# Official Journal C 339/2010

| | ISSN 1725-2423
  doi:10.3000/17252423.C_2010.339.eng |
| --- | --- |
| Official Journal
  of the European Union | C 339 |
| | |
| English edition | Information and Notices | Volume 5314 December 2010 |

ISSN 1725-2423

doi:10.3000/17252423.C_2010.339.eng

Official Journal

of the European Union

C 339

English edition

Information and Notices

Volume 5314 December 2010

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| Notice No | Contents | page |
| --- | --- | --- |
| | I   Resolutions, recommendations and opinions |
| | OPINIONS |
| | European Economic and Social Committee |
| | 459th plenary session held on 20 and 21 January 2010 |
| 2010/C 339/01 | Opinion of the European Economic and Social Committee on Early childhood care and education (own-initiative opinion) | 1 |
| 2010/C 339/02 | Opinion of the European Economic and Social Committee on The sustainable development of coastal areas (own-initiative opinion) | 7 |

Notice No

Contents

page

I   Resolutions, recommendations and opinions

OPINIONS

European Economic and Social Committee

459th plenary session held on 20 and 21 January 2010

2010/C 339/01

Opinion of the European Economic and Social Committee on Early childhood care and education (own-initiative opinion)

1

2010/C 339/02

Opinion of the European Economic and Social Committee on The sustainable development of coastal areas (own-initiative opinion)

7

| | III   Preparatory acts |
| --- | --- |
| | European Economic and Social Committee |
| | 459th plenary session held on 20 and 21 January 2010 |
| 2010/C 339/03 | Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at Community airportsCOM(2009) 634 final — 2009/0176 (COD) | 13 |
| 2010/C 339/04 | Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on the European Earth Observation programme (GMES) and its initial operations (2011–2013)COM(2009) 223 final — 2009/0070 (COD) | 14 |
| 2010/C 339/05 | Opinion of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a harmonised methodology for classifying and reporting consumer complaints and enquiriesCOM(2009) 346 final | 20 |
| 2010/C 339/06 | Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policiesCOM(2009) 362 final — 2009/0099 (COD) | 24 |
| 2010/C 339/07 | Opinion of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions concerning the European Union Strategy for the Baltic Sea RegionCOM(2009) 248 final | 29 |
| 2010/C 339/08 | Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on Community macro-prudential oversight of the financial system and establishing a European Systemic Risk BoardCOM(2009) 499 final — 2009/0140 (COD) Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing a European Banking AuthorityCOM(2009) 501 final — 2009/0142 (COD) Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing a European Insurance and Occupational Pensions AuthorityCOM(2009) 502 final — 2009/0143 (COD) Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing a European Securities and Markets AuthorityCOM(2009) 503 final — 2009/0144 (COD) | 34 |
| 2010/C 339/09 | Opinion of the European Economic and Social Committee on the Proposal for a Council Directive amending Directive 2006/112/EC as regards an optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraudCOM(2009) 511 final — 2009/0139 (CNS) | 41 |
| 2010/C 339/10 | Opinion of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on agricultural product quality policyCOM(2009) 234 final | 45 |
| 2010/C 339/11 | Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard security of gas supply and repealing Directive 2004/67/ECCOM (2009) 363 final — 2009/0108 (COD) | 49 |
| 2010/C 339/12 | Opinion of the European Economic and Social Committee on the Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee: Contributing to sustainable development: the role of fair trade and non-governmental trade-related sustainability assurance schemesCOM(2009) 215 final | 53 |

III   Preparatory acts

European Economic and Social Committee

459th plenary session held on 20 and 21 January 2010

2010/C 339/03

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at Community airportsCOM(2009) 634 final — 2009/0176 (COD)

COM(2009) 634 final — 2009/0176 (COD)

13

2010/C 339/04

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on the European Earth Observation programme (GMES) and its initial operations (2011–2013)COM(2009) 223 final — 2009/0070 (COD)

COM(2009) 223 final — 2009/0070 (COD)

14

2010/C 339/05

Opinion of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a harmonised methodology for classifying and reporting consumer complaints and enquiriesCOM(2009) 346 final

COM(2009) 346 final

20

2010/C 339/06

Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policiesCOM(2009) 362 final — 2009/0099 (COD)

COM(2009) 362 final — 2009/0099 (COD)

24

2010/C 339/07

Opinion of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions concerning the European Union Strategy for the Baltic Sea RegionCOM(2009) 248 final

COM(2009) 248 final

29

2010/C 339/08

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on Community macro-prudential oversight of the financial system and establishing a European Systemic Risk BoardCOM(2009) 499 final — 2009/0140 (COD) Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing a European Banking AuthorityCOM(2009) 501 final — 2009/0142 (COD) Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing a European Insurance and Occupational Pensions AuthorityCOM(2009) 502 final — 2009/0143 (COD) Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing a European Securities and Markets AuthorityCOM(2009) 503 final — 2009/0144 (COD)

COM(2009) 499 final — 2009/0140 (COD)

COM(2009) 501 final — 2009/0142 (COD)

COM(2009) 502 final — 2009/0143 (COD)

COM(2009) 503 final — 2009/0144 (COD)

34

2010/C 339/09

Opinion of the European Economic and Social Committee on the Proposal for a Council Directive amending Directive 2006/112/EC as regards an optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraudCOM(2009) 511 final — 2009/0139 (CNS)

COM(2009) 511 final — 2009/0139 (CNS)

41

2010/C 339/10

Opinion of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on agricultural product quality policyCOM(2009) 234 final

COM(2009) 234 final

45

2010/C 339/11

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard security of gas supply and repealing Directive 2004/67/ECCOM (2009) 363 final — 2009/0108 (COD)

COM (2009) 363 final — 2009/0108 (COD)

49

2010/C 339/12

Opinion of the European Economic and Social Committee on the Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee: Contributing to sustainable development: the role of fair trade and non-governmental trade-related sustainability assurance schemesCOM(2009) 215 final

COM(2009) 215 final

53

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EN

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I Resolutions, recommendations and opinions

OPINIONS

European Economic and Social Committee

459th plenary session held on 20 and 21 January 2010

| 14.12.2010 | EN | Official Journal of the European Union | C 339/1 |
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14.12.2010

EN

Official Journal of the European Union

C 339/1

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459th PLENARY SESSION HELD ON 20 AND 21 JANUARY 2010

Opinion of the European Economic and Social Committee on ‘Early childhood care and education’

(own-initiative opinion)

(2010/C 339/01)

Rapporteur: Ms HERCZOG

On 14 July 2009, the European Economic and Social Committee decided to draw up an own-initiative opinion, under Rule 29(2) of its Rules of Procedure, on

Early childhood care and education.

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 4 December 2009.

At its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January 2010), the European Economic and Social Committee adopted the following opinion by 194 votes, with 3 abstentions.

Preamble

Member States bear the responsibility for the education and care of all children in their own country. There are different forms of education and care and their names, content and aims have changed during the past 15 years. The definition and wording used has changed for early childhood care. The education and care of children refers not only to providing a safe environment for the child, but also to the education and care that the child requires in order to thrive, develop his/her own potential by getting the emotional, physical, social and educational support it needs. Early childhood education and care consists in a set of wide-ranging services provided for newborn to pre-school children. After school care refers to all those services provided for school-age children out of school hours, in the afternoon, at weekends, and during school holidays.

1.   Conclusions and recommendations

1.1   The Committee acknowledges and supports the efforts made by the European Commission and Member States to develop and strengthen high-quality, affordable and accessible childcare, including early childhood education and care facilities. At the same time, many steps have to be taken further to ensure that services are provided to all children.

1.2   The Committee acknowledges the importance of a holistic and comprehensive approach to childcare matters, in order to have a better understanding of the inter-related procedures and secure human, social and economic development. Member States have to provide opportunities for individuals and families to make personal choices, decisions, and express their preferences for the form and duration of their children's care. In this context, policy-makers should consider different needs, competing values and interests in the following issues:

| — | best interest of the child (1); |
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best interest of the child (1);

| — | parent support, parent education, empowerment; |
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parent support, parent education, empowerment;

| — | demographic issues (including low birth rate and fast growing number of pensioners); |
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demographic issues (including low birth rate and fast growing number of pensioners);

| — | labour market needs; |
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labour market needs;

| — | education and life-long learning; |
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education and life-long learning;

| — | equal opportunities for men and women; |
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equal opportunities for men and women;

| — | differences in geographical distribution (cities, countryside, remote areas); |
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differences in geographical distribution (cities, countryside, remote areas);

| — | reconciliation of working, family and private life; |
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reconciliation of working, family and private life;

| — | accessible, affordable and high-quality education and care for children; |
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accessible, affordable and high-quality education and care for children;

| — | active citizenship; |
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active citizenship;

| — | solidarity between generations; |
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solidarity between generations;

| — | the fight against poverty and social exclusion. |
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the fight against poverty and social exclusion.

1.3   The Committee acknowledges the differences in national family policies and as a consequence in childcare policies. However, the Barcelona targets and other relevant EU documents set fairly universal aims (2).

1.4   The Committee stresses the need to focus on special groups of children, primarily the most vulnerable groups of children with special needs, disabled, migrant, ethnic minorities, socially excluded and those living without their parents, for whom childcare plays an important role in preparing for school and achieving scholastic success. It also pleads for extra support for the parents of these groups of children.

1.5   The Committee, in agreement with the Social Agenda and other relevant policy documents, sees high-quality childcare as an opportunity to increase the quality of life and help reconcile working, private and family life for all members of the family, in addition to strengthening the labour market participation of women and generating a higher income for the family.

1.6   The Committee welcomes the fact that different forms of care and services for children are available for different age groups, not only for children who have not yet reached school age but also after-school, leisure and non-formal education activities. Accessible, affordable, high-quality services for all children should be provided.

1.7   The childcare sector is growing fast. However, the qualification and recognition of this, gender balance, prestige and payment of the labour force employed in the formal and even more in the informal provision of childcare services needs further improvement and support to provide a more diverse set of services in accordance with the diverse needs. While the aim is to provide education and care to all children, it must also be recalled that a flexible, sustainable and sensitive approach is needed in order to provide a wide range of services to meet the rights and needs of different groups of children.

1.8   The needs of families and children living in disadvantaged, remote areas and regions should be addressed better and in a more complex way, including community involvement and public support. The different forms of services – integrated, home based, parent support etc. – can respond to differences in the needs of children and their families.

1.9   The Committee strongly supports the recognition for the responsibility of the Member States, and the social partners’ growing commitment to contributing to the improvement of universal, flexible education and care opportunities for all children and their use of all possible ways to contribute to its availability and success. Employers can provide childcare themselves or support it financially, while unions and civil society organisations can help raise awareness about its importance as well as supporting ongoing assessment and evaluation. Member States can set fiscal incentives for employers that make arrangements for the provision of education and care for children.

1.10   In conformity with the common principles and lifecycle approach of flexicurity, the Committee believes that the proposal must be seen in the context of difficulties with the care and education needs of children under the age of 3 and over school starting age. The use of flexible working hours for parents negotiated by all partners has proven its worth in this context.

1.11   Social partners have an important role in supporting the Member States’ implementation of the childhood education and care policies and a comprehensive approach.

2.   Background

2.1   The Council Recommendation on Childcare (92/241/CEE) to establish criteria for the definition of quality in childcare services in 1992 already showed the importance of the role of childcare; however, the extent and scope of childcare has changed greatly since then. In 1996, the EC Childcare Network focused on quality targets in the services provided for young children and not on the number or proportion of children attending ECEC facilities.

2.2   In the EU 25 (3), the number of children up to compulsory school age was estimated at around 30 million. Of those children, less than 25 % of those under 3 years of age were attending formal childcare while the figure for those between 3 years of age and school starting age was higher than 80 %. There were significant differences between Member States, depending on their national policies, maternal and parental leave systems, traditions and values. There are also major differences between the forms and quality of care, time and days spent there.

2.3   Early education and care services for children are at different stages of development in the EU Member States and continue to be one of the fastest growing markets for the provision of care in Europe. This is partly due to the Barcelona targets but a stronger commitment is needed in order to ensure that all children have the opportunity of diverse forms of care, bearing in mind the different backgrounds and needs of children and families.

2.4   The importance of providing high-quality childcare services as an essential component in achieving gender equality and increasing female labour market participation has been pinpointed by the European Council and Commission and was included among the Barcelona targets of 2002. This was also reflected in the Lisbon Strategy in 2000 and 2008. The Commission report on Implementation of the Barcelona objectives concerning childcare facilities for pre-school children analysed achievements and further duties in this field. ‘Member States should remove disincentives to female labour force participation, taking into account the demand for childcare facilities and in line with national patterns of provision, to provide childcare by 2010 to at least 90 % of children between 3 years old and the mandatory school age and at least 33 % of children under 3 years of age (4)’. In some countries, more efforts are required to achieve the necessary implementation measures.

2.5   The European Commission’s Communication on demographic change outlines the factors that contribute to an aging Europe: low fertility rates leading to a declining labour force and increased pressure on public spending (5). In March 2006 the European Council stressed the need for better balance between work and private life in order to achieve economic growth, prosperity and competitiveness and approved the European Pact for Gender Equality (6). Its second communication on promoting solidarity between the generations addresses the issue of demographic and social change, including the possible difficulties in funding and supplying goods and services including childcare (7).

2.6   Citizens and civil society representatives consulted by the Commission expressed their concern with the fact that having children has a much higher impact on women's job prospects then on men's. The employment rate of women with dependent children is only 65 % compared to 91.7 % for men. Women have to face the consequences of stereotypical assumptions about their domestic responsibilities and their aptitude to employment (8). This can lead to fewer women returning to the labour market after having a child.

2.7   Poverty of children in Europe (9) and the aim of ensuring the EU-wide implementation of the UNCRC (10) are crucial issues, as the Commission states in its Communication that parental poverty and social exclusion seriously limit the opportunities and life chances of children; as a result it is vital to break the cycle of poverty (11).

2.8   The Commission set up a cross-national group, the Childcare Network, between 1986 and 1996 to focus on three particular areas: services for children, leave for parents and men as carers. The 40 quality targets set by the network provide a framework for future policies. It means a political commitment by the EU to childcare services and its aims.

2.9   Many studies, policy papers and analyses have been conducted to learn more about the needs of children and families and the available and perspective provisions (12). Early childhood education and care has been discussed and investigated from different approaches, such as the documents issued by the European Commission and its agencies in recent years. These approaches include the child rights approach (13), the educational issues (14), the current situation and the future of childcare in the EU (15), the Symposium on the need for improvement of ECEC (16), and the social policy component of tackling poverty and social exclusion for the most vulnerable groups of children, as well as research and project evaluations (17).

3.   General remarks

3.1   In its communication of 2006 (18) the Commission stated that children's rights are a priority for the EU and that the Member States are bound to respect the UNCRC and its Optional Protocols, as well as the Millennium Development Goals. In March 2006, the European Council requested Member States ‘to take necessary measures to rapidly and significantly reduce child poverty, giving all children equal opportunities, regardless of their social background’ (19). In the context of the current subject, this means giving all children the opportunity for proper early childhood and after-school education and care in accordance with their developmental needs and family circumstances, and access to accessible, flexible, high-quality and affordable education and care until at least the age of 14.

3.2   The development of childcare facilities for children gives the parents more opportunities to reconcile their working, private and family life. This applies in particular to women, who when faced with inadequate childcare options, are more likely to give up, fail to find work or be unable to benefit from appropriate work arrangements. This prevents them from fully fulfilling their potential and protecting their family from poverty. It is closely related to the demographic challenges as the lack of reconciliation leads to lower birth rates.

3.3   Europe has a legal framework which prohibits gender discrimination through a range of legislative measures. However, women often reduce their working hours or take longer leaves from work to care for their children, which leads to lower pay and lower pensions, and in-work poverty, especially in lone parent families or in families with many children. Although reductions in working time are a matter of a personal choice, they may be related, among other things, to the lack of adequate services for children.

3.4   Parents should have the flexibility to choose when they will take their parental leave and combine it where possible with adequate childcare options. However in this respect, national policies, priorities, the needs of enterprises, social pressure and the needs of the children should also be taken into consideration and the changes must be sensitive enough to provide specific measures.

3.5   Across the EU more than 6 million women aged 25-49 years say they are forced into not working or can work only part-time because of family responsibilities, and for more than quarter of them the lack of childcare facilities or its cost is the reason (20).

3.6   Access to high-quality, affordable and accessible ECEC and after-school programmes is not only the key to ensuring that children spend their time in a decent environment suited to their development needs, it also enables parents (primarily women) to work. Quality childcare has an impact on the quality of life and future of children, parents, families and communities.

3.7   The various goals of the EU strategies on the implementation of the Lisbon Strategy, the Barcelona targets and beyond, but also on the demographic situation, solidarity between generations, equal opportunities for men and women and a better work-life balance can be achieved partly through childcare provisions. More efforts are required to ensure these opportunities based on the best interest of the child.

3.8   The fast growing sector of services for children is also providing a growing number of jobs for women and men (21), as the educational and training requirements, prestige and pay are increasing.

3.9   A large proportion of Member States have developed sets of measures to promote a better reconciliation of professional, private and family life, which reflect the different national labour market needs and the diversity of traditions and cultures present in Europe. Wide ranging and flexible forms of childcare is part of a wider concept, together with a range of other instruments in this area. These include social inclusion programmes, flexible working arrangements, parental leave and other forms of leave, to serve the reconciliation of family, private and working life, child rights and through these the development of the EU countries’ economic and social development.

4.   Specific remarks

4.1   Childcare in the EU is a fast growing and rapidly evolving industry with set minimum standards. The needs of children concerning the importance of the first years of life, the investment component of service provision such as preparation for school and success in education and later adult life, as well as the joyful years, is a relatively new concept serving primarily the best interest of the child but also the community and society as a whole (22).

4.2   Until recently the focus of public spending on childcare has often been children between 3 years and school-starting age in order to prepare them for school. However, childcare investment must be directed towards younger children and towards those attending school until 14 years of age. It not only means better day care provided while parents are working but also providing activities and out-of-school care and education and leisure activities for all. This is proven to be very effective in preparation for adult life, besides offering a safe and joyful time.

4.3   Socialisation and the development of a value system is an essential component of childhood family education, supplemented by formal early childhood education and care. There are other providers of non-formal education – non-governmental children's and youth organisations and children's and youth centres which contribute to acquiring skills for practical life and play a role in the process of life-long learning. 70 % of our knowledge and skills are developed through informal education. Recognition and support should be provided to all possible forms of education.

4.4   In special cases – children with disabilities, migrant children, parents with mental health problems, etc. – childcare can ensure that children have the opportunity to stay with their families rather than being placed away from them. The availability of different forms of childcare is a vital component of social and economic development, and it plays a particularly crucial role in disadvantaged areas and for disadvantaged groups and households living in otherwise good situations. The provision of childcare can help address the social, economic and health issues that such disadvantaged households face, and support the social integration of excluded groups.

4.5   Bearing in mind the UN Convention on the Rights of the Child (23), the Commission should conduct a parallel study on the impact of the proposed measures on children. Children must be well nurtured and their personal wellbeing accounted for. The wellbeing of children and the value of childhood during this extremely important stage of life are crucial, but, at the same time, children constitute the workforce of the future and the lack of care and support in this early period of life might lead to failures in school and later integration in society.

4.6   Childcare provision is a form of employment opportunity traditionally mostly for women, but gender equality and a gender mix in employment, achieved by introducing a higher proportion of male workers, is desirable. High-quality training and vocational training, supervision and raising prestige by providing higher salaries are guaranteeing better service provision as well as enhanced gender balance in the workforce.

4.7   The Barcelona targets aim to achieve by 2010 at least 33 % day-care placement for children under the age of 3 and 90 % for those between 3 years old and the mandatory school age, but there is no special provision for the different forms of childcare. There is an urgent need for a European platform to classify and improve them on the basis of principles of quality, flexibility, accessibility and affordability. The question remains: what happens to those who cannot be placed despite the need for childcare? Research and more appropriate data are required to debate the questions and possible answers.

4.8   As regards the quality of childcare, there is very limited information available on informal childcare services provided in the homes; many of the service providers are unqualified, are not formally registered, and remain outside of recognised monitoring systems. These workers do not fall into formal employment structures, and thus lack proper workplace protection. Member States and local authorities should commit themselves to ensure quality care in all of its forms. These informal care arrangements endanger children as well. Social partners should plead for regulations and transparency not only in professional childcare but also in all forms of home-based and informal care by supporting and requiring professional training and supervision. Tax incentives could contribute to the setting up of more high-quality care facilities. Given the high number of women active in the care sector, improving working conditions and qualifications in this sector would also contribute to the EU overall strategy in this area (24).

Brussels, 20 January 2010.

The President of the European Economic and Social Committee

Mario SEPI

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(1)  In the context of the Commission's strategy Towards a Strategy on the Rights of the Child, launched on 4.7.2006 (http://europa.eu/scadplus/leg/en/lvb/r12555.htm).

1

(2)  In March 2002, the Barcelona European Council acknowledged the importance of childcare in terms of growth and equal opportunities calling on Member States to ‘remove disincentives to female labour force participation and strive, taking into account the demand for childcare facilities and in line with national patterns of provision, to provide childcare by 2010 to at least 90 % of children between 3 years old and the mandatory school age and at least 33 % of children under 3 years of age’.

2

(3)  Childcare in the EU in 2006, Eurostat/08/172, Bulgaria and Romania joined the EU on 1 January 2007 and were not required to collect data previously.

3

(4)  EC Implementation of the Barcelona objectives concerning childcare facilities for pre-school aged children, COM(2008) 638 Brussels.

4

(5)  EC, The demographic future of Europe – from challenge to opportunity, COM(2006) 571 final.

5

(6)  See Annex II to the Presidency Conclusions of the Brussels European Council of 23/24 March 2006 in: http://ue.eu.int/ueDocs/cms_Data/docs/pressData/en/ec/89013.pdf.

6

(7)  EC, Promoting solidarity between generations, COM(2007) 244 final.

7

(8)  Communication from the Commission: ‘Citizen's Summary – Better maternity leave provisions designed to promote reconciliation of family and working life’ (ec.europa.eu/social/BlobServlet?docId=611&langId=en); Common position on the revision of the Council Directive 96/34/EC of 3 June 1996 on the framework agreement on parental leave by the Social Platform, January 2009.

8

(9)  EC, Child Poverty and Well-Being in the EU – Current status and way forward, Luxemburg, Office for Official Publications of the European Communities, 2008.

9

(10)  UN Convention on the Rights of the Child.

10

(11)  EC, Towards an EU Strategy on the Rights of the Child, COM(2006) 367 final, Brussels, 2006.

11

(12)  Starting Strong, OECD, 2001 / Childcare services in Europe, Foundation Findings, 2009 / Families and childcare services, Eurofound, 2009 / Early Childhood Education and Care key lessons from research and policy makers, NESSE, 2009 / The Provision of childcare services, Comparative review of 30 European countries, European Commission, 2009 / Child Poverty and well being in the EU, EC, 2008 / Changing Childhood in a Changing Europe, ESF, 2009 / Babies and Bosses, OECD, 2007 / Education Today, the OECD perspective, 2009 / Tackling Social and Cultural Inequalities through Early Childhood Education and Care in Europe, Eurydice, 2009 / Out of school care services for school aged children, Eurofound, 2007 / Employment developments in childcare services for school-aged children, European Foundation for the Improvement of Living and Working Conditions, 2006 / UNICEF Report Card 8, The Childcare Transition, Florence, 2008 / Early Matters, Brussels, 2008.

12

(13)  Towards an EU Strategy on the Rights of the Child, 2006.

13

(14)  Communication from the Commission on Efficiency and equity in European education and training systems (COM(2006) 481 final).

14

(15)  Childcare services in the EU- what future?, Eurofound.

15

(16)  Early matters, ECEC symposium, 2008 October, Brussels.

16

(17)  Tackling social and cultural inequalities through early childhood education and care in Europe, Eurydice, 2009, Early Childhood education and care – key lessons for policy makers, NESSE, 2009.

17

(18)  Towards an EU Strategy on the Rights of the Child (COM(2006) 367 final).

18

(19)  See paragraph 72 of the Presidency Conclusions – 23/24 March 2006 (ref. in footnote 8 above).

19

(20)  Childcare Services in Europe, Foundation Findings, European Foundation for the Improvement of Living and Working Conditions, Dublin, 2009, pp.9, www.eurofound.europa.eu.

20

(21)  Namely through the above-mentioned Lisbon Strategy for Growth and Jobs.

21

(22)  P. Reid, D. White: Eurofound, Out of school care services for children living in disadvantaged areas, Luxembourg, Office for Official Publications of the EC, 2007.

22

(23)  Convention on the Rights of the Child, adopted by General Assembly Resolution 44/25 of 20 November 1989 and entered into force on 2 September 1990, in accordance with Article 49. In: http://www2.ohchr.org/english/law/crc.htm.

23

(24)  EESC opinion, OJ C 277, 17.11.2009, p. 102.

24

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/7 |
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14.12.2010

EN

Official Journal of the European Union

C 339/7

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Opinion of the European Economic and Social Committee on ‘The sustainable development of coastal areas’

(own-initiative opinion)

(2010/C 339/02)

Rapporteur: Mr BUFFETAUT

On 26 February 2009, the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an own-initiative opinion on:

The sustainable development of coastal areas.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 13 October 2009.

At its 459th plenary session, held on 20-21 January 2010 (meeting of 20 January), the European Economic and Social Committee adopted the following opinion by 138 votes in favour, with 4 abstentions.

1.   Conclusions and recommendations

1.1   The EESC emphasises that the EU's 136 000 kilometres of coastline represent a considerable asset, but that pressure due to demographics, land scarcity, agriculture, economic development and tourism in these areas could threaten their very attractiveness and their future. Only policies based on the concept of sustainable development in terms of its economic, social and environmental dimensions will ensure a bright future for coastal regions.

In view of this, the EESC would make the following recommendations:

1.2.1   In terms of environmental protection:

| — | setting up a European network for those managing marine protected areas and a European label for such areas; |
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setting up a European network for those managing marine protected areas and a European label for such areas;

| — | in cooperation between the Member States, creating a European database of best legislative and regulatory practices in relation to protection of the coastal heritage; |
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in cooperation between the Member States, creating a European database of best legislative and regulatory practices in relation to protection of the coastal heritage;

| — | paying close attention to the often overlooked issue of the artificial state of the coastline (apart from structures protecting the natural, historical and cultural heritage and the very existence of people living there) and setting up a European network to monitor the impact of structures on land reclaimed from the sea, based on marine research laboratories; |
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paying close attention to the often overlooked issue of the artificial state of the coastline (apart from structures protecting the natural, historical and cultural heritage and the very existence of people living there) and setting up a European network to monitor the impact of structures on land reclaimed from the sea, based on marine research laboratories;

| — | setting up a scientific and technical committee for maritime regions in order to forecast, anticipate and suggest solutions to the consequences of rising sea levels and, in the polar regions, the melting of the polar icecaps; |
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setting up a scientific and technical committee for maritime regions in order to forecast, anticipate and suggest solutions to the consequences of rising sea levels and, in the polar regions, the melting of the polar icecaps;

| — | disseminating information and raising awareness of the marine environment. |
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disseminating information and raising awareness of the marine environment.

1.2.2   Transport

The EESC reaffirms its support for the trans-European transport network programme; implementation of this programme would be a means of supporting the European economy. It particularly emphasises the importance of the following projects in supporting the sustainable development of coastal areas: motorways of the sea (the Baltic, the Atlantic Arc, south east Europe and the western Mediterranean), the Rail Baltica route, and the rail route of the Ionian/Adriatic intermodal corridor. The pollution resulting from this useful increase in sea and rail transport will have to be properly managed.

1.2.3   Coastal economic activities in difficulty

The EESC emphasises the need to effectively target action by the European Social Fund, the European Regional Development Fund and the European Fisheries Fund to benefit coastal regions which are facing particular difficulties and facilitate their transition to new economic activities.

It would draw attention to the costs that the Member States and the European Union will have to bear for the investments and works designed to contain the foreseeable rise in sea levels, which will be a major drain on budgets.

It would point out that the effects of climate change on coastal areas are likely to bring about population movements that will have social consequences and an impact on jobs for which provision should be made in advance.

1.2.4   Tourism

The EESC advocates holding a regular European conference on responsible seaside tourism, possibly with the joint support of the Committee of the Regions and the EESC; this would serve as an opportunity to discuss best practices throughout the EU.

It would also help to define environmental quality criteria for seaside resorts, ports and marinas throughout the EU.

1.2.5   Climate change

The EESC recommends launching a programme to promote European cooperation on research into means of adapting coastal areas to rising sea levels, the creation of a network for pooling information between research institutes, and the establishment of a European scientific and technical committee with responsibility for forecasting and anticipating possible specific responses to the challenge of rising sea levels.

1.2.6   Raising awareness of the marine environment

The Committee recommends developing measures to raise awareness of the marine environment and its implications for the well-being of present and future generations. Above all, such measures should be targeted at schools and the general public. They could be organised during the holiday period in coastal areas.

2.   Introduction

2.1   During the twentieth-first century, people have been drawn to the sea. This is a general trend, with some giant cities such as Shanghai, Tokyo, Osaka and Hong Kong developing on the ocean shores, especially along shallow waters. Forecasters agree that this trend will continue in all the continents.

2.2   The EU is also affected by this phenomenon, and cannot afford to ignore it, especially since it has 136 000 kilometres of coastline, with coastal regions accounting for 40 % of both population and gross domestic product.

2.3   Coastal areas therefore provide economic prosperity as well as an environment for quality of life and social well-being. Although coastal areas are attractive, numerous activities are concentrated there in a limited amount of space: tourism, fishing, agriculture, ports and airports, growing cities, economic activities, transport infrastructure, etc. All these activities impact on ecosystems, sometimes significantly. Coastal areas are the scene of conflicts between various uses linked to human activities. And ecosystems in shallow coastal waters are by far the richest sea-based ecosystems in terms of biodiversity.

2.4   Human activities are concentrated in coastal areas which, by their very nature, are of limited extent, and often threatened by rising sea levels and erosion. This threatens the quality of life, nature areas, as well as land and sea-based ecosystems.

The EU cannot ignore this situation and the resulting economic, social and environmental issues.

2.5   In 2000 the Commission published a Communication on Integrated Coastal Zone Management (ICZM) followed by a European Parliament and Council Recommendation of 30 May 2002 concerning the implementation of an ICZM strategy in Europe. In June 2007 the Commission presented an evaluation of ICZM, which concluded that the EU recommendation had achieved a beneficial impact, but that the strategy needed a new impetus.

2.6   However, EU action did not stop there: in October 2007 the Commission published a Communication on ‘An Integrated Maritime Policy for the European Union’.

2.7   Finally, in June 2008 a Marine Strategy Framework Directive was adopted. This text commits each Member State to develop strategies for their marine waters, in cooperation with other Member States and neighbouring non-EU countries. The aim is to ‘ensure the continued protection and preservation’ of the marine environment and ‘the prevention of deterioration’ in order to ‘achieve good environmental status in the marine environment’ by 2021 at the latest.

2.8   Similarly, in November 2008 the European Parliament adopted a resolution specifically on regional development issues connected to the impact of tourism on coastal regions.

2.9   As we can see, there have been numerous EU documents and initiatives in response to the numerous issues connected with coastal areas; implementation of these is up to the relevant Member States and local authorities.

2.10   In this context the impact of the Common Fisheries Policy on economic and social life in coastal areas should also be mentioned.

2.11   Any policy to promote sustainable development in coastal areas must therefore encompass mutually compatible and coordinated sectoral policies (e.g. the Common Agricultural Policy) and approaches – no easy task given the often conflicting interests and priorities both in coastal land areas and on the sea.

2.12   The EU policy on coastal areas is therefore based on five instruments:

| (1) | ICZM is a Community instrument based on the 2002 Council and Parliament recommendation. It promotes sustainable development and encourages Member States to launch national strategies. It regulates and encourages the exchange of best practice and projects; |
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(1)

ICZM is a Community instrument based on the 2002 Council and Parliament recommendation. It promotes sustainable development and encourages Member States to launch national strategies. It regulates and encourages the exchange of best practice and projects;

| (2) | the Integrated Maritime Policy for the EU. This is more specific, with the following areas considered as being of particular importance:






  — | maritime transport space without barriers; |
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(2)

the Integrated Maritime Policy for the EU. This is more specific, with the following areas considered as being of particular importance:

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maritime transport space without barriers;

| — | a European maritime research strategy; |
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a European maritime research strategy;

| — | integration of national maritime policies; |
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integration of national maritime policies;

| — | a European network for maritime surveillance; |
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a European network for maritime surveillance;

| — | a roadmap for the development of maritime spatial planning; |
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a roadmap for the development of maritime spatial planning;

| — | a strategy to mitigate the effects of climate change on coastal areas; |
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a strategy to mitigate the effects of climate change on coastal areas;

| — | the reduction of pollution caused by shipping; |
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the reduction of pollution caused by shipping;

| — | combating illegal fishing and the destruction of fisheries resources; |
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combating illegal fishing and the destruction of fisheries resources;

| — | a European network of maritime clusters; |
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a European network of maritime clusters;

| — | European employment legislation in the fishing and maritime transport sector; |
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European employment legislation in the fishing and maritime transport sector;

| (3) | European fisheries policy, which has an obvious impact and economic and social life in certain coastal areas; |
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(3)

European fisheries policy, which has an obvious impact and economic and social life in certain coastal areas;

| (4) | the Habitat Directive (Natura 2000) as applied to the maritime environment; |
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(4)

the Habitat Directive (Natura 2000) as applied to the maritime environment;

| (5) | the Marine Strategy Framework Directive. |
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(5)

the Marine Strategy Framework Directive.

2.13   At all events, it should be kept in mind that each coastal area has its own particular problems and that geographical and physical characteristics require specific policies – for deep or shallow sea areas, seas with or without tides, temperate or polar climate, steep, flat, rocky or sandy shorelines, etc. In view of this, while it is possible to set common objectives, what we cannot do is frame a uniform policy to cover all coastal areas and all the circumstances under which it will be implemented.

3.   Preserving land-based and maritime habitats

3.1   Sustainable development issues in coastal areas have mainly to do with a certain number of particularly sensitive subjects.

3.2   Given the pressures of land scarcity, some Member States have supported or taken initiatives to conserve coastal land, such as the National Trust in Great Britain and the French ‘Conservatoire du littoral’ (conservation of the coastline), or created nature parks including coastal areas. We should consider making wider use of such initiatives to manage the most vulnerable, threatened or remarkable natural areas, with the option of governments purchasing such areas from private landowners should this be in the public interest. To some extent, the aim should be to categorise such areas as part of the national heritage, on similar lines to historical monuments or artworks in museums.

3.3   Directive 92/43/EEC, which is usually referred to as the Habitats, Fauna and Flora Directive (or simply the Habitats Directive), concerns the conservation of natural habitats and wild species of fauna and flora. In view of this directive, some countries have extended Natura 2000 zones to the sea. We need to ask whether good use is being made of this tool for preservation (especially in relation to the justification for extending conservation zones to large deep-sea areas in which little is known about biodiversity or risk factors).

3.4   The need to protect sea-based biodiversity in coastal areas and maintain coastal fisheries resources has encouraged some countries to develop networks of marine protected areas (MPAs). These initiatives will have an even more beneficial impact if all countries with coastal areas sign up to them. We therefore need to bring together, harmonise and promote such MPAs. A European network for those managing such protection areas and a European label would help here.

3.5   The spread of urban sprawl into coastal areas, together with over-intensive farming and salt water intrusion into coastal groundwater are all developments which require particular attention if coastal populations are to have lasting access to good quality fresh water.

4.   Preventing and managing pollution

4.1   Obviously the classic issue of dealing with waste dumped directly into the sea and pollution from rivers and streams is important here, not to mention pollution originating specifically from water areas in ports and from sea transport.

4.2   Some of these issues are covered by European legislation, for example the framework directive on water and its daughter directives. In 2007 the Commission complained about mediocre transposition and insufficient international cooperation. There were many delays in the implementation of this directive. In 2010 the Member States will be required to produce River Basin Management Plans; among other things, these will have to include measures to protect and possibly also restore the quality of water bodies. In view of this, coordination will be needed for water bodies shared with non-European countries. The damaging impact of different types of water pollution should be clarified, while distinguishing between, on the one hand, those affected (human beings – their health, economy and well-being – or marine species) and, on the other, the time needed to reverse damage to habitat or species, or its irreversibility.

4.3   The Marine Strategy Framework Directive specifically addresses the need to preserve and improve marine waters by defining maritime regions and sub-regions and requiring Member States to work together on drawing up marine strategies and defining environmental objectives.

4.4   The issue of sea pollution by ships was targeted by the various Erika programmes.

4.5   One form of environmental damage is too often overlooked, i.e. the irreversible destruction of shallow water habitats and ecosystems caused by the excessively artificial state of the shoreline due to reasons which have nothing to do with the safety of coastal populations or protecting heritage. The European coastline is becoming increasingly artificial due to the proliferation of coastal construction – marinas, ports and various developments as well as, in the medium term, the numerous structures needed to protect the coastline from rising sea levels; this is something which requires a Community level response (on the lines of the MEDAM observatory covering all developments along the French Mediterranean coast (1)). Due to its extent the artificial state of the coastline is inconsistent with sustainable development, and preserving the natural character of coastline and shallow waters should become a major concern. To some extent, awareness of the problem is developing in the EU. For example, in the Camargue adaptation to rising sea levels involves letting the sea back into areas which it had withdrawn from, wherever possible. In Italy, there are discussions in Maremma (Tuscan coast) on yacht harbours with regard to limiting the expansion of storage sites for boats during the winter and precise management of port capacity.

5.   Transport in coastal areas

5.1   Coastal road networks are often congested. This situation results in road hazards, emissions of CO2 and other pollutants, and economic losses. The EU has long been calling for some of this road traffic to be transferred to rail or ‘motorways of the sea’, but this has not translated into tangible results. A few points should be made here:

| — | nature conservation and environmental activists are not always consistent, and often oppose new infrastructure which could help to reduce road traffic by developing alternative transport modes (for example blocking the railway line used for road-rail transport between Lyon and Turin, habitually opposing any extensions to ports, such as Le Havre in 2000 or Rotterdam, opposition to construction of the Rhine-Rhone Canal); |
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nature conservation and environmental activists are not always consistent, and often oppose new infrastructure which could help to reduce road traffic by developing alternative transport modes (for example blocking the railway line used for road-rail transport between Lyon and Turin, habitually opposing any extensions to ports, such as Le Havre in 2000 or Rotterdam, opposition to construction of the Rhine-Rhone Canal);

| — | there has been little implementation of the EU's policy of developing rail freight despite the Commission's recent initiatives (Communication on ‘Towards a rail network giving priority to freight’ in 2007, the regulation on ‘A European rail network for competitive freight’ in 2009), both for ‘cultural’ reasons – especially the traditional emphasis on passenger trains, and undoubtedly also due to the lack of commercial culture. |
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there has been little implementation of the EU's policy of developing rail freight despite the Commission's recent initiatives (Communication on ‘Towards a rail network giving priority to freight’ in 2007, the regulation on ‘A European rail network for competitive freight’ in 2009), both for ‘cultural’ reasons – especially the traditional emphasis on passenger trains, and undoubtedly also due to the lack of commercial culture.

5.2   Despite the difficulties, it is only by shifting part of the road traffic to rail or sea that the burden on the coastal road network could be eased. Everything depends on how we reconcile economic and social development with environmental protection.

6.   Towards sustainable seaside tourism

6.1   Tourism is too often considered as a solution for disadvantaged coastal areas. However, the length of the tourist season is often too limited to offer a real alternative to declining economic activity. Tourism, which is often seen as a ‘magic bullet’, can result in the over-exploitation of coastal areas and cause irreversible environmental damage without providing any lasting solution to economic problems. Moreover, over-intensive tourism can often ‘kill the goose that lays the golden eggs’ due to degradation of tourist sites. There is no doubt that we need to develop more sustainable tourism, and there have already been some initiatives by public authorities and NGOs.

6.2   In France the 1986 law on developing, protecting and enhancing the coast was adopted in reaction to what was known as the ‘concreting’ of the coast. It aims to protect biological and environmental balances, to preserve sites and landscapes, at the same time as preserving and developing economic activities linked to the proximity of water (fishing, marine crops, port activities, etc.). This law is targeted at coastal municipalities and its main provisions include an obligation on those involved in urban planning to protect outstanding natural areas and a ban on any building within 100 metres of the shore outside urbanised areas. After over twenty years of implementing this law, the results are mainly positive. While the EU does not have any powers in the fields of urban planning or coastal development, it could at least encourage the exchange of best legislative and regulatory practices between Member States.

6.3   The Environmental Education Foundation created the Blue Flag eco-label in 1985. Since then, the European Blue Flag environmental labelling scheme has been in operation: the label is awarded to coastal municipalities and ports, subject to the fulfilment of criteria on environmental education, safety, cleanliness, the availability of facilities close to beaches, waste and water management, the quality of bathing water, and efforts to clean up pollution. Specific criteria exist for yacht harbours. Although this initiative is clearly aimed at developing tourism it cannot be denied that it offers many advantages.

6.4   Ecotourism, or responsible tourism, is spreading throughout Europe, often with the support of local authorities. Agro-tourism represents an opportunity for farmers in coastal areas to boost their income.

7.   The Common Fisheries Policy

7.1   The Commission has responsibility for managing fisheries. European sustainable fisheries policy undermines certain economic models in this sector, with serious economic and social consequences. In dealing with the question of sustainable fishing, we need better scientific knowledge, without which long-term management of stocks will not be possible. In doing so, we need to distinguish between fishing in international and territorial waters, for each maritime region, while making good use of subsidies which, above all, must respect the need for effective management of stocks.

7.2   We also need to distinguish between small and large-scale fishing. For small-scale fishing, setting up a European network of MPAs (Marine Protected Areas) would enable better management of coastal fish species by guaranteeing naturally high concentrations in the non-fished sectors of these zones, with normal sex ratios for fish to allow effective dispersion of fry and young fish. It would also be useful to encourage the establishment of ‘fishing associations’ (on the lines of what already exists in several countries – cooperatives, associations, fishing tribunals, regional consultative councils, etc.) for fishermen, with the active involvement of scientific advisers enabling better management of coastal fishing areas; the areas thus managed would be on a different scale from those under current arrangements (waters in the vicinity of a port, along the coastline of one municipality, or other divisions based on administrative or historical considerations), and would cover environmentally homogeneous areas. Such fishing associations could form networks in order to encourage the exchange of experience and best practice.

7.3   Recreational (amateur) angling is another issue that needs to be looked at, given its extent and the fact that in the absence of restrictions (there are very few rules on amateur sea fishing in most countries) or economic constraints (the resources of some amateur fishermen go well beyond the value of their catch) it has serious implications for some species.

8.   Coastal economic activities

8.1   For many centuries coastal economic activities have developed throughout Europe: ports, shipyards, fishing. Although some of the world’s largest ports are situated in the EU, shipyards and fisheries are facing serious structural difficulties.

8.2   Since the end of the Second World War, European shipyards have been facing competition from Asia, forcing them to restructure and specialise. Some shipyards are still facing serious difficulties, for example the Polish shipyards of Gdansk, Gdynia and Szczecin. This situation means that considerable attention will have to be paid to redeploying and retraining employees – and not just in Poland.

8.3   Europe has succeeded in developing one of the world’s leading leisure industries. Before the recession there were over 37 000 businesses and 270 000 employees in this sector. Activity has been very severely affected. Here too, employees are in a difficult situation - it is vital to re-train and redeploy them while maintaining the sector as a mainstay of European industry.

8.4   As mentioned above, the exhaustion of fishing stocks, the ban on certain fishing methods in the EU (but not necessarily in non-European countries) and overfishing have resulted in a European fisheries policy that is having a serious impact on the sector, which itself is also facing the need for workers to retrain and find new jobs.

8.5   Aquaculture is a new activity intended to meet the growing demand for fish. We should not overlook the fact that this kind of work is very different from fishing, and is closer to stock farming. It also involves taking health and environmental precautions.

8.6   The sustainable development of coastal areas requires the maintenance of activities which are linked to this geographical situation. The continuation of farming practices that respect the environment in coastal areas is a factor favouring such activity. Tourism, on the other hand, cannot solve all the difficulties of finding new jobs for everyone, especially as some tourism infrastructure projects may threaten the remaining green coastal areas. The EU must pay particular attention to the economic and social consequences of its policies in this specific and vulnerable economic environment.

9.   Raising awareness of the marine environment

9.1   Some 40 % of Europe's population is concentrated along 136 000 km of coastline; this area also attracts the largest number of tourists. We need to know more about the marine environment, which is rich but under threat from this concentration of human activity. We need a programme to raise awareness of the marine environment, taking into account all the various circumstances of maritime regions, for example with reference to the regions or subregions defined by application of the marine strategy – or at the very least the five seas or oceans encompassing the EU (the Baltic, the North Sea, the Atlantic, the Mediterranean and the Black Sea). Such a programme would enable us to raise awareness of - and more effectively justify - measures to protect the marine environment in order to combat pollution, overfishing or degradation of the coastline due to construction. It is therefore very important to ensure that more information is targeted at schools and local authorities responsible for managing coastal areas.

10.   Global climate change and rising sea levels

10.1   Global warming will result in both generally higher sea levels and more frequent exceptionally violent weather phenomena (storms, hurricanes, tornados, etc.). The effects of this are already becoming apparent in some countries and will involve erosion of the coastline, the disappearance of beaches and the strengthening of coastal protective structures. This problem will affect European countries and regions in very different ways, with a general impact on all built-up coastal areas, particularly tourism and port infrastructures. Some Member States have already launched major operations such as the Delta Plan decided on in the Netherlands after the catastrophic floods of 1953, or the Moses operation in Italy to save Venice. Community guidelines should be considered to provide the best possible support in dealing with these expected and irreversible changes, taking into account both economic and environmental interests.

10.2   In order to face up to climate change and its consequences, the EU must not confine itself to preventive measures but should also launch a major research and development programme together with the Member States based on the principle of cooperation between research institutes and the pooling of findings. Such an initiative would demonstrate the value of - and indeed the need for - close European cooperation in this field.

Brussels, 20 January 2010

The President of the European Economic and Social Committee

Mario SEPI

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(1)  http://www.medam.org.

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III Preparatory acts

European Economic and Social Committee

459th plenary session held on 20 and 21 January 2010

| 14.12.2010 | EN | Official Journal of the European Union | C 339/13 |
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Official Journal of the European Union

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459th PLENARY SESSION HELD ON 20 AND 21 JANUARY 2010

Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at Community airports’

COM(2009) 634 final — 2009/0176 (COD)

(2010/C 339/03)

On 21 December 2009, the Council decided, in accordance with Article 100(2) of the Treaty setting up the European Community, to consult the European Economic and Social Committee on the

Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at Community airports (codified version)

COM(2009) 634 final – 2009/0176 (COD).

Feeling that the content of the proposal was entirely satisfactory and required no comments, the Committee decided, at its 459th plenary session of 20 and 21 January 2010 (meeting of 20 January 2010), by 185 votes for, no votes against and six abstentions, to issue an opinion in favour of the text proposed.

Brussels, 20 January 2010

The President of the European Economic and Social Committee

Mario SEPI

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/14 |
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Official Journal of the European Union

C 339/14

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council on the European Earth Observation programme (GMES) and its initial operations (2011–2013)’

COM(2009) 223 final — 2009/0070 (COD)

(2010/C 339/04)

Rapporteur: Mr VAN IERSEL

On 30 June 2009 the Council decided to consult the European Economic and Social Committee, under Article 157(3) of the Treaty establishing the European Community, on the

Proposal for a regulation of the European parliament and of the council on the European Earth observation programme (GMES) and its initial operations (2011–2013)

COM(2009) 223 final – 2009/0070 (COD).

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 5 January 2010.

At its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January 2010), the European Economic and Social Committee adopted the following opinion by 184 votes to 2 with 4 abstentions.

1.   Conclusions and recommendations

1.1   The EESC welcomes the Regulation on Earth Observation (EO) and its initial operations as a strategic step forward in a new framework for developing a mature European space policy.

1.2   The EESC believes that in this context substantial benefits can be obtained by carrying out existing EU policies, designing new policies, intensifying the delivery of smart and tailor-made services for Europe and beyond, and by strengthening the position of the EU in international negotiations.

1.3   The benefits for society and citizens will be all the more rewarding, as space-based services affect a broad spectrum of highly relevant issues such as climate change, emergencies, environmental and health issues like water and air quality (pollution), agriculture and forestry, the depletion of natural resources, spatial issues, and public security topics and defence.

1.4   High quality is indispensable for both space components and in situ components, as well as their interactive capabilities and synergies. Space-based services will add substantially to ground-based, airborne and sea-based services (1).

1.5   European Agencies and public services in the Member States are the primary goal of space-based services. Private parties will also benefit from them. The range of useful services for the public and private sectors will increase as the market develops. The downstream sector - the most important being SMEs - calls for special attention and funding.

1.6   Governance is of paramount importance. Decisive elements include:

| — | coordination and coherence, which are based on the recognition of ‘space’ as an integrated EU theme and the full commitment of all Commission DGs and European Agencies involved in space-related policies and activities; |
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coordination and coherence, which are based on the recognition of ‘space’ as an integrated EU theme and the full commitment of all Commission DGs and European Agencies involved in space-related policies and activities;

| — | coordination between the Commission and a variety of public parties in the Member States; |
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coordination between the Commission and a variety of public parties in the Member States;

| — | operational knowledge in the Commission to deal with the downstream sector; |
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operational knowledge in the Commission to deal with the downstream sector;

| — | satisfactory framework conditions to encourage private investments. |
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satisfactory framework conditions to encourage private investments.

1.7   Full, reliable and continuous data will result from an effective interconnection between space-based and ground-based infrastructure. Full and open access to data is crucial to avoid distortions and to stimulate the downstream sector. Well-defined sensitive data for the Member States and the Union must be protected.

1.8   The EESC takes note of the EUR 150 million envelope as a first step for the promotion of applications. For an overall positive judgment still pending questions have to be settled. A possible insufficiency of financial resources, the launch of B Sentinels in addition to the A Sentinels, and the Community Budget allocation among stakeholders call for further negotiation and clarification in order to ensure that the system successfully fulfils the policy's goals.

1.9   The forthcoming space-based services affect a broad spectrum of areas which directly respond to the needs of society and citizens. Therefore the EESC strongly recommends an EU communication strategy to raise public awareness for the future benefits of EO in giving also special attention to education and training of technical experts in this field.

1.10   Earth Observation should get a place in the post-2010 Lisbon strategy.

2.   European Space Policy in progress

2.1   Political and economic strategic reasons are the main drivers for an intensified interest in space. Climate change, environmental and space objectives, the security of citizens as well as a complementary defence infrastructure make enhanced operational services in space highly desirable.

2.2   An autonomous European space policy and autonomous services are needed in response to the increase in worldwide space activities by a growing number of partners and competitors (2).

2.3   Following the Commission’s Green and White papers, published during the last decade, and the Framework Agreement between ESA and the Commission in 2003, which were all welcomed, the EESC fully endorsed the policies outlined in documents of the Joint Space Council, the Commission and the European Space Agency (ESA) in April/May 2007 (3). In October 2009, President Barroso underlined the significance of Space for a broad spectrum of EU policies (4).

2.4   ESA has accomplished impressive work over a long period of time. In addition to research, space programmes have facilitated the development of operational services in cooperation with private companies. The EESC concluded last year that ESA had conducted a successful ‘industrial policy’. Under the new division of labour between ESA and the Commission, the latter becomes entirely responsible for the operational phase of projects.

2.5   The EESC has already expressed its expectations that the Commission's involvement in policy-making and funding would and should enhance public as well as private sector activities in the space sector.

2.6   In the same vein, the Commission proposes the Regulation on GMES and its initial operations (2011–2013) as a further necessary step towards fulfilling the requirements for a mature European space policy.

2.7   GMES has led to enhanced interest and intensified programming by European Agencies and the public and private sectors across Europe.

2.8   In order to ensure the effective handling of the possible wide range of benefits of GMES, the EESC welcomed last year the establishment of a GMES Bureau within DG Enterprise to take charge of coordination. Such coordination is highly desirable as a number of DGs and the Seventh Framework Programme (FP7) are involved.

2.9   Intensified coordination at European level and between the Commission and the Member States will also be beneficial to integral approaches in Member States, where they are often lacking. It may also generate more awareness and improve the image of ‘space’ by connecting space with specific services for citizens.

3.   The Regulation

3.1   In addition to GMES research and development, areas in which the Commission, ESA and the Member States, are acting partners, the Commission will concentrate on issues where Community action will provide clear added value.

3.2   This Regulation foresees operational GMES services on a larger scale. As this is a new step in a new framework, both the set-up of the programme, including the selection of priorities and governance have been subject to extensive consultations among all stakeholders, GMES coordinators in the Member States, (potential) users, and industry.

3.3   The Regulation on Earth observation provides a legal basis for the GMES programme and EU funding for initial operations in 2011-2013 amounting to EUR 107 million, i.e. from the Commission’s budget, while an additional EUR 43 million is earmarked under FP7, amounting to a total of EUR 150 million, until agreement is reached on the EU's multi-annual budget for 2013-2020 (5).

3.4   Five fields of actions are foreseen. For the period 2011–2013, the emphasis will be on emergency response services and land monitoring services (6).

3.5   The initial operations will be managed by the Commission as a part of the EU's overall GMES activities, which also cover EU research activities and the activities of GMES partners. This framework must be distinguished from the technical implementation level of the GMES space component which will be entrusted to ESA.

Apart from revealing overall agreement among stakeholders, the consultations demonstrated an overwhelming need for reliable and accurate data.

3.6.1   A variety of users like research communities, national and regional public authorities and security services badly need reliable data, sometimes even as a matter of extreme urgency.

3.6.2   Reliable and continuous data is an indispensable condition for the further development of EO markets in Europe by the downstream sector, enabling growth and job creation (7).

3.7   With regard to ‘subsidiarity’, it is worth noting that the overall assessment makes it clear that services to be provided under this Regulation need the aggregation of inputs from Member States at European level, allowing economies of scale as well as effective implementation of EU environmental legislation (8).

4.   General comments

4.1   In addition to the existing research programmes, services, and some operations the EESC greatly welcomes the initial operations as foreseen in the Regulation on Earth observation as a strategic step forward.

4.2   By starting GMES, the Commission and ESA have initiated a programme for the civil operational use of satellite data that, in addition to its meteorological applications, is unique in the world due to its scale and depth. The sustained development and implementation of GMES will create the opportunity for European industry to position itself as a prime global player.

4.3   Broad consultations among all relevant stakeholders as well as the impact assessment demonstrate broad agreement on the programme's objectives and future opportunities. Several specific studies, which were carried out upon request, reflect similar benefits from GMES and increasing opportunities for public and private participants (9).

4.4   The benefits of new operations expected by a wide range of public and private stakeholders and the EESC can be summarised as follows:

| — | strategically, European EO reflects the EU’s growing European and international responsibilities and lasting impact on European and world affairs; |
| --- | --- |

—

strategically, European EO reflects the EU’s growing European and international responsibilities and lasting impact on European and world affairs;

| — | tailor-made and timely space-based information will help the Commission, Member States and regions to implement existing programmes more accurately; |
| --- | --- |

—

tailor-made and timely space-based information will help the Commission, Member States and regions to implement existing programmes more accurately;

| — | (new) policies can be designed more accurately; |
| --- | --- |

—

(new) policies can be designed more accurately;

| — | space-based information will contribute substantially to non-spaced-based operations by fine-tuning knowledge and broadening data collection (10); |
| --- | --- |

—

space-based information will contribute substantially to non-spaced-based operations by fine-tuning knowledge and broadening data collection (10);

| — | new information will generate complementary value for European Agencies, such as the European Environment Agency and the European Defence Agency; |
| --- | --- |

—

new information will generate complementary value for European Agencies, such as the European Environment Agency and the European Defence Agency;

| — | huge opportunities will be generated for downstream activities in the private sector; |
| --- | --- |

—

huge opportunities will be generated for downstream activities in the private sector;

| — | new services demanded by national public authorities and agencies will result in environmental and security benefits for citizens, costs savings based on the smart solutions identified, and will also constitute a factor for growth; |
| --- | --- |

—

new services demanded by national public authorities and agencies will result in environmental and security benefits for citizens, costs savings based on the smart solutions identified, and will also constitute a factor for growth;

| — | the EU will take a more knowledge-based position in international negotiations on issues such as climate change and agreements aimed at better monitoring; |
| --- | --- |

—

the EU will take a more knowledge-based position in international negotiations on issues such as climate change and agreements aimed at better monitoring;

| — | specific services, based on tailor-made information, will support EU policies for developing countries. |
| --- | --- |

—

specific services, based on tailor-made information, will support EU policies for developing countries.

4.5   The cost-benefit outcome is expected to be positive: relatively moderate turnover will generate substantial advantages.

4.6   ESA programmes are limited to a three-year implementation period. The Council should set long-term EU commitments for the period after 2013. The continuity of the operational programmes is crucial. Long-term planning is decisive for the benefits of EO for public objectives and services. It is also a basic condition for encouraging the downstream sector to develop services.

4.7   In the same context, it vital to ensure continuity, reliability, and full and open access to data for all parties concerned.

4.8   Public awareness across Europe is indispensable for the sustainability of space policy. An EU communication strategy to ensure public support that explains clearly the future benefits of space-based services for society and citizens is urgently needed.

4.9   In the same context the EESC emphasises the need of giving special attention for education and training of technical experts in this field.

5.   Governance

As the initial operations will set the framework for extending the operations at a later stage, adequate management and governance should be guaranteed at the outset. Governance relates in particular to the points set out below.

5.1.1   For understandable reasons, ‘Space’ has long been a somewhat isolated policy area in the EU, but it should now be fully recognised in the range of Community policies. It will fit perfectly well in the post-2010 Lisbon Strategy (11).

5.2   All General Directorates of the Commission involved in space policies should effectively coordinate their activities so that overlaps are avoided and focused actions are foreseen when more than one Directorate is involved in EO.

5.3   European Agencies and DGs, namely Research, Environment, Agriculture, Justice and Home Affairs, Health and Consumers, Development, Trade and External Relations, need to be involved for two additional reasons:

| — | to deliver accurate information to set up satellite support services; |
| --- | --- |

—

to deliver accurate information to set up satellite support services;

| — | to successfully reap the benefits of the services delivered. |
| --- | --- |

—

to successfully reap the benefits of the services delivered.

5.4   Well-coordinated approaches within and by the Commission will also ensure coherence and interoperability between EO and other space-related programmes such as telecommunications and transport.

5.5   An efficient coordination is needed due to the large number of nation-based operators that are equally involved in information gathering.

5.6   Satellites, automatic measurement stations, and the Internet make it increasingly feasible to monitor environmental developments in real-time. GMES can deliver a contribution as an action ‘Near real-time information for decision-making’ in measuring the quality of environment within the framework of ‘GDP and beyond’ (12).

5.7   The increasing number of satellites requires a careful management of all space assets to avoid collisions in space which would highly undesirably result in space contamination and debris.

6.   Specific issues

6.1   Earth observation is still a relatively small market when compared with space-related markets as a whole. In 2005, global revenues were EUR 1,3 billion, including EUR 0,4 billion in Europe, half of which were meteorological applications.

6.2   The upstream sector for EO is predominantly institutional and depends on public funding. Emerging commercial observation satellites are developed in the framework of PPP and are still dependent on public funding.

6.3   Data is key

6.3.1   The EESC underlines the need for full and open access to data as a condition for creating a level playing field between public and private parties, and for encouraging a still weak private sector to develop.

6.3.2   Uninterrupted data-delivery is of paramount importance for a viable downstream sector to evolve. Uncertainty in this respect would be a tremendous setback to the market due to assumptions that the required infrastructure would not meet expectations.

6.3.3   Feedback from industry on the first series of operational satellites for GMES – A Sentinels – is explicitly positive (13). However, the current space downloading data chain requires special attention to ensure optimal conditions.

6.3.4   Equally essential for sustainability are the planned B Sentinels, which are necessary to replace A Sentinels that come to an end, and to ensure continuity of service in case of failure of a satellite. The funding for the B Sentinels is still uncertain. It has to be secured.

6.3.5   To ensure continuity of service or the development of new services, the future mechanism for charging for the use of data must – after consultation – be clarified to the downstream sector as soon as possible.

6.4   Financial conditions

6.4.1   Financial resources for the initial operations for 2011-2013 amount to EUR 150 million, i.e. EUR 43 million under FP7 and EUR 107 million from the Commission’s budget. The EESC urges clarification on several pending considerations.

6.4.2   Stakeholders must be certain of the financial envelope of EUR 107 million to be allocated as funding or credit. The participation rules must be clarified. Are the associated countries to be seen as potential beneficiaries of grants or contracts?

6.4.3   Given the envisaged results, EUR 150 million seem hardly sufficient. Firstly, there is a widespread view, e.g. at ESA and EADS, that the allocation of an additional EUR 30 million under FP7 is indispensable for ground-based installations to meet requirements. Secondly, it is not clear how 2013 will be covered even if the financial resources in the EU Budget for 2013-2020 are likely to be ensured.

6.4.4   A third area of concern is the envisaged launch of B Sentinels as the funding is not yet budgeted, and therefore still pending (14).

6.4.5   Another challenge is the funding of the adjacent Marine, Atmosphere and Security Services, which should have been decided at the same time as the financing of Land and Emergency Services. The EESC would welcome indications on funding for these services and on the extent of involvement of FP7 and FP8 and the Commission's DGs, in particular DG Environment. Such clarification is very relevant to the downstream sector.

6.4.6   The additionally needed financial expenditure should not necessarily be covered by the EU budget alone. Other sources, e.g. ESA or national contributions, are also conceivable.

6.5   The downstream sector

6.5.1   At the moment, the EO downstream sector - a sector in development - is a small fragmented sector comprising about 150 companies and employing around 3 000 persons in 2006. The total revenue in Europe amounts to EUR 250 - 300 million in 2006. Revenues from the public sector amount to around EUR 150 million. The customers are to a large extent public authorities and agencies. Profits are volatile. The US industry is two to three times the size of the European industry. It also has higher growth rates (15).

6.5.2   A desirable clustering of downstream activities is underway.

6.5.3   The longstanding relationship between ESA and industry, albeit on the limited scale of operations generated, has focused expertise in ESA as a facilitator of services. This has given rise to a successful industrial policy.

6.5.4   The EESC urges that since responsibility for applications will shift from ESA to the Commission, similar technical expertise regarding industry should be guaranteed within the Commission services.

The outlines of the upcoming programme are clear with a strong focus on the involvement of SMEs, whose creativity is of paramount importance in the EESC's view. In this context the EESC would emphasise two points:

6.5.5.1   Project budgets of EUR 25 million require the involvement of bigger companies. ESA has proactively sought the participation of SMEs. The same attitude must be taken by the Commission.

6.5.5.2   SMEs must be invited, on an equal footing, to become prime contractors in smaller projects.

6.5.6   In tendering projects relating to the EUR 150 million envelope for 2011-2013, the Commission must scrutinise possible distortions by public parties, which could be aggravated by the evaluations of consultants. At the moment, there is often insufficient clarity about the role of the public sector as the main customer for services.

6.5.7   Since GMES aims at creating an innovative geo-information service industry, the programme has to reach all industrial players. There is a tendency mainly to involve industries that are already connected with space. However, the EESC emphasises that if GMES is to have a sustainable future, participants from the whole geo-information service industry, both space and non-space related, must be brought in.

6.5.8   The EESC endorses financial support for the projects of private companies in order to compensate for market failure in this strategic and high potential sector.

6.5.9   At present, space activities are concentrated in one part of the EU. Given current capabilities, further development of the downstream sector can and must also be encouraged in the new Member States.

6.5.10   The EESC considers the diminishing number of specialists in the field a cause for special concern. The current trend has to be reversed. Intensified education and training schemes for prospective public customers as well as in the high-tech downstream sector are needed to enable the industry to get the full benefit of opportunities.

6.6   Security

6.6.1   Bearing in mind that ‘Space’ was dealt with separately by ESA for reasons of ‘national security’, the EC-ESA Agreement of 2004 and the Council Resolution in May 2007 represented a major shift. The EESC welcomes the attention paid to the use of GMES data and information for the security of citizens and a data policy for ensuring the secure use of possibly sensitive data by Commission, European Agencies and Member States.

6.6.2   The EESC also welcomes the enhanced coordination between GMES and the European Defence Agency, which will ensure links between GMES data policy and applications with the foreseen European security capability planning and related future requirements.

6.6.3   The EESC fully supports the foreseen ‘dual-use’ (or civil-defence) approach, combining scientific and security-oriented uses as a strategic roadmap for GMES. Such an approach is extremely relevant to facing immediate, mid-term and long-term challenges by improving European capabilities in areas such as maritime surveillance, land and border monitoring, including monitoring (16) of the organisation of illegal migration, of smuggling and drug-traffic control and critical infrastructure protection as well as the fight against the proliferation of weapons.

Brussels, 20 January 2010.

The President of the European Economic and Social Committee

Mario SEPI

---

(1)  The contribution of space-based services will, for instance, ensure earlier access to relevant information, thus generating more time for decision-making and for the preparation of countermeasures. In addition, they will facilitate the global and regional interpretation of events and sudden irregularities.

1

(2)  In this context it is worth to point to the Global Earth Observation System of Systems, GEOSS. Through GMES Europe intends to play a highly relevant role in GEOSS.

2

(3)  OJ C 162, 25.6.2008, p. 24.

3

(4)  Introductory speech of the President of the Commission at the Conference ‘The ambitions of Europe in Space, new opportunities for European enterprises and civil society’, Brussels 15-16 October 2009.

4

(5)  These amounts are additional to the EUR 1,4 billion provided under the FP7 for space projects.

5

(6)  See Article 3 of the Regulation.

6

(7)  See Article 8 of the Regulation.

7

(8)  See also Article 4(3) of the Regulation.

8

(9)  See amongst others Socio-Economic Benefits Analysis of GMES, PriceWaterhouseCooper, October 2006, EU Space Policy and its potential for EU industrial sector competitiveness, study for the EP, 2007, and Study on the competitiveness of the GMES downstream sector, Ecorys and others, November 2008.

9

(10)  Examples are TERRAFIRMA, a ground motion hazard information service, e.g. in coastal and earthquake areas; PROMOTE, an air quality service; MY OCEAN, an ocean monitoring and forecasting service; SAFER, an emergency response service.

10

(11)  See footnote 4.

11

(12)  See EC Communication ‘GDP and beyond: Measuring progress in a changing world’, COM(2009) 433 final.

12

(13)  See Industry Information Day on the GMES Sentinel Data Policy, Brussels, 11 September 2009.

13

(14)  B Sentinels are being developed by ESA, but the operational costs should be covered by the Commission. According to EADS’s calculations this amounts to EUR 165 million.

14

(15)  See the studies mentioned in footnote 9 for a complete and in-depth analysis.

15

(16)  In close cooperation with the ground-based border surveillance EU Agency Frontex.

16

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/20 |
| --- | --- | --- | --- |

14.12.2010

EN

Official Journal of the European Union

C 339/20

---

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a harmonised methodology for classifying and reporting consumer complaints and enquiries’

COM(2009) 346 final

(2010/C 339/05)

Rapporteur: Mr MULEWICZ

On 7 July 2009, the Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a harmonised methodology for classifying and reporting consumer complaints and enquiries

COM(2009) 346 final.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 5 January 2010.

At its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January 2010), the European Economic and Social Committee adopted the following opinion by 197 votes with 4 abstentions.

1.   Conclusions and recommendations

1.1   The proposal from the Commission is welcomed and supported.

1.2   Initially and at least for the next few years, the system proposed has to be voluntary.

1.3   Costs for reporting organisations should be minimised as much as possible. The system should be cost efficient.

1.4   The proposal for the Commission to make available to third party organisations a data handling tool is supported. It will enable those third party organisations with unsophisticated systems easily to adopt the proposed harmonised approach.

1.5   At sectoral level, the Commission could encourage the adoption of its harmonised methodology for classifying and reporting consumer complaints by all complaint-handling bodies within their respective sector.

2.   Introduction

2.1   The Commission uses five key indicators in producing The Consumer Markets Scoreboard. This is an annual publication, currently in its second edition, aimed at identifying those parts of the internal market which are not functioning well for consumers. One of the five key indicators is consumer complaints, i.e. statistics on consumer complaints. Others are prices, satisfaction, switching and safety. Therefore consumer complaints should be considered as a macroeconomic tool, not just consumer complaints analysis as such.

2.2   The Commission’s proposal is in essence a proposal that consumer complaints and enquiries be recorded throughout the EU on a common harmonised basis, using the same descriptors, so that a Europe wide database can easily be created, a database owned by the Commission’s DG SANCO. The Commission will finance and maintain the database and IT equipment necessary to store and process data. Commission presents a blueprint, a common grid for classifying and reporting consumer complaints.

2.3   The details of consumer complaints and enquiries which are to be fed into the database will not include complaints and enquiries made directly to traders but only those collected by ‘third party’ organisations where a consumer has registered a complaint, for example government agencies, regulators, consumer organisations and other organisations such as ombudsmen and self-regulatory bodies. Adoption of the common basis for recording will be voluntary for all organisations involved, though national government funded bodies could be expected to work towards adopting it as soon as possible, subject to having the necessary funding. The Commission will assist with software and expertise for small consumer organisations, unable to adopt harmonised methodology.

2.4   The Commission has already consulted widely in developing this proposal, including the use of an expert group.

2.5   The database will be used in compiling future editions of the Scoreboard. It is also intended to be made publicly available, so that organisations and individuals can interrogate it.

2.6   The proposal has just one main aim, namely to enable data about consumer complaints and enquiries to be used as a key indicator of internal market functioning and thereby to speed up policy responses to failing markets. These responses, at national or European level, could include directing enforcement activity at areas of concern or, when needed, a legislative response.

2.7   The purpose is not to enable any scrutiny of:

| (i) | whether complaints are effectively handled or resolved, or |
| --- | --- |

(i)

whether complaints are effectively handled or resolved, or

| (ii) | whether complaints are justified. |
| --- | --- |

(ii)

whether complaints are justified.

2.8   The database is sensibly intended to be anonymous. Thus details of individual consumers who make complaints are not to be reported. Details of the traders against whom complaints are made are also not to be reported.

2.9   In the common harmonised system proposed, there are three sections for the recording of information:

| (a) | General Information; |
| --- | --- |

(a)

General Information;

| (b) | Sector Information and; |
| --- | --- |

(b)

Sector Information and;

| (c) | Type of Complaint Information. |
| --- | --- |

(c)

Type of Complaint Information.

2.10   Within the second and third sections, there are sub-categories, variously termed ‘fields’ and ‘levels’. Some of the information regarding complaints is described as ‘recommended’, the remainder as ‘voluntary’. Regarding enquiries, all entries are ‘voluntary’. The purpose of the distinction between ‘recommended’ and ‘voluntary’ is:

| (a) | to enable organisations to submit data which are harmonised at a basic level (adopting all the ‘recommended’ fields); |
| --- | --- |

(a)

to enable organisations to submit data which are harmonised at a basic level (adopting all the ‘recommended’ fields);

| (b) | to encourage as many as possible also to adopt as many as possible of the ‘voluntary’ fields and levels. |
| --- | --- |

(b)

to encourage as many as possible also to adopt as many as possible of the ‘voluntary’ fields and levels.

2.11   The proposal is set out in two documents, both dated 7.7.2009:

| (i) | a Commission Communication [COM(2009) 346 final]; |
| --- | --- |

(i)

a Commission Communication [COM(2009) 346 final];

| (ii) | a draft document which sets out the proposal together with the proposed fields and levels for classifying complaints [SEC(2009) 949]. |
| --- | --- |

(ii)

a draft document which sets out the proposal together with the proposed fields and levels for classifying complaints [SEC(2009) 949].

The Draft Commission Recommendation is not final and can be changed as regards the text in first half of 2010. The main ideas and philosophy of the document will remain unchanged.

3.   General comments

More suggestions are made in the remarks below.

3.1.1   Compliance costs will vary but will be significant for a number of organisations. The resources available for this will vary between and within Member States. There is considerable variation in the current methods of recording complaints by the national organisations of different Member States (quite apart from other organisations). Some have less sophisticated systems than that proposed. Others have more sophisticated systems, which understandably they will not wish to abandon. Generally, it is the latter who will find compliance with the harmonised system most costly. Any technical or financial assistance from the Commission should not give preference to any local complaint assembling organisation.

3.1.2   Each extra field recorded represents a ‘cost’ in two ways. First it takes time (and thus money) for someone receiving a complaint, to collect each item of data from a complainant and record it. Secondly, the more data is asked of a consumer, the less likely the consumer is to complete registering the complaint.

3.1.3   The harmonised system used must be as compatible as possible with as many as possible of the systems currently used by national organisations. Clear instructions and guidelines should be provided to all organisations adopting such a system in order to ensure a uniform way of encoding complaints and enquiries, irrespective of the choice of the final methodology.

3.1.4   The number of fields with the ‘recommended’ status should be kept to a minimum. This should make it easier in the early years for organisations to join at a basic level.

3.1.5   The proposal does appear to satisfy the objectives just set out. The ‘recommended’ fields are probably reportable without too much difficulty by most third party organisations. These ‘recommended’ fields can be expected to provide a useful set of European wide data. The quality and usefulness of the database will be further improved as and when third party organisations can include recording and reporting of the further ‘voluntary’ fields and levels.

3.1.6   At sectoral level, the Commission could encourage the adoption of its harmonised methodology for classifying and reporting consumer complaints by all complaint-handling bodies within their respective sector. For example, FIN-NET might speed up the process for the financial services sector, including insurance companies. FIN-NET would benefit of a harmonised consumer complaints system. The network cooperates to provide consumers with easy access to out-of-court complaint procedures in cross-border cases. If a consumer in one country has a dispute with a financial service provider from another country, FIN-NET members will put the consumer in touch with the relevant out-of-court complaint scheme and provide the necessary information about it. To make this scheme more effective, a common classification and registration method for consumer complaints is an important step forward.

3.2   There will continue to be variations in the quality and extent of data reported from different Member States. This will be taken into account in the analysis of that data in each annual issue of Scoreboard. Such variations will probably never be totally eliminated. However, a harmonised system of reporting can be expected to result in a reduction in such variations over a period of years.

3.3   The proposal encourages reporting bodies to report all micro data for every individual complaint. The proposal (at paragraph 33 of the Commission Communication) suggests that one of the voluntary fields should be the ‘name of the trader’. This proposal should not include, even on a voluntary basis, the reporting of the name or identity of any individual trader. The Commission’s statement at paragraph 39 is therefore welcomed and strongly supported, where it says that the Commission does not wish to receive, or to make public, data concerning the names of traders or enabling the identification of traders. Therefore, the ‘name of the trader’ should be entirely removed from the lists of fields to be reported.

3.4   One of the fields in the General Information section (at number 67) is ‘doorstep selling’. Consistent with the proposed directive on Consumer Rights, this expression should be changed to ‘off-premises selling’.

3.5   In the proposed ‘Sector Information’ section (Section B), the following are included: museums, schools, hospitals, libraries, postal services. Many of these services are provided by governments. For example, schools may be provided by businesses but many more are provided by governments. The purpose of the proposal is to provide information about the functioning of the internal market and thereby to speed up policy responses to failing markets. It is not intended to give information on government performance. So is it appropriate or relevant to report consumer complaints where the supplier is the government? One possible result of this could be that many more complaints are seen to be made about a given service (for example railways) in those countries where the service is provided by the state than in those countries where the service is provided by private business.

3.6   An important aspect of the proposal is that the database will provide enhanced statistical information which will be used in the analysis published annually in Scoreboard. The information used needs to be current. All the information used in each issue should relate to the same period of time or at least to approximately the same time. It should be easy for the reader to see which period is covered by the statistics included in each issue of Scoreboard.

Therefore:

| (a) | information should be reported by third parties annually; |
| --- | --- |

(a)

information should be reported by third parties annually;

| (b) | there should be an annual reporting period (probably not longer than 6 weeks) with a clear cut-off date at the end; if there is no such reporting period, there should at least be a clear final annual reporting deadline; |
| --- | --- |

(b)

there should be an annual reporting period (probably not longer than 6 weeks) with a clear cut-off date at the end; if there is no such reporting period, there should at least be a clear final annual reporting deadline;

| (c) | the annual reporting period or deadline should be tied to the production of Scoreboard; |
| --- | --- |

(c)

the annual reporting period or deadline should be tied to the production of Scoreboard;

| (d) | each annual issue of Scoreboard should itself be given a title which includes its year (e.g. Scoreboard 2011), not an edition number such as 2nd edition; |
| --- | --- |

(d)

each annual issue of Scoreboard should itself be given a title which includes its year (e.g. Scoreboard 2011), not an edition number such as 2nd edition;

| (e) | each issue of Scoreboard should indicate the period during which the data within it were collected. |
| --- | --- |

(e)

each issue of Scoreboard should indicate the period during which the data within it were collected.

3.7   The EESC has serious concerns about data collection. Inevitably, there will be significant variations in the completeness and accuracy of the data reported by different reporting organisations and from different Member States. Also the system of referrals varies between different Member States. An organisation which receives a complaint and then refers that complaint to a more appropriate organisation may or may not delete that complaint from its own database. If it does not and if both organisations report data to the Commission, the one complaint may well be reported twice. When the Commission publishes data, including in Scoreboard, the Commission should explain the known limitations as to the completeness and accuracy of the data, including the risk of double counting and lack of verification. In the longer term data should be collected and verified by one organisation at national level.

3.8   This proposal will result in enhanced reporting and understanding of how the internal market is functioning and where it is failing for consumers. It is equally important to understand how markets are failing for business, for example in relation to counterfeit products and the industrial theft of intellectual property. Such information will probably not come from consumer complaints but equally needs to be addressed. There should also be effective mechanisms, established within the Commission, for examining the extent to which the internal market is failing business.

3.9   The EESC recognises that complaints can provide a good indication of where problems may lie for consumers. However, consumer satisfaction cannot be measured through data on consumer complaints only. A variety of factors – such as personal motivation of the plaintiff and proactive behaviour of businesses, cost benefit analysis especially in case of small financial losses, social pressure, degree of accessibility of complaint bodies, media exposure, etc. – have an influence on whether a consumer will finally complain or not. Besides, the Consumer Markets Scoreboard itself uses five indicators – complaints, prices, consumer satisfaction, switching and safety. All these indicators should be further analysed to identify malfunctioning consumer markets.

Brussels, 20 January 2010.

The President of the European Economic and Social Committee

Mario SEPI

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/24 |
| --- | --- | --- | --- |

14.12.2010

EN

Official Journal of the European Union

C 339/24

---

Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies’

COM(2009) 362 final — 2009/0099 (COD)

(2010/C 339/06)

Rapporteur-General: Mr MORGAN

On 10 September 2009 the Council decided to consult the European Economic and Social Committee, under Article 47 paragraph 2 of the Treaty establishing the European Community, on the

Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies

COM(2009) 362 final – 2009/0099 (COD).

On 29 September 2009 the Committee Bureau instructed the Section for the Single Market, Production and Consumption to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee, in accordance with Rule 57 of the Rules of Procedure, appointed Mr Morgan as rapporteur-general at its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January 2010), and adopted the following opinion by 162 votes to 4 with 18 abstentions.

1.   Conclusions and recommendations

1.1   The background to this proposed Directive, hereinafter referred to as the Directive, lies in the conclusions and recommendations of the Report of the Larosière Group. The EESC has already given its opinion on that report and is broadly supportive (1). The Directive has been prepared in the context of the Basel II international framework for the capital adequacy of banks. The text has been modified by the ECOFIN Council following the G 20 meeting in Pittsburgh. The EESC supports the thrust of the Directive which will amend Directive 2006/48/EC relating to the pursuit of the business of credit institutions and Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions.

1.2   This opinion explains the major part played by the banks in the financial crisis and how regulation and supervision failed. In the opinion of the EESC, the Directive will address many of the regulatory failures and help to correct the major failings in the operation and governance of the banks. In themselves, these regulations will not correct the self centred behaviour of bankers which was a major factor in the crisis. The interests of banking stakeholders still needs to be recognised and the corporate social responsibility of large banking institutions needs to become a central and not a peripheral concern.

1.3   The main factors behind the crisis were:

| — | The granting of credit by credit institutions to clients who were not credit worthy. |
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The granting of credit by credit institutions to clients who were not credit worthy.

| — | In many cases, inappropriate remuneration and incentive schemes for the retail staff of credit institutions. |
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In many cases, inappropriate remuneration and incentive schemes for the retail staff of credit institutions.

| — | The creation by banks of credit securities without the necessary due diligence. |
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The creation by banks of credit securities without the necessary due diligence.

| — | The acquisition by banks of these securities without using the necessary due diligence. |
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The acquisition by banks of these securities without using the necessary due diligence.

| — | Inadequate capital reserves, especially in the trading books of banks. |
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Inadequate capital reserves, especially in the trading books of banks.

| — | The creation of off-balance sheet vehicles which were not adequately capitalised. |
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The creation of off-balance sheet vehicles which were not adequately capitalised.

| — | Perverse incentives and inappropriate compensation structures which led to short-termism and excessive risk taking. |
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Perverse incentives and inappropriate compensation structures which led to short-termism and excessive risk taking.

| — | The pro-cyclical nature of regulation. |
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The pro-cyclical nature of regulation.

| — | Systemic failures of risk management in respect of the quality of securities held, the adequacy of capital reserves and the impact of variable compensation schemes on institutional risk aggregation. |
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Systemic failures of risk management in respect of the quality of securities held, the adequacy of capital reserves and the impact of variable compensation schemes on institutional risk aggregation.

| — | A lack of transparency in banks affairs which prevented lenders, borrowers, counter parties, investors, analysts and even independent directors from acting as would be expected in the financial markets. |
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A lack of transparency in banks affairs which prevented lenders, borrowers, counter parties, investors, analysts and even independent directors from acting as would be expected in the financial markets.

| — | Insufficient macro-prudential supervision and international co-ordination. |
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Insufficient macro-prudential supervision and international co-ordination.

1.4   The EESC is pleased that the Commission is working in conformance with the Financial Stability Board (FSB) and the Basel committee to refine its proposals respectively on remuneration and capital requirements. Banking is a sector of fundamental economic importance for the EU but at the same time it is a potentially mobile industry. To avoid damage to the EU finance industry by regulatory arbitrage, it is essential to find global solutions and the EU may well need to take the lead in proposing them. That is as it should be. The EU cannot afford to introduce regulation which is significantly out of line with practice elsewhere.

1.5   The EESC supports the core principles proposed for the formulation and implementation of remuneration policies. Had certain of these principles been in place prior to the crisis, many scandalous and embarrassing pay-outs would have been avoided.

1.6   In most industrial sectors, the absolute quantum of executive bonus payments is defined as a maximum percentage of salary. The EESC believes that banking should apply similar concepts to its variable compensation systems since nothing in the role of bankers qualifies them for unconstrained systems of compensation. In this context, the EESC welcomes the requirement for significant credit institutions and investment firms (CIIF) to establish Remuneration Committees.

1.7   The EESC recognises that this Directive is more concerned about the structure of compensation rather than its quantum. Nevertheless, the EESC must register its concern about the quantum. The EESC expects that the effect of both the new capital requirements and the prudential analysis of remuneration policies and plans will together constrain the excessive variable compensation of the past. The EESC recognises that the EU does not have a competence on the level of pay per se.

1.8   The EESC is pleased to note that the provisions on remuneration are without prejudice to the provisions of Article 137(5) of the Treaty, general principles of national contract and labour law as well as the rights, where applicable, of social partners in collective bargaining.

1.9   The EESC gives its full support to the increased capital requirements detailed in this Directive. These involve, in particular:

| — | Provisions to reinforce capital requirements for assets which banks hold in the trading book for short term resale. |
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Provisions to reinforce capital requirements for assets which banks hold in the trading book for short term resale.

| — | Upgraded capital requirements for complex securitisations, both in the banking and in the trading book. |
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Upgraded capital requirements for complex securitisations, both in the banking and in the trading book.

1.10   The Committee notes that the proposal no longer includes a strengthened supervisory process for re-securitisations that are particularly complex. However, the EESC would expect supervisors to be diligent in this respect and it notes that supervisors retain the full range of corrective measures.

1.11   The perspective of the EESC is influenced by the facts which came to light (2) following the SEC investigation into the collapse in value of retail backed mortgage securities, collateralised debt obligations and other such assets. Credit rating agencies (CRA) were party to the irresponsible creation of these toxic assets, which have cost the developed world hundreds of billions of dollars. Investment banks are guilty of aiding and abetting the CRA while most banks failed to understand the risks inherent in holding these securities. As the Larosière Group observed, ‘It is crucial that these regulatory changes (in respect of CRA) are accompanied by increased due diligence and judgement by investors and improved supervision’. The EESC endorsed this recommendation in its CRA opinion and it now endorses the proposed Directive because it will require banks and supervisors to act accordingly.

1.12   Point 4 in Annex I of the Directive outlines a new and extensive set of disclosure requirements. The EESC supports these. Had they been in place before the crisis, much of the ensuing grief could have been avoided. In Annex II the focus on liquidity and event risk is equally welcome. Without a technical analysis of the provisions, the EESC has received comfort from the Commission that the market liquidity crisis at the heart of the banking crisis will be averted by these measures.

1.13   The EESC understands that it is intended that liquidity issues at the level of the firm will be addressed in the next Capital Requirements Directive (CRD4). Following the crisis, this is a fundamental requirement.

1.14   The EESC notes that while nothing in the draft directive addresses the issue of off-balance sheet SPV, this had, in effect, been covered by Commission Directive 2009/83/EC issued in July 2009. Article 95 of the CRD already establishes that a bank has to calculate capital requirements for assets it originates unless it achieves ‘significant risk transfer’. The July Directive tightens up the interpretation of this provision in two important ways. Had this clarification been operative before the crisis, the contribution of SPVs to the crisis would have been considerably reduced.

1.15   The EESC is concerned that the miss-selling of credit to consumers played an important part in the build up to the crisis. The Communication on ‘packaged retail investment products’ (PRIP) (3) does appear to address the problem in that it aims to regulate selling conditions and, in particular the control of conflicts of interest that arise in that process. This builds upon the conditions imposed by the Markets in Financial Instruments Directive (2004)/39/EC.

1.16   Disclosure is key to the restoration of financial markets. The EESC is satisfied that the scale of the disclosures proposed and the access available for stakeholders is sufficient for them to obtain the information they need to do business with an institution. The disclosures required by the proposed Directive need to be understood in the context of Article 147 of CRD 2006/48/EC which directs credit institutions to publish the required disclosures.

1.17   In November 2009 the heads of HSBC and Standard Chartered Bank expressed concern that the capital requirements being proposed by regulators are excessive and damaging and will hold back both recovery and development. One might expect this view from bankers, but these are no ordinary bankers. Neither is in receipt of government support. Executives from Standard Chartered actually helped devise the UK bank support scheme. The EESC urges the Commission to ensure that when balanced by necessary due diligence and appropriate risk controls, the proposed capital requirements are proportionate to risk.

1.18   The EESC believes that an analysis should be performed by the Commission to understand the impact of the draft directive now under consideration not just on banks’ capital holdings but also on economic growth, job creation and the recovery in general.

2.   Introduction

2.1   A brief explanation of the crisis in the banking system will put the Directive into perspective. Further perspectives on the crisis are provided in the report of Lord Turner, chairman of the UK Financial Services Authority (4).

2.2   The business of retail banks involves making long term loans on the basis of short term deposits. This is called maturity transformation and it is risky. If all the depositors decided to withdraw their money, a bank would have insufficient liquid assets. Similarly, if borrowers defaulted on their obligations, bank capital would be reduced, risking insolvency. To guard against this, retail banks keep reserves of liquid assets on the balance sheet and make back up arrangements with other banks while the central bank can be the lender of last resort. Banking regulation prescribes the amount of capital to be held against the bank's obligations to guard against the possibility of borrower default.

2.3   Banks also trade on their own account. For this they also hold capital. These capital reserves have traditionally been modest because the potential losses from the trading book were expected to be low because the traded assets which were considered to be readily marketable. Capital to support the trading book was calculated by a value at risk methodology (VaR). Banks also set up special purpose trading vehicles (SPV) off balance sheet. These were highly leveraged and potentially risky but because they were deemed to be off balance sheet the regulators treated them as independent entities. However, when the crisis broke, many SPV were brought back onto bank balance sheets for reputational reasons, although no capital reserves had previously been provided against this possibility.

2.4   The authorities played a part in the development of the banking crisis. Regulators approved the capital held by banks. Monetary authorities, with the exception of the ECB, kept interest rates too low for too long. Even in the euro-zone, rates were far too low for certain economies. In the political arena, the US government forced banks to arrange imprudent mortgages to a sub-prime clientele. Savings ratios decreased in the western world leaving the growth in borrowing to be financed by Asia. These factors stimulated risky banking.

2.5   Banks granted sub-prime mortgages, then packaged them into bundles and sold them on. This activity spread beyond the United States. With the help of the credit rating agencies, these bundles were sliced into tranches carrying differential credit ratings, many paying interest much higher than the risk free rate. Re-securitisation repackaged existing debt tranches so that the underlying securities became untraceable. An alphabet soup of credit securities ended up as a major component of the own account trading book and SPV trading. The massive risk represented by this concentration was not recognised.

2.6   The origination and distribution of credit securities became a tidal wave. As Lord Turner has shown, the scope and scale of transactions in the ‘casino’ economy dwarfed the scale of economic activity in the real economy. To go even faster, banks ceased to rely on deposits and funded their lending by very short term borrowing on the wholesale money markets. This was maturity transformation gone mad. Then the Fed started to raise interest rates and the casino closed.

2.7   Sub-prime mortgage holders began to default. The rating agencies massively down graded the ratings of credit securities. Banks everywhere tried to sell these assets and this led to systemic failure. Prices plummeted. Liquidity through marketability was no more. Banks did not know the condition of other banks so confidence evaporated and interbank trading in the wholesale markets came to a halt. For the lack of liquidity, all types of banks got into trouble. Lehman's was allowed to fail while many other banks in the USA and elsewhere needed massive government support to survive

2.8   Compensation schemes tended to reinforce risk taking in credit institutions. At all levels, the incentives drove a short term profit focus, irrespective of longer term risks. The spiral of interbank trading created an artificial economy detached from the real economy and in which rewards became detached from the norms of the real world. The quality of loan books deteriorated dramatically. Traders and others were under similar short term pressures. In some cases, even front line retail staff were highly incentivised to extend credit card and mortgage facilities to clients of dubious credit worthiness.

2.9   Regulatory reforms need to be based on the lessons learnt. The quantity and quality of bank capital needs radical improvement. Capital held against the trading book should be substantially increased and the VAR formula revised. Capital calculations need to become countercyclical. Risk assessment needs to be more cautious. The liquidity risks involved in maturity transformation need reconsideration because, in the crisis, liquidity through marketability and wholesale markets both failed.

2.10   Regulatory reforms will not be enough. Market mechanisms and greater shareholder involvement are essential. The main issue is the lack of transparency. The true nature of bank loans, assets, reserves and bank risk profiles must be public. Such transparency will allow lenders, borrowers, shareholders, directors and analysts to act as they should in the market.

2.11   Government failure - political, monetary and regulatory - needs to be corrected so that bankers must return to prudent banking and require prudence from their customers. In some Member States, retail customers need protection from promiscuous lending by credit institutions.

2.12   Corporate governance must improve. Risk management and broad oversight needs a wholly new perspective. Compensation needs a longer term horizon. It must underpin rather than undermine risk management and it should be aligned with the long term interests of shareholders and stakeholders. The compensation of all staff whose professional activities can have a material impact on the risk profile of a bank should be determined in the context of that profile.

2.13   The banking crisis has brought into focus the problem of combining retail banks and investment banks into single institutions which may be deemed too big to fail. In many ways the combination makes sense, because many investment banking activities provide necessary facilities to both retail and corporate clients. The central issue is the implicit and often explicit necessary guarantee that the state provides to those who make retail deposits. This introduces moral hazard into investment banking and may encourage excessive risk taking. After the 1929 crash, the US Glass-Steagall Act enforced the institutional separation of retail and investment banking. It was repealed in 1999 because of the extent of the overlap which had developed. If the two activities are not to be separated by, for example, a new Glass-Steagall Act, then it is essential that the capital requirements regime be tough enough to prevent the investment bank from bringing down the retail bank.

3.   Gist of the Commission's Directive

Changes to the text of the Directive added after the Pittsburgh meeting and pertinent to the EESC perspective are added in italics.

3.1   Excessive and imprudent risk-taking in the banking sector has led to the failure of individual financial institutions and systemic problems in Member States and globally, there is agreement by supervisors and regulatory bodies, including the G20 and the Committee of European Banking Supervisors, that the inappropriate remuneration structures have been a contributory factor. In this context the internationally agreed and endorsed principles and standards established by the Financial Stability Board are of particular importance.

3.2   In order to address the potentially detrimental effect of poorly designed remuneration structures, there should be an express obligation for credit institutions and investment firms (CIIF) to establish and maintain, remuneration policies and practices that are consistent with effective risk management.

3.3   It is important that the new obligation concerning remuneration policies and practices should be implemented in a consistent manner. It is therefore appropriate to specify core principles to ensure that the structure of remuneration does not encourage excessive risk-taking and is aligned with the risk appetite, values and long-term interests of the institution.

3.4   The following are some of the core principles:

| — | The remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking that exceeds the level of tolerated risk of the credit institution. |
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The remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking that exceeds the level of tolerated risk of the credit institution.

| — | The remuneration policy is in line with the business strategy, objectives, values and long-term interests of the credit institution. |
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The remuneration policy is in line with the business strategy, objectives, values and long-term interests of the credit institution.

| — | The assessment of performance is set in a multi-year framework in order to ensure that the assessment is based on longer term performance and that the actual payment of performance based remuneration is spread over a period which takes account of the underlying business cycle of the firm and its business risks. |
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The assessment of performance is set in a multi-year framework in order to ensure that the assessment is based on longer term performance and that the actual payment of performance based remuneration is spread over a period which takes account of the underlying business cycle of the firm and its business risks.

| — | Payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure. |
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Payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure.

| — | Guaranteed variable compensation is exceptional and occurs only in the context of hiring new staff and is limited to the first year of employment. |
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Guaranteed variable compensation is exceptional and occurs only in the context of hiring new staff and is limited to the first year of employment.

| — | At least 50 % of variable compensation should be paid in shares or in appropriate non-cash instruments, which should be subject to an appropriate retention policy. |
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At least 50 % of variable compensation should be paid in shares or in appropriate non-cash instruments, which should be subject to an appropriate retention policy.

| — | Payment of the major part of a significant bonus is deferred for an appropriate period and is linked to the future performance of the firm. At least 40 %, at least 60 %in the case of senior management, to be deferred over not less than 3 years, vesting on a pro rata basis. |
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Payment of the major part of a significant bonus is deferred for an appropriate period and is linked to the future performance of the firm. At least 40 %, at least 60 %in the case of senior management, to be deferred over not less than 3 years, vesting on a pro rata basis.

| — | Variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the institution. |
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Variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the institution.

3.5   ‘Significant’ CIIF are required to establish a Remuneration Committee. ‘Significant’ CIIF are defined in terms of their size, internal organisation and the nature, the scope and the complexity of their activities.

3.6   Competent authorities should also have the power to impose either financial or non-financial measures or penalties for the breach of a requirement to have remuneration policies that are consistent with sound and effective risk management. Those measures and penalties should be effective, proportionate and dissuasive.

3.7   In order to promote supervisory convergences in the assessment of remuneration policies and practices, the Committee of European Banking Supervisors should ensure the existence of guidelines on sound remuneration policies in the banking sector.

3.8   Since poorly designed remuneration policies and incentive schemes are capable of increasing to an unacceptable extent the risks to which CIIF are exposed, it is appropriate that competent authorities impose qualitative or quantitative measures on the relevant entities as required. Qualitative measures include requiring CIIF to reduce the risk inherent in their activities, including structures of remuneration. Quantitative measures include a requirement to hold additional own funds.

3.9   In order to ensure adequate transparency to the market of their remuneration structures and the associated risk, CIIF should disclose information on their remuneration policies and practices for those staff whose professional activities have a material impact on the risk profile of the institution.

3.10   There should be a separate capital treatment for securitisations which re-package other securitisations and are subject to a higher credit risk than normal securitisations and provide CIIF with clear disincentives against investment in securitisations of particularly high complexity and risk.

3.11   Re-securitisations repackage medium-risk securitisation exposures into new securities. They have generally been considered low credit risk by rating agencies and market participants. However, given their complexity and sensitivity to correlated losses, such re-securitisations entail higher risks than conventional securitisations. Therefore, this proposal comprises a set of capital requirements that are higher than for straight securitisation positions of the same rating.

3.12   Given recent weak performance, the standards for internal models to calculate market risk capital requirements should be strengthened. In particular, their capture of risks should be completed regarding credit risks in the trading book. Furthermore, capital charges should include a component adequate to stress conditions to strengthen capital requirements in view of deteriorating market conditions and in order to reduce the potential for pro-cyclicality.

3.13   Without prejudice to the disclosures explicitly required by this Directive, the aim of the disclosure requirements should be to provide market participants with accurate and comprehensive information regarding the risk profile of individual institutions. Therefore institutions should be required to disclose additional information not explicitly listed in this Directive if necessary to meet this objective.

3.14   In the field of securitisation, disclosure requirements of institutions should be considerably strengthened. They should in particular also take into account the risks of securitisation positions in the trading book.

Brussels, 20 January 2010.

The President of the European Economic and Social Committee

Mario SEPI

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(1)  OJ C 318, 23.12.2009, p. 57.

1

(2)  OJ C 277, 17.11.2009, p. 117.

2

(3)  COM(2009) 204 final.

3

(4)  The Turner Review, UK Financial Services Authority, March 2009.

4

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/29 |
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14.12.2010

EN

Official Journal of the European Union

C 339/29

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Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions concerning the European Union Strategy for the Baltic Sea Region’

COM(2009) 248 final

(2010/C 339/07)

Rapporteur: Mr SMYTH

On 10 June 2009, the European Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions concerning the European Union Strategy for the Baltic Sea Region

COM(2009) 248 final.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 8 January 2010.

At its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January 2010), the European Economic and Social Committee adopted the following opinion by 198 votes to 1 with 4 abstentions.

1.   Conclusions

1.1   The EESC supports the aims embodied in the four pillars of the Baltic Sea Strategy, to make the region a prosperous place, a safe and secure place, an environmentally sustainable place and an attractive and accessible place.

1.2   The EESC recognises the comprehensive consultation process that preceded the finalisation of the Strategy and the role played in the process by the social partners and stakeholders. The EESC re-states its call for the establishment of a Baltic Sea Civil Society Forum that would help to embed civil society in the evolution of the Strategy.

1.3   The Strategy has laudable aims and objectives in tackling a set of complex structural issues in the Baltic but it nonetheless faces a number of challenges that have to be overcome for it to prove effective. These challenges relate to its value adding potential, the governance arrangements, the cohesion of the EU and the external effectiveness of the Strategy.

1.4   The governance arrangements for the Baltic Sea Strategy are also the subject of some critical comment. The Strategy encompasses the remit of 21 Directorates General as well as 8 Member States plus Russia. When these are combined with the 4 pillars, 15 priority actions and numerous horizontal actions, there are complex governance structures at the heart of the Strategy which might make it unworkable. The EESC believes that greater effort should be made to simplify the governance and administration arrangements for the Strategy.

1.5   This opinion re-iterates the proposal to establish within the EESC an ad hoc Baltic Sea Region observatory or study group so that the entire EESC can participate effectively in the inevitable development and evolution of the Strategy.

1.6   One of the main challenges for the Strategy is the external dimension especially because of the key role that Russia plays in the Baltic Sea area. Russia’s role in the implementation of the Strategy is to be handled by the Northern Dimension arrangements. There is uncertainty about whether these arrangements are sufficient to ensure Russia’s effective participation in the strategic actions.

1.7   The EESC endorses the view that the Strategy is not only a document: above all it is a process. This means that the Strategy is implemented over time. It has already been successful in bringing all the Member States and the stakeholders, together with the EU Institutions, to agree on a limited list of key actions and projects and to agree on the need to implement them. The EESC hopes that the enthusiasm which was engendered during the preparation of the Strategy will continue and contribute to an effective and timely implementation that can be revised during implementation.

2.   Background to the Strategy

2.1   The origins of the Baltic Sea Strategy are well established. It has long been recognised that the Baltic Sea region has suffered from a range of severe environmental, economic development and infrastructural weaknesses that are interrelated and interdependent. In November 2006, the European Parliament adopted a resolution to draw up a Baltic Sea Strategy. This Strategy for the designated Baltic Sea macro-region was adopted by the Commission on 10 June 2009 and was submitted to the European Council on 19 June 2009. It was a high priority for the Swedish Presidency and was adopted by the General Affairs Council on 26 October 2009 in Luxembourg.

2.2   The comprehensive Strategy marks a new departure in European Union territorial cooperation policy. The Commission’s view is that the Strategy is the first truly integrated approach to be adopted for Member States facing the same set of challenges. There are currently thirteen areas for transnational cooperation, which together cover all areas of the EU (in addition there are some fifty cross-border cooperation schemes). The Baltic Sea Strategy embodies the relatively novel concept of macro-regional cooperation, that is, the more effective coordination and use of financial resources and prevailing cooperation initiatives across the Baltic region. In terms of its geographical spread, the Strategy embraces EU Member States - Sweden, Denmark, Germany, Finland, Poland, Estonia, Latvia and Lithuania - together with Norway and Russia.

2.3   This opinion sets out to assess the proposed Baltic Sea Strategy and its Action Plan from the perspective of organised civil society. The opinion builds upon the analysis set out in the recently adopted EESC opinions ‘Baltic Sea Region: the role of organised civil society in improving regional cooperation and identifying a regional strategy’ (1) and ‘Macro-regional cooperation: Rolling out the Baltic Sea Strategy to other macro-regions in Europe’ (2). The process that led to the development of the Strategy is unprecedented. The Commission's view is that if the Baltic Sea Strategy is valid and workable in the Baltic, a similar approach may be applicable to other macro-regions such as the Danube Region, the Alpine region and the Mediterranean.

3.   Strategy in Outline

3.1   The Commission undertook a comprehensive set of consultations throughout 2008. These consultative conferences were spread geographically across the macro-region and culminated in February 2009 in Rostock. They were themed around the four pillars upon which the Baltic Sea Strategy is built to make the Baltic Sea Region

| — | an environmentally sustainable place; |
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an environmentally sustainable place;

| — | a prosperous place; |
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a prosperous place;

| — | an accessible and attractive place; |
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an accessible and attractive place;

| — | a safe and secure place. |
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a safe and secure place.

3.2   The Strategy is accompanied by an Action Plan which comprises 15 priority areas across the four pillars. Each priority area is to be coordinated by at least one Baltic Member State and they are expected to work on its implementation together with all relevant stakeholders.

3.3   The Baltic Sea Strategy and its proposed actions are to be funded from existing resources primarily the Structural funds (EUR 55 billion between 2007-13), funding from each Baltic Sea state, private financing as well as funding from financial institutions such as the EIB, NIB and the EBRD.

3.4   There are significant differences to be found between the European Parliament resolution and the Commission communication (3)
   (4). The Commission takes an internal EU perspective of the Council whereas the Parliament resolution refers to a ‘Baltic Sea Strategy for the Northern Dimension’. The Parliament resolution calls on the Commission to present a proposal for a Strategy ‘in order to reinforce the internal pillar of the Northern Dimension’ (5). The Parliament clearly links the Baltic Sea Strategy to the Northern Dimension framework, whereas the Council and the Commission make a distinction between the Strategy and the external aspects of cooperation.

3.5   There are important differences of view regarding the appropriate governance structure. The Commission’s strategy centres upon the coordination of existing initiatives, continuously reviewing progress and maintaining momentum of the Action Plan. The Commission’s approach is to keep institutional mechanisms to a minimum with no additional funding for the Baltic Sea Strategy. The Parliament proposes to hold an annual Baltic Sea summit before the summer European Council and to expand regional organisational bodies inside and outside the EU system, in part by proposing an own budget line for the Strategy. The EESC has already voiced its support for a separate budget for the Strategy. It would appear that the Parliament wishes to see a more ambitious policy development than the Commission. As if to underline the evolving nature of the Strategy, on 22 October 2009, the Parliament adopted an amendment of EUR 20 million to the 2010 Budget for the coordination and for some pilot projects of the Strategy.

3.6   Aside from these differences of approach, the Strategy itself emerged from a comprehensive set of consultations of stakeholders in the macro-region. The Strategy is innovative as it will operate on a transnational governance structure and hence it goes beyond the scope of traditional EU regional policies. This new governance structure sits between the nation state and the supranational community.

3.7   The concept of the Baltic Sea Strategy is described by the Commission as ‘a work in progress’. Defining individual aspects of the Baltic Sea Region is necessarily imprecise because the geographies change depending on the question being addressed. The approach taken in designing the Baltic Sea Strategy is to start by defining the problems and issues and letting these define the geography of the macro-region. By any objective measure, the four pillars of the Strategy and the ensuing Action Plan represent a serious attempt to produce a better coordinated development framework for such a diverse area as the Baltic Sea region and thus to try to promote territorial cohesion. Table 1 below sets out the priority areas of the Action Plan under each of the pillars of the Strategy.

3.8   Implicit in the Commission’s thinking is that an integrated approach is necessary to ensure sustainable development in the region. The issues addressed in the Strategy are complex and interrelated while existing cooperation schemes have not been effectively coordinated.

4.   Challenges and Key Questions

4.1   There is a great deal at stake on the successful implementation of the Baltic Sea Strategy. The Commission has stated on a number of occasions that the Strategy could become a template for other macro-regions in the EU. The Strategy has laudable aims and objectives in tackling a set of such complex structural issues in the Baltic but it nonetheless faces a number of challenges that have to be overcome for it to prove effective. These challenges relate to its value-adding potential, the governance arrangements, the cohesion of the EU and the external effectiveness of the Strategy.

4.2   In terms of adding value, the risk is that the Strategy encompasses a very ambitious set of actions to satisfy the majority of Baltic stakeholders; it may prove to be undeliverable. There is an argument for trying to keep the Strategy more simple and to concentrate efforts on a smaller but strategically vital set of objectives. Progress has been made by HELCOM in its Baltic Sea Action Plan in terms of fish stocks and the general environment. In spite of these improvements, the Baltic Sea Strategy should continue to generate positive improvements in fisheries and the wider environment.

4.3   The governance arrangements for the Baltic Sea Strategy are also the subject of some critical comment. Table 1 illustrates a paradox, namely that those Member States in most need of the Strategy are the least involved in its implementation. In addition the Commission has struggled to balance a complex of actions with a complex of Directorates General and a range of Member States. Experience to date with the implementation of the Leipzig Charter on Sustainable European Cities has been relatively slow and the Baltic Sea Strategy is arguably even more complex (6).

4.4   The success of any EU policy such as the Baltic Sea Strategy will be measured in terms of practical results which must be visible and tangible for the citizens. The Strategy also challenges the very notion of Community cohesion. As argued earlier the Commission has ‘upped the ante’ in terms of macro-regional cooperation. Although the severity of the environmental, infrastructure-related and other challenges facing the Baltic are all too familiar to citizens of Baltic Member States it remains a major challenge to explain the seriousness of the situation in the Baltic Sea to the rest of the Union. In this regard the assistance of organised civil society is critical. The EESC has already put forward a proposal to establish a ‘Baltic Sea Civil Society Forum’ and has indicated its readiness to begin preparing the groundwork for such a Forum. In addition the Committee has proposed the formation, within the EESC, of an ad hoc Baltic Sea Region observatory or study group so that the entire EESC can participate effectively in the evolution of the Strategy.

4.5   One of the main challenges for the Strategy is the external dimension; especially because of the key role that Russia plays, it is a key stakeholder in the Baltic Sea (BS) area. Russia has hitherto expressed interest in the Strategy since it would benefit from its successful implementation. At present Russia’s role in the Strategy is to be handled by the Northern Dimension arrangements and presumably these are to be aligned with the Strategy. It is worth noting that three out of the four pillars of the Strategy – environmental protection, attractiveness and accessibility, and safety and security – are essentially transnational in character and so there is a case for having some mechanisms within the Strategy for linking the internal and external interactions, especially at an operational level. Furthermore the external dimension of the Strategy could perhaps be even broader in its scope by, for instance, embracing Belarus, which has an impact on environmental protection and the attractiveness and accessibility of the Baltic Sea Region.

4.6   There is a view that it will be more straightforward to secure the involvement of Russia in the implementation of the Strategy through direct bilateral cooperation with the EU on a ‘partnership of equals’ basis with the EU (7). If this view is correct, then it is legitimate to ask whether the Northern Dimension, as currently suggested, is the appropriate mechanism for ensuring Russia’s commitment to the Strategy.

5.   Analysis of the Strategy

5.1   There are a number of points of contention in the Strategy which need to be monitored closely. Firstly, the Action Plan contains specific proposals to correct deficiencies in energy networks and connectivity in the Baltic Sea Region. There are some concerns that these may not be sufficient given the urgency of the need to achieve greater network integration. The Strategy should not just seek to integrate and link up the currently separate national energy markets of the BS area but should work towards EU-wide solidarity for energy. The EU needs Russian energy and therefore needs to build the infrastructure to bring gas, oil and electricity into Europe. This is necessary to guarantee the stability of supply of energy to Europe. Greater cooperation on energy is also needed from non-Member States. The Nordstream project is not dealt with in the Strategy. While this is an obvious omission, the Commission point out that the Nordstream project is a very divisive issue and that the Baltic Sea Region Strategy required unanimity to be adopted.

5.2   The Action Plan sets out proposals to improve internal and external sea, road and rail transport links. The Road infrastructure needs serious attention because it is either seriously deficient or missing altogether. What used to be the periphery of the Soviet Union could then become much more an integrated part of the European heartland. The Baltic Sea region is in urgent need of a commensurate full network of road infrastructure. The current TEN corridors need to be reviewed and adapted to the new reality of a more cohesive Union, for example the train and road corridors from Helsinki to Vienna/Slovenia.

5.3   There is no mention of the strategic importance of the large rivers in the Baltic macro-region; this deficiency should be addressed. In this context it is interesting to note that a Danube Region Strategy is now in preparation. Consultations on the Baltic Sea Strategy were widespread and extensive but they were organised on something of an ad-hoc basis. For the Danube Region Strategy, the EESC should seek to become involved in a more structured manner. The Commission has indicated that a window of opportunity exists for such an engagement from February to summer 2010. The EESC has already proposed in both REX/262 and ECO/251 the establishment of a Baltic Civil Society Forum and this should now be developed into a practical proposal. This proposal has the support of many MEPs and the Parliament is currently preparing an opinion on the Baltic Sea Region Strategy.

5.4   The complexity of the challenges implied in the Baltic Sea Region Strategy has already been acknowledged. It is understood that the unit in the Commission that is responsible for the implementation and monitoring of the Strategy may become under-resourced in the period ahead. The EESC and the Parliament both support a strengthening of the unit. There is a danger that the unit will be deeply absorbed in the administrative challenges of spending the EUR 20 million voted by the Parliament for partners outside the EU (budget line 4). The EESC emphasises that both the European Commission and the Member States responsible for given actions in the plan need to have at their disposal adequate administrative capacity to fulfil their obligations.

5.5   Concerns were expressed about the relative weight given to the issue of fishing and fisheries. It is acknowledged that much is being done, particularly by HELCOM and the early results are encouraging. It is essential that this progress is maintained and in particular efforts should be raised to stimulate responsible consumption.

5.6   Concerns were expressed about the level of emphasis in the Strategy on science, technology, research and innovation. The EESC is not fully convinced that dispersal of the so called knowledge triangle (education, research and innovation) between two different pillars of the Strategy and between three Member States responsible for coordinating them is the ideal solution. The EESC underlines that the Strategy should strengthen the interaction and the links between different elements of knowledge triangle.

5.7   In terms of Priority Action 6 – the removal of barriers to the internal market in the Baltic Sea Region – the EESC fully supports this part of the Strategy. Particular attention should be paid to SMEs which predominate in the economies of the Baltic Sea region. The EESC also supports the advance of the Decent Work agenda. Greater social dialogue around the Baltic Sea area should be encouraged to capture some of the positive spillover effects resulting from the outworking of collaboration in the Strategy, particularly in terms of enhanced energy cooperation and integration.

5.8   Of particular concern is the ongoing and structural decline in the region of the shipbuilding and related sectors, with its negative impact on economic and social cohesion. The Committee firmly believes that the Baltic Sea Strategy should be extended to address this specific issue.

Brussels, 20 January 2010.

The President of the European Economic and Social Committee

Mario SEPI

---

(1)  OJ C 277, 17.11.2009, p. 42.

1

(2)  OJ C 318, 23.12.2009, p. 6.

2

(3)  European Parliament (2006) ‘Resolution on a Baltic Sea Strategy for the Northern Dimension’, Strasbourg, 16 November 2006, A6-0367/2006.

3

(4)  The Baltic Sea Strategy and Action Plan can be found at:

4

http://ec.europa.eu/regional_policy/cooperation/baltic/documents_en.htm.

(5)  The Northern Dimension is an arrangement under which the EU, Russia, Norway and Iceland can implement policies in agreed areas of cooperation.

5

(6)  Charter signed on 24 May 2007 under the German Council Presidency during an informal meeting of EU Ministers responsible for Urban Development and Territorial Cohesion. This intergovernmental charter makes two main recommendations, namely to make greater use of an integrated urban development policy and to grant special attention to deprived neighbourhoods.

6

(7)  See for instance ‘Commitment of the Social Partners and other civil society organisations: What role can civil society and local actors play?’ a presentation by Uno Aldegren, member of the Committee of the Regions at ‘The Baltic Sea Region: The Best Place to Work and Do Business’, a conference organised by the EESC and the European Commission Representation in Finland, Helsinki 22-23 October 2009.

7

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ANNEX

Table 1

Pillars and priority areas of the EU Strategy for the Baltic Sea Region

| Pillar/priority areas | Coordinating countries | Number of actions |
| --- | --- | --- |
| Pillar 1: To make the Baltic Sea an environmentally sustainable place |
| 1) | To reduce nutrient inputs to the sea to acceptable levels |

Pillar/priority areas

Coordinating countries

Number of actions

Pillar 1: To make the Baltic Sea an environmentally sustainable place

1)

To reduce nutrient inputs to the sea to acceptable levels

Poland/Finland

5

| 2) | To preserve natural zones and biodiversity, including fisheries |
| --- | --- |

2)

To preserve natural zones and biodiversity, including fisheries

Germany

2

| 3) | To reduce the use and impact of hazardous substances |
| --- | --- |

3)

To reduce the use and impact of hazardous substances

Sweden

3

| 4) | To become a model region for clean shipping |
| --- | --- |

4)

To become a model region for clean shipping

Denmark

2

| 5) | To mitigate and adapt to climate change |
| --- | --- |

5)

To mitigate and adapt to climate change

Denmark

3

Pillar II: To make the Baltic Sea region prosperous place

| 6) | To remove hindrances to the internal market in the Baltic Sea |
| --- | --- |

6)

To remove hindrances to the internal market in the Baltic Sea

Estonia

6

| 7) | To exploit the full potential of the region in research and innovation |
| --- | --- |

7)

To exploit the full potential of the region in research and innovation

Sweden/Poland

2

| 8) | Implementing the Small Business Act: to promote entrepreneurship, strengthen SMEs and increase the efficient use of human resources |
| --- | --- |

8)

Implementing the Small Business Act: to promote entrepreneurship, strengthen SMEs and increase the efficient use of human resources

Denmark

9

| 9) | To reinforce sustainability of agriculture, forestry and fisheries |
| --- | --- |

9)

To reinforce sustainability of agriculture, forestry and fisheries

Finland

7

Pillar III: to make the Baltic Sea region an accessible and attractive place

| 10) | To improve the access to, and efficiency and security of the energy markets |
| --- | --- |

10)

To improve the access to, and efficiency and security of the energy markets

Latvia/Denmark

3

| 11) | To improve internal and external transport links |
| --- | --- |

11)

To improve internal and external transport links

Lithuania/Sweden

| 12) | To maintain and reinforce attractiveness of the Baltic Sea region in particular through education, tourism and health |
| --- | --- |

12)

To maintain and reinforce attractiveness of the Baltic Sea region in particular through education, tourism and health

Tourism: Germany

(Mecklenburg -Vorpommern)

Health: Northern Dimension

Partnership on Public Health

Education: Germany

10

Pillar IV: To make the Baltic region a safe and secure place

| 13) | To become a leading region in maritime safety and security |
| --- | --- |

13)

To become a leading region in maritime safety and security

Finland/Denmark

| 14) | To reinforce protection from major emergencies at sea and on land |
| --- | --- |

14)

To reinforce protection from major emergencies at sea and on land

Denmark

2

| 15) | To decrease the volume of, and harm done by, cross border crime |
| --- | --- |

15)

To decrease the volume of, and harm done by, cross border crime

Finland

3

Horizontal Actions

European Commission

10

Source: Adapted from R. Bengtsson ‘An EU Strategy for the Baltic Sea Region’

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/34 |
| --- | --- | --- | --- |

14.12.2010

EN

Official Journal of the European Union

C 339/34

---

Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council on Community macro-prudential oversight of the financial system and establishing a European Systemic Risk Board’

COM(2009) 499 final — 2009/0140 (COD)

Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council establishing a European Banking Authority’

COM(2009) 501 final — 2009/0142 (COD)

Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council establishing a European Insurance and Occupational Pensions Authority’

COM(2009) 502 final — 2009/0143 (COD)

Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council establishing a European Securities and Markets Authority’

COM(2009) 503 final — 2009/0144 (COD)

(2010/C 339/08)

Rapporteur: Mr NYBERG

On 6 October 2009 the Council of the European Union decided to consult the European Economic and Social Committee, under Article 95 of the Treaty establishing the European Community, on the

Regulation of the European Parliament and of the Council on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board

COM(2009) 499 final - 2009/0140 (COD)

Regulation of the European Parliament and of the Council establishing a European Banking Authority

COM(2009) 501 final - 2009/0142 (COD)

Regulation of the European Parliament and of the Council establishing a European Insurance and Occupational Pensions Authority

COM(2009) 502 final - 2009/0143 (COD)

Regulation of the European Parliament and of the Council establishing a European Securities and Markets Authority

COM(2009) 503 final - 2009/0144 (COD).

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 8 January 2010.

At its 459th plenary session, held on 20 and 21 January 2010 (meeting of 21 January 2010), the European Economic and Social Committee adopted the following opinion by 169 votes to 2 with 15 abstentions.

1.   Conclusions and recommendations

1.1   On 23 September, the European Commission presented proposals for a Regulation on a European Systemic Risk Board (ESRB) and three Regulations establishing a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority. All these are very much in line with the report prepared by the de Larosière group early in 2009.

1.2   In an opinion on the de Larosière report, the EESC discusses the reasons for the financial and economic crisis, regulation of the financial market and supervisory arrangements. Besides a general reference to that opinion we want to repeat one of its statements: ‘The EESC also thinks that supervision is key to preventing the occurrence of another financial crisis. But supervision requires rules. Therefore the proposals for amending and strengthening rules... are considered equally important.’ (1)

Stakeholder groups

The Committee argued for wider representation on the Boards of the three new Authorities. Instead the Commission proposes special stakeholder groups.

The ESRB should ‘seek, where appropriate, the advice of relevant private sector stakeholders.’ The examples given are financial sector representatives, consumer associations and certain groups established by the Commission. It ought to be mentioned that the financial sector representatives should come from both the employers and trade unions. Moreover, as the systemic risks concern not only the financial market but all of the economy employers and trade unions at European level also ought to be consulted.

1.3.1.1   Nothing is said on the form of these consultations and how often they should take place. This is needed as the article states that these consultations ‘shall’ take place. To use ‘where appropriate’ seems too vague.

The stakeholder groups for the three Authorities should, according to the Commission, be employers and employees in the respective part of the financial market as well as consumers and users of the services of the sector. The 30 representatives proposed should be evenly distributed between all the types of representatives.

1.3.2.1   These groups will meet at least twice a year, may submit opinions and advice and have secretarial support. Opinions and advice should be made public. There is a risk that their work will be concentrated only to the two meetings. They ought to have the option of following the work of the Authority in question permanently.

Macro-prudential supervision

The proposal for an ESRB lacks a definition of systemic risks. This concept needs to be discussed in public, not just behind closed doors in the new ESRB.

1.4.1   The EESC's opinion is that the ESRB must have a clear mandate to act when financial stability is at risk and that, in order to guarantee this in the regulation, the wording of some passages should be reconsidered.

| — | The different versions should be streamlined using the concept of ‘supervision’. |
| --- | --- |

—

The different versions should be streamlined using the concept of ‘supervision’.

| — | The warnings and recommendations from the ESRB should only be to the Council as in Article 16(3) and not the Council as in recital 9, which could reduce its independence. |
| --- | --- |

—

The warnings and recommendations from the ESRB should only be to the Council as in Article 16(3) and not the Council as in recital 9, which could reduce its independence.

| — | The use of the word ‘should’ for these recommendations means that they are more or less compulsory. Whether or not action is compulsory must be dependent on where the competence for the rules lies: with the Member States or with the EU. |
| --- | --- |

—

The use of the word ‘should’ for these recommendations means that they are more or less compulsory. Whether or not action is compulsory must be dependent on where the competence for the rules lies: with the Member States or with the EU.

| — | The ESRB (Article 3) is said to ‘contribute to a smooth functioning of the internal market’. The ESRB’s remit is the risks involved in the financial market but here it seems to have been given a wider role. |
| --- | --- |

—

The ESRB (Article 3) is said to ‘contribute to a smooth functioning of the internal market’. The ESRB’s remit is the risks involved in the financial market but here it seems to have been given a wider role.

The General Board of the ESRB will include the 29 members of the ECB General Council. This connection between the ESCB and the new ESRB is advocated by the EESC.

1.4.2.1   Article 11 on the Steering Committee has no rules on voting rights. The EESC recommends that there should be five members from the ECB General Council in the Steering Committee, which could make it easier to have a better geographical distribution, a distribution between small and big countries and between countries inside and outside the eurozone. In addition, given that all members in the Steering Committee seemingly should have voting rights there has to be a significant number of central bank representatives.

1.4.3   The Parliament is mentioned only as the ESRB has to give reports to the Parliament and the Council at least once a year. Under article 20 the Council shall examine the Regulation on the ESRB after three years. The Parliament should of course also be involved in this.

Micro-prudential supervision

The objectives for the Authorities (Article 1(4)) are almost identical in the three Regulations – the functioning of the internal market, the stability of the financial system and strengthened international supervisory coordination. The differences concern who they should protect – investors for the Securities and Markets Authority, policyholders and other beneficiaries for the Insurance and Occupational Pensions Authority and depositors and investors for the Banking Authority.

The main activities of the three Authorities will concern existing rules, streamlining the practices of the national authorities, mainly through guidelines and recommendations. The authorities will also be given a mandate to develop new technical standards.

1.5.1.1   Their proposals for new technical standards could, according to Article 7(2), not have the form of Directives, but only of Regulations and Decisions. If technical standards are defined as being non-political, Regulations are also excluded. Technical standards should be directed only at the national supervisory bodies and the financial institutions, not at the Member States, and they should therefore take the form of Decisions and not Regulations or Directives. Those are reserved for political rules proposed by the Commission.

The supervision carried out by the European Authorities is directed at the national supervisory authorities, not directly at the financial market participants. The exception to this is when a national authority does not follow the recommendations (articles 9 and 11). A decision directed at the financial market participants will then finally be taken by the European Authority.

1.5.2.1   There is also a description of emergency situations (article 10) where the European Authority may take such decisions without involving the Commission. The task of deciding whether there is an emergency situation should nevertheless rest with the Council. The EESC finds that the reasons for declaring emergency situations must arise from the markets in general. An individual financial institution in an emergency situation must be a task for the national supervisory body.

1.5.2.2   Article 23 concerns safeguards for a government if it considers that the new technical standards have fiscal effects. These safeguards seem adequate although standards hardly ever have fiscal effects. As the safeguards only concern articles 10 and 11 this article ought to be placed directly after article 11.

1.5.3   The EESC proposes that a national authority should give its consent before new financial instruments can be introduced, as is the case in Spain. As this is not in place in other Member States an initial step would be to scrutinise instruments used in countries other than Spain. The Commission should therefore also amend the Regulation on the European Securities and Markets Authority with a Regulation for such a task.

1.5.4   The field of action for the Banking Authority should, in the EESC's view, be as wide as possible. A level playing field for all financial institutions should be a general objective. The definition in this Regulation refers back to older Directives. The EESC would like to see a new discussion on the definitions in these Directives in order to include experiences from the financial crisis to make these definitions as wide as possible.

1.5.5   According to article 20(3) the Authorities may use confidential information received from the financial institutions only for the duties directly assigned to them by the Regulations. This statement ought to be complemented by a rule on how confidentiality must be protected.

It is proposed that the Management Board for these European Authorities should have four members from the national supervisory authorities. It instead seems natural to follow the proposal for the ESRB and have five members.

1.5.6.1   Only the heads of the national authorities will have voting rights on the Board of Supervisors. There is a risk with a Board of Supervisors supervising themselves. The importance of other aspects then increases. The independence of the Chairperson is crucial and he/she should have voting rights. Just as crucial is openness to and the influence of the stakeholder group. It is also necessary to operate transparently by making the decisions of the Authorities public.

1.5.7   If the activities of the Authorities start in 2011 it will take more than two years before they are fully active. It is necessary to speed up this expansion in order to quickly handle all the problems revealed during the crisis.

2.   Background

2.1   On 23 September, the European Commission presented a whole package of financial market legislation, consisting of a proposal for a Regulation on a European Systemic Risk Board (ESRB), together with a special Decision giving the ECB specific tasks concerning this ESRB and three proposals for Regulations establishing a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority. Subsequently, on 28 October, a Directive was presented concerning amendments to existing directives connected with the creation of the new authorities. This will be dealt with in a separate opinion.

2.2   All these proposals are very much in line with the report prepared by the de Larosière group early in 2009. This report was studied by the EESC in an own-initiative opinion adopted at its plenary session in September 2009. That opinion discusses the reasons for the financial and economic crises, necessary new or improved regulation of the financial market and new and improved supervisory arrangements. We, therefore, refer to that opinion for all other subjects involved, apart from the actual concrete proposals for legislation.

2.3   Notwithstanding this general reference we want to repeat one of its statements: ‘The EESC also thinks that supervision is key to preventing the occurrence of another financial crisis. But supervision requires rules. Therefore the proposals for amending and strengthening rules set out in the first part of the de Larosière report are considered equally important.’ After seeing the limitations in the proposals on the micro supervision of existing rules our emphasis on amending and strengthening these seems even more important.

2.4   Some legislation concerning the rules in the financial markets has also been proposed by the Commission. So far the EESC has discussed opinions on Credit Rating Agencies (2), Alternative Investment Fund Managers and Capital Requirements. Another subject for new legislation, not so far proposed by the Commission, but proposed by the EESC, is to have a national authority scrutinise all new instruments in the financial market before authorising them, a system that is already in use in Spain.

3.   General remarks

3.1   It is necessary to separate the macro and micro levels of the supervision of the financial market. At the same time it is just as necessary to guarantee close cooperation between all the bodies proposed. General problems discovered during micro level supervision are relevant to the financial market as a whole, and where risks are revealed in macro supervision the remedies can often be found at micro level. This interdependence is also referred to in several places in the regulations.

3.2   The main activities of the three Authorities will concern existing rules, and the practices of the national authorities should be streamlined, mainly through guidelines and recommendations, but these authorities will also be given a mandate to develop new technical standards for the formal proposals coming from the Commission.

In its opinion on the de Larosière report the Committee argued for wider representation on the Boards of the three new Authorities. This has not been taken up by the Commission either in the Regulations on these Authorities or in the regulation on the ESRB. Instead the Commission in both cases proposes special stakeholder groups.

The ESRB should ‘seek, where appropriate, the advice of relevant private sector stakeholders.’ In the introductory part of this proposal examples are given for these – financial sector representatives, consumer associations and certain groups established by the Commission. This description is not sufficiently informative: it ought to be mentioned that the financial sector representatives should come from both the employers and trade unions in this sector.

3.3.1.1   Moreover, as the systemic risks concern not only the financial market but all of the economy a wider representation is necessary. For this reason representatives of employers and trade unions at EU level also ought to be consulted.

3.3.1.2   Finally, nothing is said on the form of these consultations and how often they should take place. This is needed as the article states that these consultations ‘shall’ take place. To use ‘where appropriate’ also seems too vague. A more exact description of when these consultations are obligatory should be introduced.

For the composition of the stakeholder groups for the three Authorities the Commission seems to have about the same opinion as the EESC: the employers and the employees in the respective part of the financial market should be represented as well as consumers and users of the services of the sector.

3.3.2.1   Problems are most likely to arise when selecting the countries from which these representatives should come. We assume that the thought behind having 30 representatives does not mean that there will be representatives from the financial institutions from all countries. The 30 representatives should be evenly distributed between all these types of representatives as is indicated in the introductory parts of the Regulations.

3.3.2.2   The groups will meet at least twice a year. They may submit opinions and advice and will have secretarial support. Opinions and advice should be made public. All this seems appropriate but there is a risk that their work will be concentrated only in the two meetings. They ought to have the option of following the work of the respective Authority permanently. This is necessary as a guarantee for Authorities with supervisors supervising themselves to function effectively.

4.   Specific remarks

European Systemic Risk Board

4.1   Concerning macro-prudential supervision, there is a fundamental lack of discussion of what a systemic risk can be. The introduction of some new instruments could be regarded as systemic risks for the current crisis. The methods used by the Credit Rating Agencies to calculate risks and values could also be called systemic risks. Can rules for the managers of financial institutions which lead to too much risk-taking be considered systemic risks? These are some possible examples. The concept of systemic risk needs to be discussed in public, not just behind closed doors in the new ESRB.

The EESC opinion is that the ESRB must have a clear mandate to act when financial stability is at risk and that, in order to guarantee this in the regulation, the wording of some passages should be reconsidered.

4.2.1   According to the preamble to the proposal for a regulation, the task for the ESRB concerns financial ‘supervision’ (recital 1), and supervision has been the term used in the discussions on finding remedies for the financial crisis. Later on it is said that the Community needs a body for macro-prudential ‘oversight’ (recital 7). The usage of such a concept reduces the real power of this body: oversight is a first step, which should be followed by supervision involving real power to act. These are not synonyms and in some other languages only one word corresponding to ‘supervision’ is used. The different versions should be streamlined using the concept of supervision.

4.2.2   It is clearly stated that the ESRB must be an independent body. According to the regulation, however, its warnings and recommendations should go through the Council or the three Authorities, in order to give them more weight (recital 9), which somewhat brings into question its independence. In the EESC's view, the correct description is found in article 16(3), under which the warnings and recommendations should be transmitted to the Council.

4.2.3   The recommendations ‘should’ lead to action by the addressees if they cannot explain why they cannot act. The use of ‘should’ means that these recommendations are more or less compulsory, but whether or not action is compulsory must be dependent on where the competence for the rules lies: with the Member States or with the EU. Therefore, the wording in this paragraph needs to be more specific.

4.2.4   The regulation also might have gone a step too far in article 3. The ESRB is said to ‘contribute to a smooth functioning of the internal market’. The ESRB’s remit is the risks involved in the financial market but here it seems to have been given a wider role. Ordinary legislation for the financial market is the objective for the Commission. To reduce the risk for future competence disputes, this should be reworded to restrict the objective of the ESRB to the systemic risks.

The ESRB will be made up of a General Board, a Steering Committee and a Secretariat. The connection to the European System of Central Banks (ESCB) is very clear as the General Board of the ESRB will include the 29 members of the ECB General Council. This connection between the ESCB and the new ESRB was advocated by the EESC in the opinion on the de Larosière report. Among these 29 a chair and a vice-chair will be elected for a 5-year-period. In addition to those 29 members, a member of the European Commission and the three chairpersons of the new Authorities will also be members with voting rights. 27 representatives of the national supervisory authorities may be present but without voting rights, and the same goes for the president of the Economic and Financial Committee.

Article 11 on the Steering Committee has no rules on voting rights. According to the Commission proposal the Steering Committee consists of the chair and vice-chair of the General Board plus 5 other members of the ECB General Council, the three chairpersons of the new Authorities, the Commission representative and the president of the Economic and Financial Committee.

4.3.1.1   The first reports from the Council discussions on these proposals were about the number of members from the ECB General Council in this Steering Committee. Should it be three or five? The EESC recommends five, as does the ECB in its opinion, which could make it easier to have a better geographical distribution, a distribution between small and big countries and between countries inside and outside the eurozone. In addition, given that all members in the Steering Committee seemingly should have voting rights there has to be a significant number of central bank representatives. The composition of the Steering Committee should adequately reflect the composition of the General Board of the ESRB where 29 members are central bankers.

4.3.2   The Advisory Technical Committee should be included in paragraph 1 of Article 4, which enumerates all bodies of the ESRB.

4.4   There is a separate article on the question of whether the warnings and recommendations should be made public. The EESC is aware of all the considerations which have to be made before such a publication but cannot understand why this is the only decision for which the Board requires a two-thirds majority. If the members of the General Board are competent enough to make decisions on systemic risks and to formulate warnings and recommendations they ought to be competent enough also to decide whether or not decisions should be public.

4.5   The involvement of the European Parliament could be described as meagre. The decisions on all these proposals from the Commission have to be taken by both the Council and the European Parliament. Apart from this fact the Parliament is mentioned only as the ESRB has to give reports to the Parliament and the Council at least once a year. Under article 20 the Council shall examine the regulation on the ESRB after three years. The Parliament is not mentioned although it has a power in this legislation equivalent to that of the Council. The EESC considers that the regulation should give a bigger role to the European Parliament in these questions.

5.   Specific remarks

Micro-Prudential supervision

According to Point 6.6 of the Explanatory Memorandum accompanying the various proposals, the only differences in the regulations can be found in the objectives, scope of actions and definitions.

5.1.1   The objectives (Article 1(4)) have an almost identical description in the three Regulations – the functioning of the internal market, the stability of the financial system and strengthened international supervisory cooperation. The only apparent differences can be found in the description of who they should protect – investors for the Securities and Markets Authority, policyholders and other beneficiaries for the Insurance and Occupational Pensions Authority and depositors and investors for the Banking Authority.

The EESC finds the wording of this article clear with regard to the division between these supervisory bodies and the law-making competences of the EU institutions. The real powers of the Authorities are restricted, as far as we understand the Regulations, to supervision of existing rules. Regarding changes to regulatory rules their role is only to give opinions to the Commission, Council and European Parliament.

5.1.2.1   Concerning proposals from the Authorities for new technical standards these, according to Article 7(2), could not have the form of Directives, but only Regulations and Decisions. If technical standards are defined as being non-political in character it seems appropriate also to exclude the form of Regulations. Technical standards should be directed only at the national supervisory bodies and the financial institutions and not at the Member States, and they should therefore take the form of Decisions and not Regulations or Directives. Those are reserved for political rules proposed by the Commission. This article also says that the Commission adopts the draft technical standards: this cannot apply to Regulations or Directives as they have to be adopted by the Council and European Parliament.

The articles describing the details of the tasks of the Authorities all seem adequate. The supervision of the European Authorities is directed at the national supervisory authorities, not directly at the financial market participants. The exception to this is when a national authority does not follow the recommendations (articles 9 and 11). A decision directed at the financial market participants will then finally be taken by the European Authority.

5.1.3.1   The EESC welcomes the understanding that the power to determine the existence of an emergency situation should be conferred on the Council, following consultations with the Commission, the ESRB and where appropriate, the European Supervisory Authorities.

5.1.3.2   The proposal for a European Banking Authority lacks a clear definition of an emergency situation, as well as the criteria for declaring it. The text should be made more distinct regarding reasons for declaring emergency situations. The EESC finds that they must arise from the markets in general. An individual financial institution in an emergency situation must be a task for the national supervisory body.

5.1.3.3   Article 23 concerns safeguards about how a government can act if it considers that the new technical standards have fiscal effects. These safeguards seem adequate although standards hardly ever have fiscal effects. Furthermore, as the safeguards only concern articles 10 and 11 this article ought to be placed directly after article 11.

5.1.4   Financial institutions and market participants should, in the event of disagreement with the national supervisory authority, be able to appeal to the EBA.

Concerning the scope of actions the European Securities and Markets Authority will have a special task as the supervisory body for the credit rating agencies. This power will include withdrawal of the registration for such agencies, investigations and on-site inspections. These actions are not specified in this Regulation but will be in a coming amending Regulation. It seems appropriate to give this supervisory power to the Securities and Markets Authority and it will be one of its most important tasks.

5.1.5.1   One of the conclusions in the EESC opinion on the de Larosière report was that there should be a national authority, as in Spain, with the task of giving its consent before new financial instruments could be introduced. With these three Authorities in place this proposal could now be implemented. As this does not currently exist in other Member States a first step would be to scrutinise instruments used in countries other than Spain. The Commission should therefore also amend the Regulation for the European Securities and Markets Authority with a Regulation for such a task.

5.1.6   The main concern for the Banking Authority definitions is the definition of how large a part of the financial sector it should supervise. Referring to the experiences from the financial crisis this definition must be as wide as possible. The existence of financial institutions outside the supervision of this Authority may lead to such institutions having an advantage in the search for profits, as rules on and supervision of their behaviour will be outside of the scope of actions for the Authority. A level playing field for all financial institutions should be a general objective. The definition in this Regulation refers back to Directives on credit institutions, investment firms and financial conglomerates. The EESC would like to see a new discussion on the definitions in these Directives in order to include experiences from the financial crisis to make these definitions as wide as possible.

5.1.7   For the European Insurance and Occupational Pensions Authority there is also a reference to existing Directives. Here the EESC would point out that especially within the area of occupational retirement provisions there are different models used in the Member States. Therefore it is especially important in this case to clarify that the scope of action is only a question of supervision. The possibility of proposing new rules rests entirely with the Commission.

5.1.8   For the European Securities and Markets Authority it is stated that a financial market participant is a ‘person’. We assume that this means both a legal person and an individual, but this should be made clear in Article 2(1) of the Regulation.

5.1.9   In article 20(3) it is stated that the Authorities may use confidential information received from the financial institutions only for the duties directly assigned to them by the Regulations. This statement ought to be complemented by a rule on how confidentiality must be protected.

All three Authorities have the same organisation – a Board of Supervisors, a Management Board, a Chairperson, an Executive Director and a Board of Appeal. In the Authorities the Chairperson is not taken from the national supervisory authorities. It should, according to the Regulations, be an independent person working full time.

5.2.1   The proposal for the Management Board for these European Authorities is four members from the national supervisory authorities. With no reason given for the number of four it instead seems natural to follow the proposal for the ESRB and have five members.

5.2.2   Only the heads of the national authorities will have voting rights on the Board of Supervisors, not the Commission representative or the representative of the ESRB. This means giving all the power in a supervisory body to the national bodies being supervised. With such an arrangement there is a risk of non-action even with all the prescriptions in the Regulation on how the supervision shall take place, how national authorities shall be criticised, and even the situations when decisions will be taken over by the European Authority and with the final possibility of a decision by the Commission. Of course the national authorities must work in a collegial manner in the European Authority, but can it be too collegial?

5.2.3   This risk with a Board of Supervisors supervising themselves leads us to point out the importance of some other aspects for these Authorities. The independence of the Chairperson is crucial and he/she should have voting rights. Just as crucial is openness to and the influence of the stakeholder group. On top of this it is necessary to operate transparently by making the decisions of the Authorities public. Apart from advocating such a general rule the EESC is of course aware of the fact that there are decisions which cannot be immediately made public because of the risks of disorder in the financial market.

When these Authorities are planned to start their activities the proposal involves a doubling of the staff compared to the present three committees. When their activities have reached full capacity they are expected to have about four times as many employees as the present committees. As the activities have a quite different extent and character the EESC considers this to be an appropriate level of staff.

5.3.1   Our doubts relate to the length of time proposed until the Authorities are fully active: if the activities start in 2011 this will take more than two years after that. It would be possible to speed up this expansion and it is really necessary in order to quickly handle all the problems revealed during the crisis.

5.4   The EESC finds the Joint Committee of the European Supervisory Authorities, which will be established together with the three Authorities, a necessary complement. With this Committee for cooperation between the Authorities in place it does not, at least for the moment, seem necessary to create one common Authority for the three areas of supervision.

5.5   Some minor errors can be found in Article 33. In 33(2) ‘in his absence’ should be changed into ‘in his/her absence’. In the same article (33(5)) the word Chairperson is suddenly changed to Chairman, which should also be changed.

Brussels, 21 January 2010.

The President of the European Economic and Social Committee

Mario SEPI

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(1)  See point 1.4 of the EESC opinion on the Report of the de Larosière Group, OJ C 318 of 23 December 2009 p. 57.

1

Report of the de Larosière Group

(2)  See EESC opinion on Credit Rating Agencies, OJ C 277, 17.11.2009, p. 117

2

Credit Rating Agencies

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/41 |
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14.12.2010

EN

Official Journal of the European Union

C 339/41

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Council Directive amending Directive 2006/112/EC as regards an optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud’

COM(2009) 511 final — 2009/0139 (CNS)

(2010/C 339/09)

Rapporteur-General: Mr IOZIA

On 6 October 2009 the Council decided to consult the European Economic and Social Committee, under Article 93 of the Treaty establishing the European Community, on the

Proposal for a Council Directive amending Directive 2006/112/EC as regards an optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud

COM(2009) 511 final - 2009/0139 (CNS).

On 3 November 2009, the Committee Bureau instructed the Section for Section for Economic and Monetary Union and Economic and Social Cohesion to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Iozia as rapporteur-general at its 459th plenary session, held on 20 and 21 January 2010 (meeting of 21 January), and adopted the following opinion by 91 votes to two with four abstentions.

1.   Conclusions

1.1   The EESC is in favour of the proposal for a directive introducing a reverse charge mechanism for certain goods and services. Nevertheless, it deeply regrets the need once again to seek ‘conventional’ solutions to the problem of tax fraud and moving on from the ‘transitional’ system that will continue unimpeded to facilitate intra-Community fraud.

1.2   The EESC understands and supports the Commission's efforts, despite the political problems that it must face. However, it continues to insist that steps should be taken towards a new VAT system that limits opportunities for fraud and reduces the administrative burden for taxable persons.

1.3   The EESC agrees with the proposals set out in the European Parliament resolution of 2 September 2008 on a coordinated strategy to improve the fight against fiscal fraud, in particular taxation in the country of origin at a single rate of 15 % for intra-Community transactions. This option would be in line with the provisions of Article 402 of Directive 2006/112/EC.

The proposal for a directive introduces further divergences within the VAT system. The EESC is concerned about choices that postpone VAT harmonisation.

1.4.1   The choice of legal instrument seems appropriate although it would be advisable to adopt regulations.

1.5   Member States will have to strengthen fiscal administration. Reimbursement requests will increase since it will no longer be possible to offset input VAT against output VAT. A rigorous control system will be essential in order to protect Member States from the negative impact that the reverse charge mechanism could have.

1.6   The EESC considers as essential the decision to include the trading of emission certificates in the directive.

1.7   The EESC does not agree to the limit of only two of the four products set out in the directive. Each Member State should decide whether its administration is in a position to manage the introduction of the reverse charge mechanism adequately for all product categories. This limit seems to contradict Article 395 of Directive 2006/112/EC.

1.8   The EESC will continue to support the Commission's initiatives to strengthen the harmonisation of the VAT tax system, preferably by adopting those ‘more far-reaching’ structural reforms that would drastically reduce opportunities for tax fraud.

2.   Introduction

2.1   The fight against tax fraud, especially intra-Community fraud, has not made much progress in recent years. Overall fraud-related fiscal losses amount to 200 to 250 billion euros, equivalent to 2 % of the EU's GDP.

2.2   VAT fraud amounts to about 40 billion euros, i.e. 10 % of tax revenues.

2.3   The gradual growth in trade has led to a rise in so-called ‘carousel’ fraud. The relevant legislation provides for the free movement of goods within the EU but for VAT on commercial transactions with EU countries to be paid in the country of destination.

2.4   Introducing a fictitious third trader into trade within the EU creates an unlawful triangulation that simulates two successive transfers of the same goods. The buyer is entitled to reimbursement for VAT that has never been paid by the intermediary, who has purchased the goods exempt of VAT from a supplier in another Member State. In this way, the intermediary leaves no trace.

2.5   Under the reverse charge mechanism, no VAT is charged by domestic suppliers to taxable customers who, in turn, become liable for the payment of VAT. In theory, this procedure should eliminate opportunities for 'carousel’ fraud.

2.6   The inconsistency of a system based on applying the principle of destination, which in order to function properly would require a consolidated and efficient information-exchange system between Member States, opens the door to tax fraud that is difficult to combat. The Community has finally opted for the principle of origin, which provides for a form of rebalancing payments between Member States by redistributing VAT. Article 402 of Directive 2006/112/EC of 28 November 2006 provides for taxation on intra-Community trade to take place in the Member State of origin.

2.7   Redistribution is necessary to neutralise the effect on tax revenues of exports and tax deductions on imports, already taxed in the country of origin.

2.8   Adopting a definitive system that would drastically reduce intra-Community tax fraud requires an integrated system of administrative cooperation which, despite the Commission's efforts, has so far failed to materialise (1). Similarly, there are difficulties in the essential task of setting up the clearing house, called for by the Commission since 1987, because the verification and gathering of data still varies considerably between Member States.

2.9   The Commission's proposal for a Council Directive aimed at providing a temporary option allowing for national rules to apply the reverse charge mechanism to supplies of certain goods and services (2) comes in the midst of this highly unpromising scenario.

3.   The Commission proposal

3.1   The initiative under consideration is based on the proposals of the Anti Tax Fraud Strategy (ATFS) expert group. The Commission had presented a Communication (3) setting out innovative proposals to fight fraud, which included a generalised reverse charge mechanism. Ecofin did not approve these proposals.

In order to counter the growing phenomenon of Missing Trader Intra-Community (MTIC) fraud, better known as ‘carousel’ fraud because of the repeated transfer of the same goods between operators in different Member States, some Member States asked the Commission to apply the derogation set out in Article 395 of the VAT Directive, which allows for the temporary application of the reverse charge mechanism to certain goods and services.

3.2.1   The Commission decided that it would be more appropriate to adopt an instrument amending the VAT Directive by inserting an Article 199a, and extending the derogation to the end of 2014.

The list of goods for which a reverse charge mechanism may be introduced includes extremely commonplace electronic devices such as mobile phones and integrated circuit devices. This is already the case in the United Kingdom, which has been granted a Council derogation.

3.3.1   Perfume and precious metals that are not antiques or collectors’ items complete the four categories of goods mentioned in the Directive. The services mentioned include emission certificates.

4.   General comments

4.1   Although, on the one hand, the Communication from the Commission to the Council and the European Parliament (4) highlighted the positive contribution that the reverse charge mechanism could theoretically make to fighting fraud, it also underlined all the possible risks of new types of fraud and the need to tighten controls, but most of all, administrative cooperation.

4.2   The Commission stressed its concern that ‘introducing a generalised reverse charge mechanism on an optional basis would significantly affect the coherence and harmonisation of the EU VAT system and the scope for its future development’.

4.3   The EESC shares the Commission's concerns and believes that any measures liable to compromise progress towards future VAT harmonisation should be avoided.

4.4   As early as 2008, the European Parliament, when urging the Council to take more incisive action to fight tax fraud (5), drew attention to the risk that introducing a generalised reverse charge mechanism could create new opportunities for fraud, especially at the retail level and the misuse of VAT identification numbers. In this resolution, the European Parliament suggested a better solution, i.e. moving on from the transitional system and taxing intra-Community supplies at the rate of 15 %.

4.5   The EESC, in all its more or less recent opinions, has stressed the need to move on from the transitional system (6). It agrees with the European Parliament’s proposal to introduce uniform taxation on the intra-Community supply of goods. Moreover, the transitional system is fragmented into a high number of special systems (for agriculture, small enterprises, travel agencies, publishing firms, and others) comprising exemptions, rebates or derogations.

4.6   As usual, Ecofin was unable to reach an agreement. The EESC once again regrets that decision deadlock on tax issues has blocked yet another attempt to launch a harmonisation process.

4.7   The EESC backs the Commission proposal despite underlining certain inconsistencies regarding its declared objectives: an optional system that imposes additional administrative burdens on operators in the sectors concerned, who are in practice forced to use parallel duplicate accounting with considerable responsibilities for taxable persons, who have to work out the right tax procedure for themselves.

4.8   The European Court of Justice has already ruled on the reverse charge mechanism (7). The judgment examines the case of a tax authority's request for payment made as a result of an error in interpreting the reverse charge mechanism. In order to avoid pointless and costly litigation, in the light of experience gained, it will be necessary to examine national laws, which despite applying the general principles, show inconsistencies, e.g. between time-limits for reimbursement requests and for tax payments.

4.9   The authorities of Member States that adopt the system will have to process more reimbursement requests for excess VAT credit from taxable persons, who will no longer be able to recover input VAT.

4.10   The tax payment burden will shift towards increasingly smaller-scale economic actors, who might be less reliable than current VAT taxable persons, i.e. medium-sized and large businesses that contribute the bulk of tax revenue. The system increases the risk of revenue loss by eliminating payment fragmentation.

4.11   An overall analysis reveals that a rigorous control system would be indispensable to protect Member States from the potential negative impacts of a reverse charge mechanism. Stepping up control measures will have to be carried out in parallel with increased administrative cooperation and the use of standardised telematics systems for dialogue between authorities.

5.   Specific comments

5.1   The EESC disagrees with the Commission's decision not to carry out an impact assessment because it considered its preceding consultation – ‘Possible introduction of an optional reverse charge mechanism for VAT – Impact on businesses’ of 13 August 2007 – to be exhaustive. However, this consultation, which was not published on the Commission's website, does not take account of the impact that the proposed directive could have on operators and authorities.

5.2   The argument that since the mechanism is not mandatory, the Member States concerned should be responsible for carrying out impact assessments is entirely open to question. The EESC has repeatedly recommended that the utmost attention be devoted to a rigorous and in-depth analysis of the consequences of European legislation.

5.3   The legal basis for the proposal seems appropriate and proportionate. However, the EESC believes that the decision to opt for a directive presents the obvious risk of widening differences between tax systems. It would have been better to adopt a regulation.

5.4   The EESC strongly backs the inclusion of the Emission Trading System (ETS), which constitutes (2008) 73 % of the international market value of certificates. Since the trading of certificates between taxable persons is regarded as a service, it should be taxed in the country where the purchasing company is based. The EESC only regrets that a reverse charge mechanism is not mandatory for these transactions.

5.5   The EESC believes inadequate justification has been given for the restriction to only two of the four categories of products indicated. It would have been more appropriate to allow Member States to decide this issue. Article 395 of Directive 2006/112/EC has already granted this possibility to one Member State, with the Council’s authorisation. Article 199a, as currently drafted, may be inconsistent with the abovementioned article.

Brussels, 20 January 2010

The President of the European Economic and Social Committee

Mario SEPI

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(1)  COM(2009) 427 final - 2009/0118 (CNS). ECO 265 (work in progress), rapporteur: Mr Burani.

1

(2)  COM(2009) 511 final.

2

(3)  COM(2008) 109 final, 22.2.2008 and SEC(2008) 249, 22.2.2008.

3

(4)  Ibidem.

4

(5)  European Parliament resolution of 2 September 2008 on a coordinated strategy to improve the fight against fiscal fraud (2008/2033(INI)) OJ C 295 E, 4.12.2009, p. 13.

5

(6)  EESC Opinion on VAT/derogations - OJ C 32, 5.2.2004, p. 120.

6

VAT/derogations

EESC Opinion on the fight against fiscal fraud – OJ C 161, 13.7.2007, p. 8.

the fight against fiscal fraud

EESC Opinion on VAT rates other than standard VAT rates – OJ C 211, 19.8.2008, p. 67.

VAT rates other than standard VAT rates

EESC Opinion on Tax evasion linked to import – OJ C 277, 17.11.2009, p. 112.

Tax evasion linked to import

EESC Opinion on combating tax evasion – OJ C 100, 30.4.2009, p. 22.

combating tax evasion

EESC Opinion CESE on the rationalisation of exemptions and anti-fraud measures concerning the Sixth VAT directive – OJ C 65, 17.3.2006, p. 103.

rationalisation of exemptions and anti-fraud measures concerning the Sixth VAT directive

(7)  Joined Cases C-95/07and C-96/07, 8 May 2008.

7

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/45 |
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14.12.2010

EN

Official Journal of the European Union

C 339/45

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Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on agricultural product quality policy’

COM(2009) 234 final

(2010/C 339/10)

Rapporteur: Mr KAPUVÁRI

On 28 May 2009 the European Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on agricultural product quality policy

COM(2009) 234 final.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 9 December 2009.

At its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January), the European Economic and Social Committee adopted the following opinion by 145 votes in favour, with 5 abstentions.

1.   Conclusions and recommendations

1.1   The large and growing number of certification schemes is not helping the European Union's quality policy to achieve its objectives. In view of this, the aim should be not only to harmonise and simplify existing schemes, but also to reduce their number. The EESC would suggest identifying a scheme which would have preference at Community level. The Commission should determine the scheme which is the most appropriate for this purpose.

1.2   The European Union's quality policy is a key component covering other components forming an extremely complex system. Given that quality policy ties in with all other components, instruments and objectives of the Common Agricultural Policy, these aspects must also be taken into account. However, the three main issues to be addressed of quality policy development (information, coherence and simplification) only reflect this approach in a narrow sense. The EESC recommends that the Commission endeavours to make use of the potential offered by quality policy in line with its ideas on long-term strategy and policy for the EU's agri-food sector. Indeed, quality policy is a tool which could be used even more effectively to create new sources of income and new way for farmers to become more competitive. At the same time, this is an area where there is considerable scope for developing internal cooperation within the agri-food chain. There is great need for such cooperation, given that, in view of the unequal distribution of revenue in the food production chain, strategic partners are increasingly coming to view one another as adversaries. This particularly applies to countries and sectors where processing is not in the hands of producers.

1.3   On 18 September 2008, the EESC adopted the Opinion on the Proposal for Regulation of the European Parliament and of the Council on the provision of food information to consumers (1). In this opinion among others – the EESC stressed that it would like to see mandatory indication of the origin of food, of the primary processing products and, on the basis of a case-by-assessment of the secondary processing products, the origin of the main ingredients used to make them.

1.4   The more EU consumers consciously opt for EU products in the long term, the more predictable the future of the European agricultural and agri-food sectors will become. In view of the market opening process linked to WTO negotiations, this aspect is one of the most important factors for the EU agricultural sector, or even the most important one. The policy on the quality of products from the agricultural and agri-food sectors should be adapted with all this in mind.

1.5   In this context, it is very important to clarify what good, ‘European quality’ means for consumers. To this end, it would be useful to carry out a survey based on a professionally prepared questionnaire, which could be used to establish the basic general principles.

1.6   The EESC believes that ‘European quality’ is to a major extent a result of the European agricultural model. The European agricultural model reflects a policy which touches on fundamental questions that are important to society as a whole. The EESC supports the policy that this European agricultural model should be preserved and maintained (2). The EESC calls for adequate CAP reform in order to have a level playing field for our agriculture.

2.   General comments

2.1   The EU's policy on the quality of agricultural products must not only contribute to achieving the objectives of the CAP, but also play a key role in keeping the sustainable development of European agriculture and the agri-food industry on track, by putting in place the conditions for foodstuffs of ‘European quality’. For this to happen, it is not enough simply to raise awareness of such ‘European quality’ in the internal market but to promote it on external markets as well, if the European agriculture and food-processing sectors are to be preserved and developed.

2.2   Besides, this involves a lot more than providing consumers with accurate information on the characteristics of products linked to production processes. The more EU consumers consciously opt for EU products in the long term, the more predictable the future of the European agricultural and agri-food sectors will become. In view of the market opening process linked to WTO negotiations, this aspect is one of the most important factors for the EU agricultural sector, or even the most important. The policy on the quality of products from the agricultural and agri-food sector should be adapted with all this in mind. The protection of values resulting from the European agricultural model should be strengthened outside the EU.

2.3   In this context, it is very important to clarify what good, ‘European quality’ means for consumers. To this end, it would be useful to carry out a survey based on a professionally prepared questionnaire, which can be used to establish the general principles.

2.4   In this context, as we have already pointed out, it is very important to clarify what good, ‘European quality’ means for consumers. Characteristics which cannot be expressed in figures can also be put on an equal footing with other foodstuff properties and form part of quality policy. The EESC considers the ‘European quality’ in a broader sense. It means environmental friendly production, meeting the rules of animal welfare, sustainable production methods and maintaining the rural areas as well.

2.5   Preference for internally produced high-quality foodstuffs is a fundamental principle of the EU, but in recent times this principle has been a bit overlooked. In the case of products from the agricultural and agri-food sector, positive motivation in favour of internal products is particularly important, as these are strategic products which inspire consumers’ trust and are at the heart of their well-being, provided that we maintain and improve production conditions. Given the unequal sharing of revenue from the food production chain, together with declining profitability and the resulting threat to food quality and nutritional value, this issue is especially topical. The subject is also on the agenda of numerous EU bodies and is closely linked to quality policy - to be more precise, a complex approach to such policy (3).

3.   Specific comments

3.1   Current agricultural product quality measures

3.1.1   As the Communication explains, one of the essential objectives of the policy on agricultural product quality is to inform consumers of product characteristics. In our opinion, European consumers feel that foodstuffs produced in EU Member States meet basic requirements, but are not really aware of the other valuable characteristics of these foodstuffs. As the Communication points out, this situation has developed because quality policy was developed gradually, sector by sector, over time and to a varying extent. Some measures have not been communicated effectively – or rather, transparently – enough to the public.

3.1.2   The EESC approves and supports efforts to create a single system from various instruments and to develop a comprehensive policy on the subject. Not only is greater effectiveness needed, but EU consumers also need to accept the prices that go with products manufactured in this way, to accept that they are fair and to prefer these products.

3.2   Policy development

3.2.1   The EESC was pleased to note that the Commission's quality policy consultations were very wide-ranging and enabled all stakeholders to participate in the setting of strategic guidelines on further development.

3.2.2   The Committee agrees with the three main strategic priorities of information, coherence and simplification. The policy must be developed in such a way as to contribute to simplification and transparency; at the same time, it is at least as important to ensure that all stakeholders in the food production chain and, above all, consumers, have the requisite information.

3.2.3   In framing policy on this subject, it is important to endeavour to reduce the costs associated with quality policy and to maintain the resulting costs for producers and processors at a reasonable level.

3.2.4   On 18 September 2008, the EESC adopted the Opinion on the Proposal for Regulation of the European Parliament and of the Council on the provision of food information to consumers (1). In this opinion – among others – the EESC stressed that it would like to see mandatory indication of the origin of food, of the primary processing products and, on the basis of a case-by-assessment of the secondary processing products, the origin of the main ingredients used to make them.

On the other hand, the EESC considers that origin labelling should not cause extra costs in the food chain, has to provide a competitive advantage to the producers and has to fulfil the requirements of enforceability. It can be discussed whether the present compulsory origin labelling, like on fresh beef meat, has an additional value to the consumers.

3.3   EU agricultural quality measures

3.3.1.   EU farming requirements

3.3.1.1   From the perspective of agricultural product quality policy, the system of requirements applicable to production is an important tool. One characteristic of the system is the complexity of the requirements. In view of this and the lack of general awareness of such requirements, consumers cannot be expected to have detailed knowledge of them. Besides, foodstuffs manufactured in line with production requirements are mostly raw materials, many of which do not reach consumers directly.

Thirdly, all farmers must comply with EU production requirements. This makes the difference to most of the imported products. Everything which is necessary from an environmental and social perspective is checked (as a necessary condition for direct subsidies, so called cross compliance); however, this means information which is less relevant for consumers. The system of production requirements is important and we need to support compliance with it, in view of ensuring quality food products. However, it is of limited relevance as a means of informing consumers.

3.3.1.2   The EESC agrees that products produced on EU territory under normal circumstances comply with basic requirements; in view of this, there is no need to make special mention of such compliance. The relevant inspection systems have been developed to this end, and work well. It would be good to remind EU consumers that this is the normal situation.

3.3.2   Marketing standards

3.3.2.1   Marketing standards tend to be technical issues which the EESC has little to comment on, insofar as it has not already commented on them in the opinion referred to in detail in the following section. All concerned had an opportunity to express their views on this during the wide-ranging consultation.

However, the Committee would point out that the ‘EU requirements’ label mentioned in the preceding paragraph is not an appropriate means of communicating with consumers, given that it would be displayed on almost every product, and would therefore no longer allow consumers to make an informed choice. On the other hand, place-of-farming labelling, indication of origin provides specific information on a product and can motivate buyers. For processed products, it is information on the place of farming of the main agricultural product which is relevant to consumers, as it represents the added value of the EU production. These products reserved their market positions even under the economic crisis situation both as far as volume and prices.

3.3.2.2   The EESC supports implementation of the regulatory plans set out in this chapter of the Communication. Any information or standard must reflect reality and inspire consumer trust in products.

3.3.3   Geographical indications

3.3.3.1   In 2008 the EESC discussed this issue in its own initiative opinion ‘Geographical indications and designations’ (4). The Committee still fully stands by what was said in that document, and believes that it should be considered as an appendix to this opinion.

3.3.3.2   The introduction of a system of geographical indications has proved to be a successful initiative which is in the interests both of consumers and producers/processors. For this reason the Committee is of the opinion that the three systems of registration of geographical indications (for wines, for spirits and for agricultural products and foodstuffs) should be maintained as they stand at present, as well as the two instruments in place (the PDO protected designation of origin and PGI protected geographical indication).

3.3.3.3   The Committee is particularly in favour of authorising companies which have the right to manufacture products with a geographical indication to carry out checks too. In this way, by going beyond declared objectives, we may achieve a higher level of cooperation, thus contributing to both production and marketing efficiency. This could lead to excluding from production some companies not meeting these regulations. The EESC believes that the EU legislation should be modified so that Member States can allow the organisations that they designate or recognise with regard to the management, protection and/or promotion of the GI to adapt the production potential to the requirements of the market on the basis of fair and non-discriminatory principles. Thanks to this a better distribution of the value added can also be achieved on the food supply chain.

3.3.3.4   The protection of our GIs at the international level remains very problematic. It is therefore very important for European agriculture to benefit from the support of the European Commission which is a key player in international trade negotiations.

3.3.4   Traditional specialities

3.3.4.1   The Committee feels that the ideas on developing a system of traditional specialities have not been sufficiently worked out. Such a system should be maintained as it represents a tool to protect the European agri-food patrimony.

3.3.4.2   Anyway, the Committee feels that it is important and necessary to define the category of ‘traditional specialities’ more precisely. In the case of foodstuffs, traditional specialities are characterised by the use of traditional raw materials together with traditional technologies and ingredients in the production process. The difference in quality in comparison to ordinary products has to do with the specific production method (local know-how). In the case of products which are local in character, these factors cannot easily be separated from the local environment; in view of this it would be more accurate to refer to such products as so called ‘traditional and local specialities’.

3.3.4.3   This terminology expresses the transfer (tradition) of production know-how based on the knowledge and practices of local communities (local character) over a longer period (from one generation to the next). The quality of ‘traditional and local specialities’ therefore has both temporal (historic) and spatial (link to a geographical location) dimensions. Moreover, tradition also expresses culture which is linked to the life of local communities; culture is therefore the third dimension of the quality of ‘traditional and local specialities’ The above-mentioned EESC opinion also discusses this issue in detail, and emphasises that quality policy and rural development, the second pillar of the CAP, are closely interlinked.

3.3.5   Organic farming

3.3.5.1   Creating a single logo for organic products at European level would spare organic farmers procedures for participating in various systems, the costs of which impact on the prices of these specific products. It would also help consumers to get to grips with such products more easily.

3.3.5.2   The EESC supports the efforts which have been made to achieve this, as mentioned in the Commission's communication.

4.   Development of EU framework for quality policy

4.1   Coherence of new EU schemes

4.1.1   Production methods which offer greater added value and scope for enhancing the level of ‘European quality’ warrant the development by the EU of an appropriate labelling scheme. We are therefore in favour of all such initiatives.

4.2   Guidelines for private and national food quality certification schemes

4.2.1   The only action taken on such schemes used in the EU should be in the form of guidelines.

4.2.2   Introduction of private food quality certification schemes must in no way cause an increase in production costs and/or public taxation. However, the EESC would prefer certification by public bodies with European rules and parameters, or, in any case, involving public-private cooperation.

Brussels, 20 January 2010

The President of the European Economic and Social Committee

Mario SEPI

---

(1)  OJ C 77, 31.3.2009, p. 81.

1

(2)  OJ C 368, 20.12.1999, p. 76-86.

2

(3)  We refer to the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A better functioning food supply chain in Europe, 28.10.2009 COM(2009)591.

3

A better functioning food supply chain in Europe

(4)  OJ C 204, 9.8.2008, p. 57.

4

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/49 |
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14.12.2010

EN

Official Journal of the European Union

C 339/49

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard security of gas supply and repealing Directive 2004/67/EC’

COM (2009) 363 final — 2009/0108 (COD)

(2010/C 339/11)

Rapporteur: Mr SANTILLÁN CABEZA

On 4 September 2009, the European Council decided to consult the European Economic and Social Committee, under Article 95 of the Treaty establishing the European Community, on the

Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard security of gas supply and repealing Directive 2004/67/EC

COM(2009) 363 final.

On 29 September 2009, the Bureau of the European Economic and Social Committee instructed the Section for Transport, Energy, Infrastructure and the Information Society to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Santillán Cabeza as rapporteur-general at its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January), and adopted the following opinion by 173 votes with four abstentions.

1.   Conclusions and recommendations

1.1   The replacement of the current legislation to safeguard supply of natural gas is one element in a package of urgent measures being adopted in view of the severe consequences of disruptions in supply.

1.2   The EESC endorses the proposal for a regulation safeguarding the supply of natural gas in the EU.

1.3   The choice of legal instrument to replace Directive 2004/67EC concerning measures to safeguard security of natural gas supply (1) is appropriate, as it enables faster and more uniform application. The urgency and seriousness of the matter are such that decision-makers must act as quickly as possible to implement measures to prevent disruptions of supply.

1.4   The EESC particularly welcomes the specification of actions which the responsible parties must undertake (infrastructure, preventive measures and emergency plans for crisis situations), reducing the margin of discretion that exists under the 2004 Directive.

1.5   Since responsibilities are not allocated explicitly enough in the Commission's proposal, the Committee suggests that a clear distinction should be made between those falling to the public authorities (Commission and national Competent Authorities) and to private organisations and companies.

1.6   The EESC wishes to draw attention to consumers’ rights, which are insufficiently addressed by the draft regulation, in areas such as: the repercussions of the cost of the measures on tariffs, clarification of the ‘domestic customer’ and ‘protected customer’ concepts, the right of information in the case of an emergency, etc.

1.7   As argued in point 5.3, penalties need to be established for Member States that do not comply with their security of supply obligations.

1.8   The EESC calls for special protection for household customers and small-scale consumers of gas in the event of an emergency.

1.9   The EESC believes that all service suppliers should bear the same level of responsibility for supply in accordance with their capacity, without exception.

1.10   Plans for alternative pipelines (such as Nord Stream and Nabucco) will provide durable solutions in the medium to long term but, until the measures set out in the draft Regulation are fully in force, precautionary steps must be adopted to avoid a repeat of the January 2009 crisis.

1.11   The EESC draws attention to the importance of implementing some of the measures contained in the Third Energy Package as soon as possible, including the establishment of National Action Plans to tackle energy poverty, ensuring the independence of regulatory bodies, and protecting vulnerable users.

1.12   The EESC feels that there should be a debate on energy market liberalisation, which has up to now been a central policy of the EU, because it has failed to achieve the objective of diversifying sources and ensuring supply. Moreover, liberalisation has triggered major losses of qualified jobs.

1.13   It needs to be pointed out that the effectiveness of the draft Regulation, like the other measures approved, depends essentially on solidarity between the EU Member States and their willingness to cooperate.

1.14   It is also important that the Commission's powers to coordinate measures in emergencies be strengthened, avoiding unilateral decisions that would weaken the EU's position vis-à-vis third countries.

2.   Reason for the proposal for a regulation

2.1   One quarter of all energy consumed in the EU is gas, 58 % of which is imported. Of this, 42 % comes from Russia, and around 80 % of EU imports of gas from Russia pass via Ukraine (300-350 million cubic metres per day). Among the eight new eastern European Member States, dependence on Russian imports averages 77 % (Commission Staff Working Document SEC(2009) 977 final). Given its heavy dependence on external sources, the EU has for some years been concerned about security of gas supply, as reflected in the 2004 Directive (1). In 2006, a dispute between Gazprom (Russia) and Naftogaz (Ukraine) led to supply being briefly disrupted.

2.2   On 13 November 2008, the Commission published a Communication (COM(2008) 769) on the implementation of the 2004 Directive, pointing to the need for amendments.

2.3   On 1 January 2009 – in the middle of winter – Gazprom again cut off the supply of gas through Ukraine, creating a very serious situation in 18 European countries. Although it was in principle a commercial dispute over gas prices, its impact and the fact that it affected so many EU Member States meant that the European Commission had to intervene directly. The dispute was resolved by an agreement signed by the companies (on 19 January 2009), but its prolonged nature, the serious damage caused and Europe's heavy dependence on Russian gas set the alarm bells ringing.

2.4   Coming in the wake of the ‘Gas Summit’ (Natural Gas for Europe: Security and Cooperation, Sofia, April 2009), which brought together representatives of countries from the Caspian Sea, Central Asia, the Black Sea and the Balkans, as well as Russia and the EU, the proposal for a regulation examined in the present opinion seeks to offer solutions to the problems identified, such as the lack of coordination between Member States, or the inadequate definition of the obligations of the various responsible parties. The Commission has therefore rightly opted to fully replace the 2004 Directive rather than to introduce partial amendments.

3.   Content of the proposal for a Regulation

3.1   Responsibility for security of supply

3.1.1   Within their respective areas of responsibility, the natural gas undertakings, the Competent Authorities of the Member States, industrial gas customers, and the Commission are responsible (Article 3(1)). There must be a high degree of cooperation among them all.

3.1.2   Within twelve months of the regulation entering into force, the Competent Authority of each Member State is – after consulting with the stakeholders and exchanging information with the other national authorities and the Commission – to establish a Preventive Action Plan and an Emergency Plan. After consultation of the European Network of Transmission System Operators for Gas (ENTSO-G) and the Agency for the Cooperation of Energy Regulators (ACER), the Commission may also recommend the establishment of a joint plan at regional level.

3.1.3   The measures to ensure the security of supply are to be clearly defined, transparent, proportionate, non-discriminatory, verifiable, and should not unduly distort competition or the effective functioning of the internal market (Article 3(5)).

3.2   Preventive Action Plan

3.2.1   The Preventive Action Plan must include the necessary infrastructure measures, risk assessment arrangements, measures to address the risks identified and information on the relevant Public Service Obligations. It is to be updated every two years (Article 5).

3.2.2   Supply infrastructure. It must be ensured that in the event of disruption of the largest gas supply structure, the remaining infrastructure has the capacity to deliver the necessary volume of gas to satisfy total gas demand of the calculated area during a period of sixty days of exceptionally high gas demand during the coldest period statistically occurring in recent years (Article 6(1)). The N-1 indicator describes the ability of the gas infrastructure's capacity to supply the gas for maximal demand in the calculated area in case of disruption of the largest infrastructure (Annex I of the proposal).

3.2.3   Measures to ensure gas supply. The Competent Authority must ensure that State-protected clients (household customers, schools, hospitals, etc.) are supplied, avoiding both discrimination and an undue burden on market entrants and small undertakings (Article 7).

3.2.4   Risk assessment. This will be compulsory for the authorities, in keeping with certain criteria (Article 8).

3.3   Emergency Plan and Crisis Levels

3.3.1   The content of the plan is detailed in the proposal (among other aspects, it includes a definition of the role of each of the relevant parties, the procedures to be followed in the event of a crisis, inter-State cooperation mechanisms, etc.). It is to be based on three crisis levels, depending on the seriousness of the threat: Early Warning, Alert and Emergency (Article 9(1) and (2).

3.3.2   The Commission is equipped with broad powers, as it can verify ‘whether the declaration of an Emergency is justified and whether it does not impose an undue burden on the natural gas undertakings and on the functioning of the internal market’. Moreover, it can ask the Competent Authority to modify or even lift the measure in the event that it imposes an undue burden or is unjustified (Article 9(6)).

3.3.3   The Commission may declare a Community emergency at the request of one Competent Authority (among other circumstances), specifying the geographical scope of the measure. Its primary task is to coordinate the actions of the Competent Authorities, in which it is to be assisted by the Gas Coordination Group (Article 10(1)).

3.4   Gas Coordination Group (GCG)

3.4.1   Set up by the 2004 Directive, the GCG is to be made up of representatives of the Competent Authorities, ACER, ENTSO-G, ‘representative bodies of the industry ... and relevant customers’. The Commission will decide on the composition of the GCG and will chair it (Article 11).

3.4.2   The GCG's functions are to assist the Commission in implementing the measures contained in the Regulation.

3.5   Information exchange

3.5.1   In the event of a national emergency, the Competent Authority must have information available on a daily basis on aspects such as the hourly flow of gas at all cross-border entry and exit points; in the case of a Community emergency, the Commission is entitled to request information from the Competent Authority on a series of aspects, including whatever information this authority has available (Article 12(1) to 12(5)).

3.5.2   The Commission must also be informed of intergovernmental agreements and commercial supply contracts concluded with third countries (Article 12(6). It is further stipulated that an annual report is to be published (Article 13).

4.   General comments

4.1   The replacement of the 2004 Directive forms part of a raft of measures adopted with a view to guaranteeing security of supply, including Directive 2009/73/EC of the European Parliament and of the Council concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC, Regulation (EC) No 713/2009 of the European Parliament and of the Council establishing an Agency for the Cooperation of Energy Regulators, and the ‘Third Energy Package’ on the internal energy market (2). Scrupulous and timely implementation of all these measures is vital.

4.2   The EESC welcomes the proposal for a regulation: given the past events outlined above, this is vital. It regards a regulation to be the appropriate legal form on account of its rapid entry into force and uniform application.

4.3   The EESC is pleased that the proposal significantly increases coordination of emergency responses, curtailing the current room for discretion. The proposal strengthens the Commission's powers, which is a good thing.

4.4   The Committee also takes a very positive view of the detailed establishment of plans and measures for various critical situations, while pointing out that implementing them will require very substantial efforts in terms of human and material resources on the part of the various parties responsible.

4.5   Another positive aspect is the definition of the obligations of the various responsible parties, taking a specific threat (N-1 principle) as the reference point. At the same time, the high cost for some Member States entailed by the infrastructure they will have to build in order to comply with the regulation needs to be pointed out.

5.   Specific comments

5.1   The Committee considers that the responsibilities and tasks of the public authorities set out in Article 3(1) must be distinguished from those of companies or private bodies, and therefore suggests a new wording making it clear that:

| — | security of gas supply is a task of the Member State Competent Authorities and the Commission, within their respective fields of responsibility; |
| --- | --- |

—

security of gas supply is a task of the Member State Competent Authorities and the Commission, within their respective fields of responsibility;

| — | natural gas companies and industrial gas consumers must cooperate and implement the measures decided by the relevant authorities. |
| --- | --- |

—

natural gas companies and industrial gas consumers must cooperate and implement the measures decided by the relevant authorities.

5.2   The EESC considers that the draft Regulation (and, if relevant, its application in each Member State) should place greater emphasis on consumers’ rights in at least some of the following areas:

| (a) | Tariffs. Since the cost of these measures could fall in whole or in part to consumers via tariffs, it should be borne in mind that in democratic societies, the authorities must take account of users’ economic and social conditions when taking the relevant decisions. |
| --- | --- |

(a)

Tariffs. Since the cost of these measures could fall in whole or in part to consumers via tariffs, it should be borne in mind that in democratic societies, the authorities must take account of users’ economic and social conditions when taking the relevant decisions.

| (b) | Clarification of the ‘domestic customer’ and ‘protected customer’ concepts, which are only described in general terms in the draft (Recital 18, which mentions ‘schools’ and ‘hospitals’). A more detailed, even if not exhaustive, list must be included. |
| --- | --- |

(b)

Clarification of the ‘domestic customer’ and ‘protected customer’ concepts, which are only described in general terms in the draft (Recital 18, which mentions ‘schools’ and ‘hospitals’). A more detailed, even if not exhaustive, list must be included.

| (c) | Right of information. Consumers must receive precise information on the measures adopted by the authorities, forecasts of how the situation will develop, the bodies to which they should address themselves, etc. These aspects are not mentioned in the draft. |
| --- | --- |

(c)

Right of information. Consumers must receive precise information on the measures adopted by the authorities, forecasts of how the situation will develop, the bodies to which they should address themselves, etc. These aspects are not mentioned in the draft.

5.3   The EESC considers it necessary to ensure that, as indicated in the draft Regulation, all Member States are capable of guaranteeing supply to final customers up to 2014. To this end, they must plan for or set up an N-1 network, or provide for the corresponding storage facilities. The Member States are to report in 2011 and 2014 on the measures they have taken to meet this indicator. If a Member State should fail to meet it, the other Member States should be exempted from the obligation to provide gas supplies in the event of a shortage of supply.

5.4   In the EESC's opinion, household customers and small-scale consumers must receive special protection in the event of supply disruptions. All the Member States must therefore undertake to guarantee the supply of gas and heating in accordance with the current standards.

5.5   The EESC considers that, in cases of shortage of supply, all suppliers of gas services must be equally obliged to take the necessary emergency measures. This is the only way of ensuring fair, non-discriminatory competition over the long term in the EU gas market. The exceptions that the European Commission's proposal makes for market entrants and small undertakings (Article 7(3)) should be removed.

5.6   Alternative pipeline projects to provide durable solutions in the medium to long term are under way. On 5 November 2009, the Swedish and Finnish governments authorised (as the Danish government had done earlier) the construction of Nord Stream, two parallel pipelines to convey gas from Russia to Germany via the Baltic Sea. It is expected to begin operating in 2011-2012. The purpose of the Nabucco project, headed by the Austrian OMV consortium with EU and US support, is to bring gas to Europe from the Caspian Sea, Central Asia and the Near and Middle East without passing through Russia. It is in competition with South Stream (Gazprom – ENI), supplying Russian gas to Bulgaria and other parts of Europe. However, since the measures laid down in the draft Regulation will not come into force until 2011, there is room for concern about the security of gas supplies in the immediate future, especially during the winter. The EESC trusts that the European and national authorities will be proactive in preventing a repeat of crises like that of January 2009. One option that might be considered would be to set up a crisis unit, able to take measures urgently.

5.7   Regarding the objective of the proposal, the EESC highlights the importance of the EU-Russia agreement on an early warning system in the event of supply problems, signed in Moscow on 16 November 2009, together with the willingness of both sides to cooperate on energy issues, as expressed at the Stockholm summit of 18 November 2009.

5.8   The measures contained in the Third Package for the internal energy market are complementary to those under the proposal for a Regulation and so it is important that they be put into practice. They include drawing up National Energy Action Plans to tackle energy poverty, ensuring the independence of regulatory bodies, and protecting vulnerable users, with a ban on disconnection during critical periods.

5.9   The EESC considers that the relevant EU political bodies must reconsider the gas market liberalisation policy, insofar as it works against security of supply. By the same token, Evert Faber van der Meulen (EU Studies Coordinator, Leiden University), is critical of the Commission's ‘liberal inclination’, arguing that liberalisation should be seen only as a ‘long-term’ goal. See Gas Supply and EU–Russia Relations. As experience has shown on a number of occasions, market deregulation has not produced greater investment in clean energies, or boosted diversification of supply. See, for example, the case of the United Kingdom: ‘The call for a U-turn on two decades of government policy that has created one of the most liberal energy markets came as the Committee on Climate Change, chaired by Lord Turner, concluded that deregulated markets did not produce the needed investment in low carbon energy and a diversity of supply’ (U-turn urged on UK energy policy, Financial Times, 12 October 2009). The process of liberalising and privatising the energy sector has also produced large-scale job losses. It has been estimated that liberalisation of the electricity market has resulted in the loss of 34 % of jobs in EU-15 (examples of losses in Member States: Germany 34 %, Italy 40 %, Netherlands 39 %, Spain 34 %, Sweden 33 %), while for gas, a loss of 12 % occurred over just four years in 12 Member States (CZ, DK, DE, ES, IT, LV, LT, HU, AT, PT, SI, FI). (Hermann, C and R. Atzmüller (2008), Liberalisation and Pvivatisation of Public Services and the Impact on Employment, Working Conditions and Labour Relations, Transfer, Summer 2008, Volume 14, Number 2, p. 303).

5.10   The EESC points out that the highly complex nature of the subject, and its strategic importance, mean that fundamental decisions on security of supply, complementary to those in the proposal, such as those concerning transmission networks, renewable energies and energy saving, fall within the remit of the Member States. Ultimately, the 2009 crisis highlighted the need for greater solidarity and cooperation within the EU in response to emergency situations. The regulation represents a major step in this direction, but its effectiveness depends on scrupulous application within the deadline set.

Brussels, 20 January 2010

The President of the European Economic and Social Committee

Mario SEPI

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(1)  OJ L 127, 29.4.2004, p. 92.

1

(2)  OJ L 211, 14.8.2009, p. 94 and OJ L 211, 14.8.2009, p. 1.

2

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| 14.12.2010 | EN | Official Journal of the European Union | C 339/53 |
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14.12.2010

EN

Official Journal of the European Union

C 339/53

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Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee: Contributing to sustainable development: the role of fair trade and non-governmental trade-related sustainability assurance schemes’

COM(2009) 215 final

(2010/C 339/12)

Rapporteur: Mr ADAMS

Co-rapporteur: Ms SHARMA

On 5 May 2009 the European Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the

Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee: Contributing to Sustainable Development: The Role of Fair Trade and non-governmental trade-related sustainability assurance schemes

COM(2009) 215 final.

The Section for External Relations, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 7 January 2010.

At its 459th plenary session, held on 20 and 21 January 2010 (meeting of 20 January 2010), the European Economic and Social Committee adopted the following opinion by 184 votes to 3 with 10 abstentions.

1.   Conclusions and recommendations

1.1   The EESC has, for many years, actively encouraged the wide-ranging initiatives on sustainable production developed by both the corporate and NGO sectors. The Committee therefore warmly welcomes the Commission’s Communication which highlights and supports the increasing impact of consumer labelling schemes to enable consumer choice.

1.2   While agreeing that the dynamic and market-responsive nature of these consumer labels is encouraged by their voluntary nature it is recommended that resource and regulatory support is given to the development of the improved transparency, impact and credibility of such schemes and the capacity of producers to influence them and participate through certification. The ISEAL Alliance, the independent global association for social and environmental standards systems, offer a framework for schemes to work together to consolidate standard setting and objective analysis. The aim should be to harmonise approaches where they agree and ensure that the factors which distinguish them are communicated in a transparent way.

1.3   The Committee highlights the role that Fair Trade especially has played in stimulating practical consumer action on sustainable purchasing, with the building of civil society engagement in numerous forms. The further commitment by the Commission to support civil society organisations to develop consumer awareness and support for sustainability assurance schemes in this area is welcome as it additionally provides capacity to generate civil solidarity and positive action. The direction of support towards Member States in which no such schemes have been developed could be particularly effective where civil society advocates of development and sustainability are active.

1.4   The growth in recent years of all forms of sustainable purchasing initiatives indicates that now is the time for the Commission to seriously consider how the underlying standards and processes can influence its engagement with the WTO, especially concerning international trade policy towards developing countries which gives greater emphasis to social and environmental factors (1).

2.   Introduction

2.1   Often underlying the difference between Fair Trade and other labels are factors which go back to their origins. The Fair Trade label arose as a response to the perceived injustices to the poor in international trade and was fostered by the ‘progressive’, solidarity and development-based movements largely originating in the 1970s. Its contemporary, the industry-driven corporate social responsibility movement (CRS) also introduced social and environmental standards to the supply chain and offered a mainstream approach for producers and consumers. Each influenced the other. For example, Fair Trade adopting minimum labour standards and CSR processes adopting the device of a consumer assurance label. Today, when climate change and resource consumption have become critical to the world’s future, the consumer-facing aspects of all such guarantee or certification marks can be categorised as ‘sustainability’ labelling.

2.2   In 2005 the Economic and Social Committee, at the request of the UK Presidency, published its Opinion on Ethical Trade and Consumer Assurance Schemes (2). It concluded that such voluntary schemes (usually taking the form of a certification or guarantee label) could make a significant contribution to sustainable development and to the direct engagement of consumers in a positive and empowering response to globalisation. This Opinion also explored the necessary requirements of such schemes to be effective, the adequacy of policy definition within the EU and the urgently required need for clarification and coordination. Finally, it argued for a framework which would give an intelligent basis for comparing consumer assurance schemes with other policy instruments aiming to achieve similar goals. The Committee recommended that this would provide EU institutions and Member States with a pointer towards policy coherence and a practical tool for assessing the investment of resources. The Committee is therefore particularly pleased to see these conclusions fully acknowledged in the present Communication and further developed.

2.3   During the intervening four years sales of products carrying such assurance marks have increased phenomenally, in the case of Fair Trade-marked products, for example, by 400 % and sales of Utz Certified products by 365 %. This is a continuing trend, apparently unaffected by recession. Leading international processors and manufacturers are converting entire brands and product categories to Fair Trade whilst retailers similarly are switching product lines comprehensively. Encouraged by consumer interest a number of sustainability-related guarantee marks have been launched or further developed. There are significant examples of these sustainability schemes making a comparable impact. This has raised questions about whether consumers are clear about differences between labels and the tangible benefits resulting to producers.

2.4   The EESC has maintained a strong and consistent interest in this subject. In its first Opinion on European Fair Trade Marking Movement, issued in 1996 (3), the Committee recommended three main points: that high quality international certification and verification systems should be established; that the process remain a voluntary one and that the Commission should support both fair trade producer organisations in developing countries and public education and awareness campaigns in Europe.

2.5   In October 2009 the Committee re-affirmed these views in its Opinion on Fair Trade Food products (4) rapporteur Mr Coupeau. Although this Opinion follows closely on that of Mr Coupeau’s it specifically addresses the Commission’s Communication and contains a range of expanded recommendations consistent with the Committee’s established position.

3.   Summary of the Commission's communication

3.1   ‘Sustainable’ labelling, in various forms, has become a part of the consumer landscape. Such labels enable consumers to support a range of sustainable development objectives. The Fair Trade label is specifically identified as one such label which concentrates on assessing and certifying: working and environmental conditions which meet or are above minimum international standards; supportive trading arrangements and; premium payments in some form to the benefit of producers in developing countries. This particular approach features strongly in the communication. Because of the potential for confusion by consumers the Commission provides an Annexe with its recognised definition of Fair Trade and distinguishes between other approaches (5):

| (1) | Fair Trade proper; |
| --- | --- |

(1)

Fair Trade proper;

| (2) | other ‘niche’ certified products not participating formally in Fair Trade but targeting consumers aware of sustainability issues (Rainforest Alliance, Utz Certified); |
| --- | --- |

(2)

other ‘niche’ certified products not participating formally in Fair Trade but targeting consumers aware of sustainability issues (Rainforest Alliance, Utz Certified);

| (3) | products covered by baseline standards that aspire to be ‘industry-wide’ (e.g. Code for the Coffee Community (4C's); Ethical Tea Partnership); |
| --- | --- |

(3)

products covered by baseline standards that aspire to be ‘industry-wide’ (e.g. Code for the Coffee Community (4C's); Ethical Tea Partnership);

| (4) | the rest (‘no name’ commodity supplies). |
| --- | --- |

(4)

the rest (‘no name’ commodity supplies).

3.2   The Commission recognises that although there are a variety of consumer labels and indications any attempt by it to regulate these schemes could be counter-productive. Essentially they are voluntary, dynamic schemes which respond to trade and consumer demands and regulation could unnecessarily restrict further development.

3.3   However, consumers’ confidence and awareness can be improved by clarity and transparency in the definition of schemes and independent monitoring is also an important requirement. Further analysis of the impact and benefit of schemes is suggested and expected, though the Commission again makes it clear that it has no intention of defining appropriate sustainability standards for these private schemes though it does suggest general principles. These are:

| — | Maintaining the non-governmental nature of private schemes throughout the EU. |
| --- | --- |

—

Maintaining the non-governmental nature of private schemes throughout the EU.

| — | Exploring the scope for possible synergies between schemes and enhancing clarity for the consumer and producers. |
| --- | --- |

—

Exploring the scope for possible synergies between schemes and enhancing clarity for the consumer and producers.

| — | Achieving a common understanding of reasonable basic process requirements. |
| --- | --- |

—

Achieving a common understanding of reasonable basic process requirements.

| — | Establishing objective facts on the relative impacts of different private trade-related sustainability assurance schemes. |
| --- | --- |

—

Establishing objective facts on the relative impacts of different private trade-related sustainability assurance schemes.

3.4   The goal of some of these assurance schemes, development of poorer countries, is also a key objective of both WTO and EU trade policy. The communication suggests that private sustainability certification initiatives, providing they are transparent and non-discriminatory, can supplement trade liberalisation processes.

3.5   As 16 % of EU GDP is spent by public authorities the communication deals with the basis on which sustainability requirements can be built into public procurement processes. It is pointed out that whilst requiring products to be certified by a particular labelling scheme runs counter to procurement regulation the inclusion of appropriate criteria relating to production processes is legitimate and licensing by a particular ethical label is one way of proving compliance (6).

3.6   The Commission supported Fair Trade and other trade-related sustainability initiatives with over EUR 19 m of funding in 2007 and 2008, mostly in awareness-raising in the EU. The intention is to offer further support, particularly on impact assessments and market transparency and to encourage Member States to do likewise.

4.   General comments

4.1   The term ‘fair’ or ‘fair trade’ cannot be legally controlled, thus meaning that it is open to anyone to make less substantiated, or less beneficial, claims of fairness than the Fair Trade label. In such circumstances recognition of the underlying certification and assurance process by the consumer is essential. In practice it is noted that other non-governmental trade-related sustainability assurance schemes or sustainability company schemes avoid using the terms ‘fair’ or ‘fair trade’ to avoid confusion with Fair Trade.

4.2   Ten years have elapsed since the Commission’s previous communication on this subject. In that time public interest has massively increased, encouraged by growing awareness of sustainability issues and a connected corporate trend to provide for some degree of ethical, social and environmental standards in their supply process. This is therefore a timely update on a market which was worth over EUR 2 billion in Europe in 2009 (Fair Trade label) and at least as much again from other ‘sustainability’ labels. Nevertheless, in terms of European trade in imported goods from developing countries, this remains a relatively small proportion and it should be noted that in the Commission's Communication the term ‘niche’, used to describe non-Fair Trade consumer labels should equally be applied to Fair Trade, which itself is a niche ‘sustainability’ label.

4.3   In particular country and product markets sustainability labelling is, however, moving out of the niche. For example, in the Netherlands where according to the Dutch based NGO Tropical Commodities Coalition (TCC) 25 % of the coffee consumed is ‘ethically’ traded. It is therefore particularly important that consumer misapprehensions are dealt with.

4.4   It must be recognised that the use of the term ‘Fair Trade’ (or ‘Good Origin’ or similar terms in labelling) implies an absolute ethical value in the product when often the reality is an identifiable but marginal improvement. The pressure to simplify for consumer marketing purposes, rather than any intention to deliberately mislead, is usually the reason for such categorical statements but runs the risk of consumer disillusion if expectations are not met.

4.5   In the case of Fair Trade, a label is only one of the two complementary Fair Trade channels, together with the integrated supply chain route. The Communication does little to explore the far-reaching effects of the Fair Trade movement, its grassroots campaigns and political activities in the North and the producer-support activities in the South. Similarly, the Commission does not enter into the important contribution that for instance Utz Certified makes to food safety through its highly developed system of traceability nor to the positive impact of Rainforest Alliance certification on climate change mitigation through its emphasis on the preservation of the rainforest. It has to be recognized that the Commission cannot fully explore such important additional impacts in this Communication without making it unwieldy. The Commission may wish to take up these topics in future policy papers.

4.6   Although the Commission portrays assurance schemes as a supplement to the WTO trade liberalisation process the Fair Trade movement rejects this viewpoint when applied to itself, preferring to regard its approach as an alternative trading partnership. Other sustainability assurance schemes would welcome a thorough analysis by WTO how the trade liberalisation process can foster sustainability, and prevent a situation where social, environmental and economic requirements associated with sustainability are erroneously considered to be obstacles to trade.

5.   Specific comments

5.1   The Committee respects the position taken by the Commission in not seeking to regulate assurance schemes as EU regulation tends to reduce the aspirational and dynamic aspect in social and environmental labelling. However, a non-legal framework requires both probity of independent certification and the need for consumers to clearly understand what each independent assurance initiative is actually delivering. This suggests that all such schemes should be based on ISO65 accredited certification procedures.

5.2   It would be helpful to encourage the development of a common framework of standards where there is a clear overlap between the schemes, e.g. labour standards and pesticide use. There is also the need for rigorous impact assessment should take account of the significant differences in claimed outcomes, e.g. improving market access for small farmers in the case of Fair Trade or improving farm managerial practice in the case of UTZ Certified; the Fair Trade focus on empowerment of individual producer organisations or the Rainforest Alliance's focus on biodiversity.

5.3   Although the Commission is choosing not to set standards itself it is supporting a major study into comparative differences and benefits of the main schemes. Market transparency is recognised as an essential requirement underpinning marketing-focussed ethical assurance schemes and the EESC welcomes, in principle, the development of this project in establishing an internet portal to analyse and discuss such schemes. However, the key points that must be taken into account are how they perform in areas where they have common goals and how they offer specific benefits where they differ. It must be noted that the current presentation of the UNCTAD ‘portal’ (7) does not achieve these aims, ignoring the significant differences between the schemes and lacking the necessary clarity and rigour needed in such a reference facility.

5.4   It is suggested that support is given to the development of procedures underlying the transparency and credibility of sustainability labels and the capacity of producers to achieve certification and market access and to meet the challenges of organisation on which this depends. For example, resources could be made available to the ISEAL Alliance (8) to take forward the work to harmonise schemes where appropriate and clarify the unique elements where not. ISEAL provides a multi-stakeholder organisation where the common aspects of various labelling schemes can be consolidated and where differences can be independently evaluated and explained.

5.5   In the current debates about Fair Trade and non-governmental trade-related sustainability assurance schemes the producer organisations from developing countries clearly have a vital role to play (9) and their experience of various sustainability schemes needs to be taken more into account. The Committee believes that sustainability schemes and any assessment of their impact should have equal input from producer organisations that have experience with most of the leading initiatives.

5.6   The great majority of the total sales volume of Fair Trade and non-governmental trade-related sustainability assurance schemes in Europe are made within a minority of Member States. The Committee strongly recommends that priority is given by the Commission to the support and funding of civil society organisations in Member States where sustainability – related consumer awareness programmes are weak and where trusted civil society actors are able to take forward this work.

5.7   EU trade policy has, for some time, acknowledged the contribution of Fair Trade and recognised its potential in influence world trade policy. The Committee calls on the Commission to reflect the growing importance EU citizens are placing on sustainable and socially-beneficial trade to inform its engagement with the WTO on trade regulations.

Brussels, 20 January 2010

The President of the European Economic and Social Committee

Mario SEPI

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(1)  In this respect EU-Korea FTA (Free Trade Agreement), chapter on trade and sustainable development (chapter 13) should be noted.

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(2)  OJ C 28, 3.2.2006, p. 72-81.

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(3)  OJ C 204, 15.7.1996, p. 41.

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(4)  OJ C 318, 23.12.2009, p. 29.

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(5)  The Communication refers to the Fair Trade criteria as defined by the Fair Trade movement and recalled by the European Parliament Resolution on Fair Trade and development of 6 June 2006 (A6-0207/2006).

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(6)  This has also been illustrated by the decision of the European Commission of 29 October 2009 to send a formal request to the Netherlands concerning the award of a public contract for the supply and management of coffee machines by the Province of Noord-Holland. In the Commission's view, the tender procedure used by the Province of Noord-Holland did not meet the requirements of EU public procurement rules, thereby restricting competition.

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(7)  http://193.194.138.42/en/Sustainability-Claims-Portal/Discussion-Forum/Fair-Trade/Web-links/.

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(8)  ISEAL is the global association for social and environmental standards systems, whose Codes of Good Practice are international reference documents for such standards systems.

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(9)  As is the case for the World Fair Trade Organization (WFTO) and Fairtrade Labelling Organisations International (FLO), which already include producer organisations from developing countries in their governance systems as well as for Rainforest Alliance (its International Standards Committee includes landowners, farmers, NGOs, community members, researchers, technicians and other stakeholders as members) and Utz Certified (its board includes representatives from coffee growers, coffee traders and roasters, and NGOs and its Code of Conduct has been evaluated and recognized by all stakeholders involved in the Utz Certified programme).

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