EU Insight, 10 July 2020

SUMMER 2020 ECONOMIC FORECAST ANTICIPATES AN EVEN DEEPER RECESSION

The European Commission’s Summer 2020 economic forecast predicts a deeper recession than anticipated in light of the COVID-19 pandemic. The analysis projects that the euro area economy will contract by 8.7% in 2020 and grow by 6.1% in 2021. The 2020 contraction is thus higher than the 7.7% projected in the Spring forecast. Growth in 2021 will also be slightly less robust than the Spring forecast had foreseen. Going forward, while all Member States are experiencing dramatic economic shocks from the pandemic, differences between countries in terms of economic impact and recovery strengths are set to be significant.

COMMISSION STRATEGIES FOR THE ENERGY SYSTEM OF THE FUTURE AND CLEAN HYDROGEN

The Commission laid out two strategies for energy system integration and hydrogen, targeting a more efficient and interconnected EU energy system. The aim is to create an integrated, more flexible and efficient energy system where energy infrastructures, carriers and sectors are linked. Together, the two strategies have three key pillars, namely a more circular energy system; greater direct electrification of end-use sectors; and in cases where electrification is problematic, promotion of clean fuels such as renewable hydrogen, sustainable biofuels and biogas. The Commission considers hydrogen essential to the goal of reaching carbon neutrality by 2050.

EUROGROUP ELECTS PASCHAL DONOHOE TO SUCCEED MARIO CENTENO

Eurozone Finance Ministers elected the Irish Minister for Finance and Public Expenditure and Reform, Paschal Donohoe, as the new President of the Eurogroup. Mr Donohoe defeated the odds-on favourite, the Spanish Minister of Finance Nadia Calviño by one vote. The Luxembourgish Minister of Finance, Pierre Gramegna, decided to withdraw his candidacy after the first round of votes. Paschal Donohoe will succeed current Eurogroup President, Mario Centeno, and will take office on 13 July. In his acceptance speech, Mr Donohoe committed to an ambitious recovery strategy with a focus on sustainable growth.

COMMISSION COMMUNICATION ON READINESS AT THE END OF THE TRANSITION PERIOD

The Commission published a Communication on readiness at the end of the transition period between the European Union and the United Kingdom. The 30-page Communication sets out the main changes that will apply from January 2021 whether an EU-UK agreement is reached or not, and urges businesses to get ready for significant upheaval. EU chief negotiator Barnier tweeted that significant EU-UK divergences remain at the end of the second round of intensified negotiations in London. Negotiations continue next week in specialised small group sessions in Brussels.

GERMAN PRESIDENCY PRIORITIES

German Chancellor Angela Merkel presented to the European Parliament the strategy and goals of the German presidency of the Council of the EU. Taking the motto “Together for Europe’s recovery,” the central priority for the next six months will be accelerating the COVID-19 recovery. Merkel also highlighted five areas of central focus: climate change, fundamental rights, solidarity and cohesion, digitisation, and Europe’s role in the world. Promoting overall European unity and solidarity is also likely to be a personal goal for Merkel, who is due to step down as Chancellor next year.

COMING UP NEXT WEEK

• 13 July: Foreign Affairs Council.
• 13-17 July: European Parliament Plenary session. On the agenda: general budget of the EU for 2021, developments in international digital taxation, establishment of an EU Health Programme for 2021-2027, review of the EU Solidarity Fund, medicine shortage.
• 13-17 July: Third round of specialised EU-UK negotiations (Brussels).
• 15 July: EU-India summit via videoconference; videoconference of Ministers for European Affairs.
• 16 July: Informal meeting of health ministers.
• 17 July: Informal meeting of employment, social affairs ministers.
• 17-18 July: Special European Council. On the agenda: the COVID-19 recovery plan and a new long-term EU budget under the multiannual financial framework (MFF).

Karl Isaksson, Managing Partner Brussels, Kreab