EU Insight, 12 February 2021

Brussels, 12 February 2021

COMMISSION REVISES GROWTH FORECAST DOWNWARDS BUT SEES LIGHT AT END OF TUNNEL

The European Commission released its Winter Economic Forecast, which revises economic growth estimates downwards for the second time in seven months. The euro area economy is now expected to grow by 3.7% in 2021 and 3.9% in 2022. While the euro area economy is entering a double-dip recession, the Commission predicts that growth will return to the euro area in the spring and gather pace over the summer, as more people get vaccinated and containment measures are eased. Although the recovery will be largely asymmetrical, “there is, at last, light at the end of the tunnel” said Economy Commissioner Paolo Gentiloni.

CO-LEGISLATORS ADOPT €672.5 BILLION RECOVERY AND RESILIENCE FACILTIY

The European Parliament and the Council adopted the Recovery and Resilience Facility (RRF) Regulation, which was proposed by the Commission as a cornerstone of the EU recovery strategy. The RRF will make €672.5 billion in grants and loans available for public investment and reforms in the 27 member states to help them address the impact of the COVID-19 pandemic, to foster the green and digital transitions and to build resilient and inclusive societies. Member States will receive support from the facility on the basis of their national recovery and resilience plans, which are due to be submitted to the Commission by 30 April.

EU AND UK COMMIT TO IMPLEMENTING NORTHERN IRELAND PROTOCOL AT CRUNCH MEETING

After a “frank but constructive discussion,” Commission Vice-President Šefčovič and UK Chancellor of the Duchy of Lancaster Michael Gove committed to full implementation of the Northern Ireland Protocol, specifically the solutions mutually agreed by both sides in December 2020. The EU has been wary of UK attempts to adjust Protocol provisions after the Commission’s controversial move (which was ultimately reversed) to trigger Article 16 to control vaccine exports. Meanwhile, the UK is demanding a two-year extension to “grace periods” to allow more time for businesses to adjust to new customs checks. But Šefčovič has emphasised any additional flexibility would first require full UK compliance with the new trade and customs regulations.

MEMBER STATES REACH NEGOTIATING POSITION ON REVISED E-PRIVACY RULES

The Council has agreed on a negotiating mandate for revised rules on the protection of privacy and confidentiality in the use of electronic communications services. The updated ePrivacy rules aim to define cases in which service providers can process electronic communications data or have access to data stored on end-users’ devices. The Council position also reflects new technological and market developments, such as the current widespread use of Voice over Internet Protocol, web-based email and messaging services, and the emergence of new techniques for tracking users’ online behaviour. The agreement allows the Portuguese Presidency to start inter-institutional negotiations with the European Parliament.

EU AND UKRAINE DISCUSS POLITICAL REFORM, TRADE AND ECONOMIC COOPERATION

The 7th meeting of the EU-Ukraine Association Council took place in Brussels, co-chaired by Josep Borrell, the EU’s High Representative for Foreign Affairs and Security Policy and Denys Shmyhal, Ukraine’s Prime Minister. The crux of the meeting focussed on implementation of the EU-UK Association Agreement, Ukraine’s reform agenda, economic cooperation, trade and Ukraine’s sovereignty and territorial integrity. EU representatives welcomed Ukraine’s reform efforts, while both sides acknowledged a need to strengthen rule of law and anti-corruption efforts in the country. Further, both sides committed to using the Association Agreement as a vehicle to bring the EU’s and Ukraine’s economies and societies closer together.

COMING UP NEXT WEEK

• 15 February: Video conference of the Eurogroup. On the agenda: Macroeconomic developments and policy prospects in the euro area, international role of the euro, solvency of the corporate sector.
• 16 February: Informal video conference of economic and finance ministers. On the agenda: Economic recovery in the EU, annual budgetary procedure, international issues.
• 19 February: Informal video conference of the members of the EU-Tajikistan Cooperation Council.
• 19 February: Informal video conference of education ministers.

Karl Isaksson, Managing Partner Brussels, Kreab

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Kreab • Tel: +32 2 737 6900 • karl.isaksson@kreab.com • www.kreab.com/brussels • Twitter: @KreabEU