digital (Brussels) 17 June: Digital conference (Brussels) Summer: Presentation of the copyright reform

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2015: a critical year for the energy union Energy policy is emerging as one of the most critical priorities for the new EU leadership and is gaining political relevance. Two Commissioners share responsibility for energy during the upcoming legislative period: Miguel Arias Cañete (Spain) and Maroš Šefcovic (Slovakia).

The European institutions will focus on two topical projects in 2015: the release of the European Commission’s much-awaited strategy on the energy union and preparation for the United Nations Climate Change Conference in Paris in December.

Towards a strategy for the energy union On 25 February the European Commission will unveil its draft strategy for the energy union, which has been highly anticipated by energy circles in Brussels. Over half of the EU’s Commissioners are involved in the elaboration of this strategy, including Commissioners for energy and climate, internal market, competition, the digital agenda, regional policy, research and the High Representative for foreign affairs.

The Energy Union is expected to be structured around five pillars: (1) security of supply, (2) completion of the internal energy market, (3) demand moderation, (4) decarbonisation of the EU energy mix and (5) research and innovation. The strategy is expected to include 42 diplomatic, political and legislative measures in the energy domain, and encapsulates the various initiatives previously discussed separately or in subgroups.

In particular, the European Commission will put forward options for the common purchasing of gas and initiatives to increase the diversification of gas supply routes by targeting Norway, North Africa and the USA. It will also put forward measures to

legally require gas suppliers to build up reserves.

Additionally, the Commission may propose revision of some directives, including those on carbon capture and storage, energy efficiency, renewable energy and fuel quality. These revisions, however, will not likely outline the objectives and timeline of such reviews. This strategy is of utmost importance to energy stakeholders in Brussels, as it will set the tone and perspective for the next five years of EU energy policy. The uncertainty over oil prices in the short and long term has already reshaped the debate and forced policymakers to reconsider their original energy strategies, which were based on the assumption of higher oil prices. As gas contracts are linked to the price of oil, renewable energy producers are apprehensive of increased competition from electricity generated by gas-fired power stations.

Some Member States are considering a reduction or removal of their subsidies for fossil fuel infrastructure. This stance has been backed by the European Commissioner for Energy, who has called for a reallocation of these subsidies for renewable energy projects.

The rotating presidency of the European Council will be held by Latvia through June 2015. This presidency has organised a high-level ministerial conference in Riga on 6 February to discuss concrete objectives and a timeline for implementing an Energy Union.

Industry representatives and stakeholders will have the opportunity at the conference to debate and reach an agreement on the future of European energy policy.

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Towards a global agreement on climate change Throughout 2015 and in particular during the second half of the year, the European Commission and energy stakeholders will be busy with the preparation of the December Climate Change Conference in Paris. In its programme for 2015, the European Commission announced that it will issue a Communication entitled ‘The Road to Paris’, which “will set out the EU’s vision and expectations in the run-up to the United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties in Paris at the end of 2015 and will begin to table the legislative proposals to implement the 2030 Climate and Energy package.”

Leading by example, the EU is currently discussing a policy framework which includes setting itself a 2030 emissions reduction target of 40% below 1990 levels, with renewables targets representing at least 27% of the European energy mix by 2030. Industry representatives in Brussels, responding shortly after the informal agreement on the proposal in October 2014, made no secret of their discontent. Two major pan-European business organisations (BusinessEurope and Eurochambres) hold that such an approach would be detrimental to the competitiveness of the European industry and should rather favour more cost-effective solutions to reduce emissions. NGOs and environmentalists also argued that the targets are “desperately inadequate and ineffective – Europe has lost all credibility with respect to its ambitions on energy and climate policy.”

Energy and Environment ministers will further discuss the 2030 energy/climate framework at an informal meeting on 14-16 April in Riga under the leadership of the Latvian Presidency. Based on these talks, the European Commission will come forward with a more formal legislative proposal during the first semester of the year. The framework will then have to go through the full co-decision procedure involving the

Parliament and Council. As the process is likely to take 12 to 18 months, there is only a slight chance that the framework will be finalised before the Paris Conference in December.

Besides these two major energy dossiers, the European Commission will continue its policy debates on the reform of the European Emissions Trading System (EU ETS), the deployment and funding of Trans-European energy infrastructures, the uptake of Carbon Capture and Storage (CSS) technologies and the negotiation of international partnerships in the field of energy.

2015 EU ENERGY MILESTONES 6 February: High Level ministerial and stakeholder conference on Energy Union (Riga) 12 February: EU Heads of State and Government meeting (Brussels) 25 February: Presentation of the Strategy for the Energy Union (Brussels) 5 March: EU Energy Ministers meeting (Brussels) 19 March: EU Heads of State and Government meeting (Brussels) Spring: New Energy Charter with Central and Eastern European Countries (Brussels) 14-16 April: Informal meeting of EU Energy Ministers (Riga) 8 June: EU Energy Ministers meeting (Brussels) 25 June: EU Heads of State and Government meeting (Brussels) 30 November – 11 December: United Nations Climate Change Conference (Paris)

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Towards a healthier Europe?

While the organisation and delivery of healthcare is the responsibility of each country, the EU complements and adds value to national policies by addressing common challenges and sharing best practices and by ensuring a level playing field in terms of market access for the industry and product safety for European citizens.

Looking at the 2015 Work Programme, it is the internal market aspect that seems to prevail this year. Meanwhile EU financial resources will be made available throughout the year to support leadingedge health care projects of EU interest.

2015 health programme The EU Health Programme (2014-2020) is the main instrument managed by the European Commission (total budget of â‚Ź 449.4 million) to implement EU health strategy. The EU Health Programme aims at supporting co-operation projects at the EU level, actions jointly undertaken by Member State health authorities, the functioning of nongovernmental bodies and co-operation with international organisations.

It is implemented by annual work plans, setting out each year priority areas and the activities which can be co-financed under the programme. Programming and implementation are conducted through calls for grants and tenders regularly published in the EU official journal.

Participation is open to a wide range of organisations, including research institutes and universities, public authorities, NGOs and businesses.

This year’s plan is expected to be released later during the first semester of the year.

Medical devices In 2015 the EU institutions will try to finalise the agreement on a new legal framework for medical devices and in-vitro diagnostic medical devices. The proposals govern the placing on the market and the monitoring of health products for internal and external use, such as pregnancy tests, pacemakers and HIV blood tests. The proposals aim to ensure that patients, consumers and healthcare professionals can benefit from safer, effective and innovative medical devices and thereby reduce the risk of future health threats, such as those associated with PIP breast implants.

The European Parliament adopted its position in April 2014 and gave a negotiating mandate to the two rapporteurs (Glenis Willmott (S&D, UK) and Peter Liese (EPP, DE)) last November. The Council, however, is finding it difficult to reach agreement.

Currently, many stumbling blocks remain despite almost two years of discussions between the national governments. The Member States do not agree on the question of reprocessing single-use devices.

Some Member States have called for an EU system, while others say it is a national competence. Germany hopes that reprocessing will be allowed in certain specific cases (e.g., in hospitals) established by national law. France, meanwhile, prefers to maintain a total ban. Another problem is the supervision of devices before/after they are placed on the market, as well as the costs that should be assumed by competent authorities, notified bodies and

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manufacturers. The matter of the field of application for the new legislation also remains unresolved: should cosmetic products and tinted contact lenses be considered medical devices even though their main objective is not considered health-improving?

As ever, the matter of secondary legislation and the inclusion of the European Parliament in the scrutiny thereof remain open.

The European Commission and the European Parliament are both hoping that the Latvian Presidency will manage by June to agree on a general approach for the EU Council that would allow the three-way talks to reach a final decision backed by support from the other two EU institutions. If agreement is reached before the summer the new rules may come into effect as of 2018.

Transparency This year’s Commission Work Programme includes a list of 80 pending proposals due to be withdrawn.

One of these proposals is aimed at regulating the transparency of measures related to the price of medical products for human use and their inclusion in the scope of public health insurance systems.

The reason behind the withdrawal of the directive is the lack of any foreseeable agreement; the Member

States oppose the proposal, believing it interferes too much with their national sovereignty regarding price-setting systems.

Stakeholders’ open consultations Stakeholders’ open consultations are becoming an integral part of the EU decision making process. As regards Health policy, there will be a consultation during the second semester of 2015 on the revision of guidelines for orphan medicinal products. Orphan medicinal products are intended for the diagnosis, prevention or treatment of life-threatening or very serious rare diseases or medical conditions that affect no more than 5 in 10,000 people in the European Union. The legislation aims at providing incentives for the development of orphan and other medicinal products for rare disorders. Currently, companies with an orphan designation for a medicinal product benefit from incentives such as fee waivers, a 10-year post-authorisation market exclusivity period for designated products; scientific assistance for marketing authorisation; and the possibility of Community marketing authorisation.

The consultation will look into aspects of the application procedure of orphan medicinal products.

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During the 2nd semester the European Commission will also launch a consultation on pharmaceuticals in the environment. The issue of effects of pharmaceuticals in the environment was heavily debated within the European institutions with reference to substances that represent a pollution risk to surface waters in Europe. In its draft text the Commission included a provision on Environmental Quality Standards (EQS) for 3 pharmaceutical substances (hormonal preparations 17alphaethinylestradiol and 17beta-estradiol and the painkiller Diclofenac), thereby including these substances in the sustainability target in terms of the ecological, chemical and quantitative “good status” for European water. In the final text adopted as law, pharmaceuticals were only included in a “watch list” of emerging pollutants that may one day be placed on the priority list.

Better use of antibiotics The Horizon Prize The European Commission is launching a € 1 million prize to address the issue of unnecessary use of antibiotics, which is contributing to the growing problem of antibiotic resistance. The challenge is

to develop a rapid test that will allow healthcare providers to differentiate at the point of care patients with upper respiratory tract infections that require antibiotics from those that can be treated safely without antibiotics.

The test will need to be inexpensive, rapid, easy-touse for healthcare providers and non- or minimally invasive for patients. By putting a stop to the needless prescription of antibiotics, the aim is to prevent the side effects associated with unnecessary treatment, eliminate the cost of prescribing antibiotics and, most importantly, decrease the development of resistant bacteria.

The rules of the competition will specify the targets that need to be met but will not prescribe the methodology or any technical details of the test.

Applicants will therefore have total freedom to come up with the most promising and effective solution – whether they be an established scientist in the field or an innovative newcomer. The competition will be launched in February 2015 and will run through the end of 2016.

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Internal market and digital health solutions Placing the Health Commissioner on the Commission Project Teams of Jobs, Growth, Investment and Competitiveness and Digital Single Market (alongside the Better Regulation and Inter-Institutional Affairs, Budget and Human Resources teams) strengthens the new approach of increasing focus on the internal market factors and growth potential within the health sectors. The new Health Commissioner, Vytenis Andriukaitis, is promoting “a new boost for Health in Europe” to stimulate investments in health. He argues that health policies can make a significant contribution to Europe’s economic recovery, with the Commission supporting national health systems to become more efficient and innovative so that they can provide equitable healthcare to all citizens while also remaining financially sustainable. In future, regulatory changes related to medicines and pharmaceutical products will be developed jointly by Health Commissioner Andriukaitis and Elzbieta Bienkowska, Commissioner for the Internal Market, Industry, Entrepreneurship and SME portfolio.

Health Commissioner Andriukaitis will also work closely with Vice-President Ansip (responsible for the Digital Single Market) and Commissioner Oettinger (responsible for Digital Economy & Society) to support the further deployment of eHealth across Europe.

Many potential hurdles to eHealth can only be tackled at the national and regional levels (e.g., reimbursement issues) but co-ordination at the EU level helps ensure a coherent approach. Patient safety, the involvement of health professionals and mutually comprehensible terminology are areas in which EU co-ordination is seen as particularly useful. Projects related to eHealth can be co-financed by the EU under several programmes, such as the EU Health Programme.

The next meeting of the EU eHealth Network will take place in Riga on 12 May, during the Latvian presidency.

2015 EU HEALTH MILESTONES 1st semester 2015: Annual Work Plan 2015 for the EU Health Programme 1st semester 2015: Public consultation on the Concept paper on Delegated Regulation on Good Manufacturing Practice for investigational medicinal products February 2015: Launch of a €1 million prize addressing the issue of the unnecessary use of antibiotics 2nd semester 2015: Stakeholder consultation on Revised EC guidelines on aspects of the application of Regulation EC 141/2000 on orphan medicinal products 2nd semester 2015: Stakeholder consultation on the Strategy on pharmaceuticals in the environment 2nd semester 2015: stakeholder consultation on Scientific advice of EMA on the impact of public health and animal health of the use of antibiotics in animals 12 May 2015: eHealth Network meeting in Riga, Latvia.

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Financial services’ “sticks and carrots” to support the EU economy

The development of a Capital Markets Union (CMU) by 2019 is mainly focused on growing and diversifying the funding capacity of the European economy and reducing the cost of raising capital for companies. It constitutes a flagship priority project of the Commission’s 2015 Working Programme and will consists of an action plan for improving the financing of the economy through more efficient market-based instruments. Jonathan Hill, the British-born Commissioner for Financial Stability, Financial Services and Capital Markets Union, will launch a broad consultation process on such plan by the end of February and subsequently finalise the plan by next summer.

Towards a capital market union The European Commission recently kicked off its flagship project to create a Capital Markets Union (CMU) for all 28 EU Member States with operational orientations due to be revealed on 18 February and submitted to a wide consultation among stakeholders on concrete areas for action. CMU is designed to help businesses tap into diverse sources of capital from anywhere in the EU and offer investors and savers additional opportunities to put their money to work.

It aims to create a single market for capital for all 28 Member States by removing barriers to cross-border investment and lower costs of funding within the EU. According to Commissioner Hill, “One of the key challenges Europe faces is to get investment flowing to support jobs and growth. A true single market

for capital in all 28 Member States would help support that goal by linking savers and investors with businesses, big and small, that want to grow.

It would also help broaden sources of funding, complementing the important contribution already made to our economy by the banking system. We need to identify the barriers that are stopping capital from flowing and work out how to knock them down one by one. That will be the purpose of the Green Paper we will launch in a few weeks’ time.” Based on the feedback it receives, the Commission will unveil an Action Plan on the CMU during third quarter of 2015.

The College of European Commissioners has recently agreed that the forthcoming consultative paper should build on the short-term priorities set out in the Investment Plan for Europe – such as reviving the markets for high quality securitisation and simplifying the Prospectus Directive by consulting on how those priorities should be implemented. In addition, the Green Paper should seek views on how to address, in the medium term, the deep seated barriers, which go beyond financial market issues, to integrated capital markets. In the longer term, if and when the capital markets will become increasingly integrated, the Commission may also consider the possibility of expanding the role of the European supervisory authorities.

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Banking union and supervision A single rulebook for the resolution of banks and large investment firms in the EU Member States came into force on 1 January 2015. The rules harmonise and improve the tools for dealing with bank crises across the EU and ensure that, in case of failure, banks’ shareholders and creditors, rather than taxpayers, will bear their share of the costs through a “bail-in” mechanism.

Governance and supervision are also key issues with respect to non-banking entities. Throughout 2015, the regulatory framework will be further strengthened by a proposal on crisis management and resolution of systemic non-banking entities such as central counterparties (CCPs), central securities depositories (CSDs), insurance companies, hedge funds, etc. The Commission will begin preparatory work on ways in which the single market for retail financial services can deliver more benefits to consumers through increased choice, competition, and transparency.

Completion and implementation of the financial regulatory framework Throughout 2015, the Commission will also focus on the enforcement and implementation of the complex regulatory framework (already agreed) spanning from new capital adequacy to solvency and updated rules for markets in financial instruments.

There are over 400 delegated and implementing acts yet to be adopted to translate EU regulation into daily market practices. These kinds of postsecondary rules are used to specify the details of technical and operational issues, after the general act is adopted, and are prepared by the European Commission with the support and agreement of national technical experts in the field.

In this respect, on 16 December 2014 the European Banking Authority (EBA) adopted the final guidelines on the criteria for determining conditions of application of the revised Capital Requirement Directive (CRD IV) in relation to the assessment of other systemically important institutions. The guidelines establish a scoring process for assessing systemic importance based on evaluating an

institution’s size, importance, complexity, crossborder activity and interconnectedness.

The Commission also adopted its first “equivalence” decision for credit risk weighting by establishing a list of third countries whose supervisory and regulatory arrangements would be considered by the EU as equivalent.

Building a deeper and fairer internal market An important aspect due to be addressed by this year’s Commission Working Programme regards new draft legislation to toughen regulation of clearinghouses in a bid to prevent financial turmoil.

Tougher safeguards are needed to calm concerns that might be triggered across the global financial system by the collapse of a clearinghouse company.

In addition to the clearinghouse rules, Commissioner Hill is assessing the need to boost measures covering other financial industries, beyond banks, in order to prevent firms being too-big-to-fail.

Another important challenge for 2015 refers to the development of an EU framework for highquality securitisation. In this context, on 14 October 2014 the EBA published a discussion paper on simple, standard and transparent securitisations, in response to the European Commission’s call for an investigation of the potential ways and merits of promoting a safe and stable securitisation market.

EBA aims to shape a new class of prudentially sound securitisation products that may become subject to specific regulatory recognition, and intends to use the three pillars (simplicity, standardisation and transparency) as protection measures to ensure that risks in securitisations unrelated to an underlying exposure are adequately mitigated. The consultation closed on 14 January 2015 and EBA is expected to submit its final technical advice to the EU on this matter during the second quarter of the year.

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Pension funds Revision of the first pan-European regulatory framework put in place by the 2003 Directive on the Institutions for Occupational Retirements Provisions (IORP) is one issue inherited from the previous legislature that is due to be tackled in 2015. Last December the Council agreed its negotiating stance on a draft Directive aimed at facilitating the development of occupational retirement savings and better protecting pension scheme members and beneficiaries in Europe (“IORP II”). The new draft legislation is intended to improve the governance and transparency of pension funds and facilitate cross-border activity. The European Parliament recently appointed Irish MEP Brian Hayes as rapporteur for this long-awaited revision, which is likely to continue for another year. Meanwhile the European Commissioner may also reconsider the scope of the legislative revision by exploring opportunities to develop a completely new regulatory regime.

In relation to the good news for EU pension schemes, it is worth recalling the European Commission’s recommendation from early in 2015 to grant pension funds a two-year exemption from central clearing requirements for their over-the-counter (OTC) derivative transactions. Under current arrangements, pension schemes – which encompass all categories of pension funds – would have to source cash for central clearing. This further exemption would not exclude the need to find technical solutions towards central clearing for their derivatives transactions, as is the case for other financial institutions.

In many Member States, pension schemes use OTC derivative transactions (i.e., derivatives that trade through a dealer network rather than through a centralised exchange) to hedge long-term interest rate and inflation risks. Pension schemes, however, do not generally hold cash, but rather invest in higher-yielding and longerterm assets such as bonds to enhance returns for pensioners. A requirement to source cash for central clearing would require very far-reaching and costly changes to this business model and may ultimately reduce pensioners’ retirement income.

2015 EU FINANCIAL MILESTONES February: launching of a green paper on Commission’s plans to set up the CMU. 17 February 2015: next ECOFIN meeting 19-29 March 2015: European Council meeting 3rd quarter of 2015: the Commission will unveil an Action Plan on the CMU. June 2015: approval by the EP of the investment plan for Europe aimed at mobilizing private financing in the context of the CMU. September 2015: expected functioning of the investment plan for Europe.

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Boosting EU trade policy negotiations with more transparency

The European Union is the biggest player on the global trading scene, ranking first in both inbound and outbound international investments, and is the top trading partner for 80 countries. The most recent estimates for the trade in goods between the 18 eurozone countries and the rest of the world showed a €20.0 billion surplus in November 2014, as compared with a €16.5 bn surplus in November 2013. Trade policy is at the core of EU competences and broadly focuses on four overall objectives: the creation of a global system for fair and open trade; opening up markets with key partner countries (particularly through negotiating better access and conditions for trade and investment through free trade agreements); ensuring that other countries play by the rules (with a focus on reducing counterfeiting and piracy of European goods); leveraging trade as a means to promote sustainable development, to improve working conditions for workers in developing countries and ensure the highest standards of health and safety for the products bought and sold

by Europeans. Cecilia Malmström from Sweden is the European Commissioner for International Trade and Trade Agreements. The agreement on a comprehensive EU-US trade and investment partnership has emerged as the most compelling – and controversial – external trade issue on the table of the new Commission. Meanwhile, other important bi-lateral agreements are subject to ongoing negotiations, in particular with China for a comprehensive investment agreement.

Transatlantic Trade and Investment Partnership (TTIP) The Transatlantic Trade and Investment Partnership (TTIP) is a free trade agreement currently being negotiated between the European Union and the United States. It is one of the top ten priorities of the new Commission in office, reflecting the importance of EU-US relations and the positive impact that a new comprehensive agreement can have for economies on both sides of the Atlantic.

The objective of the agreement is to remove trade barriers, enhance market access and improve cooperation in international standards on both sides.

The first working group was set up by EU and US leaders back in November 2011. Negotiations were launched two years later, and by early February 2015 eight rounds of bilateral negotiations have been conducted (held alternatively in Brussels and Washington DC).

The ongoing negotiations have been heavily debated, with citizens, NGOs and stakeholders expressing concerns about the transparency process that would lead to the adoption of the text and to the investorstate dispute settlements (ISDS) – i.e., clauses that grant an investor the right to use dispute settlement proceedings against a foreign government.

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With respect to the transparency issue, on 25 November 2014 the Commission adopted a communication outlining actions to be taken to enhance transparency during negotiations, and on 7 January 2015 eight papers covering competition, food safety, animal and plant health, customs issues, technical barriers to trade, and SMEs were published by the Commission.

DG Trade Commissioner Malmstrรถm said that more information will follow after the end of the eight rounds of negotiations in February.

With respect to ISDS, it should be borne in mind that the issue is of extreme importance due to the consequences these clauses may have on other agreements. For instance, if there were no ISDS deal with the US, China would not accept such an insertion in the investment treaty. In the negotiation mandate given to the Commission it was made clear that investment protection and ISDS should form part of the agreement concluded with the US only after a number of conditions are met.

Consequently, a decision on whether or not to include ISDS will have to be taken during the final phase of the negotiations in agreement with First Vice-President Timmermans, who will ensure that ISDS fully complies with the rule of law, the principle of equality before the law and the principle of transparency.

The Commission will further consult with EU stakeholders, Member States and the European Parliament during the first quarter of 2015 on the above-mentioned issues, with a view to developing concrete proposals for the TTIP negotiations. Until then, no negotiations are currently being held on this issue.

2015 EU TRANSATLANTIC MILESTONES February 2015: 10th round of negotiations of Trade in Services Agreement with US (TiSA).

April 2015: 9th round of negotiations for the Transatlantic Trade and Investment partnership (TTIP).

End of 2015: final agreement for Japan-EU Economic Partnership Agreement.

First semester of 2016: application of the EUCanada trade agreement

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