# Official Journal C 155/30 A

| | ISSN 1977-091X |
| --- | --- |
| Official Journal
  of the European Union | C 155 |
| | |
| English edition | Information and Notices | Volume 6430 April 2021 |

ISSN 1977-091X

Official Journal

of the European Union

C 155

English edition

Information and Notices

Volume 6430 April 2021

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| Contents | page |
| --- | --- |
| | I   Resolutions, recommendations and opinions |
| | RESOLUTIONS |
| | European Economic and Social Committee |
| | 558th plenary session of the European Economic and Social Committee – Interactio, 24.2.2021-25.2.2021 |
| 2021/C 155/01 | Resolution of the European Economic and Social Committee on Involvement of Organised Civil Society in the National Recovery and Resilience Plans – What works and what does not? – (based on consultations in the 27 Member States) | 1 |

Contents

page

I   Resolutions, recommendations and opinions

RESOLUTIONS

European Economic and Social Committee

558th plenary session of the European Economic and Social Committee – Interactio, 24.2.2021-25.2.2021

2021/C 155/01

Resolution of the European Economic and Social Committee on Involvement of Organised Civil Society in the National Recovery and Resilience Plans – What works and what does not? – (based on consultations in the 27 Member States)

1

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| | III   Preparatory acts |
| --- | --- |
| | European Economic and Social Committee |
| | 558th plenary session of the European Economic and Social Committee – Interactio, 24.2.2021-25.2.2021 |
| 2021/C 155/02 | Opinion of the European Economic and Social Committee on: Communication from the Commission to the European Parliament and the Council – An Action Plan for Fair and Simple Taxation Supporting the Recovery Strategy (COM(2020) 312 final) – Communication from the Commission to the European Parliament and the Council on Tax Good Governance in the EU and beyond (COM(2020) 313 final) – Proposal for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (COM(2020) 314 final – 2020/0148 (CNS)) | 8 |
| 2021/C 155/03 | Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Capital Markets Union for people and businesses – new action plan(COM(2020) 590 final) | 20 |
| 2021/C 155/04 | Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Digital Finance Strategy for the EU(COM(2020) 591 final) | 27 |
| 2021/C 155/05 | Opinion of the European Economic and Social Committee on: Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (COM(2020) 593 final – 2020/0265 (COD)) – Proposal for a Regulation of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology (COM(2020) 594 final – 2020/0267 (COD)) | 31 |
| 2021/C 155/06 | Opinion of the European Economic and Social Committee on: Proposal for a Regulation of the European Parliament and of the Council on digital operational resilience for the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014 and (EU) No 909/2014 (COM(2020) 595 final – 2020/0266 (COD)) – Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2009/65/EC, 2009/138/EC, 2011/61/EU, 2013/36/EU, 2014/65/EU, (EU) 2015/2366 and (EU) 2016/2341 (COM(2020) 596 final – 2020/0268 (COD)) | 38 |
| 2021/C 155/07 | Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank – Annual Sustainable Growth Strategy 2021(COM(2020) 575 final) | 45 |
| 2021/C 155/08 | Opinion of the European Economic and Social Committee on Proposal for a Regulation of the European Parliament and of the Council establishing the Brexit Adjustment Reserve(COM(2020) 854 final – 2020/0380 (COD)) | 52 |
| 2021/C 155/09 | Opinion of the European Economic and Social Committee on: Proposal for a Regulation of the European Parliament and of the Council on asylum and migration management and amending Council Directive 2003/109/EC and the proposed Regulation (EU) XXX/XXX [Asylum and Migration Fund] (COM(2020) 610 final – 2020/0279 (COD)) – Proposal for a Regulation of the European Parliament and of the Council addressing situations of crisis and force majeure in the field of migration and asylum (COM(2020) 613 final – 2020/0277 (COD)) | 58 |
| 2021/C 155/10 | Opinion of the European Economic and Social Committee on: Amended proposal for a Regulation of the European Parliament and of the Council establishing a common procedure for international protection in the Union and repealing Directive 2013/32/EU (COM(2020) 611 final – 2016/0224 (COD)) – Proposal for a Regulation of the European Parliament and of the Council introducing a screening of third-country nationals at the external borders and amending Regulations (EC) No 767/2008, (EU) 2017/2226, (EU) 2018/1240 and (EU) 2019/817 (COM(2020) 612 final – 2020/0278 (COD)) – Amended proposal for a Regulation of the European Parliament and of the Council on the establishment of Eurodac for the comparison of biometric data for the effective application of Regulation (EU) XXX/XXX [Regulation on Asylum and Migration Management] and of Regulation (EU) XXX/XXX [Resettlement Regulation], for identifying an illegally staying third-country national or stateless person and on requests for the comparison with Eurodac data by Member States’ law enforcement authorities and Europol for law enforcement purposes and amending Regulations (EU) 2018/1240 and (EU) 2019/818 (COM(2020) 614 final – 2016/0132(COD)) | 64 |
| 2021/C 155/11 | Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Renovation Wave for Europe: greening our buildings, creating jobs, improving lives(COM(2020) 662 final) | 73 |
| 2021/C 155/12 | Opinion of the European Economic and Social Committee on Proposal for a Directive of the European Parliament and of the Council on the initial qualification and periodic training of drivers of certain road vehicles for the carriage of goods or passengers (codification) (COM(2021) 34 final – 2021/0018 (COD)) | 78 |

III   Preparatory acts

European Economic and Social Committee

558th plenary session of the European Economic and Social Committee – Interactio, 24.2.2021-25.2.2021

2021/C 155/02

Opinion of the European Economic and Social Committee on: Communication from the Commission to the European Parliament and the Council – An Action Plan for Fair and Simple Taxation Supporting the Recovery Strategy (COM(2020) 312 final) – Communication from the Commission to the European Parliament and the Council on Tax Good Governance in the EU and beyond (COM(2020) 313 final) – Proposal for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (COM(2020) 314 final – 2020/0148 (CNS))

(COM(2020) 312 final)

(COM(2020) 313 final)

(COM(2020) 314 final – 2020/0148 (CNS))

8

2021/C 155/03

Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Capital Markets Union for people and businesses – new action plan(COM(2020) 590 final)

(COM(2020) 590 final)

20

2021/C 155/04

Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Digital Finance Strategy for the EU(COM(2020) 591 final)

(COM(2020) 591 final)

27

2021/C 155/05

Opinion of the European Economic and Social Committee on: Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (COM(2020) 593 final – 2020/0265 (COD)) – Proposal for a Regulation of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology (COM(2020) 594 final – 2020/0267 (COD))

(COM(2020) 593 final – 2020/0265 (COD))

(COM(2020) 594 final – 2020/0267 (COD))

31

2021/C 155/06

Opinion of the European Economic and Social Committee on: Proposal for a Regulation of the European Parliament and of the Council on digital operational resilience for the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014 and (EU) No 909/2014 (COM(2020) 595 final – 2020/0266 (COD)) – Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2009/65/EC, 2009/138/EC, 2011/61/EU, 2013/36/EU, 2014/65/EU, (EU) 2015/2366 and (EU) 2016/2341 (COM(2020) 596 final – 2020/0268 (COD))

(COM(2020) 595 final – 2020/0266 (COD))

(COM(2020) 596 final – 2020/0268 (COD))

38

2021/C 155/07

Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank – Annual Sustainable Growth Strategy 2021(COM(2020) 575 final)

(COM(2020) 575 final)

45

2021/C 155/08

Opinion of the European Economic and Social Committee on Proposal for a Regulation of the European Parliament and of the Council establishing the Brexit Adjustment Reserve(COM(2020) 854 final – 2020/0380 (COD))

(COM(2020) 854 final – 2020/0380 (COD))

52

2021/C 155/09

Opinion of the European Economic and Social Committee on: Proposal for a Regulation of the European Parliament and of the Council on asylum and migration management and amending Council Directive 2003/109/EC and the proposed Regulation (EU) XXX/XXX [Asylum and Migration Fund] (COM(2020) 610 final – 2020/0279 (COD)) – Proposal for a Regulation of the European Parliament and of the Council addressing situations of crisis and force majeure in the field of migration and asylum (COM(2020) 613 final – 2020/0277 (COD))

(COM(2020) 610 final – 2020/0279 (COD))

force majeure

(COM(2020) 613 final – 2020/0277 (COD))

58

2021/C 155/10

Opinion of the European Economic and Social Committee on: Amended proposal for a Regulation of the European Parliament and of the Council establishing a common procedure for international protection in the Union and repealing Directive 2013/32/EU (COM(2020) 611 final – 2016/0224 (COD)) – Proposal for a Regulation of the European Parliament and of the Council introducing a screening of third-country nationals at the external borders and amending Regulations (EC) No 767/2008, (EU) 2017/2226, (EU) 2018/1240 and (EU) 2019/817 (COM(2020) 612 final – 2020/0278 (COD)) – Amended proposal for a Regulation of the European Parliament and of the Council on the establishment of Eurodac for the comparison of biometric data for the effective application of Regulation (EU) XXX/XXX [Regulation on Asylum and Migration Management] and of Regulation (EU) XXX/XXX [Resettlement Regulation], for identifying an illegally staying third-country national or stateless person and on requests for the comparison with Eurodac data by Member States’ law enforcement authorities and Europol for law enforcement purposes and amending Regulations (EU) 2018/1240 and (EU) 2019/818 (COM(2020) 614 final – 2016/0132(COD))

(COM(2020) 611 final – 2016/0224 (COD))

(COM(2020) 612 final – 2020/0278 (COD))

(COM(2020) 614 final – 2016/0132(COD))

64

2021/C 155/11

Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Renovation Wave for Europe: greening our buildings, creating jobs, improving lives(COM(2020) 662 final)

(COM(2020) 662 final)

73

2021/C 155/12

Opinion of the European Economic and Social Committee on Proposal for a Directive of the European Parliament and of the Council on the initial qualification and periodic training of drivers of certain road vehicles for the carriage of goods or passengers (codification) (COM(2021) 34 final – 2021/0018 (COD))

(COM(2021) 34 final – 2021/0018 (COD))

78

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| | Corrigenda |
| --- | --- |
| 2021/C 155/13 | Corrigendum to Opinion of the European Economic and Social Committee on Proposal for a Regulation of the European Parliament and of the Council establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021-2027 (the Pericles IV programme) (COM(2018) 369 final – 2018/0194 (CNS)) ( OJ C 440, 6.12.2018 ) | 79 |

Corrigenda

2021/C 155/13

Corrigendum to Opinion of the European Economic and Social Committee on Proposal for a Regulation of the European Parliament and of the Council establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021-2027 (the Pericles IV programme) (COM(2018) 369 final – 2018/0194 (CNS)) ( OJ C 440, 6.12.2018 )

( OJ C 440, 6.12.2018 )

79

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EN

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I Resolutions, recommendations and opinions

RESOLUTIONS

European Economic and Social Committee

558th plenary session of the European Economic and Social Committee – Interactio, 24.2.2021-25.2.2021

| 30.4.2021 | EN | Official Journal of the European Union | C 155/1 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/1

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Resolution of the European Economic and Social Committee on Involvement of Organised Civil Society in the National Recovery and Resilience Plans – What works and what does not?

(based on consultations in the 27 Member States)

(2021/C 155/01)

| Rapporteurs: | Gonçalo LOBO XAVIER


  Javier DOZ ORRIT


  Luca JAHIER |
| --- | --- |

Rapporteurs:

Gonçalo LOBO XAVIER

Javier DOZ ORRIT

Luca JAHIER

At its plenary session of 24 and 25 February 2021 (meeting of 25 February), the European Economic and Social Committee adopted the following resolution by 268 votes with 5 abstentions.

1.   Introduction

| 1.1 | The EESC has adopted a number of opinions, resolutions and declarations on the NextGenerationEU Recovery Plan and its various components, in particular the Recovery and Resilience Facility (RRF). The Committee has expressed its agreement with its content and the direction of the reform proposals, which are intended to boost economic and social recovery and trigger a change in the production model. |
| --- | --- |

1.1

| 1.2 | The EESC considers that all reforms in the restructuring process must be based on the principles underpinning the EU: the protection of human and social rights, democratic values and the rule of law. Investments under the RRF must aim to unlock the full potential of the single market, strengthen the EU’s economic resilience, meet the United Nations Sustainable Development Goals (SDGs), create a circular economy, achieve climate neutrality in the EU by 2050 at the latest, encourage innovation and modernisation related to the digitalisation of the economy and society, and secure effective implementation of the European Pillar of Social Rights to ensure social cohesion, eradicate poverty and reduce inequalities. They must respond to the economic and social crisis caused by the pandemic, taking into account that the impacts will be larger, heavier and deeper than earlier anticipated, ensuring a swift recovery. The use of the RRF should also fall fully in line with international conventions and treaties to which the EU and Member States are party, such as the United Nations Convention on the Rights of Persons with Disabilities. The Committee considers it essential to ensure good governance, vigilance against corruption in the management of funds and democratic accountability. |
| --- | --- |

1.2

| 1.3 | The Committee also considers it very important that reforms are aimed at both improving the productivity of the economy and strengthening the innovative industrial tissue through support for SMEs and social economy enterprises. It underlines the role of research at the European level and its links with the production process. It also believes that mechanisms should be put in place to ensure fair green and digital transitions in the EU and in all Member States, and to support the economic reintegration of those excluded from the labour market. In this regard, the EESC reiterates its concern that the funds set aside for just transition in the 2021-2027 Multiannual Financial Framework (MFF) are insufficient. |
| --- | --- |

1.3

| 1.4 | The EU institutions have reacted very differently than they did to the 2008 crisis. The financing of the Recovery Plan (RP) through the issuance of common European debt is a milestone in the history of the EU. The Committee is particularly concerned about the support for a deepening of the Economic and Monetary Union (EMU). This issue should be taken up at the forthcoming Conference on the Future of Europe, while also appreciating the importance of the Porto Summit to be convened by the Portuguese Presidency on the effective implementation of the European Pillar of Social Rights. The EESC believes that the involvement of civil society must go beyond the economic, social and environmental spheres to such important issues as the Future of Europe or accession and pre-accession negotiations with the EU applicant countries. |
| --- | --- |

1.4

| 1.5 | The Commission should take account of the impact of the pandemic on the different Member states and their capacities when assessing their NRRPs. |
| --- | --- |

1.5

| 1.6 | In this resolution we would also like to express our satisfaction with the agreement reached last December between the European Parliament and the Council, in the framework of the trilogue, which includes the approval of a Regulation that establishes (Article 18) the need for social partners and civil society organisations (CSOs) to participate, by consultation, in the drafting and implementation of National Recovery and Resilience Plans (NRRPs). |
| --- | --- |

1.6

| 1.7 | Civil society participation in the NRRPs is precisely the subject of this resolution. On the basis of the reports drawn up by the national delegations of the European Semester Group, we would like to make an initial assessment of how this participation is developing and be able to inform the European institutions and national governments of the shortcomings we find there. In this way, the Committee could help to ensure that national governments and European institutions take appropriate corrective measures before the deadline for the finalisation of the NRPPs by national governments and their approval by the European Commission. This assessment should unveil not only the extent of civil society participation in the design of the plans, but also the quality of their involvement, and how transparent the different Member States have been in making their draft NRRPs available to the public. |
| --- | --- |

1.7

| 1.8 | With regard to the involvement of pan-European social partners and CSOs in the NextGenerationEU Recovery Plan, they have acknowledged that progress has been made compared to the usual European Semester procedures. They also recognise the positive role that the European Commission is playing in promoting civil society participation at national level. However, most of them consider that the level of actual participation is still largely insufficient and that the processes do not allow CSO opinions to have enough of an impact. Social partners and CSOs call for these shortcomings to be corrected in the NRRP implementation and evaluation phases by establishing more formal procedures that facilitate real exchanges. |
| --- | --- |

1.8

2.   Background

| 2.1 | On 18 December 2020, the Council of the European Union and the European Parliament reached an agreement on the RRF. In order to access funding, Member States will prepare NRRPs that set out a package of investments and reforms, in line with guidance from the European Union concerning the consultation process. Already the first guidance note, published in September, asks Member States to ‘describe any consultation and contribution of social partners, civil society and other relevant stakeholders, in the drafting and implementation of the recovery and resilience Plan’ (1). |
| --- | --- |

2.1

| 2.2 | The agreement reached by the European Parliament and the Council in December includes a paragraph on the involvement of the social partners and civil society, among others. Article 18(4)(q) requires NRRPs to set out ‘a summary of the consultation process, conducted in accordance with the national legal framework, of local and regional authorities, social partners, civil society organisations, and other relevant stakeholders, for the preparation and, where available, the implementation of the plan and how the inputs of the stakeholders are reflected in the plan’ (2). |
| --- | --- |

2.2

| 2.3 | The 2020-2023 Work Programme of the European Semester Group was adopted during the group’s first meeting on 16 December 2020. An important new element in the Work Programme was the organisation of virtual consultations by EESC members in the Member States in January 2021. The purpose of this exercise was to collect information on involvement of organised civil society (OCS) in the NRRPs so that the EESC could adopt a resolution at the February Plenary Session. |
| --- | --- |

2.3

3.   Method

| 3.1 | The data and information required for this report were collected in January 2021.
  In total, 26 national contributions were received. Consultations took place on the basis of members’ own knowledge and involved social partners and CSOs. In some countries, national economic and social councils or equivalent bodies were involved, and in others, government representatives were also consulted. |
| --- | --- |

3.1

In total, 26 national contributions were received. Consultations took place on the basis of members’ own knowledge and involved social partners and CSOs. In some countries, national economic and social councils or equivalent bodies were involved, and in others, government representatives were also consulted.

| 3.2 | The following five questions formed the basis for the consultations:






  1) | Are there mechanisms for consultation on the Recovery and Resilience Plans in your country? Do you consider them sufficient and adequate? |
| --- | --- | --- |

3.2

1)

Are there mechanisms for consultation on the Recovery and Resilience Plans in your country? Do you consider them sufficient and adequate?

| 2) | Are there different consultation mechanisms for the social partners and the rest of civil society in your country? |
| --- | --- |

2)

Are there different consultation mechanisms for the social partners and the rest of civil society in your country?

| 3) | Your country must submit its National Recovery and Resilience Plan by 30 April at the latest. Where is your country in the process? |
| --- | --- |

3)

Your country must submit its National Recovery and Resilience Plan by 30 April at the latest. Where is your country in the process?

| 4) | How does the R&R procedure differ compared to the consultation of OCS during the normal Semester procedure in your country? |
| --- | --- |

4)

How does the R&R procedure differ compared to the consultation of OCS during the normal Semester procedure in your country?

| 5) | To what extent does the R&R plan of your country correspond with the policy objectives of OCS in your country? |
| --- | --- |

5)

To what extent does the R&R plan of your country correspond with the policy objectives of OCS in your country?

4.   Observations from the results of the consultations

4.1   Question 1: Are there mechanisms for consultation on the Recovery and Resilience Plans in your country?

| 4.1.1 | The vast majority of responses reported that some form of consultation mechanism has been established by the national government in question for the involvement of OCS in the drafting of their recovery and resilience plan (RRP). In some Member States, consultations with civil society have already been carried out, whereas in others they are still ongoing or scheduled to take place at a later stage. |
| --- | --- |

4.1.1

| 4.1.2 | The mechanisms employed are varied, including submission of written proposals, high-level meetings with responsible ministers, evaluating purposely designed and returned questionnaires and round table discussions between representatives of the government and CSOs. Some Member States have also used and built on mechanisms established for consultation within the ordinary European Semester procedure, mutatis mutandis, the special new calendar of the 2021 one and the limiting circumstances of the COVID-19 pandemic. |
| --- | --- |

4.1.2

| 4.1.3 | Nevertheless, several responses pointed to a lack of real participation from civil society. One barrier for involvement identified was the apparent unwillingness of some national governments to include civil society in the drafting of their plan. Rather than the government seeking to involve civil society, consultations were often carried out at the initiative of and following appeals from the social partners and other CSOs. |
| --- | --- |

4.1.3

| 4.1.4 | Although civil society was formally included, the insufficient time reserved for civil society consultation was identified as another barrier to true involvement. Participants were critical of the tight timetables adopted by some governments, as they are likely to hinder substantive debate and consideration of civil society’s input regarding the RRPs. Hence, while a large number of Member States do have some form of consultation mechanism for OCS as part of their RRP drafting process, a significantly smaller number actually enables civil society to be truly involved and the resulting proposals to have a real impact. |
| --- | --- |

4.1.4

| 4.1.5 | Regrettably, a number of participants reported that no consultation has been carried out or is scheduled to take place in the drafting stage of their national plan. In addition, some respondents reported that, although consultations have taken place, they have so far only encompassed the social partners and not the broader OCS. |
| --- | --- |

4.1.5

| 4.1.6 | On the basis of the information that we have obtained (3), we divided the Member States into three categories in relation to the subject of this resolution: those where there has been virtually no involvement, at least so far (Denmark, Slovakia); those where there has been some formal or informal involvement but where no capacity to influence has been identified (Austria, Belgium, Czechia, Germany, Greece, Spain, Estonia, France, Croatia, Hungary, Ireland, Lithuania, Latvia, Luxembourg, the Netherlands, Poland, Portugal, Romania, Sweden, Slovenia); and finally, those where there has been more structured involvement, which in some cases has had an impact on some aspects of the plans (Bulgaria, Cyprus, Finland, Italy, Malta). |
| --- | --- |

4.1.6

| 4.1.7 | Overall, the responses reveal a strong desire on the part of OCS to contribute to the drafting of NRRPs. Respondents representing social partners and CSOs described attempts to become involved, including drawing up proposals and reaching out to government representatives. In some Member States, these initiatives have led to civil society being more involved in drafting the plans, but unfortunately, in others they appear to have fallen on deaf ears. |
| --- | --- |

4.1.7

4.2   Question 2: Are there different consultation mechanisms for the social partners and the rest of organised civil society in your country?

| 4.2.1 | The majority of Member States have different procedures for consulting the social partners and the rest of OCS. Respondents reported that the social partners are included on a more structured, institutionalised and permanent basis whereas the remaining CSOs are instead consulted in an ad hoc and informal manner. As mentioned above, a number of Member States have only consulted the social partners and not broader civil society as part of their RRP drafting process. A version is true for one Member State, where the government only consults the body of wider civil society including also the social partners but not the narrower body including only the social partners. A smaller number of Member States have opted to use a common procedure encompassing all stakeholders. |
| --- | --- |

4.2.1

4.3   Question 3: Your country must submit its National Recovery and Resilience Plan by 30 April at the latest. Where is your country in the process?

| 4.3.1 | In terms of substance, the responses gathered were mixed. While all participants reported that their national government has begun work on their RRP, Member States are at different stages of the process. |
| --- | --- |

4.3.1

| 4.3.2 | In the majority of Member States, a first version of the NRRP is being drafted by the ministries responsible, most often the Ministry of Finance. Some have concluded civil society consultations whereas others are yet to consult outside stakeholders. A number of respondents also reported that their government is consulting closely with the European Commission or planning to begin consultation shortly. |
| --- | --- |

4.3.2

| 4.3.3 | A few Member States were reported to be working on a second version of their national plan, following consultation with the European Commission at an earlier stage. |
| --- | --- |

4.3.3

4.4   Question 4: How does the R&R procedure differ compared to the consultation of OCS during the normal Semester procedure in your country?

| 4.4.1 | The responses here are also mixed and somewhat inconclusive. However, some of the same trends can be observed as in the answers to the previous questions: some respondents say that it is too early to tell, some say that there is not enough time for a proper consultation and some say that the social partners are more involved than the rest of OCS. A few report that the R&R procedure has been more open or adapted to OCS than the normal Semester procedure, but even more state that the established framework in place for consulting OCS during the normal Semester procedure is not being used for the R&R procedure. |
| --- | --- |

4.4.1

4.5   Question 5: To what extent does the R&R Plan of your country correspond with the policy objectives of OCS in your country?

| 4.5.1 | The answers to this question fall into three broad categories, roughly of the same size. One group thinks that the objectives generally correspond, either as a result of a consultation procedure or because the interests were already the same. Another group regrets that governments have ignored the public and well-known interests of OCS in drawing up the plans, and the third and final group is unable to answer, either because of a lack of solid knowledge, or because it is still too early in the process. |
| --- | --- |

4.5.1

5.   Conclusions

| 5.1 | Although the NRRP consultation processes with the social partners and CSOs have generally improved on those of the regular European Semester from previous years, the EESC considers that, in most Member States, they are far from satisfactory in relation to the justified demands of civil society and even in relation to the terms set out in the RRF Regulation. While social partners generally have more opportunities to participate, through either social dialogue or processes specific to the NRRPs, other CSOs have more limited options. |
| --- | --- |

5.1

| 5.2 | The results of the survey on which this resolution is based are consistent with those of other studies (4) carried out by pan-European CSOs on the participation of Member State CSOs in the NRRPs. According to these studies, there has been little or no real CSO participation in the majority of countries. The data we collected in January for our study show only a slight improvement in this regard. A similar level of dissatisfaction emerges from the Committee of the Regions’ (5) consultation on the involvement of regional and local political institutions in the NRRPs. |
| --- | --- |

5.2

| 5.3 | The Committee considers that real participation takes place when, in formal consultation processes based on legal rules and public and transparent procedures, CSOs are duly informed by means of written documentation, have sufficient time to analyse the government’s proposals and draw up their own proposals, which are either taken into account or justifiably refused, and which are in any case set out in minutes or public documents. When new framework conditions apply, this consultation should be repeated. Civil society participation is in no way intended to replace or call into question the primacy of parliamentary democratic institutions, only to complement them by collaborating with them. |
| --- | --- |

5.3

| 5.4 | The EESC calls on the governments of the Member States that have not established adequate procedures for consulting the social partners and CSOs to put such procedures in place as a matter of urgency and to comply with the RRF Regulation. The Committee calls on the European institutions, in particular the Commission, to use their powers to require national governments that have not done so to fulfil their obligations in this respect. It is still possible to do this within the deadlines set for the adoption of the NRRPs. The EESC shares the view of the other political and social actors that the resources for financing investment for the recovery and transformation of European economies and societies must reach the Member States and their societies as soon as possible. |
| --- | --- |

5.4

| 5.5 | The experience of civil society participation in the drafting phase of the NRRPs and the assessment of the gaps and shortcomings in this regard must be used to ensure that, in future, during the implementation phases of the NRRPs and with a view to the drafting of the 2022 NRRPs, these gaps and shortcomings are corrected. Strong involvement of social partners and CSOs more generally is a guarantee for bottom-up-driven changes that will be sustainable and effective. CSOs also have to be taken into account in the implementation of the plans as many social services are provided by CSOs. |
| --- | --- |

5.5

| 5.6 | Among the risks arising from the need for public and social players to invest considerable financial resources in a short space of time are an inability to absorb and execute the funds within the planned timeframe and inefficient use of those resources. An even more serious risk is that of corruption. While the Committee calls on national governments to put in place the necessary measures to improve management capacity and promote transparency and administrative and parliamentary control to address these risks, it stresses that the involvement of representative CSOs in monitoring the implementation of the NRRPs is a powerful tool in the fight against corruption and inefficiency. |
| --- | --- |

5.6

| 5.7 | The EESC is concerned that at the time of drafting the national reports on which this resolution is based, there is insufficient clarity in most Member States on the NRRP governance systems and the distribution of responsibilities between the central, regional and local levels for their implementation. Nor, of course, is there sufficient clarity on the appropriate mechanisms for involving OCS and social partners in the implementation, monitoring and adjustment phases of the NRRPs. |
| --- | --- |

5.7

| 5.8 | This resolution focuses on the involvement of social partners and CSOs in the NRRPs at a time when the process of drawing up the NRRPs has not yet been completed, with a view to being able to improve these processes and also push for social partners and CSOs to be properly involved in the implementation, monitoring and adjustment of the NRRPs. We are aware of the contents of the plans as expressed in the framework programmes and in the first drafts of some Member States’ NRRPs. From the answers to question 5 of the questionnaire, however, it can be deduced that among those who are speaking out at this stage of the process, in most countries — ten out of sixteen — there is broad or partial alignment between the objectives of CSOs and what is stated in the framework programmes and draft NRRPs, in keeping with the objectives and guidelines set out by the Commission and the European Parliament for NextGenerationEU and its RRF. In the remaining six countries, CSOs are critical, and in ten they do not answer, mostly because they consider it premature. |
| --- | --- |

5.8

| 5.9 | The Committee would, however, like to echo some concerns and demands expressed by social partners and CSOs regarding the content of the NRRPs:






  — | Investments consistent with the objectives of the Green Deal and the digital transformation — and the associated just transitions — and those related to national social vulnerabilities, employment, health and social protection, together with the implementation of the necessary structural reforms indicated in the 2019 and 2020 country-specific recommendations, should lead to a shift towards a more productivity-enhancing, environmentally and socially sustainable economic model. |
| --- | --- | --- |

5.9

—

Investments consistent with the objectives of the Green Deal and the digital transformation — and the associated just transitions — and those related to national social vulnerabilities, employment, health and social protection, together with the implementation of the necessary structural reforms indicated in the 2019 and 2020 country-specific recommendations, should lead to a shift towards a more productivity-enhancing, environmentally and socially sustainable economic model.

| — | The NRRPs should make explicit the relationship between investment projects and each country’s reform agenda, setting out appropriate indicators, timetables and monitoring methodology. |
| --- | --- |

—

The NRRPs should make explicit the relationship between investment projects and each country’s reform agenda, setting out appropriate indicators, timetables and monitoring methodology.

| — | The NGEU programme offers unprecedented financial support by the EU to national budgets. When assessing the national plans, the Commission should demand that the European funds will also be used to create real European added value by supporting cross-border infrastructure investments and projects. There are clear positive economic and social spill-over effects of cross-border investments, which need to be promoted more strongly. |
| --- | --- |

—

The NGEU programme offers unprecedented financial support by the EU to national budgets. When assessing the national plans, the Commission should demand that the European funds will also be used to create real European added value by supporting cross-border infrastructure investments and projects. There are clear positive economic and social spill-over effects of cross-border investments, which need to be promoted more strongly.

| — | Investments under the NRRPs should serve as leverage for other private investments in the sectors identified as priorities in these plans. Investment programmes must take sufficient account of eligible projects coming from SMEs and social economy enterprises. |
| --- | --- |

—

Investments under the NRRPs should serve as leverage for other private investments in the sectors identified as priorities in these plans. Investment programmes must take sufficient account of eligible projects coming from SMEs and social economy enterprises.

| — | As the UN Special Rapporteur on extreme poverty and human rights, Olivier De Schutter, expressed very clearly in his speech at the Committee’s plenary session on 28 January 2021, there is a risk that social issues, including instruments to combat poverty and inequality, will not be given the necessary weight in the NRRPs. It is important to underline how high the risk is that the digital gap will not be reduced, considering that the digitalisation of the economy and society is one of NextGenerationEU’s main focuses. |
| --- | --- |

—

As the UN Special Rapporteur on extreme poverty and human rights, Olivier De Schutter, expressed very clearly in his speech at the Committee’s plenary session on 28 January 2021, there is a risk that social issues, including instruments to combat poverty and inequality, will not be given the necessary weight in the NRRPs. It is important to underline how high the risk is that the digital gap will not be reduced, considering that the digitalisation of the economy and society is one of NextGenerationEU’s main focuses.

| — | Investments in high-quality education, lifelong learning and R&D are essential to drive and complement the economic and social changes that NextGenerationEU promotes, as well as investments that strengthen the health systems and public health policies of societies that have been hit hard by the COVID-19 pandemic. |
| --- | --- |

—

Investments in high-quality education, lifelong learning and R&D are essential to drive and complement the economic and social changes that NextGenerationEU promotes, as well as investments that strengthen the health systems and public health policies of societies that have been hit hard by the COVID-19 pandemic.

| 5.10 | The EESC calls on national governments and the EU institutions to take account of these concerns of European civil society regarding the content of the NRRPs when adopting them. |
| --- | --- |

5.10

Brussels, 25 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

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(1)  SWD(2020) 205 final.

1

(2)  OJ L 57, 18.2.2021, p. 17.

2

(3)  The reports from the various Member States are analysed in the annex to this resolution. All this material is available on the Committee’s website.

3

(4)  Civil Society Europe and the European Center for Not-for-Profit Law: Participation of civil society organisations in the preparation of the EU National Recovery and Resilience Plans; December 2020.

4

(5)  CoR-CEMR: The involvement of municipalities, cities and regions in the preparation of the national Recovery and Resilience Plans; 20 January 2021.

5

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III Preparatory acts

European Economic and Social Committee

558th plenary session of the European Economic and Social Committee – Interactio, 24.2.2021-25.2.2021

| 30.4.2021 | EN | Official Journal of the European Union | C 155/8 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/8

---

Opinion of the European Economic and Social Committee on:

Communication from the Commission to the European Parliament and the Council – An Action Plan for Fair and Simple Taxation Supporting the Recovery Strategy

(COM(2020) 312 final)

Communication from the Commission to the European Parliament and the Council on Tax Good Governance in the EU and beyond

(COM(2020) 313 final)

Proposal for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation

(COM(2020) 314 final – 2020/0148 (CNS))

(2021/C 155/02)

| Rapporteur: | Krister ANDERSSON |
| --- | --- |
| Co-rapporteur: | Javier DOZ ORRIT |

Rapporteur:

Krister ANDERSSON

Co-rapporteur:

Javier DOZ ORRIT

| Referral | Council of the European Union, 28.7.2020
  European Commission, 12.8.2020 |
| --- | --- |
| Legal basis | Articles 113 and 115 of the Treaty on the Functioning of the European Union |
| Section responsible | Economic and Monetary Union and Economic and Social Cohesion |
| Adopted in section | 12.2.2021 |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 220/0/7 |

Referral

Council of the European Union, 28.7.2020

European Commission, 12.8.2020

Legal basis

Articles 113 and 115 of the Treaty on the Functioning of the European Union

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted in section

12.2.2021

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

220/0/7

1.   Conclusions and recommendations

| 1.1. | The EESC broadly supports the Commission’s legislative proposals and praises their coordination with the global discussions carried out at the OECD/Inclusive Framework level in order to achieve a global consensus. |
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1.1.

| 1.2. | The EESC agrees with the Commission’s approach that good tax governance, the basis for fair taxation, requires tax transparency through the exchange of information between tax authorities, fair tax competition, the absence of harmful tax measures, more efficient tax measures and the implementation of internationally agreed rules. |
| --- | --- |

1.2.

| 1.3. | The EESC furthermore agrees with the Commission’s acknowledgement that tax competition is not an issue in itself (1). At the same time, there is a concern about the existence of unfair tax competition within the EU which promotes tax avoidance. The Committee believes that an effective monetary union requires a coherent fiscal policy and consistency between the fiscal rules of its members. |
| --- | --- |

1.3.

| 1.4. | The EESC supports the Commission initiative on reviewing the Code of Good Conduct and praises the fact that the Commission proposal takes the OECD’s work and the importance of embracing internationally agreed standards into due consideration, especially with regard to global principles leading to a minimum effective corporate tax rate. |
| --- | --- |

1.4.

| 1.5. | The EESC deems that the result and achievements of the Code of Conduct should be more regularly updated and publicly available to civil society, in line with the Commission objective of making the concrete activity and results of the Code more transparent. |
| --- | --- |

1.5.

| 1.6. | The EESC supports the Commission decision to carry out a legislative intervention aimed at enhancing cooperation among tax authorities and increased harmonisation of procedural rules across the internal market. |
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1.6.

| 1.7. | The EESC shares the Commission’s view that tax fraud and evasion remain a threat to public finances, especially in times of crisis, as clearly demonstrated by the most recent estimations by the Commission; revenue losses in the EU due to international tax evasion by individuals — covering personal income tax, capital income taxes, as well as wealth and inheritance taxes — have indeed been estimated at EUR 46 bn in its most recent estimate. The VAT gap is estimated at around EUR 140 bn, of which some EUR 50 bn is related to cross-border frauds (2). |
| --- | --- |

1.7.

| 1.8. | The EESC notes the reduction of the estimated gap (3) due to corporate tax avoidance at some EUR 35 bn per year, according to several estimates, down from the previous Commission estimations of some EUR 50-70 bn before anti-BEPS measures were introduced and the correlation, explored by the Commission, between such an improvement and the legislative efforts on tax avoidance carried out by the previous Commission (4). However, it remains a cause for concern in a situation where public spending to sustain the economy and society is so important. |
| --- | --- |

1.8.

| 1.9. | Efficiency cannot be achieved without an intensive fight against tax crime and tax evasion, which must be improved through enhanced administrative cooperation and a more harmonised legal framework. A fiscal framework cannot be seen as fair if some Member States have facilities to circumvent it easily, which discourages others and creates inefficiency. |
| --- | --- |

1.9.

| 1.10. | Given the complexity currently generated by 27 different tax systems and considering how such a plurality of models creates burdens for businesses and individuals operating across borders, the EESC encourages Member States, while respecting tax sovereignty, to harmonise tax reporting requirements and to improve cooperation between tax administrations. |
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1.10.

| 1.11. | The 25 actions planned by the Commission seem reasonable. Most of them are related to VAT, which is appropriate due to the high level of revenue losses in the VAT area. However, they are described very briefly and it remains difficult, for the moment, to fully assess the specific impact of such actions on the everyday operability of European citizens and businesses. |
| --- | --- |

1.11.

| 1.12. | The adoption of a single VAT registration is very welcome. It is an important step towards the creation of a deepened single market, reducing the uncertainty and costs for cross-border operations. |
| --- | --- |

1.12.

| 1.13. | The EESC welcomes the European Commission’s proposal to modernise and harmonise VAT reporting requirements through the increased use of transaction-based (‘real time’) reporting and e-invoicing. |
| --- | --- |

1.13.

| 1.14. | The EESC also welcomes a review of whether VAT should be levied on financial services. A thorough impact assessment is required including the VAT treatment of financial services in non-EU countries. |
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1.14.

| 1.15. | The EESC supports the Commission initiative for an ‘EU cooperative compliance framework’, based on greater trust and cooperation among multiple tax administrations to solve cross-border corporate tax issues. It is important that SMEs are given equal treatment as larger businesses in this framework. The Committee notes the substantially higher compliance burden for SMEs than for large multinational firms and urges the Commission to take steps to reduce the burden on SMEs. |
| --- | --- |

1.15.

| 1.16. | The EESC considers the issue of tax reimbursement crucial, in particular in times of crisis such as currently, which imply high risk in terms of scarce liquidity for both individuals and enterprises. |
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1.16.

| 1.17. | The EESC would urge the Commission to assess how a simpler, more harmonised VAT bad debt relief mechanism can be brought forward. This mechanism should ensure that VAT which businesses have not been able to collect from their customers but have already paid to the tax authorities can be claimed by businesses from the tax authorities in a swift and timely manner. |
| --- | --- |

1.17.

| 1.18. | The EESC considers it very important to have clear and internationally coherent tax and employment rules for digital platforms. The EESC supports the effort to increase the transparency of digital platforms in order to prevent inconsistent declarations of income, which pose a high risk of tax evasion. Reporting requirements and tax forms should be the same across Member States. |
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1.18.

| 1.19. | The EESC underlines that joint audits, which are in principle a useful and effective tool, should be performed respecting the rights of taxpayers, including the Charter of Fundamental Rights of the European Union, especially with regard to the rights of defence and the predictability of both the procedural and substantial rules concerning them and the collection of evidence by the prosecuting tax authorities regarding possible sanctions. |
| --- | --- |

1.19.

| 1.20. | Although there has been progress in the conduct of countries and jurisdictions that were on the list of those non-cooperative for tax purposes, the overall volume of money defrauded, evaded, eluded and laundered remains so high that increased efforts must be made. |
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1.20.

| 1.21. | The EESC embraces the Commission’s view that it is time to review the listing and see how it can be more effective and fair, also considering the new challenges of a global digitalised economy. The EESC also supports the Commission’s criterion of giving specific low risk and low capacity jurisdictions the opportunity to improve their tax good governance and transparency standards within a reasonable period of time when they are, or could be, put on the list. |
| --- | --- |

1.21.

| 1.22. | The EESC has proposed (5) launching a European pact to effectively combat tax fraud, evasion and avoidance and money laundering. The EESC called on the European Commission to promote a political initiative involving national governments and the other European institutions in achieving this goal, fostering the consensus needed for this and involving civil society. Cooperation between Member States should be the main pillar of the pact. |
| --- | --- |

1.22.

| 1.23. | The EESC stresses that cooperation between civil society organisations at large and governments could contribute to raising awareness regarding environmental taxes and contribute to development by creating more equitable and sustainable societies in developing and developed countries. |
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1.23.

| 1.24. | The EESC encourages the Commission to continue its evaluation of the effectiveness of earlier directives on administrative cooperation. |
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1.24.

2.   Context and Commission proposals

2.1.   Context

| 2.1.1. | Achieving fair and efficient taxation is one of the main objectives of the Commission (6) during the current legislature. Such an objective is even more strategic in the aftermath of the COVID-19 crisis. Tax rules are, according to the Treaty, the responsibility of Member States. Member States can, however, agree to adopt directives and regulations to enhance the functioning of the internal market. An effective monetary union requires a coherent fiscal policy and consistency between the fiscal rules of its members. |
| --- | --- |

2.1.1.

| 2.1.2. | The COVID-19 outbreak has disrupted economies across the internal market. Moreover, the EU is facing the COVID-19 crisis during transformative times, characterised by environmental challenges, continuous digital innovation and growing inequality among citizens. Member States and the European institutions are therefore required to put forward an unprecedented response, using all the available resources and tools. |
| --- | --- |

2.1.2.

| 2.1.3. | The Commission proposals (7) aim both at developing an appropriate response to the COVID-19 crisis and at managing the transition to a greener and more digital scenario, in line with the principles of a social market economy enshrined in the Treaties. |
| --- | --- |

2.1.3.

| 2.1.4. | Fair and efficient taxation plays an important role in this respect. An effective response to the major challenges triggered by the crisis largely depends on the possibility for businesses to continue domestic and cross-border trade, on a level playing field, supported by an efficient and simple tax system, and on Member States, which need to secure the tax revenues needed to finance the recovery through fair taxation of citizens and businesses. The fight against tax fraud, tax avoidance and evasion as well as supporting European businesses in simplifying and harmonising their day-to-day tax administration are crucial in order to effectively cope with the current challenges (8). |
| --- | --- |

2.1.4.

| 2.1.5. | Taxation is also a policy instrument to achieve climate neutrality by 2050 (9), as well as the other environmental objectives of the European Green Deal (10). Bringing adequate tax revenues to public budgets in order to support a green transition is therefore of paramount importance. At the same time an unfavourable demographic development with an ageing population must be recognised in economic policies. |
| --- | --- |

2.1.5.

| 2.1.6. | The Commission proposal setting an action plan for more efficient and fair taxation is divided into three different parts. First, a Communication laying down measures aimed at reducing obstacles related to taxation for businesses in the single market. In particular, the Commission is pursuing tax simplification as a tool to improve the business environment. Second, a legislative proposal to revise the directive on administrative cooperation through an automatic exchange of information between tax authorities, able to allow adequate taxation of incomes generated by sellers on digital platforms. Third, the Commission issued a Communication on Tax good governance in the EU and beyond to improve tax good governance both in domestic and external jurisdictions. |
| --- | --- |

2.1.6.

| 2.1.7. | The Commission notes that the Action Plan is part of a wider and more ambitious tax programme for the EU which, in the near future, will include initiatives on: (i) environmental taxation; (ii) a reform of corporate taxation aimed at realigning taxing rights with value creation and setting a minimum level of effective taxation on business profits; (iii) a recommendation that Member States make their financial support to EU companies conditional on the absence of links between these companies and the countries and territories (11) on the European Union’s list of non-cooperative countries and territories; and (iv) determining how proposals on taxation are to be adopted under the ordinary legislative procedure of Article 116 of the TFEU. |
| --- | --- |

2.1.7.

| 2.1.8. | The EESC has in numerous opinions expressed its views on measures needed to enhance the efficiency of the single market, increasing the EU’s own resources and kick-starting a debate on qualified majority voting on tax matters. The EESC now asks for action on the Commission proposals on the package for fair and simple taxation as urgently as possible. |
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2.1.8.

2.2.   Action Plan for Fair and Simple Taxation

| 2.2.1. | In its Communication on tax simplification, the Commission sets out a new approach, combining actions against tax fraud and tax evasion with measures aimed at simplifying the lives of taxpayers. The plan comprises 25 actions, whose implementation is progressively scheduled over the coming years until 2024 (12). |
| --- | --- |

2.2.1.

| 2.2.2. | Specific actions have been planned with regard to registration duties (identification and VAT registration). Effective and efficient registration is considered crucial to ensure all taxpayers pay their fair share. As a consequence, the Commission promotes several actions to keep the databases holding taxpayers’ data effectively working and constantly up do date. Simplicity in registration is also considered important, especially when taxpayers move across Member States. |
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2.2.2.

| 2.2.3. | Another set of specific actions is planned as far as reporting obligations are concerned. Reporting from taxpayers should be as efficient as possible and based on mutual collaboration with tax authorities. Tax returns should be simple and the data requested kept to a minimum and processed through straightforward procedures carried out via a one-stop-shop digital service. Many Member States have eased some payment rules for VAT as a response to the COVID-19 pandemic. |
| --- | --- |

2.2.3.

| 2.2.4. | Additional actions are expected to make the payment of taxes easier, specifically by making electronic payment methods, for example, smartphone applications, available to taxpayers (13). The amount of tax due should be correct from the start to avoid burdensome refund procedures if possible. When refunds are expected, tax administrations should handle them quickly, in order to prevent cash flow problems for taxpayers. |
| --- | --- |

2.2.4.

| 2.2.5. | Providing legal certainty to taxpayers is a primary objective of the Commission action plan, alongside effective management of disputes when they arise. Disputes should be prevented and, when they occur, swiftly resolved between Member States within their legal systems and European Union law. |
| --- | --- |

2.2.5.

| 2.2.6. | The Commission deems it important to allow the opportunity to correct or clarify any misunderstandings in order to avoid the escalation of disputes. The prevention of litigation is therefore encouraged, together with the fast resolution of unsettled cases to save time and money for both taxpayers and tax authorities. Some stakeholders have already expressed their preference for further intervention at EU level to prevent and solve disputes (14). |
| --- | --- |

2.2.6.

2.3.   Administrative cooperation between tax authorities

| 2.3.1. | In the past years, the EU has focused its efforts on tackling tax fraud, tax evasion and aggressive tax planning, as well as on boosting transparency through adequate cooperation between tax authorities. Even though major improvements have been made in exchanging information, the Commission proposal underlines the need to further improve the existing provisions. |
| --- | --- |

2.3.1.

| 2.3.2. | In particular, the Commission aims to better address the challenges posed by the digitalisation of the economy with particular regard to the digital platform, the use of which make the traceability and detection of taxable events by tax authorities difficult (15). The problem is intensified when such transactions are performed through the use of a digital platform established in another Member State or a jurisdiction outside of the EU (16). |
| --- | --- |

2.3.2.

| 2.3.3. | There appears to be a consensus among the representatives of digital platform operators on the benefits of having a standardised EU legal framework for gathering information from platforms and on the possible advantages of a solution resembling the VAT one-stop-shop. |
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2.3.3.

| 2.3.4. | As for the matter of exchange of information on request, the Commission proposal focuses on the foreseeable relevance concept. Article 5a provides for a definition of the standard of foreseeable relevance that applies in case of a request for information, setting the standard and procedural requirements to be observed by the involved authority. The request for information can relate to one or more taxpayers, as long as they are individually identified. The standard of foreseeable relevance should not apply where request for information is sent as a follow up to the exchanged cross-border ruling or an advance pricing agreement. |
| --- | --- |

2.3.4.

| 2.3.5. | Before requesting information, the tax authority is obliged to exhaust all the usual sources of information that it could have used for obtaining the information requested and pursue all the available means. However, if by doing so the requesting authority faces disproportionate difficulties and runs the risk of jeopardising the achievement of its objectives, the obligation does not apply. In case the requesting authority did not respect this obligation, the requested authority may refuse to provide the information. |
| --- | --- |

2.3.5.

| 2.3.6. | Section IIa lays down a legal framework for the conduct of joint audits. A joint audit is thereby defined as an administrative enquiry jointly conducted by the competent authorities of two or more Member States. The competent authorities of the Member States involved proceed in coordination, in accordance with their legal systems, to examine a case related to one or more tax subjects of common or complementary interest to them. |
| --- | --- |

2.3.6.

2.4.   Tax Good Governance in the EU and beyond

| 2.4.1. | The European Commission’s Communication on Good Tax Governance starts from the fact that fair taxation is central to the EU’s social and economic model and that good tax governance is the basis for fair taxation and sustainable revenues to sustain that model (17). The Communication contains proposals to: (i) reform the Code of Conduct for business taxation; (ii) review the list of non-cooperative countries and territories; and (iii) promote good tax governance at international level. |
| --- | --- |

2.4.1.

| 2.4.2. | Since its creation in 1997, the Code of Conduct for Business Taxation (henceforth ‘Code’) (18) has been the EU’s primary instrument to prevent harmful tax competition, setting principles for fair tax competition and to determine whether a tax regime is harmful or not (19). |
| --- | --- |

2.4.2.

| 2.4.3. | Despite its achievements, the Code needs to be modernised. The nature and form of tax competition have changed substantially in the last years, due to globalisation, digitalisation, the growing role of multinationals in the world economy and complex incentive schemes introduced by some Member States. |
| --- | --- |

2.4.3.

| 2.4.4. | More specifically, the Commission aims to widen the scope of the Code to cover all measures which pose a risk of unfair tax competition. In addition, the Code should also be updated to ensure as many cases of very low taxation as possible are duly examined inside and outside the EU. |
| --- | --- |

2.4.4.

| 2.4.5. | Principles set out in the Code are among the criteria used to assess third countries under the EU listing of non-cooperative tax jurisdictions. The Commission intends to review the geographical scope of the EU list, updating the original scoreboard used to select the most relevant jurisdictions to screen. |
| --- | --- |

2.4.5.

| 2.4.6. | The reflections on the geographical scope of the EU list will also consider the criteria that selected jurisdictions must comply with. Removing any jurisdiction that is currently in the scope of the EU list would impact the level playing field and undermine the positive work that most of these jurisdictions have already done. However, there should be a reflection on whether the EU listing criteria could be applied in a more targeted way for certain jurisdictions. |
| --- | --- |

2.4.6.

| 2.4.7. | In its dialogue with third countries — and consistently with the approach embraced within the EU — the Commission will also put emphasis on environmental objectives, as well as on the ‘polluter- pays principle’, which requires putting a price on negative environmental externalities. According to the Commission Communication, there is under-explored potential for environmental taxes to contribute to sustainable development globally and to more equitable societies in developing countries. Cooperation between civil society organisations at large could contribute to awareness raising in this area. |
| --- | --- |

2.4.7.

| 2.4.8. | Based on the current application of a legally binding link between good governance standards and the use of EU funds, the Commission considers that such funds could be better used to reinforce tax good governance principles (20). In this respect, the Commission also urges Member States to reflect the EU requirements in their national funding policies and in the compliance rules applied by their promotional banks and development agencies. |
| --- | --- |

2.4.8.

| 2.4.9. | The Commission also put forward a recommendation advising Member States to make their financial support conditional on the absence of links between the beneficiary undertakings and jurisdictions inserted into the list of non-cooperative jurisdictions for tax purposes. The Commission adds, however, that a carve-out should be available to those enterprises which have substantial economic presence (supported by staff, equipment, assets and premises) in the listed jurisdictions. The efforts of Member States in this field must be implemented consistently with the need to ensure international tax fairness. |
| --- | --- |

2.4.9.

3.   General and specific comments

3.1.   Action Plan for Fair and Simple Taxation

| 3.1.1. | The EESC supports the Commission’s legislative proposals and praises their coordination with the global discussions carried out at the OECD/Inclusive Framework level in order to achieve a global consensus (21). It draws particular attention to the urgency of reaching an agreement on uniform rules on how to allocate taxable profits among countries at OECD/Inclusive Framework level as a consequence of the ongoing rapid digitalisation of economies and the need to combat tax avoidance effectively. |
| --- | --- |

3.1.1.

| 3.1.2. | The EESC also appreciates the regulatory approach embraced by the Commission in order to develop its proposals and throughout the legislative provisions under examination. The objective is to improve the general efficiency of taxation systems, so that they are fair systems which provide the revenue necessary for the conduct of public policy while at the same time providing job and growth opportunities. |
| --- | --- |

3.1.2.

| 3.1.3. | The EESC shares the Commission’s view that tax fraud and evasion remain a threat to public finances, especially in times of crisis, as clearly demonstrated by the most recent estimations recalled by the proposals. According to the Commission, revenue losses in the EU due to international tax evasion by individuals — covering personal income tax, capital income taxes, as well as wealth and inheritance taxes — have indeed been estimated at EUR 46 bn in 2016. The VAT gap, in turn, is estimated at around EUR 140 bn, of which some EUR 50 bn is related to cross-border fraud (22). Individual Member States must take significant steps to tackle their national VAT gap. |
| --- | --- |

3.1.3.

| 3.1.4. | The EESC welcomes the reduction of the estimated gap due to corporate tax avoidance at around EUR 35 bn per year from the previous Commission estimations of EUR 50-70 bn and the correlation, explored by the Commission, between such an improvement and the legislative efforts on tax avoidance carried out by the previous Commission (more than 20 tax directives in five years) (23). |
| --- | --- |

3.1.4.

| 3.1.5. | In order to fully support individuals and enterprises during the times of hardship brought about by the COVID-19 crisis, the EESC urges the Commission to further work on the reduction of compliance costs related to tax obligations. Estimated tax compliance costs for large companies amount to about 2 % of taxes paid, while for SMEs the estimate is about 30 % of taxes paid. |
| --- | --- |

3.1.5.

| 3.1.6. | Given the complexity currently generated by 27 different fiscal systems and considering how such a plurality of models makes life difficult for businesses and individuals operating across borders, the EESC encourages Member States to harmonise tax reporting requirements and to improve cooperation between tax administrations. The renewed and expanded work of the Code of Conduct Group must eliminate harmful tax measures to create a level playing field and contribute, together with legislative reforms, to promote sufficient levels of tax convergence to avoid unfair tax competition. |
| --- | --- |

3.1.6.

| 3.1.7. | The 25 actions planned by the Commission seem reasonable. The EESC broadly supports them. Most of them are related to VAT, which is appropriate due to the high level of revenue losses in the VAT area. However, the actions are described very briefly and it remains difficult, for the moment, to fully assess the specific impact of such actions on the everyday operability of European citizens and businesses. Member States have to act decisively to enforce their national rules and decrease national VAT problems and at the same time cooperate more firmly across borders. |
| --- | --- |

3.1.7.

| 3.1.8. | The adoption of a single VAT registration, through a continued extension of the OSS, similar to the e-commerce package, is very welcome. Even though no more details are given on what sectors will be covered, an expansion of the OSS to Articles 36-39 of Council Directive 2006/112/EC (24) (‘VAT directive’), covering B2C supplies of goods, can be considered a very significant step forward. For example, expanding the OSS to cross-border supplies of gas, electricity, heat or cooling energy (Article 39 of the VAT directive) could also be helpful in deepening the EU energy market and aiding the energy transition. |
| --- | --- |

3.1.8.

| 3.1.9. | The EESC welcomes the European Commission’s proposal to modernise and harmonise VAT reporting requirements through increased use of transaction-based (‘real time’) reporting and e-invoicing. Transaction-based reporting allows tax administrations to have a complete overview of the different supply chains in real time, leading to better targeted audits and much earlier detection of fraud and potentially risky traders. Reporting requirements must, however, be easy to abide by and not entail high administrative costs or costly investment spending, in particular for SMEs (25). Similarly, a greater use and harmonised standard of e-invoicing could lower storage and compliance costs for businesses and would improve the fight against VAT fraud. |
| --- | --- |

3.1.9.

| 3.1.10. | The EESC also welcomes a review of whether VAT should be levied on financial services. Many businesses encounter extra costs since some firms or financial institutions are not liable for VAT. Furthermore, exempt entities cannot claim deductions for input VAT while the created value added is not taxed by VAT. It is a complex matter and the EESC expects comprehensive impact assessments to be conducted. The EESC notes that an increase in VAT revenues would also have a positive implication for the EU budget. |
| --- | --- |

3.1.10.

| 3.1.11. | The EESC notes that Member States have the option of using a reverse charge system to combat VAT fraud. Such an option has been used to combat VAT carousel fraud. The EESC calls for a Commission assessment of which method is most effective and has the least administrative burden to address carousel fraud. |
| --- | --- |

3.1.11.

| 3.1.12. | Tax administrations rely on taxpayers to provide them with the correct information, and some Member States have installed ‘cooperative compliance’ schemes to enhance this partnership. Unfortunately, these schemes are currently only working at the national level. In this light, the EESC supports the Commission initiative for a ‘EU cooperative compliance framework’, based on greater trust and cooperation among multiple tax administrations to solve cross-border corporate tax issues. It is important that SMEs are given equal treatment as larger businesses in this framework. |
| --- | --- |

3.1.12.

| 3.1.13. | However, it is still not clear how this EU cooperative compliance framework will work in practice and the EESC is eager to evaluate such developments and to provide its constructive contribution during the development and implementation process. |
| --- | --- |

3.1.13.

| 3.1.14. | On first evaluation, the preventive dialogue to solve cross-border tax disputes planned by the Commission seems a useful and positive development, also considering that it has been a long-standing request from the business community. A harmonised approach by several Member States would be strongly welcomed, even though it remains to be evaluated how such an approach can be concretely implemented, starting from the current heterogeneous regulatory scenario (26). |
| --- | --- |

3.1.14.

| 3.1.15. | The issue of tax reimbursement is always crucial, and especially in times of crisis such as currently, which imply high risk in terms of scarce liquidity for both individuals and enterprises. During the COVID-19 pandemic, several countries increased the speed with which VAT refunds and reimbursements in general were paid in order to ensure businesses had enough cash to cope with an unprecedented and disruptive economic situation. |
| --- | --- |

3.1.15.

| 3.1.16. | Given that some businesses are already suffering liquidity issues, invoices might be going to be paid with a delay or even not at all in the end, with the consequence that businesses that charged VAT in their invoices have to submit the amount to the tax authorities in the relevant VAT return period without VAT having been received (so-called ‘bad debt’). In this light, the EESC would also urge the European Commission to assess how a simpler, more harmonised VAT bad debt relief mechanism can be brought forward. This mechanism should ensure that VAT which businesses have not been able to collect from their customers but have already paid to the tax authorities can be reclaimed by businesses from the tax authorities in a swift and timely manner. |
| --- | --- |

3.1.16.

| 3.1.17. | The EESC urges national tax administrations to continue such a swift management of reimbursement, both with regard to direct and indirect taxes, suggesting a harmonised administrative approach across Europe and noting that a common system of withholding taxes for cross-border portfolio investments would be an initial step forward. |
| --- | --- |

3.1.17.

| 3.1.18. | Tax fraud, tax evasion and related offences are prosecuted by the national courts of the Member States under a wide variety of criminal laws. However, these tax offences have, in many cases, a transnational dimension. The Committee believes that it is important to take this and the penalty structure into account, in particular in the case of joint audits between Member States. An assessment of the implications of differing penalties among Member States should be undertaken. |
| --- | --- |

3.1.18.

| 3.1.19. | The EESC welcomes the Commission’s initiative regarding a recommendation on Taxpayer’s Rights in the Single Market. Providing Member States with an overview of best-practices in the area of tax in terms of simplification and digitalisation can help smoothen the relationship between taxpayers and tax authorities across the EU, to strengthen citizens’ tax awareness and improve the collection of revenue. The EESC considers this a good example of a soft-law initiative. |
| --- | --- |

3.1.19.

3.2.   Administrative cooperation between tax authorities

| 3.2.1. | The EESC supports the Commission decision to carry out a legislative intervention aimed at enhancing cooperation among tax authorities and increased harmonisation of procedural rules across the internal market. |
| --- | --- |

3.2.1.

| 3.2.2. | The proposal is indeed fully in line with the principle of subsidiarity set forth by Article 5 TFEU, given that it envisages an intervention of the European legislator to address issues that cannot be adequately regulated by Member States. |
| --- | --- |

3.2.2.

| 3.2.3. | The EESC supports the intention to strengthen Eurofisc’s competences, so that it becomes a reference centre on cross-border tax crimes. |
| --- | --- |

3.2.3.

| 3.2.4. | The application of existing provisions of the Directive has indeed proved that there are significant discrepancies among Member States, since some Member States are willing to fully cooperate and exchange information, while others apply a restrictive approach or even reject exchanges of information. |
| --- | --- |

3.2.4.

| 3.2.5. | The EESC also supports the effort to increase the transparency of digital platforms in order to prevent inconsistent declarations of income, which pose a high risk of tax evasion. Although some Member States have imposed a reporting obligation in their national legal systems, experience shows that national provisions against tax evasion are not always fully effective, especially when targeting cross-border activities. Legal certainty and clarity can therefore be ensured by a single set of reporting requirements and tax forms applying to all Member States. |
| --- | --- |

3.2.5.

| 3.2.6. | The proportionality of the Commission proposal with regard to the procedural cooperation among national tax authorities is also welcomed by the EESC, since the modifications put forward do not appear to go beyond what is necessary to achieve the objective of a more effective exchange of information and better administrative cooperation. |
| --- | --- |

3.2.6.

| 3.2.7. | The system of sanctions for platform operators who do not respect their declaration obligations, as indicated in Article 25a of the proposal for the DAC 7 directive, even if it is a national competence, must be applied as homogeneously as possible in all states to ensure its effectiveness. |
| --- | --- |

3.2.7.

| 3.2.8. | Considering that the identified distortions regarding platform operators in the functioning of the internal market go beyond the borders of single Member States, EU common rules represent the minimum intervention necessary for tackling the problems in an effective manner. In this line of reasoning, the EESC encourages the Commission to further develop its role and collaboration within the OECD on the digitalisation of the economies, in order to achieve a common international approach between tax authorities to tackle global issues. |
| --- | --- |

3.2.8.

| 3.2.9. | Article 12a(6) determines that the joint audit shall be carried out in accordance with the procedural agreements applicable in the Member State where the actions of an audit take place. The evidence collected during the joint audit should be mutually recognised by all competent authorities of the participating Member States. |
| --- | --- |

3.2.9.

| 3.2.10. | The EESC underlines that joint audits, which are in principle a useful and very effective tool, should be performed respecting the fundamental rights of taxpayers, rigorously observing the principles of the Charter of Fundamental Rights of the European Union (27) with regard to the rights of defence and the predictability of both the procedural and substantial rules concerning them and the collection of evidence by the prosecuting tax authorities regarding possible sanctions. |
| --- | --- |

3.2.10.

| 3.2.11. | In particular, the set of data to be exchanged and transmitted by tax administrations should be defined in such a way as to capture only the minimum data necessary to detect non-compliant underreporting or non-reporting, in line with the GDPR obligations (28), which should be interpreted and applied rigorously. Any possible negative impact on personal data should be minimised by adequate IT and procedural measures with specific regard to their collection, elaboration and subsequent storage. |
| --- | --- |

3.2.11.

| 3.2.12. | The EESC stresses that in line with GDPR rules, the use of Group requests must have a well-founded motivation and be carried out in a careful manner so as not to infringe upon the rights of natural and legal persons, and not lead to so-called ‘fishing expeditions’. |
| --- | --- |

3.2.12.

| 3.2.13. | The EESC encourages the Commission to continue its evaluation of the effectiveness of earlier directives on administrative cooperation (29). |
| --- | --- |

3.2.13.

3.3.   Tax Good Governance in the EU and beyond

| 3.3.1. | The EESC agrees with the Commission’s approach that good tax governance, the basis for fair taxation, requires tax transparency through the exchange of information between tax authorities, avoiding unfair tax competition, the absence of harmful tax measures and the implementation of internationally agreed rules. It also agrees with the European Parliament that the EU should take decisive action to tackle harmful tax competition and aggressive tax planning, in particular in tax havens. |
| --- | --- |

3.3.1.

| 3.3.2. | The EESC supports the Commission initiative on reviewing the Code of Good Conduct and praises the fact that the Commission proposal takes the OECD’s work and the importance of embracing internationally agreed standards into due consideration, especially with regard to global principles leading to a minimum effective corporate tax rate. |
| --- | --- |

3.3.2.

| 3.3.3. | The EESC deems that the result and achievements of the Code of Conduct should be more regularly updated and publicly available to civil society, in line with the Commission objective of making the concrete activity and results of the Code more transparent. |
| --- | --- |

3.3.3.

| 3.3.4. | The Commission’s approach acknowledges that tax competition is not an issue in itself (30). At the same time, however, the Commission and the European Parliament have on numerous occasions expressed concern about the existence of unfair tax competition within the EU which promotes tax avoidance. The Committee believes that serious work is needed to resolve this complex problem. It has recently adopted an opinion (31), in which it proposes launching a European pact to effectively combat tax fraud, evasion and avoidance and money laundering. The EESC called on the European Commission to promote a political initiative involving governments and the other European institutions to achieve this goal fostering the consensus needed for this and involving civil society. Cooperation between Member States should be the main pillar of the pact. |
| --- | --- |

3.3.4.

| 3.3.5. | Widening the scope of the Code of Conduct in the EU in order to cover other measures that affect tax competition is also a regulatory choice supported by the EESC. An update to ensure that regimes leading to very low or no taxation inside or outside the EU are examined is overdue. However, the Code is a non-binding instrument that must deal with those issues that are not regulated by European legislation. |
| --- | --- |

3.3.5.

| 3.3.6. | The Commission argues there is also a need to make the listing process clearer to third countries, boosting transparency as to why a jurisdiction is put on the list or not. Enhanced harmonisation of the standards adopted by the EU Member States and better coordination between national lists and the EU list would be useful, since the EU and several Member States follow different standards, which may create confusion. |
| --- | --- |

3.3.6.

| 3.3.7. | The Commission also assesses the so-called tax haven blacklist, which has been in place since 2017, and has examined hundreds of harmful tax regimes globally, with many listed jurisdictions having made commitments to the Council to address concerns regarding unfair tax competition and limited transparency. The EESC embraces the Commission’s view that it is time to review the listing and see how it can be more effective and fair, considering the new challenges of a global digitalised economy. The EESC also supports the Commission’s criterion of giving specific low risk and low capacity jurisdictions the opportunity to improve their tax good governance and transparency standards within a reasonable period of time when they are, or could be, put on the list. |
| --- | --- |

3.3.7.

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  ‘It [the Code of Conduct] works on the premise that, whilst tax competition among countries is not problematic per se, there need to be common principles on the extent to which they can use their tax regimes and policies to attract businesses and profits. This is particularly important in a Single Market, where the Treaty freedoms increase the mobility of profits and investment.’ (COM(2020) 313 final, page 3).

1

per se

(2)  See also VAT Gap: EU countries lost EUR 140 billion in VAT revenues in 2018, with a potential increase in 2020 due to coronavirus https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1579

2

(3)  COM(2020) 312 final, page 5. There are other estimations, for example by the European Parliament, with estimated losses from financial crime, tax evasion and tax avoidance amounting to EUR 190 bn. Based on the OECD’s comprehensive work in the Base Erosion Profit Shifting report (BEPS), Action 11, global revenue losses before any of the anti-BEPS measures were decided amounted to some USD 100-240 bn or 0,35 per cent of global GDP. The EU Commission estimated that some EUR 50-70 bn was attributable to the EU before the Anti-Tax Avoidance Directives I and II were agreed on by Member States.

3

(4)  The Commission issued 20 major legislative proposals during its previous five-year mandate.

4

(5)  See EESC Opinion on Combatting tax fraud, tax avoidance and money laundering (OJ C 429, 11.12.2020, p. 6).

5

Combatting tax fraud, tax avoidance and money laundering

(6)  Political Guidelines for the Next European Commission 2019-2024.

6

(7)  See COM(2020) 312 final, COM(2020) 313 final, COM(2020) 314 final.

7

(8)  See EESC Opinion on Combatting tax fraud, tax avoidance and money laundering (OJ C 429, 11.12.2020, p. 6).

8

Combatting tax fraud, tax avoidance and money laundering

(9)  See COM(2020) 312 final. See also EESC opinion Taxation mechanisms for reducing CO2 emissions (OJ C 364, 28.10.2020, p. 21).

9

Taxation mechanisms for reducing CO2

(10)  See COM(2019) 640 final.

10

(11)  This provision concerns jurisdictions featuring in Annex I of the relevant Council Conclusions. The list is regularly updated: https://ec.europa.eu/taxation_customs/tax-common-eu-list_en

11

(12)  These actions are listed in COM(2020) 312 final.

12

(13)  European Commission (2018). Study on tax compliance costs for SMEs.

13

(14)  Responses to the public consultation on the evaluation of the Directive on administrative cooperation in taxation, summarised in Annex 2 of Commission staff working document — Evaluation of the Council Directive 2011/16/EU on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (SWD(2019) 328 final).

14

(15)  Demands for requiring registration in each Member State have been raised. It would increase the administrative burden and make it harder for SMEs to expand into new countries and areas.

15

(16)  Proposal for a Council Directive on administrative cooperation in the field of taxation (COM(2020) 314 final).

16

(17)  Communication on Tax Good Governance in the EU and beyond (COM(2020) 313 final).

17

(18)  Resolution of the Council and the Representatives of the Governments of the Member States, meeting within the Council of 1 December 1997 on a code of conduct for business taxation (OJ C 2, 6.1.1998, p. 2).

18

(19)  The Commission view on harmful tax competition versus fair tax competition has over time been expressed in different ways. When the draft directive on the Common Consolidated Corporate Tax Base was presented, the Commission stressed that fair tax competition based on rates offered more transparency and was to be encouraged (COM(2011) 121 final, p. 4). In the Communication on Tax Good Governance, presented in 2020, tax competition is not seen as problematic per se, but common principles for how Member States use their tax regimes are deemed needed (COM(2020) 313 final, p. 3). It is reasonable to conclude that there is good tax competition and there is harmful, unfair tax competition. Member States decide tax regimes but are required to do so in an open, transparent manner adhering to the Treaty and refraining from harmful and discriminatory rules. The EU and Member States must ensure a well-functioning single market with a sufficient degree of convergence also including in the tax area.

19

(20)  Several funding instruments prevent funding projects that contribute to tax avoidance. See Financial Regulation, European Fund for Sustainable Development (EFSD), the European Fund for Strategic Investment (EFSI) and the External Lending Mandate (ELM). See the Commission Communication on new requirements against tax avoidance in EU legislation governing in particular financing and investment operations (C(2018) 1756, 21.3.2018).

20

(21)  See EESC Opinions on Combatting tax fraud, tax avoidance and money laundering (OJ C 429, 11.12.2020, p. 6); Taxation in the digitalised economy (OJ C 353, 18.10.2019, p. 17) and Taxation of profits of multinationals in the digital economy (OJ C 367, 10.10.2018, p. 73).

21

Combatting tax fraud, tax avoidance and money laundering

Taxation in the digitalised economy

Taxation of profits of multinationals in the digital economy

(22)  See also VAT Gap: EU countries lost EUR 140 billion in VAT revenues in 2018, with a potential increase in 2020 due to coronavirus https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1579.

22

(23)  There are other estimations, for example by the European Parliament, with estimated losses from financial crime, tax evasion and tax avoidance amounting to EUR 190 bn. Based on the OECD’s comprehensive work in the Base Erosion Profit Shifting report (BEPS), Action 11, global revenue losses before any of the anti-BEPS measures were decided amounted to some USD 100-240 bn or 0,35 per cent of global GDP. The EU Commission estimated that some EUR 50-70 bn was attributable to the EU before the Anti-Tax Avoidance Directives I and II were agreed on by Member States.

23

(24)  Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, 11.12.2006, p. 1).

24

(25)  There are many good examples of how countries have reduced their VAT gap. The reform in Estonia in 2014 has been mentioned as one such an example.

25

(26)  See EESC Opinion Initiative on Improving double taxation dispute resolution mechanisms (OJ C 173, 31.5.2017, p. 29).

26

Initiative on Improving double taxation dispute resolution mechanisms

(27)  See Charter of Fundamental Rights of the European Union (OJ C 202, 7.6.2016, p. 389).

27

(28)  Commission staff working document — Evaluation of the Council Directive (EU) no 2011/16/EU on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (SWD(2019) 328 final) (OJ L 119, 4.5.2016, p. 1).

28

(29)  SWD(2019) 327 final.

29

(30)  It is obvious that the Commission, like the OECD, makes a distinction between good transparent tax competition and harmful, unfair tax competition.

30

(31)  See EESC Opinion on Combatting tax fraud, tax avoidance and money laundering (OJ C 429, 11.12.2020, p. 6).

31

Combatting tax fraud, tax avoidance and money laundering

---

| 30.4.2021 | EN | Official Journal of the European Union | C 155/20 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/20

---

Opinion of the European Economic and Social Committee on ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Capital Markets Union for people and businesses – new action plan’

(COM(2020) 590 final)

(2021/C 155/03)

| Rapporteur: | Pierre BOLLON |
| --- | --- |

Rapporteur:

Pierre BOLLON

| Referral | European Commission, 11.11.2020 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Economic and Monetary Union and Economic and Social Cohesion |
| Adopted in section | 12.2.2021 |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 226/1/4 |

Referral

European Commission, 11.11.2020

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted in section

12.2.2021

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

226/1/4

1.   Conclusions and recommendations

| 1.1. | The EESC welcomes the Commission communication on A Capital Markets Union for people and businesses-new action plan. This is a much-needed continuation of what has been achieved through the first 2015 plan and its mid-term review of 2017, which the Committee endorsed in its opinions Action Plan on Capital Markets Union (1) and Capital Markets Union: mid-term review (2) The Committee has also in the last two years published several opinions on matters closely linked to the CMU, including the own-initiative opinions Towards a more resilient and sustainable European economy (3) and A new vision for completing the Economic and Monetary Union (4). |
| --- | --- |

1.1.

| 1.2. | The initial goals of the action plan, which are to help mobilise capital in Europe and channel it towards companies, infrastructure and long-term projects, which would have positive effects on employment, remain fully relevant. These goals are of the utmost importance to enabling the EU-27, its companies and its citizens to make decisive progress on reinforcing its financial and economic geostrategic sovereignty and on the essential climate, social and digital transitions. The EESC also stresses that the CMU can only achieve the intended targets if financial stability and consumer protection remain priorities in order to avoid a severe negative impact on companies, workers and consumers and the economy as a whole. |
| --- | --- |

1.2.

| 1.3. | The unexpected and violent COVID-19 crisis calls for a strengthening and acceleration of the action plan. European companies of all sizes have been forced to increase their indebtedness and will need in the coming months and years to raise equity or their own funds to be able to invest for the future, while generating employment. |
| --- | --- |

1.3.

| 1.4. | The agreement reached on Brexit at the end of December 2020 is another key reason for making a new push for the CMU. EU-27 financial centres will have to be able to provide services that have up to now been provided through the City of London. Highly integrated, functional and fair financial and capital markets must be developed in the EU-27 and the EESC believes that a more common rule-book will be necessary to avoid both loopholes and constraints leading to diseconomies of scale. |
| --- | --- |

1.4.

| 1.5. | Approving all of the 16 actions proposed by the Commission, the Committee stresses the importance of prioritising and coordinating the initiatives (with concrete milestones to measure progress), emphasises those that it deems most essential and makes targeted complementary proposals. |
| --- | --- |

1.5.

| 1.6. | While recognising the importance of public funding, better use should clearly be made of the high level of savings in Europe compared with other regions. An overarching prerequisite for achieving this goal is to improve the financial education of Europeans (Action 7). The EESC recommends best national practices and experiences from teaching and learning be identified and promoted. The EESC also recommends that all stakeholders, including representatives of workers and consumers, be involved in the development and implementation of financial education measures across Europe, making solid protection rules more efficient and reducing information asymmetries between providers of financial services and citizens. The EESC recommends, in particular, including financial literacy in the future revision of the key competences framework. |
| --- | --- |

1.6.

| 1.7. | To develop the EU's strategic autonomy in key sectors and capacities, the Committee agrees with the Commission’s approach to propose technical measures: (i) simplifying listing rules for SMEs (Action 2), (ii) enabling cross-border shareholders to better exercise their rights (Action 12), (iii) improving cross-border settlement services (Action 13), (iv) creating a consolidated tape for equity post-trades (Action 14) and a properly targeted Invest EU portal (Action 15). A first additional and positive action would be for the Commission to assess the feasibility of permitting European Investment Funds to benefit from an ‘.eu’ ISIN code, thereby increasing their availability across borders. |
| --- | --- |

1.7.

| 1.8. | The EESC concurs with the European Court of Auditors, which has noted that the new securitisation legislation, although a positive step forwards, has not in practice helped banks to increase their lending capacity, especially to SMEs. There is thus room for improvement (Action 6), provided there are effective controls to prevent the resurgence of systemic risks. |
| --- | --- |

1.8.

| 1.9. | It is important to take into account the principle of subsidiarity where retail investors are concerned, as specific savings habits are deeply entrenched in national patterns. Therefore, the EESC recommends that, in its very welcome work on improving the quality of financial advice (Action 8), the Commission should consider the benefit provided by each different model, keeping in mind that the availability of advice, as well as comparable and adequate/meaningful information, are key to engaging citizens in investing. |
| --- | --- |

1.9.

| 1.10. | Where pensions are concerned, beyond the PEPP, which is a positive tool for cross-border workers and will be a success if easy-to-implement level 2 legislation is adopted and if consumers understand the key features of the products marketed under this denomination, one-size-fits-all additional pan-European rules on funded schemes complementing pay-as-you-go systems would not be beneficial, as retirement provisions are deeply embedded in national social laws. The EESC therefore welcomes the Commission’s proposal (Action 9) to collect, share and promote best practices. |
| --- | --- |

1.10.

| 1.11. | The energy transition is rightly high on the Commission agenda, in order to fight climate change. The EESC recommends that environmental, social (with a stronger focus) and governance (ESG) considerations be taken into account, while at the same time promoting economic recovery and the preservation and generation of jobs. The green and social agendas should become, in terms of competition, an advantage for Europe. It would be important, as a second additional action, for investors to be able to access reliable ESG data, moving away from their current dependence on concentrated non-EU vendors, index providers and rating agencies. |
| --- | --- |

1.11.

| 1.12. | The EESC recommends that the CMU take full account of the different forms of social impact investment, especially those in the field of the ‘social economy’ thereby contributing positively to the general interest and the common good. The European Social Entrepreneurship Funds (EuSEF) should be strongly supported, possibly through a review of Regulation (EU) No 346/2013 of the European Parliament and of the Council (5), which created them. |
| --- | --- |

1.12.

| 1.13. | In addition to the measures already mentioned, the Committee argues in favour of two types of priorities that, if adopted through this action plan and enacted in the Member States (a monitoring programme would be welcomed) would permit a socially and environmentally responsible European financial system, enabling it to play its role as intermediary between supply and demand more effectively, being more competitive and resilient to shocks. |
| --- | --- |

1.13.

| 1.14. | A first priority is to improve the efficiency of the Capital Markets Union through three key actions: (i) by creating the European Single Access point, which will help, among other things, investors in the selection of issuers (Action 1); (ii) by applying a single rule-book, based on close supervision and preventing arbitrage and loopholes, permitting market participants throughout Europe (no single financial centre will become dominant) to benefit from economies of scale (Action 16); (iii) by simplifying withholding tax relief at source procedures, while making them more effective against fraud (Action 10). |
| --- | --- |

1.14.

| 1.15. | A second priority is to help shift long-term savings towards long-term investments. The high level of savings in Europe — which is an asset for the EU-27 — does not sufficiently benefit companies or citizens. The Committee supports three key actions to change gear: (i) the European Long Term Investment Fund (ELTIF) review should make it easier to invest institutional and retail savings in SMEs' and mid-caps' listed and non-listed shares and infrastructure projects (Action 3); (ii) the planned review of the insurance prudential framework will be an opportunity to strengthen the role of insurers in capital markets by taking better account of the long-term and stable nature of their investments in equity (Action 4); (iii) developing employee shareholding would be a welcome third complementary element in the action plan, as clearly set out in the Benjumea own-initiative report of the European Parliament of October 2020. Indeed, widespread employee share ownership, as well as employee participation in profits, would — if implemented in a fair way — contribute to social cohesion and economic efficiency. The CMU new action plan could be an opportunity to encourage such schemes, in line with the social agenda. |
| --- | --- |

1.15.

| 1.16. | The EESC would finally recommend that, in terms of policy achievements, any new regulation linked to the building of the CMU would be submitted to four tests, additional to the necessary ‘traditional’ ones (‘is it good for building a single market?’ and ‘is it protecting European Consumers?’).






  — | ‘is it having positive effects on the competitiveness of European financial companies in the world, strengthening the strategic geopolitical autonomy of the EU?’ |
| --- | --- | --- |

1.16.

—

‘is it having positive effects on the competitiveness of European financial companies in the world, strengthening the strategic geopolitical autonomy of the EU?’

| — | ‘is it safeguarding financial market stability?’ |
| --- | --- |

—

‘is it safeguarding financial market stability?’

| — | ‘is it positive for the long-term financing of European companies, especially SMEs and mid-caps, and employment?’ |
| --- | --- |

—

‘is it positive for the long-term financing of European companies, especially SMEs and mid-caps, and employment?’

| — | ‘is it positive for the climate, social and digital transitions?’ |
| --- | --- |

—

‘is it positive for the climate, social and digital transitions?’

2.   Background

| 2.1. | The Capital Markets Union (CMU) aims to create a truly single market for capital across the EU and facilitate investment and savings flowing across all Member States. A well-functioning and integrated European capital market would contribute to sustainable growth, increase the competitiveness of Europe and strengthen the EU's role on the global stage. |
| --- | --- |

2.1.

| 2.2. | The CMU is also essential for delivering on several key EU objectives, such as creating an inclusive and resilient economy, supporting the transition towards a digital and sustainable economy and a strategically open autonomy in an increasingly complex global economic context and contributing to the post-COVID-19 recovery. These objectives require massive investment beyond the abilities of public funding and traditional bank financing. |
| --- | --- |

2.2.

| 2.3. | The European Commission adopted the first CMU action plan in 2015. Since then, the EU has made some progress in putting in place the building blocks. However, significant barriers to a single market remain. Furthermore, the initial set of CMU actions needs to be complemented by new measures that are able to address the new challenges, such as the digital and environmental transformations and the much-needed recovery efforts as a result of the COVID-19 pandemic. |
| --- | --- |

2.3.

| 2.4. | With this new action plan (6), the Commission has set out a list of 16 new measures to make decisive progress towards completing the CMU and to achieve three key objectives:






  — | support a green, digital, inclusive and resilient economic recovery by making financing more accessible to European companies; |
| --- | --- | --- |

2.4.

—

support a green, digital, inclusive and resilient economic recovery by making financing more accessible to European companies;

| — | make the EU an even safer place for individuals to save and invest long term; |
| --- | --- |

—

make the EU an even safer place for individuals to save and invest long term;

| — | integrate national capital markets into a genuine single market. |
| --- | --- |

—

integrate national capital markets into a genuine single market.

| 2.5. | The EESC has been actively involved in the creation of a common European capital market since its inception. The Committee published its first opinion on the subject on the Green Paper on a Capital Markets Union (7), then expressed its view on both the original Capital Markets Union action plan (8) and its mid-term review (9), as well as on numerous legislative proposals stemming from these action plans. In this opinion, the EESC will put forwards its recommendations on the new CMU action plan, both building on the previous work done by the Committee and taking into account the new priorities and challenges in Europe. |
| --- | --- |

2.5.

3.   General comments

| 3.1. | The EESC welcomes the new CMU Action Plan as a needed continuation of what has already been achieved through the first 2015 plan. The continuation of the plan is even more urgent in the context of the unexpected COVID-19 crisis, a crisis which, due to its magnitude, somewhat changes the diagnostic underpinned by very good work undertaken by the next CMU high-level expert group and by the High-Level Forum (HLF) on the CMU, and which would justify some adjustments and reinforcements. The EESC regrets the slow pace in implementing the 2015 action plan, due largely to a lack of positive support from some Member States. Another major project under way, the Banking Union, is also suffering from delays. The EESC considers that a strong political will on the part of the Member States is needed to support (the European Semester review process could perhaps be used as a tool to monitor progress) the measures necessary to deliver on the CMU, which is not intended to be a goal in itself. A safe and properly functioning CMU is crucial to support economic recovery and restructuring in the wake of COVID 19 and to support relevant capital, infrastructural and social investment across the EU, as well as the European Green Deal and digital transformation. In this context, the EESC also acknowledges the importance of public funding, which also plays a vital role by attracting private investment and reducing uncertainty. Foreign investment could also play a meaningful role, complementing European savings. |
| --- | --- |

3.1.

| 3.2. | In addition, as also mentioned by the EC, ‘there is a risk that the crisis will widen disparities within the Union threatening the collective economic and social resilience’. In this context, the EESC would stress the importance of prioritising and coordinating initiatives. The CMU Action Plan identified 16 measures of action, which is quite a large programme. Due to the burden on economies and the increasing indebtedness of both Member States and private companies, together with a quite different level of impact between EU countries and between different economic sectors, the CMU Action Plan must be given very careful consideration and scrutiny, to which the EESC is providing its inputs through this opinion, with the aim of enabling a socially responsible European financial system to play its role as intermediary between supply and demand more effectively, while being more resilient to shocks. |
| --- | --- |

3.2.

| 3.3. | Measures that can address systemic risks linked to the high level of public and private debt should be favoured. In parallel, support should be granted as a matter of priority to crisis-impacted but viable companies and to newly created ones in order to develop employment and the competitiveness of the EU economy, all the more so since the COVID-19 impact on Asian economies seems to be lower than in Western countries. External dependency in terms of economic funding may also entail systemic risks and the CMU Action Plan should aim at greater reliance on European savings. Better use should be made of the high level of savings in Europe compared with other regions. An overarching prerequisite in order to achieve such a goal is an improvement in the financial education/literacy of Europe's citizens (Action 7). In this field, the EESC recommends identifying best national practices and experiences from teaching and learning in this subject, in order to promote them across Europe, making solid investor protection rules more effective and reducing information asymmetries (adequate information is key) between providers of financial services and citizens. The EESC recommends including financial literacy in the future revision of the key competences framework. The EESC further recommends that all stakeholders be involved in the development and implementation of financial education measures, including representatives of workers and consumers. |
| --- | --- |

3.3.

| 3.4. | The core task of a socially responsible financial system is to fulfil its intermediary function between the supply and demand of financial assets, while being resilient to shocks, as a fragile financial sector has severe negative impacts on companies, workers and consumers and the economy as a whole. The EESC therefore stresses that the CMU can only achieve the intended objectives if financial stability and consumer protection remain priorities in the CMU action plan. In particular, retail investor protection must not be diminished. When deepening the CMU, regulatory arbitrage and regulatory loopholes must be avoided. |
| --- | --- |

3.4.

| 3.5. | As also mentioned by the European Commission, there is a ‘strategic interest for internal market supply chains to develop the EU's strategic autonomy in key sectors and capacities’. In this respect, several technical proposals within the new CMU Action Plan should be supported, such as simpler listing rules for SMEs (Action 2), dissemination of electronic voting, and progress towards an EU definition of ‘shareholder’, which will enable cross-border shareholders to better exercise their rights (Action 12), the improvement of cross-border settlement services (Action 13), and the creation of a consolidated tape for equity post-trades (Action 14). An additional positive action would be for the European Commission to assess the merit and feasibility of permitting European investment funds to benefit from an ‘.eu’ ISIN code, improving their availability across borders. Through these measures, the CMU will also play a crucial role in supporting SMEs, and also companies of all sizes in their green and digital transitions, improving their opportunities to access funding through complementary channels to the banking sector. |
| --- | --- |

3.5.

| 3.6. | Regarding the securitisation legislation, the EESC concurs with the European Court of Auditors (ECA)'s assessment that this legislation, although a positive step forwards, has not yet produced the anticipated recovery in the European securitisation market after the financial crisis, and has not helped banks increase their lending capacity, inter alia, to the benefit of SMEs. Transactions remain concentrated within a small number of asset classes (such as mortgages and car loans) and this also only in certain Member States. The securitisation market should indeed be improved (Action 6), with effective controls, to prevent the resurgence of systemic risks through the weakening of regulation. |
| --- | --- |

3.6.

| 3.7. | Deeper financial integration is a cornerstone of the CMU. However, it is important to maintain a pragmatic and realistic approach when considering some of its aspects. Where retail investments are concerned, national preferences and specific patterns often prevail, deriving from the need for proximity when looking for financial advice. The language barrier must also be taken into consideration when addressing the markets of individual savings. In addition, uniformity is not necessarily synonymous with efficiency regarding distribution models of retail financial products. The Commission should, in its very welcome work to improve the quality of financial advice (Action 8), consider the benefit provided by each different model, keeping in mind that the availability and quality of advice, as well as comparable and clear information, including sustainability information, together with solid and confidence-building rules, are key to engaging citizens in investing. |
| --- | --- |

3.7.

| 3.8. | Where pensions are concerned, beyond the PEPP concept, various national patterns embedded in social law should be preserved when they are satisfactory, though not all identical. The EESC thus fully supports the CMU proposal of sharing best practices, such as auto-enrolment, national tracking systems accessible to all citizens and national dashboards with indicators. Availability of advice and greater involvement of representatives of savers, workers and pensioners should be added. In any event, the aim should be to complement, and not weaken, pay-as-you-go schemes (Action 9). |
| --- | --- |

3.8.

| 3.9. | The EESC recommends that the CMU take full account of the different forms of social impact investments, especially those in the field of the ‘social economy’ contributing positively to the general interest and the common good. The European Social Entrepreneurship Funds (EuSEF) should be strongly supported, possibly through a review of Regulation (EU) No 346/2013, which created them.. |
| --- | --- |

3.9.

| 3.10. | Environmental considerations and energy transition had quite rightly been put very high on the EU and Commission agenda prior to the COVID-19 crisis. In the new pandemic context, the EESC recommends the environmental, social (with an increased focus) and governance (ESG) agenda to remain a top priority and be considered in congruence with economic recovery, employment restoration and preservation, and financial stability. In this exercise, the EU will have also to keep in mind the competition side in order to maintain the green and social agenda as an advantage for Europe. Among other things, it will be important to rely on European providers of information and ratings based on converging and reliable standards, while acting in the international scene in favour of consistency across the world. In addition, specific regulation on ESG data and rating agencies could be welcome, be it as an amendment to the Regulation (EU) No 462/2013 of the European Parliament and of the Council (10) (‘Credit Rating Agencies Regulation’) or as a separate regulation, in line with the Digital Markets Act. |
| --- | --- |

3.10.

| 3.11. | The COVID-19 pandemic has also aggravated disparities between Member States, due in particular to its dramatic impact on many sectors, such as tourism or transport. Anything that can mitigate these economic disparities must also be considered a priority, such as favouring cross-border funding for less developed European countries. The creation of the Invest EU portal could ease such funding provided that it is carefully targeted (Action 15). European competitiveness and convergence is also key and Europe needs strong actors of all sizes able to compete at global level, pulling other actors along in their wake. In order to achieve this, European policymakers must ensure a level playing field with other markets in the world. |
| --- | --- |

3.11.

| 3.12. | The EESC acknowledges that the CMU Action Plan has not led to a breakthrough as regards resolving the main barriers impeding cross-border capital flows and that some Member States continue to apply ring-fencing policies to capital and liquidity, preventing the proper allocation of resources, fragmenting the market and slowing economic recovery. |
| --- | --- |

3.12.

| 3.13. | Brexit is another disruptive factor that has to be taken into consideration. Continental financial markets appear quite fragmented, with unequal levels of liquidity. . Because of this, the EU 27 could run a real risk of further dependency on external financial markets that are more integrated, with a number of European companies having chosen in the past to be listed in the UK or the US. The EESC concurs with the ECA's statement that the Commission (and indeed in our opinion, the European Parliament and the Council) should recommend that all Member States with less developed capital markets implement relevant reforms. It must be also stressed that the constitution of a developed market infrastructure for the EU is vital for financial and economic autonomy and could lead to a stronger international role for the euro. |
| --- | --- |

3.13.

| 3.14. | To summarise the EESC view beyond the technical measures already mentioned, we would argue in favour of two types of priorities among the Action Plan's 16 proposals:






  — | Enhancing EU financial markets in order to improve efficiency. This should be facilitated by three key actions (i) by the creation of the European Single Access Point, which will help, inter alia, investors in the selection of issuers (Action 1), (ii) by the enforcement of the single rule book, especially regarding market venues, CCPs (central counterparties) and data providers. In general, supervisory convergence and stronger cooperation would be crucial in order to prevent regulatory arbitrage and loopholes (Action 16), and (iii) by simplifying cross-border investment and introducing a common, standardised EU-wide system for withholding tax relief at source, preventing tax fraud and tax arbitrage.(Action 10). |
| --- | --- | --- |

3.14.

—

Enhancing EU financial markets in order to improve efficiency. This should be facilitated by three key actions (i) by the creation of the European Single Access Point, which will help, inter alia, investors in the selection of issuers (Action 1), (ii) by the enforcement of the single rule book, especially regarding market venues, CCPs (central counterparties) and data providers. In general, supervisory convergence and stronger cooperation would be crucial in order to prevent regulatory arbitrage and loopholes (Action 16), and (iii) by simplifying cross-border investment and introducing a common, standardised EU-wide system for withholding tax relief at source, preventing tax fraud and tax arbitrage.(Action 10).

| — | Shifting long-term savings towards long-term investments. The high level of savings in Europe — which is the EU-27's strong point — does not sufficiently benefit the real economy. The European Long-Term Investment Fund (ELTIF) review must allow for the renewed framework of this long-term type of fund, which will in particular ease the investing of institutional and retail long-term savings in SMEs' and midcaps' listed and non-listed shares and infrastructure projects (Action 3). A better prudential regime for insurers' and banks' investments in equity, enhancing and not diminishing the effectiveness of prudential rules (Action 4). Additionally, as stressed in the EP's own-initiative report on ‘Further development of the Capital Markets Union (CMU) (11)’, Member States should work toward rebalancing the debt/equity bias in taxation. However, in so doing, the objective should not be to undermine the amount of tax revenues as a whole. Favouring employee shareholding, which is a missing element in the Action Plan, is another important topic that the Commission could push again, as it did before. In fact, Employee Share Ownership, as well as Employee Participation in Profits, would, if implemented in a fair way, contribute to social cohesion and economic efficiency. In order not to impose undue risks on workers, the involvement of their representatives and solid investor protection is crucial.. The CMU should be a new opportunity to encourage these schemes, in line with the social agenda and with the call made in the European Parliament's own-initiative report. |
| --- | --- |

—

Shifting long-term savings towards long-term investments. The high level of savings in Europe — which is the EU-27's strong point — does not sufficiently benefit the real economy. The European Long-Term Investment Fund (ELTIF) review must allow for the renewed framework of this long-term type of fund, which will in particular ease the investing of institutional and retail long-term savings in SMEs' and midcaps' listed and non-listed shares and infrastructure projects (Action 3). A better prudential regime for insurers' and banks' investments in equity, enhancing and not diminishing the effectiveness of prudential rules (Action 4). Additionally, as stressed in the EP's own-initiative report on ‘Further development of the Capital Markets Union (CMU) (11)’, Member States should work toward rebalancing the debt/equity bias in taxation. However, in so doing, the objective should not be to undermine the amount of tax revenues as a whole. Favouring employee shareholding, which is a missing element in the Action Plan, is another important topic that the Commission could push again, as it did before. In fact, Employee Share Ownership, as well as Employee Participation in Profits, would, if implemented in a fair way, contribute to social cohesion and economic efficiency. In order not to impose undue risks on workers, the involvement of their representatives and solid investor protection is crucial.. The CMU should be a new opportunity to encourage these schemes, in line with the social agenda and with the call made in the European Parliament's own-initiative report.

| 3.15. | These last measures would provide a welcome first and significant quick push in favour of the CMU while making progress on key but more difficult objectives such as increased convergence on targeted areas of insolvency laws (Action 11) or a more integrated set of European exchanges and trading venues. |
| --- | --- |

3.15.

| 3.16. | Beyond the considerations of the present advice, the EESC would recommend that, in terms of policy achievements, any new regulation should weigh up the potential positive or detrimental competitive effects for European entities, in order to strengthen EU financial companies in the world, reinforcing the strategic geopolitical autonomy of the EU on its path towards the much-needed climate, social and digital transitions. |
| --- | --- |

3.16.

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  OJ C 133, 14.4.2016, p. 17.

1

(2)  OJ C 81, 2.3.2018, p. 117.

2

(3)  OJ C 353, 18.10.2019, p. 23.

3

(4)  OJ C 353, 18.10.2019, p. 32.

4

(5)  Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds (OJ L 115, 25.4.2013, p. 18).

5

(6)  COM(2020) 590 final.

6

(7)  OJ C 383, 17.11.2015, p. 64.

7

(8)  OJ C 133, 14.4.2016, p. 17.

8

(9)  OJ C 81, 2.3.2018, p. 117.

9

(10)  Regulation (EU) No 462/2013 of the European Parliament and of the Council of 21 May 2013 amending Regulation (EC) No 1060/2009 on credit rating agencies (OJ L 146, 31.5.2013, p. 1).

10

(11)  REPORT on further development of the Capital Markets Union (CMU): improving access to capital market finance, in particular by SMEs, and further enabling retail investor participation

11

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| 30.4.2021 | EN | Official Journal of the European Union | C 155/27 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/27

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Opinion of the European Economic and Social Committee on ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Digital Finance Strategy for the EU’

(COM(2020) 591 final)

(2021/C 155/04)

| Rapporteur: | Petru Sorin DANDEA |
| --- | --- |
| Co-rapporteur: | Jörg Freiherr FRANK VON FÜRSTENWERTH |

Rapporteur:

Petru Sorin DANDEA

Co-rapporteur:

Jörg Freiherr FRANK VON FÜRSTENWERTH

| Referral | European Commission, 11.11.2020 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Economic and Monetary Union and Economic and Social Cohesion |
| Adopted in section | 12.2.2021 |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 237/0/5 |

Referral

European Commission, 11.11.2020

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted in section

12.2.2021

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

237/0/5

1.   Conclusions and recommendations

| 1.1. | The EESC welcomes the Digital Finance Package launched by the Commission and believes that it contains strategic legislative and non-legislative elements aimed at developing the sector. |
| --- | --- |

1.1.

| 1.2. | The four-priority programme presented by the Commission essentially covers almost all important areas of activity in the digital transformation of the EU financial sector. The EESC supports these approaches by the Commission. |
| --- | --- |

1.2.

| 1.3. | The Commission is on the right track to rely on strong European market participants to implement digital financial services, but the EESC considers that the special role of specialised, regional or/and cooperative or mutual local providers in the financial sector must not be neglected. |
| --- | --- |

1.3.

| 1.4. | Due to the digitalisation process, the EU financial sector is facing a huge transformation process that goes hand in hand with far-reaching restructuring processes, closing of local branches, changes in the professional qualifications of employees and completely new forms of work. These major challenges must not be ignored. They represent a great challenge for providers and — of course — for employees in the financial sector. |
| --- | --- |

1.4.

| 1.5. | The Commission announces the need to explore setting up an EU digital finance platform. The EESC agrees and recommends the inclusion of the social partners and civil society representatives in this process. |
| --- | --- |

1.5.

| 1.6. | The EESC considers that in addressing the challenges and risks associated with digital transformation, regulation for technology providers, protecting consumers, granting access to financial services, operational resilience and security of network and information systems are crucial for creating the Digital Single Market for financial services. |
| --- | --- |

1.6.

| 1.7. | In the field of cybersecurity the EESC welcomes the GAIA-X project, which is intended to challenge the US and China’s dominance in cloud services. This project, which also involves the European Commission, aims to achieve EU data sovereignty or data governance through an EU-based cloud network. |
| --- | --- |

1.7.

| 1.8. | The Commission’s commitment to the ‘same activity, same risk, same rules’ principle is fundamental and a key to solving the new challenges, including ensuring the same supervision. The EESC considers that creating a level playing field for all financial institutions is of particular importance. |
| --- | --- |

1.8.

2.   The Commission proposals

| 2.1. | On 24 September 2020, the Commission endorsed the Digital Finance Package, which consists of a Digital Finance Strategy (1), a Retail Payments Strategy (2), legislative proposals for an EU regulatory framework on crypto-assets (3) and its underlying distributed ledger technology (4), as well as proposals for an EU regulatory framework on digital operational resilience (5). |
| --- | --- |

2.1.

| 2.2. | In the particularly dynamic context of digital innovation, accelerated by the COVID-19 crisis, the Commission is proposing a strategy with one strategic goal and four priorities and related actions on digital finance. This strategy is the subject of this EESC opinion. |
| --- | --- |

2.2.

| 2.3. | The strategic objective set out by the Commission is to adopt digital finance for the benefit of consumers and businesses. The four priorities are: (1) to tackle fragmentation in the Digital Single Market for financial services, thereby enabling European consumers to access cross-border services and help European financial firms scale up their digital operations; (2) to ensure that the EU regulatory framework facilitates digital innovation in the interest of consumers and market efficiency; (3) to create a European financial data space to promote data-driven innovation, building on the European Data Strategy, including enhanced access to data and data-sharing within the financial sector; and (4) to address new challenges and risks associated with the digital transformation. |
| --- | --- |

2.3.

3.   General and specific comments

| 3.1. | With the initiative to create and implement a new digital finance strategy in Europe (as a part of the Commission’s Digital Finance Package), the Commission confirms the great importance of digitalisation in the financial sector (digital financial services). The importance has become particularly clear during the COVID-19 crisis. The four-priority programme presented by the Commission essentially covers almost all important areas of activity in the digital transformation of the EU financial sector. The EESC supports these approaches of the Commission. |
| --- | --- |

3.1.

| 3.2. | The Commission is on the right track to rely on strong European market participants to implement digital financial services, but the EESC considers that the special role of specialised regional or/and cooperative or mutual providers in the financial sector must be considered, as the diversity in the financial sector helps to meet the specific needs of consumers and SMEs and contributes to competitive markets. The EESC encourages the Commission to pursue proportionality in terms of the nature, scale and complexity of financial institutions and their products. |
| --- | --- |

3.2.

| 3.3. | The Commission Communication is extremely technical and there is one point that it fails to address: Due to digitalisation, the EU’s financial sector is facing a huge process of transformation. This process goes hand in hand with far-reaching restructuring processes, the closure of local branches, changes in the professional qualifications of employees and completely new forms of work. These major challenges must not be ignored. They represent a great challenge for providers and — of course — for employees in the financial sector. The EESC advocates social dialogue to address the fields where the transformation is taking place. |
| --- | --- |

3.3.

| 3.4. | The Commission states that a well-functioning Single Market for digital financial services will help improve access to financial services for consumers and retail investors in the EU. The EESC supports this approach by the Commission. To reduce the fragmentation in the Digital Single Market for financial services, it is essential to enable the markets to develop. |
| --- | --- |

3.4.

| 3.5. | The Commission states the need to explore setting up an EU digital finance platform. The EESC agrees and recommends the inclusion of the social partners and civil society representatives in this process. |
| --- | --- |

3.5.

| 3.6. | Practical experience shows that a Single Market for digital financial services will only work if new customers are able to access financial services quickly and easily (the so-called ‘on-boarding’). The EESC notes the crucial problem in the areas emphasised by the Commission. |
| --- | --- |

3.6.

| 3.7. | The fragmentation of money-laundering rules between the Member States makes the cross-border use of digital identities considerably more difficult, if not impossible. The rules on customer identification should be harmonised across the EU. The EESC therefore recommends ensuring the Europe-wide legal interoperability of digital identities. |
| --- | --- |

3.7.

| 3.8. | When creating the Digital Finance Strategy for the EU, the issue of citizens’ safety cannot be forgotten. The recommendation to Member States to introduce, in parallel with the implementation of the strategy, legal and organisational measures to counteract the phenomenon of identity theft should be included in the strategy. This problem is becoming more and more common with the development of digital services and products and if no action is taken, it may be a factor that inhibits implementation of the strategy. |
| --- | --- |

3.8.

| 3.9. | The EESC supports the proposals of the Commission to create an innovation-friendly and competitive framework for financial markets, from which consumers and industry will benefit. In doing so, however, it must be ensured that supervisory practices and EU legislation continue to be based on the guiding principle of technology neutrality and reviews existing paper requirements. |
| --- | --- |

3.9.

| 3.10. | In the digital market, however, some FinTech companies offer services to financial companies, while others compete with them. The EESC considers that the Commission should take these issues into account when drafting new regulations. The EESC therefore recommends that the new regulations be geared towards supporting partnerships between incumbent financial institutions and the FinTech sector. While it is evident that banks are the most significant institutions, legislation should avoid simple copy-paste requirements that may not fit all kinds of financial services. It should differentiate between consumer-oriented products that can be seen as commodities and more complex products where the scope and the after-sales services are of significant importance. |
| --- | --- |

3.10.

| 3.11. | The EESC considers that there is a need to expand data sharing beyond the financial sector and reminds the Commission of the EESC’s recommendation (6) regarding the Commission’s Communication on a European strategy for data where the EESC welcomed the Commission’s proposal for a Data Strategy that sets cross-sectoral data sharing as a priority and to improve the use, sharing, access and governance of data with legislative, sector-specific action and emphasised that such a framework should be built to combine high standards of data protection, cross-sectoral and responsible data sharing, clear criteria for sector-specific governance and data quality, and greater control of data by individuals. It is essential to ensure that data collected by a payment subsidiary of a BigTech group of companies are not provided to or merged with the data held by the parent company. To make this principle work, there is a need for firewalls between the payment subsidiary and the parent company. |
| --- | --- |

3.11.

| 3.12. | The EESC considers that, in addressing the challenges and risks associated with digital transformation, regulation for technology providers, consumer protection, granting access to financial services, operational resilience and the security of network and information systems are all crucial for creating the Digital Single Market for financial services. |
| --- | --- |

3.12.

| 3.13. | In the field of cybersecurity, the EESC points out that most European systemic financial institutions use FinTech services provided by corporations outside the EU. The legislative initiative on Digital Operational Resilience (DORA) (7) proposed by the Commission may prove insufficient in certain situations, and the EESC therefore welcomes the GAIA-X project, which is intended to challenge the US and China’s dominance in cloud services. This project, which also involves the European Commission, aims to achieve EU data sovereignty or data governance through an EU-based cloud network. As we are coming to rely more heavily on digital services, it is in the interest of EU stakeholders to be independent from external cloud service providers, and for the EU itself to enhance its economic and political sovereignty. A European cloud network would also facilitate data flows across Member States. |
| --- | --- |

3.13.

| 3.14. | The Commission’s commitment to the ‘same activity, same risk, same rules’ principle is fundamental and a key aspect of meeting the new challenges, including ensuring the same supervision. In light of the increasing inroads of BigTech, platforms and technology companies and useful activities of technology companies in the financial sector, the EESC considers that creating a level playing field for all market players in this field is of particular importance. |
| --- | --- |

3.14.

| 3.15. | The Commission is considering a strategy to support and invest in general financial education with a focus on digitalisation. This can lead to both increased openness in digital services and better protection for consumers regardless of age, gender or occupational status. The EESC encourages the Commission to continue down this path. |
| --- | --- |

3.15.

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  COM(2020) 591 final.

1

(2)  COM(2020) 592 final.

2

(3)  COM(2020) 593 final.

3

(4)  COM(2020) 594 final.

4

(5)  COM(2020) 595 final and COM(2020) 596 final.

5

(6)  OJ C 429, 11.12.2020, p. 290.

6

(7)  COM(2020) 595 final. See also the related EESC opinion on Digital operational resilience (ECO/536) (See page 38 of this Official Journal).

7

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| 30.4.2021 | EN | Official Journal of the European Union | C 155/31 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/31

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Opinion of the European Economic and Social Committee on:

Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937

(COM(2020) 593 final – 2020/0265 (COD))

Proposal for a Regulation of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology

(COM(2020) 594 final – 2020/0267 (COD))

(2021/C 155/05)

| Rapporteur: | Giuseppe GUERINI |
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Rapporteur:

Giuseppe GUERINI

| Referral | European Parliament, 13.11.2020
  Council of the European Union, 18.11.2020 |
| --- | --- |
| Legal basis | Articles 114 and 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Economic and Monetary Union and Economic and Social Cohesion |
| Adopted in section | 12.2.2021 |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  for/against/abstentions) | 235/1/8 |

Referral

European Parliament, 13.11.2020

Council of the European Union, 18.11.2020

Legal basis

Articles 114 and 304 of the Treaty on the Functioning of the European Union

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted in section

12.2.2021

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

for/against/abstentions)

235/1/8

1.   Conclusions and recommendations

| 1.1. | The EESC endorses the two European Commission initiatives on the proposal for a regulation on markets in crypto-assets amending Directive (EU) 2019/1937 of the European Parliament and of the Council (1) and the proposal for a regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT). |
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1.1.

| 1.2. | The EESC considers that the action taken by the Commission is urgently needed to regulate a technology which is becoming increasingly widespread, whose practical application is growing and which is constantly and rapidly changing. |
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1.2.

| 1.3. | The EESC therefore endorses the usefulness of quickly implementing the various regulatory adjustment measures envisaged by the Commission which are needed to modernise financial services, without losing sight of consumer protection and prudential rules. |
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1.3.

| 1.4. | One pressing reason for European action stems from the fact that in the last few months several Member States have adopted national regulatory instruments either through legislative acts or by means of recommendations and guidelines issued by regulatory authorities in this sector. These tools risk creating a fragmented regulatory framework which could undermine the consolidation of the internal market and increase the compliance costs borne by businesses. |
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1.4.

| 1.5. | The EESC accordingly supports the objectives pursued by the Commission within a single regulatory framework which seek to: i) protect the end-users of digital finance; ii) safeguard financial stability; iii) protect the integrity of the EU's financial sector; iv) ensure a level playing field among the different operators in the economic and financial system. |
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1.5.

| 1.6. | The EESC also agrees with the objective of ensuring that issuers of ‘global stablecoins’ are subject to stricter requirements in terms of capital, investor rights and supervision, owing to the potential systemic relevance of these instruments. |
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1.6.

| 1.7. | The EESC would like to see measures to ensure that consumers and small-scale investors are provided with suitable information and made aware of the situation so as to reduce the information asymmetry which could have a disproportionate impact on them due to the new and highly technical measures explored in this opinion. |
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1.7.

| 1.8. | The EESC recommends that special attention be paid to checks performed in advance of the authorisation measures set out in the proposals examined in this opinion, especially as regards the reliability of operators subject to authorisation, in order to avoid the negative consequences of opportunistic and harmful behaviour. |
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1.8.

| 1.9. | As a level of standardisation and interoperability of DLT that can safely guide the assessment of the technological reliability and cyber-resilience of the infrastructures adopted by operators has yet to be achieved, the EESC recommends that the regulatory system to be applied to these instruments, which are constantly evolving, be made as clear as possible, as a change in their nature could call for different regulatory provisions. |
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1.9.

| 1.10. | In view of the potential technological risks, the EESC has high hopes of the pilot regime for market infrastructures based on distributed ledger technology. This scheme will identify a test space in a controlled environment that allows for temporary derogations from the current rules, enabling regulators and operators to gradually build up experience of using DLT in market infrastructures while safeguarding market integrity and financial stability. |
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1.10.

| 1.11. | However, despite endorsing the proposal on the pilot regime, the EESC believes that the 5-year deadline for ESMA to submit its report to the Commission is too long given the speed with which digital finance technology evolves. It would also be useful to look at the arrangements for leaving the pilot scheme in order to safeguard the users involved in this phase. |
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1.11.

| 1.12. | Lastly, with regard to the application of the MiCA regulation, the EESC has serious concerns regarding the transitional measures, which provide for permanent exemption from MiCA requirements for crypto-assets that were already on the market before the regulation came into force. When it comes to a crypto-asset which has already been issued, that exemption is liable to lead to a sort of regulatory exemption derogating from the principle of fair treatment whereby the same risk and the same asset are dealt with in the same way. |
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1.12.

2.   Commission proposals

| 2.1. | This opinion examines two European Commission initiatives: i) the proposal for a regulation on the market in crypto-assets, amending Directive (EU) 2019/1937; ii) the proposal for a regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT). These proposals are part of a package of Commission initiatives which includes the communication on the digital finance strategy and the proposal for a regulation on digital operational resilience (DORA). These two initiatives were considered by the EESC in its opinions on A Digital Finance Strategy for the EU (2) and Digital operational resilience (3) respectively. |
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2.1.

2.2.   Proposal for a regulation on markets in crypto-assets (amending Directive (EU) 2019/1937)

| 2.2.1 | The MiCA regulation aims to ensure legal certainty for crypto-assets not covered by existing EU legislation and to establish uniform rules for crypto-asset issuers and Virtual Asset Service Providers (VASPs). The regulation aims to replace existing national frameworks, which currently fall outside the scope of existing European legislation, thereby providing the desired level playing field. |
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2.2.1

| 2.2.2 | The Commission has emphasised that its proposal stems from the need to adopt ‘a common approach with Member States on cryptocurrencies to understand how to make the best use of the opportunities they create and address the new risks they may pose’. |
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2.2.2

| 2.2.3 | The proposal has four objectives: i) to guarantee legal certainty; ii) to support innovation in a sector with huge potential; iii) to instil appropriate levels of consumer and investor protection and market integrity; iv) to ensure financial stability. |
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2.2.3

| 2.2.4 | The proposal covers not only issuers of crypto-assets, but also companies providing crypto-asset related services such as firms holding clients' crypto-assets, entities that enable customers to buy or sell crypto-assets for money, and firms operating trading platforms. For this reason, the safeguards introduced include capital requirements, governance requirements and investor rights vis-à-vis the issuer. |
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2.2.4

| 2.2.5 | In particular, in cases where certain asset-referenced tokens and e-money tokens are recognised as being ‘significant’ (counting as ‘global stablecoins’ in terms of volume, value or customer base), issuing operators will be subject to stricter requirements. |
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2.2.5

| 2.2.6 | Thus, considering the very real possibility that ‘stablecoins’ could become widely accepted and potentially systemic in the future, the Commission proposal also includes safeguards to address potential risks to financial stability and orderly monetary policy that they could pose. |
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2.2.6

| 2.2.7 | These instruments are crypto-assets which, for instance, unlike the well-known bitcoin, have a relatively stable price because they are tied to an equally stable medium of exchange (i.e. an institutional currency) and could therefore, in the not so distant future, become widespread payment and investment systems. |
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2.2.7

| 2.2.8 | More specifically, Title II of the proposal regulates the offerings and marketing to the public of crypto-assets other than asset-referenced tokens and e-money tokens. It stipulates that an issuer shall be entitled to offer such crypto-assets to the public or seek admission to trading on a trading platform if they comply with: i) the requirements set out in Article 4, such as the obligation to be established in the form of a legal person; ii) the obligation to draw up an information document, also referred to as a white paper, on the crypto-assets (Article 5); iii) the further obligation to notify the competent authorities of the white paper and to publish it (Articles 7 and 8). |
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2.2.8

| 2.2.9 | The information document (white paper) will not be necessary if the total consideration of the offering of crypto-assets is less than EUR 1 000 000 over a period of 12 months, to avoid creating an excessive administrative burden for small and medium-sized enterprises (SMEs). |
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2.2.9

| 2.2.10 | The Commission also proposes to clarify that the current definition of ‘financial instruments’ — laying down the scope of the MiFID Directive — includes financial instruments based on DLT. It also proposes a specific regime for crypto-assets and currency tokens that are not covered by existing financial services legislation. |
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2.2.10

| 2.2.11 | The rules also focus on the issuance of crypto-assets (or tokens) by operators intending to act in the European single market, who will have to comply with:






  — | transparency and publication requirements in relation to the issuance and admission to trading of the relevant tokens; |
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2.2.11

—

transparency and publication requirements in relation to the issuance and admission to trading of the relevant tokens;

| — | arrangements for authorising and supervising service providers and stablecoin issuers; |
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—

arrangements for authorising and supervising service providers and stablecoin issuers;

| — | operational, organisational and governance requirements in relation to stablecoin issuers (again, it should be noted that this does not apply to the other tokens concerned, i.e. essentially utility tokens) and service providers; |
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—

operational, organisational and governance requirements in relation to stablecoin issuers (again, it should be noted that this does not apply to the other tokens concerned, i.e. essentially utility tokens) and service providers;

| — | consumer protection rules relating to crypto-asset issuance, trading and storing; |
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—

consumer protection rules relating to crypto-asset issuance, trading and storing;

| — | measures to prevent market abuse and ensure the integrity of the markets where crypto-assets are traded. |
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—

measures to prevent market abuse and ensure the integrity of the markets where crypto-assets are traded.

2.3.   Proposal for a regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT)

| 2.3.1 | The proposal for a regulation on a pilot regime for DLT market infrastructures has four general objectives: i) to provide legal certainty; ii) to support innovation, eliminating obstacles to the application of new DLT technologies in the financial sector; iii) to guarantee consumer and investor protection, as well as market integrity; iv) to ensure financial stability. |
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2.3.1

| 2.3.2 | In order to achieve these objectives, the pilot scheme introduces appropriate safeguards, for example by limiting the types of financial instrument that can be traded, with provisions specifically aimed at ensuring financial stability and consumer and investor protection. |
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2.3.2

| 2.3.3 | By introducing a pilot scheme for testing DLT market infrastructures, the proposal for a regulation seeks to enable EU companies to exploit the full potential of the existing framework, allowing supervisory authorities and legislators to identify obstacles to regulation, while regulatory authorities and companies themselves will gradually be able to gain valuable knowledge about the use of DLT. |
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2.3.3

| 2.3.4 | It is precisely for these reasons, and because a gradual approach is needed, that the pilot scheme must be considered the most proportionate instrument in relation to the objectives to be achieved. At present, there is insufficient evidence to justify introducing permanent, more significant and more far-reaching regulatory change. |
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2.3.4

| 2.3.5 | The proposal aims to guarantee legal certainty and flexibility for market participants wishing to operate a DLT market infrastructure by laying down uniform operating requirements. Authorisations granted under the regulation would also allow market participants to operate a DLT market infrastructure and to provide their services in all Member States with appropriate supervision. |
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2.3.5

| 2.3.6 | On a more detailed note, Article 1 defines the subject matter and scope of the proposal, while Article 2 sets out the relevant terms and definitions, including those relating to the concepts of ‘DLT market infrastructure’, ‘multilateral DLT trading facility’ or ‘DLT MTF’, ‘DLT securities settlement system’ and ‘DLT transferable securities’. |
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2.3.6

| 2.3.7 | Article 3 describes the limitations imposed on DLT securities that can be admitted to trading on, or recorded by, DLT market infrastructures. For shares, the market capitalisation or the tentative market capitalisation of the issuer of DLT transferable securities should be less than EUR 200 million; for public bonds other than sovereign bonds, covered bonds and corporate bonds the limit is EUR 500 million. DLT market infrastructures should not admit to trading or record sovereign bonds. |
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2.3.7

| 2.3.8 | Article 4 sets out the requirements for a DLT, which are the same as for an MTF under Directive 2014/65/EU of the European Parliament and of the Council (4), and specifies the possible exemptions under this regulation. Articles 7 and 8 lay down the specific authorisation procedure to operate a DLT MTF and a DLT securities settlement system and list in detail the information to be submitted to the competent authority. Article 9 defines the cooperation between the DLT market infrastructure, the competent authorities and the European Securities and Markets Authority (ESMA). Article 10 specifies that, at the latest after a five-year period, ESMA shall produce a detailed report on the pilot scheme for the Commission. |
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2.3.8

3.   General and specific comments

| 3.1. | The EESC agrees with the European Commission's objectives and in this opinion endorses the usefulness and importance of implementing, by mid-2022, the various regulatory adjustment measures needed to modernise financial services, without ever neglecting consumer protection or market integrity. |
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3.1.

| 3.2. | More specifically, the legislative proposals aim to ensure legal certainty with regard to crypto-asset regulation. A clear regulatory framework applying to all types of crypto-assets, as well as to all providers of related services, is a prerequisite for creating innovative value-added solutions in this market. In particular, opting for a regulation rather than a directive will help to achieve uniform content and application of the new rules on the internal market. |
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3.2.

| 3.3. | The EESC stresses that the Commission's long-awaited regulatory intervention is now urgently needed to comprehensively regulate a constantly and rapidly changing technology. |
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3.3.

| 3.4. | The EESC deems useful the measures envisaged to: i) protect the end-users of digital finance; ii) safeguard financial stability; iii) protect the integrity of the EU's financial sector; iv) ensure a level playing field among the different operators in the economic and financial system. |
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3.4.

| 3.5. | The EESC agrees with and supports the proposal to ensure that issuers of significant crypto-assets known as ‘global stablecoins’ are subject to stricter requirements in terms of capital, investor rights and supervision. Regulatory intervention is crucial to prevent money flows emerging outside the oversight of central banks, sectoral authorities and democratic institutions. |
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3.5.

| 3.6. | The EESC is pleased that the Commission's work on classifying and defining the concepts of crypto-assets and distributed ledger technology has embraced the different types of crypto-assets in the definitions used, thereby enabling them to cater for possible future technological and market developments. |
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3.6.

| 3.7. | However, the EESC believes that a greater degree of clarity could be achieved by developing more detailed specifications on the various sub-categories of crypto-assets and their scope. This could avoid risks related to interpretation of the rules on types of crypto-assets in the residual category ‘other than asset-referenced tokens and e-money tokens’. |
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3.7.

| 3.8. | The EESC welcomes the care taken in the proposal for a regulation to avoid duplicating rules, evident in the exemptions from the scope of the MiCA regulation set out in Article 2(2) of the proposal. These measures are appropriate and relevant, as it is necessary to avoid overlapping requirements and rules being duplicated in the MiCA proposal and, for example, the MiFID Directive. |
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3.8.

| 3.9. | Regulatory frameworks must not conflict with each other, as this would increase regulatory uncertainty and create excessive compliance costs and burdens for operators, potentially limiting innovation. In order to achieve a clear separation between the two areas, and thus the necessary legal certainty, a definition of ‘security token’ is needed, along with clear guidance on the distinctive features of a crypto-asset that can be classified as a financial instrument. |
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3.9.

| 3.10. | The EESC therefore welcomes the involvement and expertise of the EBA (5) and the ESMA (6) both prior to the publication of the proposals covered by this opinion and in the context of the expected administrative cooperation between these European authorities and the competent national authorities once the new rules apply. |
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3.10.

| 3.11. | By choosing to limit the application of the proposal essentially to utility tokens and stablecoins, the Commission is limiting regulatory intervention to activities other than financial instruments and investment products which can be defined as ‘digital representations’ of rights deriving from investments and business activities, managed by means of distributed ledger technologies. In this way, tokens or crypto-assets must be linked to tangible values and are therefore less exposed to the risk of opportunistic use that could lead to savings being built up without the necessary safeguards for investors. |
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3.11.

| 3.12. | The EESC considers that hybrid tokens need to be classified more clearly. After the issuance phase some crypto-assets may perform different functions, changing their nature under predetermined conditions. It is therefore necessary to clarify the regulatory system to be applied to these evolving hybrid instruments, as a change in their nature could call for different regulatory provisions. |
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3.12.

| 3.13. | The EESC also supports EU action to remove potential barriers to innovation that may be caused by new digital technologies and which could be attributed to financial services legislation, which is not always able to keep up with the rapid succession of technological innovations. |
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3.13.

| 3.14. | Among the innovations with disruptive potential for the financial and monetary sectors, specific attention must obviously be paid to distributed ledger technology (DLT); the well-known blockchain technology is one example, as this is the infrastructure behind the success of bitcoin and other forms of crypto-assets. |
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3.14.

| 3.15. | The EESC believes that through the proposed amendments adapting Directive (EU) 2019/1937, the EU will be able to ensure that existing rules are applied properly in this new environment. European rules can also guarantee the safe development of a new regulatory framework, such as that set out in the pilot proposal regulating market infrastructures based on DLT. |
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3.15.

| 3.16. | These actions should ensure regulatory clarity, enabling the institutional financial sector to achieve greater efficiency through the wider use of DLT, including in response to the sometimes uncontrolled dissemination of alternative crypto-currencies or payment systems developed by unregulated operators. |
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3.16.

| 3.17. | One pressing reason for European action also stems from the fact that several Member States have started adopting regulatory instruments either through legislative action or by means of recommendations and guidelines issued by secondary regulatory authorities or institutions, such as central banks or financial market control and supervisory authorities. |
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3.17.

| 3.18. | Whilst sharing the same basic aims and objectives, they risk creating a fragmented and uneven regulatory framework in the internal market. Conversely, some Member States have not taken any initiatives to date, also contributing to an uneven and piecemeal regulatory scenario where differentiated regulatory measures and lack of regulatory intervention exist side by side. |
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3.18.

| 3.19. | The EESC believes that the interpretation of the regulation and the decisions taken by the relevant national authorities during the authorisation process should be as consistent as possible in order to ensure a level playing field and avoid regulatory arbitrage between the different Member States, considering the option of using the EU-wide portability regime for authorised entities. |
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3.19.

| 3.20. | With this in mind, the EESC supports the Commission's decision to take action by means of a specific regulation to ensure uniform and simultaneous EU-level rules: uniform and standardised rules are undoubtedly more effective than a proliferation of state interventions, in line with the subsidiarity principle laid down in the Treaties. |
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3.20.

| 3.21. | The EESC is pleased that the main objective of the proposed regulation is transparency of information and establishing an appropriate authorisation system. Prior to the present proposals, the regulatory set-up lacked an authorisation filter for DLT-based activities, as well as effective supervision of operations. |
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3.21.

| 3.22. | The EESC would like to see measures to ensure that consumers and small-scale investors are provided with suitable information on and made aware of the new rules which will shortly be approved. Both the risks and benefits of and the opportunities offered by the new technologies used in the financial and investment sector must be made clear in order to reduce the information asymmetry characteristic of the financial sector. This asymmetry could have a disproportionate impact on consumers and small-scale savers due to the measures explored in this opinion: they are new and, being highly technical, are not easy to understand. |
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3.22.

| 3.23. | The EESC recommends that special attention be paid to prior checks on authorisation measures, especially as regards the corporate reliability of authorised entities, in order to avoid opportunistic and harmful behaviour. |
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3.23.

| 3.24. | There still does not seem to be a level of standardisation and interoperability of DLT that can safely guide the assessment of the technological reliability and cyber-resilience of the infrastructures adopted by operators. Attention should therefore be paid to ensuring a high level of consumer and investor protection. |
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3.24.

| 3.25. | The EESC would like to see real progress being made with regard to digital operational resilience, a subject covered by the DORA proposal which is part of the digital finance package. This package tackles critical aspects flagged up by the financial sector and aims to bring legal clarity to the provisions on risks related to information and communication technology (ICT), reducing legislative complexity and alleviating the administrative burden on businesses, as pointed out by the EESC in its opinion on Digital operational resilience (7). |
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3.25.

| 3.26. | With this in mind, the EESC welcomes the proposal for a regulation on a pilot scheme for market infrastructures based on DLT, in which the Commission takes into account the market infrastructures intended to allow trading and settlement of transactions in financial instruments in the form of crypto-assets, specifies in detail the prior requirements and conditions for obtaining specific authorisation to operate a DLT MTF and embeds these requirements in a supervisory framework run by sectoral authorities. |
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3.26.

| 3.27. | Moreover, through the pilot scheme, the decision has been taken to adopt a ‘sandbox’ approach, identifying a test space in a controlled environment that allows for temporary derogations from the current rules. This approach will enable regulators and operators to gain experience of using DLT in market infrastructures, thus ensuring sufficient time to adequately manage risks to investors, market integrity and financial stability. |
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3.27.

| 3.28. | By adopting a pilot scheme (or sandbox), an empirical approach based on practical and temporary experiments can be followed in order to proceed, at a subsequent stage and in the light of experience, with more robust regulatory adjustment, without hampering the introduction and full roll-out of DLT and the innovation that it may bring about. Particular attention should be paid to the exit phase at the end of the pilot scheme in order to safeguard users and individuals who have participated in the trial. |
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3.28.

| 3.29. | Despite endorsing the Commission proposal, the EESC believes that the 5-year deadline for ESMA to submit its report to the Commission is too long given the speed with which digital finance technologies evolve. |
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3.29.

| 3.30. | In addition, the option of ending the pilot scheme following the ESMA report should be considered, phasing it out in a way that allows operators to gradually leave the pilot scheme and recoup as many of the costs incurred during the trial as possible. Moreover, the EESC believes that the pilot regime model could also be applied in order to recognise the role played by investment firms and banks carrying out activities related to the operation of DLT infrastructure for trading and securities custody and administration services. |
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3.30.

| 3.31. | Lastly, with regard to the overall application of the MiCA regulation, the EESC has serious concerns regarding the transitional provisions, which provide for permanent exemption from MiCA requirements for crypto-assets that were already on the market before the regulation came into force and which fall into the residual category ‘other than asset-referenced tokens and e-money tokens’ (Article 123). |
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3.31.

| 3.32. | The EESC therefore calls for careful assessment of the possibility of this exemption being permanently applied to a crypto-asset, so as not to undermine the principle of fair treatment, whereby the same risk and the same asset are dealt with in the same way. It would in fact be more appropriate to make this provision properly transitional by establishing an adjustment period for crypto-assets in that category already on the market. |
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3.32.

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

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(1)  Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law (OJ L 305, 26.11.2019, p. 17).

1

(2)  EESC opinion on A Digital Finance Strategy for the EU (ECO/534) (see page 27 of this Official Journal).

2

A Digital Finance Strategy for the EU

(3)  EESC opinion on Digital operational resilience (ECO/536) (see page 38 of this Official Journal).

3

Digital operational resilience

(4)  Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (recast) (OJ L 173, 12.6.2014, p. 349).

4

(5)  European Banking Authority.

5

(6)  European Securities and Markets Authority.

6

(7)  EESC opinion on Digital operational resilience (ECO/536) (see page 38 of this Official Journal).

7

Digital operational resilience

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| 30.4.2021 | EN | Official Journal of the European Union | C 155/38 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/38

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Opinion of the European Economic and Social Committee on:

Proposal for a Regulation of the European Parliament and of the Council on digital operational resilience for the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014 and (EU) No 909/2014

(COM(2020) 595 final – 2020/0266 (COD))

Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2009/65/EC, 2009/138/EC, 2011/61/EU, 2013/36/EU, 2014/65/EU, (EU) 2015/2366 and (EU) 2016/2341

(COM(2020) 596 final – 2020/0268 (COD))

(2021/C 155/06)

| Rapporteur: | Antonio GARCÍA DEL RIEGO |
| --- | --- |

Rapporteur:

Antonio GARCÍA DEL RIEGO

| Referral | European Parliament, 17.12.2020
  Council of the European Union, 22.12.2020 |
| --- | --- |
| Legal basis | Articles 53(1), 114(1) and 304 of TFEU |
| Section responsible | Economic and Monetary Union and Economic and Social Cohesion |
| Adopted in section | 12.2.2021 |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 243/1/4 |

Referral

European Parliament, 17.12.2020

Council of the European Union, 22.12.2020

Legal basis

Articles 53(1), 114(1) and 304 of TFEU

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted in section

12.2.2021

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

243/1/4

1.   
  Conclusions and recommendations

| 1.1 | The EESC welcomes the Digital Operational Resilience (DORA) proposal issued by the European Commission, as it aims to bring legal clarity on the ICT risk provisions, reduce regulatory complexity, establish a common set of standards to mitigate ICT risks and facilitate a harmonised supervisory approach, while also providing legal certainty and the necessary safeguards for financial firms and ICT providers. DORA not only enhances the sector’s resilience to ICT risks, but is also of interest to a number of stakeholders, including customers, investors and employees, and contributes to the implementation of sustainable development. |
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1.1

| 1.2 | The EESC recommends enhancing the effectiveness of DORA by means of the following steps: |
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1.2

| 1.2.1 | Including within the scope of DORA any provider of critical financial services that develops financial activities and excluding the use of ICT services for non-critical functions. |
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1.2.1

| 1.2.2 | Ensuring consistency in definition and scope between DORA and the requirements set out in existing guidelines issued by the ESAs. |
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1.2.2

| 1.2.3 | Regarding ICT Management, favouring a framework focused on a principle and risk-based approach that facilitates the implementation of controls that are future-proof, flexible and proportionate to the risks. |
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1.2.3

| 1.2.4 | Regarding ICT-related incidents, full alignment with the FSB’s Cyber Incident Response and Recovery toolkit. |
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1.2.4

| 1.2.5 | Regarding digital operational resilience testing, emphasising not only the scale of the financial institution, but also the complexity and critical nature of the service; avoiding mandatory outsourcing conducted by the limited number of external testers, and mutual recognition of testing results. |
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1.2.5

| 1.2.6 | Consolidating requirements on outsourcing into a single rulebook, in order to enforce legal certainty for all market participants and reliably comply with supervisory expectations. |
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1.2.6

| 1.2.7 | Fully enforcing lead overseers’ recommendations and a clear set of roles and responsibilities for the different authorities involved in the oversight of CTTPs. |
| --- | --- |

1.2.7

| 1.2.8 | Ensuring access to outsourced services that are deemed critical to TPPs established in third countries so as to avoid restricting firms’ freedom of contract and the capacity to access the services of high value-added providers. |
| --- | --- |

1.2.8

| 1.2.9 | Including proportionality in the penalty regime to avoid disincentives for ICT providers to serve EU financial entities and moving away from the current reference to worldwide turnover. |
| --- | --- |

1.2.9

| 1.2.10 | Providing clarity on the ability of firms to share cyber-threat information by ensuring that such arrangements are put in place on a voluntary basis and that an explicit provision allowing for the exchange of personal information is included in the DORA proposal. |
| --- | --- |

1.2.10

| 1.2.11 | Raising the exemption threshold of the proposal to micro and small enterprises as defined under Annex I, Article 2.2 of Commission Recommendation 2003/361/EC (1): enterprises which employ fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million and reducing the number of requirements applicable to SME entities proportionally to the digital risk profile of the entity could be considered. |
| --- | --- |

1.2.11

| 1.3 | The EESC supports the empowerment of the lead overseers to execute the audit and inspection procedures over the CTPPs, as lead overseers would gain a better understanding of the risks that the CTPPs may pose and this could help to streamline banks’ outsourcing procedures. |
| --- | --- |

1.3

2.   
  Background

| 2.1 | European consumers and businesses rely increasingly on digital financial services, which goes hand in hand with market participants deploying more and more innovative solutions based on new technologies. The digital transformation is key for the European recovery and for creating a sustainable and resilient European economy. |
| --- | --- |

2.1

| 2.2 | In line with the European Commission priorities to make Europe fit for the digital age and to build a future-ready economy that works for the people, the Commission put forward a digital finance package. This package outlines measures to further enable and support the potential of digital finance in terms of innovation and competition while mitigating the risks arising from it. |
| --- | --- |

2.2

| 2.3 | In addition to the proposal on digital operational resilience, the digital finance package includes a new strategy on digital finance for the EU financial sector (2) and a proposal for a regulation on markets in crypto assets together with a proposal for a regulation on a pilot regime on distributed ledger technology (DLT) market infrastructure (3). |
| --- | --- |

2.3

| 2.4 | Digital operational resilience is the capacity of firms to ensure that they can withstand all types of disruptions and threats related to Information Communication Technologies (ICT). The ever-increasing dependency of the financial sector on software and digital processes means that ICT risks are inherent in finance. Financial firms have become targets of cyberattacks, which result in serious financial and reputational damage to consumers and firms. These risks need to be well understood and managed, especially in times of stress. |
| --- | --- |

2.4

| 2.5 | While reforms that followed the 2008 financial crisis strengthened the resilience of the EU financial sector, ICT risks were only indirectly addressed. The lack of a comprehensive European-level regulatory framework on digital operational resilience led to a reliance on national regulatory initiatives. This, however, has limited cross-border effectiveness and has led to a fragmentation of the single market, which undermines the stability and integrity of the EU financial sector. Against this background, the Commission proposes to create a comprehensive framework on digital operational resilience for EU financial entities. |
| --- | --- |

2.5

| 2.6 | The legislative proposal on digital operational resilience (DORA) (4) aims to enhance and streamline financial entities’ conduct of ICT risk management, establish thorough resilience testing of ICT systems, foster information sharing and increase supervisors’ awareness of cyber risks and ICT-related incidents faced by financial entities, as well as introduce powers for financial supervisors to oversee risks stemming from financial entities’ dependency on ICT third-party service providers. The proposal also aims to create a consistent incident reporting mechanism that could help reduce administrative burdens for financial entities and strengthen supervisory effectiveness. |
| --- | --- |

2.6

| 2.7 | The Commission also presented a proposal for a directive (5) because it is necessary to establish a temporary exemption for multilateral trading facilities and amend or clarify certain provisions in existing EU financial services directives to achieve the objectives of the digital operational resilience proposal. |
| --- | --- |

2.7

| 2.8 | Ranking as one of the largest industries in the world, the ICT market was estimated to be worth over five trillion USD in 2019 and over six trillion by 2022. The continuous growth serves as a reminder of the ever-increasing prevalence and importance of technology in today’s society. Finance is the largest ICT user in the world, with about 20 % of all total ICT expenditure, according to the legislative proposal’s impact assessment. |
| --- | --- |

2.8

| 2.9 | COVID-19 has driven the proliferation of digital financial services, as branch networks of financial institutions remain underutilised. This will spur investments in digital self-service tools, open finance applications and value-added services. Overall, the current situation will force financial institutions to invest more in IT infrastructure, prioritise the migration of critical workloads and update existing apps. The European financial sector is already undergoing a major digital transformation and its ability to compete on a global scale will largely depend on the ability of European institutions to benefit from the most advanced technologies. |
| --- | --- |

2.9

3.   
  General comments

| 3.1 | The EESC welcomes the Digital and Operational Resilience (DORA) proposal issued by the European Commission which addresses many of the claims noted by the financial sector and aims to bring legal clarity on the ICT risk provisions, reduce regulatory complexity and lower the administrative burden resulting from diverse rules that apply to financial entities across the EU. DORA not only enhances the sector’s resilience to ICT risks, but it is also of interest to several stakeholders, including customers, investors and employees and contributes to the implementation of sustainable development. |
| --- | --- |

3.1

| 3.2 | The EESC sees DORA as an important step towards establishing a common set of standards to mitigate ICT risks and to facilitate a harmonised supervisory approach, but caution should be taken to avoid adding hurdles that could prevent EU financial institutions from being part of the global innovative process. |
| --- | --- |

3.2

| 3.3 | The EESC sees it as an overarching goal that EU authorities seek to achieve a proportionate and risk-based regime that provides supervisors with tools to address their concerns, while also providing legal certainty and the necessary safeguards for financial firms and ICT providers. |
| --- | --- |

3.3

4.   
  Specific comments

4.1   Scope and regulatory overlapping issues

4.1.1   Inclusion of additional relevant financial market participants

While the EESC acknowledges and welcomes the broad scope of financial market participants targeted by the proposed legislation that will ensure the consistent application of its requirements across the EU financial sector, we recommend that EU policymakers include financial participants that are not considered part of the scope of this proposed legislation — such as mortgage credit providers and consumer credit providers — to an appropriate degree determined by the risk they may pose to the system. Every provider of financial services that is developing the same activities and taking the same risks should be covered by the same rules and supervision to ensure the same minimum framework for digital resilience that protects consumers and financial stability.

4.1.2   Consistency at international and EU level, as well as with existing regulations

It is crucial to provide clarity to firms, particularly to those operating across borders, ensuring that definitions and terms are consistent and avoiding duplications, overlaps and different interpretations of how to meet similar regulatory expectations in different jurisdictions. The EESC recommends that EU policymakers amend the definition of operational resilience to be consistent with the Basel Committee on Banking Supervision (BCBS) definition (6) and to ensure that it is the leading regime applicable to EU financial institutions to avoid the risk of contradictions with others. Besides, many of the principles and requirements set in DORA are already defined in the existing guidelines on outsourcing (7). ICT risks and security risk management requirements are also already defined in the EBA Guidelines. It will be crucial to ensure consistency in definition and scope between DORA and the requirements set out in the existing guidelines in order to achieve the harmonisation of EU regulatory requirements.

| 4.1.3 | Equally, the EESC recommends that the EC make sure that the ongoing review of the Security of Network and Information Systems (NIS) Directive and the proposal on DORA share the same definitions and requirements on security incident reporting policy for financial entities. |
| --- | --- |

4.1.3

4.2   ICT risk management

Some elements of the framework are overly focused on compliance rather than on how firms can demonstrate outcomes in a principle- and risk-based approach. Since they are too prescriptive and detailed, they run the risk of becoming obsolete over time as the cyber and ICT risk landscape evolves. The EESC recommends a more principle- and risk-based approach that facilitates the implementation of controls that are future-proof, flexible, proportionate, and commensurate to the risks.

4.3   ICT-related incidents

The EESC recommends full alignment between the recently published Cyber Incident Response and Recovery (CIRR) toolkit (8) by the Financial Stability Board (FSB), which provides best practices for incident reporting and the proposed management, classification and reporting of ICT-related incidents envisaged in DORA. There are overlaps that create regulatory uncertainty and increase the regulatory burden for firms.

4.4   Digital operational resilience testing

| 4.4.1 | Although the EESC welcomes the pan-European Threat Led Penetration Testing (TLPT) regime across the EU, as it will increase efficiency and reduce fragmentation, the EESC recommends that authorities focus not only on the size or the scale of the financial institution, but also on the complexity and criticality of the service, taking into account the proportionality principle, where appropriate, to eliminate the distinction between basic testing for all financial institutions and more advanced testing for significant financial institutions, and making sure that customers from smaller financial entities are equally protected and that a level playing field is created among all financial entities. |
| --- | --- |

4.4.1

| 4.4.2 | The EESC recommends that outsourcing testing to external testers should not be made mandatory, as external testers are limited in number. Indeed, firms may have their own in-house testing teams that are familiar with the firms’ environment and are able to quickly pivot to more advanced and targeted tests. |
| --- | --- |

4.4.2

| 4.4.3 | The inclusion of ICT third-party service providers within the remit of TLPT should be reviewed. The fact that ICT third-party providers may serve a number of clients could result in significant duplication of testing, which could in turn create relevant risks for the ICT third-party provider and the clients they serve. |
| --- | --- |

4.4.3

| 4.4.4 | Moreover, the EESC recommends making explicit reference to the mutual recognition of testing results, given its role in reducing risk and ensuring the smooth functioning of the single market, as well as to avoid cost increases for financial entities operating across borders. |
| --- | --- |

4.4.4

4.5   Management of ICT third-party risk and oversight framework for critical third-party providers (CTPPs)

4.5.1   Ensuring consistency with the existing guidelines on outsourcing

The EESC welcomes the fact that DORA establishes a common regulatory framework for the sound management of ICT third-party risks for all financial market participants across Europe. However, it will be crucial to ensure full alignment between this common ground set out in the key principles (articles 25, 26 and 27) and existing rules such as the European supervisory authorities’ (ESAs) Guidelines on Outsourcing (i.e., solving the existing dichotomy in scope between ‘outsourcing’ and ‘third-party service’ (9)). Furthermore, we believe this is a great opportunity for EU authorities to consolidate the requirements on outsourcing into a single regulation — with a sufficient level of detail to avoid differences of interpretation — that could bring legal certainty to all market participants and to reliably comply with supervisory expectations.

4.5.2   Requirements applicable to critical or important outsourced activities

In the application of its own Art. 25.2, in order to keep a risk-oriented focus, the regulation needs to be more specific on how the principle of proportionality will be applied, specifying the requirements that would be applicable to critical or important outsourced activities and those that would be applicable to the rest (10). The EESC recommends that the use of ICT services for non-critical functions should fall outside the scope of DORA.

4.5.3   Direct oversight framework for critical third-party providers (CTPPs)

The EESC welcomes the introduction of a direct oversight framework that will allow for continuous monitoring of the activities of CTPPs by financial authorities, in the absence of an EU horizontal sector-agnostic framework. In the proposed regulation, EU authorities should recognise that when a critical ICT provider comes under this supervision, the risk exposure of financial institutions decreases due to continuous monitoring of their activities. Therefore, this new oversight framework should also help to streamline banks’ outsourcing procedures by alleviating some of the burden currently faced by financial entities, for example in relation to the performance of audit and inspection procedures concerning the TPPs that are deemed critical.

| 4.5.4 | The EESC supports empowering the lead overseers to execute the audit and inspection procedures over the CTPPs, as lead overseers would gain a better understanding of the risks that the CTPPs may pose by having first-hand knowledge of their processes and premises, instead of relying on the current reporting provided by the supervised financial institutions and inspections undertaken by national competent authorities. Although the risk mitigation policies of financial entities should be maintained, and the legal obligation remains with them, if inspection and audits are already executed by the lead overseer, financial institutions should benefit from this additional level of security and not have to perform them again. |
| --- | --- |

4.5.4

4.5.5   Lead overseer and national competent authorities

Once the oversight process has been completed, the lead overseer’s recommendations will be followed up by the national competent authorities, which may have their own approach on how to implement the findings of the lead overseer for designated CTPPs. The EESC recommends providing full clarity on the roles and responsibilities of the different authorities in order to avoid a situation where disparity of interpretations affects each of the CTPPs’ customers differently depending on their competent authority and thus reduce the risk of fragmentation. These recommendations should also be made fully enforceable, bearing in mind the current ambiguity of Art. 37 as to their binding nature.

4.5.6   Suspension of a CTPP

DORA gives national financial regulators the power to require customers to temporarily suspend or discontinue the use of an ICT provider until the risks identified in the recommendations have been addressed. Requirements for any immediate termination of work with a CTPP would definitely impact existing or future business and commercial decision-making (e.g. deterring investments in the EU) and potentially impact financial stability. Before taking this decision, competent authorities should carefully consider, among other factors, the potential negative impact of terminating the service for the financial entities using this particular CTPP (11), set clear criteria for such a requirement and contemplate potential remedies.

| 4.5.7 | In addition, we recommend that if this is ultimately the situation, financial entities should be informed well in advance and should be given sufficient time to exit. |
| --- | --- |

4.5.7

4.6   Preserving European financial firms’ global competitiveness

| 4.6.1 | The new framework needs to preserve European financial firms’ ability to access at least the same technologies as their global competitors. EU financial firms are competing on a global scale and the EU’s upcoming regulatory framework should not be putting those EU businesses at a disadvantage by limiting their access to the most advanced technologies — as long as the providers of these technologies meet the EU standards when it comes to resilience and security. |
| --- | --- |

4.6.1

4.6.2   TPPs established in third countries

The regulation should not limit the possibility of outsourcing services that are deemed critical to TPPs established in third countries. This limitation would definitely restrict individual entities’ freedom of contract and the capacity of European financial institutions to access the services of high value-added providers that most likely will not be found in Europe in sufficient number. This is even more relevant as the proposed oversight framework is limited to the financial sector, creating an uneven playing field for other players not subject to this regulation, and could end up increasing the risk of concentration, which DORA seeks to avoid.

4.6.3   Punitive penalties based on global turnover

DORA includes punitive penalties with reference to worldwide turnover for ICT providers if they fail to comply with requests by EU financial supervisors. A disproportionate application of those penalties could deter global ICT providers from serving EU financial firms, which could, de facto, limit the choice of providers EU financial firms could have. Additionally, it would deter non-critical third-party providers (non-CTPPs) from opting in to the oversight regime given the fear of being penalised with disproportionate fines and therefore reducing competition in the upstream market. The EESC advocates for the introduction of a level of proportionality in the penalties regime, which is key to avoid disincentives for ICT providers looking to provide services to EU financial entities.

4.7   On information sharing arrangement

| 4.7.1 | As a timely exchange of information is vital to efficiently identify attack vectors and isolate and prevent potential threats, the EESC welcomes the provision for facilitating the establishment of cyber threat information sharing arrangements among financial institutions on a voluntary basis. |
| --- | --- |

4.7.1

| 4.7.2 | We also recommend that EU authorities provide an explicit basis to allow the exchange of personal information (such as IP addresses) among the conditions of this proposal, as this would reduce uncertainty and boost financial entities’ capacity to enhance their defensive capabilities, better identify threats and reduce the risk of contagion between them. Further clarity is needed due to the confidential/sensitive nature of the data. |
| --- | --- |

4.7.2

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  OJ L 124, 20.5.2003, p. 36.

1

(2)  See EESC opinion ECO/534 — Digital Finance Strategy for the EU (see page 27 of this Official Journal).

2

(3)  See EESC opinion ECO/535 — Crypto assets and distributed ledger technology (see page 31 of this Official Journal).

3

(4)  COM(2020) 595 final.

4

(5)  COM(2020) 596 final.

5

(6)  Basel Committee on Banking Supervision, Principles for operational resilience,6 November 2020.

6

Principles for operational resilience,

(7)  Such as those produced by the EBA, EIOPA as well as the draft ESMA guidelines which were under consultation.

7

(8)  Financial Stability Board, Final Report on Effective Practices for Cyber Incident Response and Recovery, 19 October 2020.

8

Final Report on Effective Practices for Cyber Incident Response and Recovery

(9)  DORA refers only to ‘ICT TPP services’ with regards to the key principles for sound management of ICT third-party risk (Chapter V), while the scope of the EBA Guidelines on outsourcing arrangements is based on the definition of outsourcing which implies that the activity is performed on a recurrent or an ongoing basis (par.26). EBA Guidelines also set a list of exceptions that are not considered outsourcing (par. 28).

9

(10)  Again, it will also be crucial to align the definition of ‘critical or important functions’ in both DORA and the EBA Guidelines on Outsourcing. In particular, the EBA Guidelines define the factors that financial institutions should consider when assessing whether an outsourcing arrangement relates to a function that is critical or important (articles 29, 30, and 31).

10

(11)  One of the criteria to designate an ICT provider as critical would be the degree of substitutability of the TPP, taking into account the lack of real alternatives or the difficulties of partially or fully migrating the services (article 28.2). If this was the case, it would be difficult for financial institutions to port the service to another provider. In addition, requiring exposed financial institutions to move to another service provider would in the end contribute to increased concentration in the European market which would specifically go against the intention of this regulation.

11

---

| 30.4.2021 | EN | Official Journal of the European Union | C 155/45 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/45

---

Opinion of the European Economic and Social Committee on ‘Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank – Annual Sustainable Growth Strategy 2021’

(COM(2020) 575 final)

(2021/C 155/07)

| Rapporteur: | Krzysztof BALON |
| --- | --- |

Rapporteur:

Krzysztof BALON

| Referral | European Commission, 11.11.2020 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Economic and Monetary Union and Economic and Social Cohesion |
| Adopted in section | 12.2.2021 |
| Date adopted in plenary | 25.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 237/2/22 |

Referral

European Commission, 11.11.2020

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted in section

12.2.2021

Date adopted in plenary

25.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

237/2/22

1.   Conclusions and recommendations

| 1.1. | The European Economic and Social Committee (EESC) welcomes the fact that the Recovery and Resilience Facility Regulation (1) has finally confirmed the importance of genuine involvement of civil society organisations and social partners in the development of national recovery and resilience plans. It also advocates the establishment of a binding conditionality principle requiring governments to involve social partners and other civil society organisations in planning and implementing national recovery and resilience plans and other instruments under the Multiannual Financial Framework (MFF), on the basis of minimum standards defined at EU level. |
| --- | --- |

1.1.

| 1.2. | The EESC is convinced that in order for the joint actions as part of the Annual Sustainable Growth Strategy 2021 to be effective and for the European Recovery and Resilience Facility to be implemented successfully, it is essential that conditions favouring economic development be strengthened and, above all, that the Single Market continue to be fully functional. This particularly concerns preventing disruptions to the free movement of people and goods. Maintaining open borders in the Schengen area is still a key issue for recovery and increasing resilience as well as for fostering European solidarity and identity. The EESC believes that Member States should not introduce any regulations that directly or indirectly restrict freedom of movement unless coordinated at EU level. |
| --- | --- |

1.2.

| 1.3. | The EESC notes that public debt arising from borrowing to finance programmes under the Recovery and Resilience Facility should not burden future generations in the EU. In that connection, the EESC recommends Member States earmark funds from the Facility for budgetary expenditure relating to the current crisis, and take it as an opportunity to make our economies and societies sustainable and equitable. The EESC also acknowledges that public investment into infrastructure and education is needed in order to ensure economic, social and environmental sustainability for future generations. Moreover, this is also the base to secure prosperity, income and competitiveness in the long run. |
| --- | --- |

1.3.

| 1.4. | At the same time, given that loans under the Facility are an exceptional measure in exceptional circumstances, the EESC suggests considering not counting them in the medium term towards a Member State’s budget deficit in the EU’s fiscal framework. In addition, it is necessary to continue fiscal policies that support economic development, which is why the EESC warns against phasing out support measures, such as the escape clause, too early and advocates the establishment of new fiscal rules that reflect social and economic realities after the pandemic. |
| --- | --- |

1.4.

| 1.5. | The EESC welcomes the appropriate steps taken, in the Annual Sustainable Growth Strategy 2021, to address the challenges of the COVID-19 pandemic in the context of the European Green Deal. This means that efforts towards a more sustainable and socially inclusive economic model and, in particular, towards the transition to a green model of growth will continue. However, the EESC stresses that a prerequisite for the success of the green transition is for the national recovery and resilience plans to be in line with the proposed territorial just transition plans under the Just Transition Mechanism. |
| --- | --- |

1.5.

| 1.6. | The EESC believes that the digital transition should not only contribute to productivity gains, but also improve education and the political, social and cultural participation of everyone living in the EU. As part of support for equality in access to digital infrastructure, equipment and skills, special attention should be paid to older people, people with disabilities, people at risk of social exclusion and other vulnerable groups. The EESC takes the view that one of the objectives of the digital transition should be to establish universal access to broadband internet as a public service free of charge for all EU residents. |
| --- | --- |

1.6.

| 1.7. | The EESC regrets that the strategy devotes too little attention to social issues, particularly in view of the urgent need for consistent implementation of the European Pillar of Social Rights. Likewise, the Committee notes with concern that the approach proposed in the strategy is not entirely sustainable. Efforts to move rapidly towards a green and digital economy must not result in a further increase in poverty and greater social exclusion. It will be crucial to ensure a balanced distribution of the benefits of the economic recovery, which will contribute not only to improving social justice, but also to stabilising demand as a precondition for economic recovery. |
| --- | --- |

1.7.

| 1.8. | The EESC believes that the current socio-economic situation for young people, including the postponement of key life decisions such as starting a family, could have a negative impact on the future development of the EU. The Committee therefore calls for a smooth implementation of the reinforced Youth Guarantee programme and the accompanying initiatives. |
| --- | --- |

1.8.

| 1.9. | One of the measures to ensure the stability of public finances should, in the EESC’s view, be to increase the effectiveness of existing instruments and introduce, both at EU and Member State level, new instruments to combat tax evasion, undeclared work and the shadow economy which is linked to insufficient protection of workers' rights, money laundering and corruption, including with regard to transnational corporations. |
| --- | --- |

1.9.

| 1.10. | The EESC recommends that the joint, coordinated European flagships proposed by the European Commission (EC) be reviewed so that they take greater account of the social aspects of the transition, and that development of the social economy in conjunction with the European Action Plan for the Social Economy and ensuring equal access to affordable and high-quality healthcare systems and social services should be added to the list of initiatives. |
| --- | --- |

1.10.

| 1.11. | The EESC recommends that the EC draw up an additional document presenting the content of the Communication in a clearer and simpler way so that it can be debated within civil society organisations. |
| --- | --- |

1.11.

2.   Introduction

| 2.1. | On 17 September 2020, the EC published its Communication Annual Sustainable Growth Strategy 2021 (2) and asked the EESC for an opinion on it on 11 November 2020. The EESC fully supports the idea behind the Commission Communication, which points out the need to protect EU citizens, their health and jobs while also ensuring fairness, resilience and macroeconomic stability throughout the EU in the face of the sudden and deep recession caused by the COVID-19 pandemic. |
| --- | --- |

2.1.

| 2.2. | The strategy focuses on overcoming the sudden and deep recession caused by the COVID-19 pandemic while also keeping the Single Market running smoothly and continuing the sustainable, fair and democratic transition towards the European Green Deal in line with the UN Sustainable Development Goals. The EESC notes, however, that although the EC document refers to 2021 in its title, its content pertains more to the medium-term perspective. |
| --- | --- |

2.2.

| 2.3. | The Commission points out the landmark importance of the agreement reached by the European Council on 21 July 2020 on the next MFF and the Next Generation EU initiative, including the Recovery and Resilience Facility. This agreement was confirmed jointly with the European Parliament in December 2020, which allowed related legislation at European level to enter into force. However, it is equally important that Member States swiftly carry out the procedures for approving the Own Resources Decision, in accordance with their respective constitutional procedures, which allows the Commission to borrow on the market to finance programmes under this instrument. |
| --- | --- |

2.3.

| 2.4. | The EESC shares the view expressed in the Communication that in order for the joint actions as part of the Annual Sustainable Growth Strategy 2021 to be effective and for the European Recovery and Resilience Facility to be implemented successfully, it is essential that the Single Market continue to be fully functional. This particularly concerns preventing disruptions to the free movement of people and goods. Therefore, the EESC welcomes the Council’s recommendation on a common and coordinated approach to restrictions on free movement adopted on 12 October 2020 (3). Maintaining open borders, including not introducing border controls, in the Schengen area is a key issue for recovery and increasing resilience as well as for fostering European solidarity and identity. Member States should not introduce any regulations that directly or indirectly restrict freedom of movement unless coordinated at EU level. |
| --- | --- |

2.4.

| 2.5. | The EESC believes that measures to create a more business-friendly environment will enable the private sector to fulfil its role in achieving the objectives of the strategy. Such actions could include reducing the administrative burden for SMEs, lowering market entry barriers for new businesses, addressing the shortage of essential skills, facilitating the financing of business ventures and adapting the rules to new types of economic risk. |
| --- | --- |

2.5.

| 2.6. | Environmental sustainability, productivity, fairness and macroeconomic stability, which were identified as key dimensions in the Annual Sustainable Growth Strategy 2021, are at the heart of the European Semester and remain the guiding principles of Member States' recovery and resilience plans. At the same time, the EESC points to the need to review the Council recommendations issued in previous years in the context of the European Semester in terms of how feasible they are in the economic and social context caused by the pandemic. |
| --- | --- |

2.6.

3.   The European Recovery and Resilience Facility — Towards competitive sustainability

| 3.1. | The Recovery and Resilience Facility, as a core component of the Next Generation EU initiative, is to be one of the main tools for economic recovery. Effective implementation of the instrument could provide 2 % of additional GDP by 2024 and create two million additional jobs (4). At the same time, the EESC stresses that while the instrument, in the short term, is intended primarily for recovery and increased resilience, its main function in the medium to long term should be to support the green and digital transitions. |
| --- | --- |

3.1.

| 3.2. | In order to ensure synergies, Member States will, under certain conditions, be able to combine funding from different instruments, in particular EU cohesion policy funds and the Recovery and Resilience Facility. Also in this context, it is necessary to increase the absorption capacity of EU funds by Member States, including through appropriate mechanisms for the rule of law and good governance, high-quality public administration and effectively fighting against corruption, and to align the European Semester with the activation of the Facility, including linking the National Reform Programme and the recovery and resilience plan in a single integrated document. |
| --- | --- |

3.2.

| 3.3. | The EESC welcomes the establishment of a scoreboard as part of the instrument which will be updated every six months. In the EESC’s view, it will contribute to greater transparency, which could help significantly increase the level of trust between Member States. It will also help monitor the distribution and use of funds, as well as to disseminate best practices from the countries where funds are used. |
| --- | --- |

3.3.

| 3.4. | At the same time, the EESC recognises the potential risk that Member States could use the Facility’s resources for budgetary expenditure that is not linked to the current crisis. The Committee therefore recommends that their targeted use be subject to strict control. |
| --- | --- |

3.4.

| 3.5. | The EESC believes that the Next Generation EU initiative has been developed and adopted in the right form and at the right time. By providing financial support, it will ensure the economic recovery and can help the EU emerge from the current crisis stronger and more resilient through public investment in infrastructure, education and measures to overcome the climate crisis. However, it should be borne in mind that loans taken out to finance programmes under the Recovery and Resilience Facility will have to be reimbursed in the future. The Commission document could address a second scenario to finance the plan taking into account the possibility of future crises. However, the EESC also acknowledges, that public investment into infrastructure and education is needed in order to ensure economic, social and environmental sustainability for future generations. Moreover, this is also the base to secure prosperity, income and competitiveness in the long run. |
| --- | --- |

3.5.

4.   Green transition

| 4.1. | The EESC welcomes the appropriate steps taken to address the challenges of the COVID-19 pandemic in the context of the European Green Deal. This means that despite the turbulence linked to the global challenge of COVID-19, the previously declared efforts towards a more sustainable and socially inclusive economic model, the Sustainable Development Goals and, in particular, towards the transition to a green model of growth will continue. The transition to the European Green Deal creates a particular opportunity for the development of businesses based on the social economy model. |
| --- | --- |

4.1.

| 4.2. | In this context, the EESC supports the opinion of the European institutions that national recovery and resilience plans should allocate at least 37 % of expenditure to climate-related objectives. |
| --- | --- |

4.2.

| 4.3. | The EESC stresses that a prerequisite for the success of the green transition is for the national recovery and resilience plans to be in line with the proposed territorial just transition plans under the Just Transition Mechanism. |
| --- | --- |

4.3.

5.   Digital transition and productivity

| 5.1. | The EESC supports setting a minimum level of 20 % of expenditure on digitalisation in the national recovery and resilience plans. |
| --- | --- |

5.1.

| 5.2. | At the same time, the Committee warns against treating digitalisation as a purely productivity-enhancing instrument. The digital transition should contribute to improving the broader education, quality of life and political, social and cultural participation of the whole EU population. |
| --- | --- |

5.2.

| 5.3. | The EESC therefore shares the view the EC expressed in the Communication that equality of access to digital infrastructure, equipment and skills should be promoted. In the EESC’s view, special attention should be paid to promoting the digital access and skills of older people, people with disabilities and those at risk of social exclusion. The EESC also believes that one of the objectives of the digital transition should be to ensure universal access to broadband internet as a public service free of charge for all EU residents. |
| --- | --- |

5.3.

6.   Fairness

| 6.1. | The COVID-19 pandemic has revealed the urgent need to take action to strengthen social justice. The crisis is likely to exacerbate social inequalities, including wealth and income disparities, differences in access to healthcare and education, housing and life expectancy. Rising poverty and social exclusion and fear of the future and loss of prosperity will affect many EU citizens in 2021. In this context, it will be crucial to ensure a balanced distribution of the benefits of economic recovery to ensure greater achievement of social justice and to stabilise demand, which is a precondition for economic recovery. |
| --- | --- |

6.1.

| 6.2. | The crisis we are experiencing should also be seen as an opportunity to reshape Europe’s socio-economic model. The Recovery and Resilience Facility should promote a European model of economic and social development based on social inclusion and the creation and support of good quality jobs (5). |
| --- | --- |

6.2.

| 6.3. | The strategy devotes too little attention to social issues. This concerns in particular the urgent need for the European Pillar of Social Rights to also be consistently implemented at the level of Member States, which should take action to ensure equal opportunities, inclusive education, fair working conditions, universal accessibility and affordability of services of general interest and adequate social protection. Efforts to move rapidly towards a green and digital economy must not result in a further increase in poverty and social exclusion. Therefore, close monitoring of the economic consequences is not sufficient to respond effectively to the impact of the COVID-19 pandemic. It is also necessary to monitor social indicators and not only in terms of employment but also in terms of social exclusion, increasing disparities and discrimination. |
| --- | --- |

6.3.

| 6.4. | The crisis has shown the importance of maintaining existing jobs and creating new jobs and strengthening social security systems. Millions of people working without social security have lost their livelihoods. Reforms leading to higher quality and more secure employment and maintaining and developing employment support programmes are therefore necessary. The EESC agrees with the overall objective that further efforts are needed regarding convergence of wages and establishing adequate minimum wages in the Member States as well as strengthening collective bargaining systems and the role of social partners across EU, in line with national industrial relations systems. The Commission has presented its proposal for a Directive to address these objectives and the EESC is working on its opinion concerning this proposal. The EESC also calls for an adequate level of security and a decent life for those who have lost their jobs. |
| --- | --- |

6.4.

| 6.5. | The EESC welcomes the efforts set out in the Communication to achieve greater socio-economic cohesion and to more strongly encourage the employment of young people, women, people from risk groups or those at risk of exclusion. However, the Committee stresses it is necessary to make even more efforts in this area, to carry out bolder and more concrete initiatives and incentives for action and to support all stakeholders. |
| --- | --- |

6.5.

| 6.6. | The EESC is concerned that the strategy does not sufficiently consider the current socio-economic situation for young people, including the postponement of key life decisions such as starting a family, which could have a negative impact on the future development of the EU. The Committee therefore calls for swift implementation of the reinforced Youth Guarantee and the accompanying initiatives which will ensure that young people have better access to the labour market and the possibility of receiving various forms of support. Otherwise, completely contrary to the idea of Next Generation EU, there may be a ‘Coronavirus pandemic generation’ that will never reach its full potential. |
| --- | --- |

6.6.

| 6.7. | Another group particularly affected by the crisis is older workers who are pushed out of the labour market. This not only undermines the social balance between generations, but also negatively affects social security systems both currently and in the future. |
| --- | --- |

6.7.

| 6.8. | The EESC welcomes the strategy’s intention to promote convergence and increase the resilience of regions in order to reduce territorial disparities. However, it is worrying that the resources provided for the Just Transition Fund have been reduced compared to the original EC proposal, all the more so as direct public investment, the creation of alternative industries and new businesses in the areas most affected by the climate transition will be necessary. In this context, the EESC also points to the need to adapt the rules on state aid skilfully. |
| --- | --- |

6.8.

| 6.9. | The EESC believes that achieving the vision proposed in the strategy may come up against a lack of full acceptance and understanding, as there are no new governance mechanisms whereby citizens and businesses, as well as public and private actors at local and regional level, can be proactively involved in the process of defining and solving problems at local level. The values set out in the European shared governance model specified in the 2001 White Paper could be helpful in this respect. |
| --- | --- |

6.9.

7.   Macroeconomic stability

| 7.1. | The EESC advocates a balanced approach between the stability of public finances and the promotion of economic development through an active public investment policy and a public procurement system that takes account of social objectives. The success of the economic and social recovery and of the green and digital transitions will depend not only on private investment but also on adequate public funding. |
| --- | --- |

7.1.

| 7.2. | In order to ensure the stability of public finances, the EESC considers it essential to make existing instruments more effective and introduce, both at EU and Member State level, new instruments to combat tax evasion, undeclared work, overuse of forms of employment that do not sufficiently protect workers’ rights, the shadow economy, money laundering and corruption, including with regard to transnational corporations. |
| --- | --- |

7.2.

| 7.3. | The continuation of fiscal policies that support building confidence, addressing the problem of inequalities and avoiding further risks is necessary. The EESC therefore warns against phasing out support measures, such as the escape clause, too early. If the escape clause remains active only until the end of 2021, Member States will be obliged to gradually reduce their deficits from 2022. Loans under the Facility will be an opportunity for Member States on the one hand to boost growth and liquidity in their economies, while on the other hand leading to an increase in budget deficits. This creates a contradictory situation where the capacity to stimulate growth provided by the Facility’s loans may be limited if Member States are required at the same time to take additional measures to consolidate their public finances. |
| --- | --- |

7.3.

| 7.4. | In this context, and given that these loans are an exceptional measure in exceptional circumstances, it may be useful to introduce specific rules for handling them in the EU fiscal framework, for example not counting them in the budget deficit of a Member State. |
| --- | --- |

7.4.

| 7.5. | In addition, the EESC proposes the establishment of new fiscal rules reflecting economic and social realities after the pandemic. |
| --- | --- |

7.5.

| 7.6. | The EESC fully supports the need expressed in the Communication to ensure high-quality and efficient public administration and services of general interest, while noting that this means that in some Member States it is necessary to ensure decent and stable employment conditions. |
| --- | --- |

7.6.

| 7.7. | Budgetary deficits linked to the costs of emerging from the crisis are making joining the European single currency a more distant prospect for those Member States that have yet to do so, and are contributing to a decline in confidence in the euro. The EESC therefore considers it necessary to review the criteria for joining the euro area, and to carry out measures to stabilise the euro in relation to other leading currencies and cryptocurrencies. |
| --- | --- |

7.7.

8.   European flagships

| 8.1. | The EESC welcomes the EC’s intention to define common, coordinated European flagships and that the EC strongly encourages Member States to take account of these initiatives in their national recovery and resilience plans. |
| --- | --- |

8.1.

| 8.2. | At the same time, the EESC calls for a review of the proposed initiatives so that they would take greater account of the social aspects of the transition and better contribute to the achievement of the UN’s 2030 Sustainable Development Goals (SDGs) and the six EC priorities for 2019-2024 (6). |
| --- | --- |

8.2.

| 8.3. | In addition, the EESC proposes that the list of European flagships also include the development of the social economy, in conjunction with the European Action Plan for the Social Economy, and measures to promote equal access to affordable and high-quality healthcare systems and social services, taking into account local circumstances for provision of services. |
| --- | --- |

8.3.

9.   The role of civil society and social and civil dialogue

| 9.1. | In order to overcome the crisis and effectively implement the Next Generation EU initiative, the EU requires action from all its citizens. The EESC therefore welcomes the fact the Recovery and Resilience Facility Regulation, approved in December 2020, has finally confirmed the importance of genuine involvement of civil society organisations and social partners in the development of national recovery and resilience plans. In accordance with Article 18(4)(q) of the Regulation, national recovery and resilience plans must include a summary of the consultation process carried out with local and regional authorities, social partners, civil society organisations, youth organisations and other relevant stakeholders for the preparation and implementation of the plan and information on how the input of stakeholders is reflected in the plan. The EESC stresses the key role of the social partners and other civil society organisations in the planning, implementation and evaluation of both the Recovery and Resilience Facility and other elements of the European Semester in the Member States. |
| --- | --- |

9.1.

| 9.2. | The EESC welcomes the inclusion of democracy in the Communication as a key value in the measures taken in relation to the strategy. At the same time, it recognises that the wording in this area is not substantive and has not been sufficiently taken into account in the planned activities, such as those related to the implementation of the European flagships, or in recognising the partnership role of civil society organisations as key actors of participatory democracy. |
| --- | --- |

9.2.

| 9.3. | Sacrifices and constraints related to the crisis will be much easier to overcome if accompanied by broad inclusion of civil society organisations in managing crises and organising information campaigns particularly at the local and regional level. Local media and educational institutions should support civil society in this regard. Member States should be encouraged to provide financial support for such activities, including through EU funds, where possible. |
| --- | --- |

9.3.

| 9.4. | The EESC strongly encourages Member States, regions and local authorities to put into practice the model of co-creation advocated by the EC in the process of creating policies, programmes and actions jointly with EU citizens, rather than for them. |
| --- | --- |

9.4.

| 9.5. | The EESC has repeatedly called for the social partners and other civil society organisations to be more closely involved in the European Semester process. Consistent adherence to the partnership principle in the planning, implementation and evaluation of national recovery and resilience plans is, more than ever under the current crisis conditions, a prerequisite for successfully implementing them. The quality of public dialogue and consultation deteriorated dramatically, especially during the first phase of the crisis. This has in many cases led to poor quality of legislation and difficulties implementing it, especially for businesses. In addition, the EESC draws attention to the lack of reference to collective bargaining in the EC communication. |
| --- | --- |

9.5.

| 9.6. | For this reason, also taking into account input from Member States to prepare a resolution on the role of civil society in national recovery and resilience plans, the EESC strongly supports the establishment of a binding conditionality principle. According to this principle, governments will be required to involve civil society in the planning and implementation of these plans on the basis of minimum standards defined at EU level. |
| --- | --- |

9.6.

| 9.7. | The EESC also stresses the crucial importance of dialogue with the younger generation of the EU — Next Generation EU — including through civil dialogue with youth organisations. |
| --- | --- |

9.7.

| 9.8. | The language of the Commission’s communication, which was addressed to EU institutions and bodies, is not easy to understand for a wide range of the EU population, so it will be difficult to discuss it in civil society organisations (7). The EESC therefore proposes that the EC draw up an additional document presenting the content of the Communication in a clearer and simpler way. |
| --- | --- |

9.8.

Brussels, 25 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17).

1

(2)  COM(2020) 575 final.

2

(3)  COVID-19: Council adopts a recommendation to coordinate measures affecting free movement.

3

(4)  COM(2020) 575 final, page 2.

4

(5)  How good is your job? Measuring and assessing job quality (OECD, February 2016).

5

How good is your job? Measuring and assessing job quality

(6)  https://ec.europa.eu/info/strategy/priorities-2019-2024_en

6

(7)  COM(2020) 698 final could serve as a positive example of the use of simpler language in the Commission’s communications.

7

---

| 30.4.2021 | EN | Official Journal of the European Union | C 155/52 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/52

---

Opinion of the European Economic and Social Committee on ‘Proposal for a Regulation of the European Parliament and of the Council establishing the Brexit Adjustment Reserve’

(COM(2020) 854 final – 2020/0380 (COD))

(2021/C 155/08)

| Rapporteur-general: | Florian MARIN |
| --- | --- |

Rapporteur-general:

Florian MARIN

| Consultation | European Parliament, 18.1.2021
  European Council, 20.1.2021 |
| --- | --- |
| Legal basis | Article 175(3) and 304 TFEU |
| Section responsible | Economic and Monetary Union and Economic and Social Cohesion |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 242/0/2 |

Consultation

European Parliament, 18.1.2021

European Council, 20.1.2021

Legal basis

Article 175(3) and 304 TFEU

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

242/0/2

1.   Conclusions and recommendations

| 1.1. | The EESC considers that Brexit is a very complex and difficult exercise. The EU-UK Trade and Cooperation Agreement (1) alleviates some of the economic and social damage of a ‘no-deal’ scenario, but the future economic and financial losses are very difficult to quantify at such an early stage. Targeted and fast action is clearly needed in order to mitigate the economic and social impact. |
| --- | --- |

1.1.

| 1.2. | This new partnership seriously challenges the existing economic, social and commercial interdependence between the EU and the UK. The EESC already observes the negative impacts on cross-border mobility and barriers to trade in goods and services. This could result in job losses and businesses going bankrupt, especially SMEs. Increased flexibility and understanding towards EU stakeholders in the current adaptation period is paramount. |
| --- | --- |

1.2.

| 1.3. | The EESC welcomes the creation of the Brexit Adjustment Reserve (2) (the ‘Reserve’) within the special instruments outside of the EU budget ceilings of the Multiannual Financial Framework (MFF) (3). The EESC considers that cohesion and solidarity between Member States are fundamental EU values and appreciates the retroactive application of the Reserve going back to July 2020. |
| --- | --- |

1.3.

| 1.4. | Workers’ rights have to be protected immediately and the mutual recognition of qualifications must be further negotiated. The EESC recommends that all Member States should immediately start organising information campaigns to raise awareness among citizens regarding the new rules in place. For such action to be a complete success, the social partners and civil society organisations must be fully involved. Trade unions, and employers’ and civil society organisations have a vital role to play in building a strong economic and social partnership with the UK. |
| --- | --- |

1.4.

| 1.5. | The EESC suggests that the fisheries sector should have a completely separately designed reserve that will support this sector only. Special attention should be paid to other sectors, such as tourism and agriculture, for example. Appropriate infrastructure investments and support for the EU citizens that are returning to their home countries after Brexit should also be considered. |
| --- | --- |

1.5.

| 1.6. | The EESC expects prolonged discussions between stakeholders on who gets the biggest slice of the Reserve and considers that additional funds should be immediately provided for. In this respect, the EESC asks the co-legislators to increase the proposed ceiling. |
| --- | --- |

1.6.

| 1.7. | The EESC calls on all Member States to act responsibly and direct the available funds towards the regions, companies, workers and citizens that need them the most. Otherwise, the solidarity behind the design of such a reserve could be called into question and its chances of success would be in doubt. |
| --- | --- |

1.7.

| 1.8. | Article 5(1)(a) should be modified as follows: ‘measures to assist businesses, workers in the transition towards new skills and new jobs, and local communities adversely affected by the withdrawal’. Moreover, Article 5(1)(d) should be modified as follows: ‘measures to support job protection and employment, including through short-time work schemes, re-skilling and training in affected sectors’. Indicator 15.4 from Annex II should be modified accordingly. |
| --- | --- |

1.8.

| 1.9. | The eligibility period could be extended by two more years, just to make sure that the Member States have adequate time to make use of their share of the Reserve and absorb the shock waves from the UK’s withdrawal. |
| --- | --- |

1.9.

| 1.10. | The EESC considers that a small part of the Reserve should be earmarked for technical assistance purposes, for when a new management system is created. However, the EESC strongly believes that the largest part of the Reserve should be allocated to supporting employment and economic activities. |
| --- | --- |

1.10.

| 1.11. | SMEs are particularly affected by the newly introduced customs procedures, regulatory burdens and rising transport costs. Since SMEs mostly lack the administrative and legal capacity to implement a full contingency plan, the EESC is asking for specially designed measures to support them. |
| --- | --- |

1.11.

| 1.12. | When possible and in agreement with the European Commission, the EESC recommends that the simplified costs option be used. Simplified rules and less bureaucracy in the implementation process will contribute to faster distribution of the financial resources. |
| --- | --- |

1.12.

| 1.13. | The EESC calls for the creation of a monitoring committee in each Member State with the main purpose of eliminating possible risks that could appear in the implementation process, while ensuring the formal involvement of civil society in the process. The committees should comprise representatives of social partners, NGOs and public institutions involved in the implementation of the Reserve. |
| --- | --- |

1.13.

| 1.14. | The EESC proposes that more clarity should be provided in terms of governance by clearly designating a management body for the Reserve. The European Commission should protect the level playing field between Member States. |
| --- | --- |

1.14.

| 1.15. | The EESC calls for an intermediary performance framework to be created, based on specific performance-driven indicators to be established by the Member States and evaluated by the European Commission yearly. It considers that limited use of the available funds will proportionally increase the negative economic and social impact of Brexit. |
| --- | --- |

1.15.

| 1.16. | The integration of the European code of conduct on partnership (4) in the framework of the European Structural and Investment Funds into the management of the Reserve will empower stakeholders and civil society organisations to play a vital role as intermediary bodies. |
| --- | --- |

1.16.

| 1.17. | Finally, the EESC suggests that the European Commission report on its evaluation of the Reserve’s effectiveness, efficiency and added value to the European Parliament and the Council within three months from the assumed deadline. |
| --- | --- |

1.17.

2.   Introduction

| 2.1. | The EU-UK Trade and Cooperation Agreement has been signed after four years of negotiations and provides for the future partnership. It consists of three new pillars:






  — | a free trade agreement |
| --- | --- | --- |

2.1.

—

a free trade agreement

| — | a new partnership for our citizens’ security |
| --- | --- |

—

a new partnership for our citizens’ security

| — | a horizontal agreement on governance. |
| --- | --- |

—

a horizontal agreement on governance.

| 2.2. | Although the main rules of the game have been established, citizens and businesses alike need to adapt to this new situation, examining in detail the new restrictions and sector-by-sector challenges. The future economic and financial losses are very difficult to quantify at such an early stage, but targeted and fast action is clearly needed to mitigate the negative economic and social impact. |
| --- | --- |

2.2.

| 2.3. | Brexit is indeed a very complex and difficult exercise. Member States may have to step up control measures at sea, ports and airports in order to carry out additional monitoring and inspections when issuing certificates and authorising products, and in order to comply with establishment requirements, SPS (Sanitary and Phytosanitary Standards) rules and labelling and marking rules. They may also need to consider and update specific awareness-raising campaigns on the consequences that the withdrawal will have for citizens and businesses. |
| --- | --- |

2.3.

| 2.4. | With the new customs and regulatory checks in force causing delays and additional costs, supply chains are often disrupted. Business as usual is already being affected by the new rules in place and the new compliance requirements, especially in the current year, where most of the adverse consequences are expected to occur. Additional taxes that now apply, like VAT, may hinder economic relations and business partnerships. Minimising the negative impact of Brexit on the EU economy requires active involvement from all stakeholders: the EU, Member States, employers, trade unions, civil society organisations, etc. |
| --- | --- |

2.4.

| 2.5. | Furthermore, it is not yet clear how mutual recognition of qualifications will take place, how the flow of data is going to be ensured, or what rules will apply to the services sector. Further negotiations are desperately needed with the aim of achieving viable solutions that will benefit both sides. |
| --- | --- |

2.5.

| 2.6. | On the other hand, we do have to get used to the fact that we are dealing with two different markets and two different regulatory and legal spaces. This change represents an important hurdle for all stakeholders and will affect public administrations, citizens and businesses alike. This new partnership seriously challenges the existing economic, social and commercial interdependence between the EU and the UK. Negative impacts on cross-border mobility and barriers to trade in goods and services are already in place. This could result in job losses and businesses going bankrupt, especially SMEs. |
| --- | --- |

2.6.

| 2.7. | The proposal for a Regulation specifies the exact eligible public expenditure, notably measures to assist businesses and local communities; support for employment, including re-skilling and training; job protection; designing regimes for certification and authorisation; communication for awareness-raising; as well support for the functioning of the border. |
| --- | --- |

2.7.

3.   General comments

| 3.1. | The EESC, first of all, welcomes the EU-UK Trade and Cooperation Agreement signed at the very last stage of the transition period. It establishes the future relations, while protecting the integrity of the single market and providing for legal certainty and a level playing field. The Agreement alleviates most of the economic and social damage of a ‘no-deal’ scenario and can be considered the end of the beginning of our EU-UK relationship. The public authorities should show increased flexibility and understanding towards EU stakeholders in the current adaptation period. However, the EU and the Member States should pay special attention to protecting the single market, and its labour, social and environmental and food standards, to avoid the risk of market power abuses. |
| --- | --- |

3.1.

| 3.2. | The agreement on zero tariffs on the trade of goods, as long as they comply with the ‘rules of origin’, and the generally free movement of capital are significant achievements. However, the EESC is concerned that the movement of people (from 30 June 2021) and services have not yet been agreed. Furthermore, Brexit is happening on top of the COVID-19 crisis, which has already generated rising unemployment and reduced incomes. The EESC is also extremely worried that rising social inequalities have become more visible across the EU and reiterates that ‘the European Pillar of Social Rights (EPSR) needs to be prioritised in cohesion policy’ (5). |
| --- | --- |

3.2.

| 3.3. | The EESC considers that the Commission has chosen the appropriate instrument, with the implementation taking place under shared management. The Regulation will ensure clear and standardised application of rules across Member States, as well as common reporting obligations and deadlines in order to preserve the level playing field between Member States. |
| --- | --- |

3.3.

| 3.4. | The EESC welcomes the creation of the Brexit Adjustment Reserve within the special instruments outside of the EU budget ceilings of the MFF, which is designed to address the negative economic and social consequences in all Member States, supporting businesses and employment in the most affected sectors and assisting regional and local communities. Common challenges like Brexit require a coordinated response and the EESC considers that cohesion and solidarity between Member States are fundamental values of the EU. |
| --- | --- |

3.4.

| 3.5. | The Brexit Adjustment Reserve is expected to complement additional existing funds available under NextGenerationEU (6) and the MFF. It constitutes a completely new instrument that should provide support to mitigate the negative effects of the UK's withdrawal from the EU, while enhancing economic, social and territorial cohesion and protecting employment. The EESC has already proposed that ‘the Commission consider creating an EU instrument that can deal with such political situations and crises in the future’ (7). |
| --- | --- |

3.5.

| 3.6. | Trade unions and employers’ and civil society organisations have a vital role to play in building a strong economic and social partnership with the UK. |
| --- | --- |

3.6.

| 3.7. | The EESC welcomes the fact that all Member States are eligible and that 80 % of the pre-financing allocation will be disbursed already in 2021. This is clear evidence of European solidarity and a coordinated approach to face the short-term impact of Brexit. |
| --- | --- |

3.7.

| 3.8. | The proposed allocation method takes into consideration the importance of trade with the UK as well as the importance of the fisheries sector, but the EESC considers that the two issues should have been separated. Basically, the allocation formula proposed by the Commission implies that the factor linked to fisheries should represent EUR 600 million. Hence, the EESC suggests that the sector should have a completely separately designed reserve that will support fisheries only. Special attention should also be paid to other sectors, such as tourism and agriculture, for example. |
| --- | --- |

3.8.

| 3.9. | It is also very clear that this Reserve is an Adjustment fund that seeks to compensate for the economic and social impact of Brexit. The EESC considers that the EUR 5,4 billion Reserve is not enough to mitigate the negative effects of Brexit. Therefore, the EESC considers that additional funds should be immediately provided for, either through additional budget allocated for the Reserve, or though separately designed funds. In this respect, the EESC asks the co-legislators (Parliament and Council) to increase the proposed ceiling. |
| --- | --- |

3.9.

| 3.10. | The EESC believes that some sectors are more affected than others. Amongst other, agriculture and tourism sectors should also be in the forefront of the Reserve and benefit from the available funds. The tourism sector has suffered dramatically because of the COVID-19 crisis and Brexit will add more obstacles. Farmers are also severely affected in countries like Ireland or the Netherlands, for example. |
| --- | --- |

3.10.

4.   Specific comments

| 4.1. | Some Member States have already initiated national measures against the negative effects of Brexit on their economies and on public administrations’ procedures. Hence, the retroactive application of the Reserve going back to July 2020 is considered to be an important means of providing support. |
| --- | --- |

4.1.

| 4.2. | With more than 4 million EU citizens granted a new residence status in the UK (8), workers’ rights have to be immediately protected and the mutual recognition of qualifications must be further negotiated. The Member States should immediately start organising information campaigns to raise awareness among citizens regarding the new rules in place, as well as the effort that the EU is making to extend the Agreement. For such action to be a complete success, the social partners and civil society organisations must be fully involved. |
| --- | --- |

4.2.

| 4.3. | Specific support schemes should be designed to ensure proper support for regions and sectors affected by Brexit. All Member States should act responsibly and direct the available funds towards the regions, companies, workers and citizens that need them the most, and not towards the ones that are most easily financeable. Otherwise, the solidarity behind the design of such a reserve could be called into question and its chances of success would be in doubt. |
| --- | --- |

4.3.

| 4.4. | The eligibility period could be extended by two more years, just to make sure that the Member States have adequate time to make use of their share of the Reserve and absorb the shock waves caused by the UK’s withdrawal. The EESC calls on all MS to carefully take into consideration appropriate infrastructure investments and support for the EU citizens that are returning to their home countries after Brexit. |
| --- | --- |

4.4.

| 4.5. | The EESC also considers that part of the Reserve should have been earmarked for technical assistance purposes, in case a new management system is created. Using technical assistance for management, monitoring, information and communication, complaint resolution, and control and auditing will help to make the instrument a success, to improve risk management and to ensure that the financial resources allocated are spent efficiently. |
| --- | --- |

4.5.

| 4.6. | Some public administrations, especially the ones that represent the main entry and exit points for the trade relationship with the UK, have already made significant investments in infrastructure and human resources, including training. This is also the case for Member States that have a particular relationship with the UK in the tourism sector. However, the EESC strongly believes that the largest part of the Reserve should be allocated to supporting employment and economic actors. |
| --- | --- |

4.6.

| 4.7. | The Commission’s proposal includes a specifically designed measure to reduce the supervision period for SMEs from five to three years, from the final payment of the financial contribution. The EESC expects that SMEs will be the most affected and believes that a significant part of the Reserve should be directed at providing them with economic and financial support, with the end objective of preserving employment and keeping businesses afloat. |
| --- | --- |

4.7.

| 4.8. | SMEs are particularly affected by the newly introduced customs procedures, regulatory burdens and rising transport costs. This adds to the extra burden caused by the COVID-19 pandemic, with companies across Member States having to adapt to government lockdowns. As SMEs mostly lack the administrative and legal capacity to implement a full contingency plan, the EESC is asking for specially designed measures to support the SMEs that are most affected, using the funds available in the Reserve. Member States are encouraged to support SMEs’ efforts making use of State Aid, within the limits. |
| --- | --- |

4.8.

| 4.9. | The EESC considers that, for simplification purposes, the Reserve can be managed using existing management systems. When possible and in agreement with the European Commission, the option of simplified costs must be used. Promoting simplified rules and less bureaucracy in the implementation process and avoiding extra financial and administrative burdens will contribute to faster spending of the financial resources and better results for mitigating the negative impact of Brexit. |
| --- | --- |

4.9.

| 4.10. | Since the Reserve is a completely new instrument and it is almost impossible to evaluate the real negative impact Brexit will have, the EESC suggests that a monitoring committee be set up in each Member State. These should comprise representatives of social partners, NGOs and public institutions involved in the implementation of the Reserve. The committees should organise meetings at least twice a year to evaluate how the Reserve is contributing to reducing the negative impact of Brexit. The main purpose of the committees would be to eliminate potential risks that could appear in the implementation process, while ensuring that civil society is formally involved in the process. The wider (non-organised) society should be informed on the progress of the implementation plan and the final report should contain the summary of the communication activity. Coordination at EU level should be ensured in order to protect the level playing field in the Single Market and the EESC should be actively involved, together with the European Parliament. |
| --- | --- |

4.10.

| 4.11. | The EESC proposes that more clarity should be provided in terms of the governance of the Reserve. In particular, it is important to designate a management body for the Reserve and specify if there is going to be more than one. |
| --- | --- |

4.11.

| 4.12. | An intermediary performance framework is needed, based on specific performance-driven indicators to be established by the Member States and evaluated by the European Commission yearly. This will provide for close monitoring and evaluation of the implementation and spending process, while identifying which Member States are not using the financial resources or are making limited progress. Limited use of the funds will proportionally increase the negative economic and social impact of Brexit. |
| --- | --- |

4.12.

| 4.13. | Civil society must be formally involved in the implementation process. The integration of the European code of conduct on partnership in the framework of the European Structural and Investment Funds into the management of the Reserve will ‘empower stakeholders and civil society organisations to play a vital role as intermediary bodies, bringing projects closer to their final beneficiaries’ (9). The partners’ selection process should be transparent and clear, while enough relevant information should be provided to the selected organisations. |
| --- | --- |

4.13.

| 4.14. | The Commission proposes conducting a thorough evaluation of the Reserve’s effectiveness, efficiency and added value by 30 June 2026, with a reporting obligation towards the Parliament and the Council one year later. The EESC thinks that the Commission could report to the Parliament and the Council within three months, specifically on 30 September 2026. |
| --- | --- |

4.14.

| 4.15. | The EESC considers that Article 5(1)(a) should be modified as follows: ‘measures to assist businesses, workers in the transition towards new skills and new jobs, and local communities adversely affected by the withdrawal’. Moreover, Article 5(1)(d) should be modified as follows: ‘measures to support job protection and employment, including through short-time work schemes, re-skilling and training in affected sectors’. Indicator 15.4 from Annex II should be modified accordingly. |
| --- | --- |

4.15.

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  Trade and cooperation agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part (OJ L 444, 31.12.2020, p. 14).

1

(2)  Proposal for a Regulation of the European Parliament and of the Council establishing the Brexit Adjustment Reserve (COM(2020) 854 final — 2020/0380 (COD)).

2

(3)  Long-term EU budget 2021-2027 and recovery package.

3

(4)  Commission Delegated Regulation (EU) No 240/2014 of 7 January 2014 on the European code of conduct on partnership in the framework of the European Structural and Investment Funds (OJ L 74, 14.3.2014, p. 1).

4

(5)  EESC opinion on the Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund, and on the Cohesion Fund (OJ C 62, 15.2.2019, p. 90).

5

Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund, and on the Cohesion Fund

(6)  NextGenerationEU.

6

(7)  EESC opinion on the Modification of the Solidarity Fund — No-Deal Brexit (OJ C 14, 15.1.2020, p. 84).

7

Modification of the Solidarity Fund — No-Deal Brexit

(8)  European Commission — Citizens’ rights.

8

(9)  EESC opinion on the Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund, and on the Cohesion Fund (OJ C 62, 15.2.2019, p. 90).

9

Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund, and on the Cohesion Fund

---

| 30.4.2021 | EN | Official Journal of the European Union | C 155/58 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/58

---

Opinion of the European Economic and Social Committee on:

Proposal for a Regulation of the European Parliament and of the Council on asylum and migration management and amending Council Directive 2003/109/EC and the proposed Regulation (EU) XXX/XXX [Asylum and Migration Fund]

(COM(2020) 610 final – 2020/0279 (COD))

Proposal for a Regulation of the European Parliament and of the Council addressing situations of crisis and force majeure in the field of migration and asylum

(COM(2020) 613 final – 2020/0277 (COD))

(2021/C 155/09)

| Rapporteur: | Dimitris DIMITRIADIS |
| --- | --- |

Rapporteur:

Dimitris DIMITRIADIS

| Referral | European Parliament, 11.11.2020
  European Commission, 27.11.2020 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Employment, Social Affairs and Citizenship |
| Adopted in section | 8.2.2021 |
| Adopted at plenary | 25.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 235/5/25 |

Referral

European Parliament, 11.11.2020

European Commission, 27.11.2020

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Employment, Social Affairs and Citizenship

Adopted in section

8.2.2021

Adopted at plenary

25.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

235/5/25

1.   Conclusions and recommendations

| 1.1. | Ensuring balance in dealing with asylum applications, so that those in need of international protection receive it or those not in need of protection are effectively returned, should not have to be the responsibility of individual Member States alone, but should be managed by the EU as a whole. |
| --- | --- |

1.1.

| 1.2. | The EESC recognises that migration is a human, structural phenomenon, that asylum and international protection are fundamental rights for persecuted people and a legal obligation under international law for the States Parties to the Geneva Convention. The EESC draws attention to the fact that fundamental rights and personal data should be protected under the proposals for regulations discussed in this opinion. |
| --- | --- |

1.2.

| 1.3. | The EESC welcomes the improved information for asylum-seekers about the application process envisaged in these regulations and their rights and obligations under it, which will enable them to better defend those rights. The right to appeal is strengthened by defining the scope of the appeal and setting a target for court decisions to be taken within a harmonised time limit. The rules on remedies have also been adapted in order to considerably speed up and harmonise the appeal process. |
| --- | --- |

1.3.

| 1.4. | The EESC is also pleased to note that the right to private and family life and the rights of unaccompanied minors are strengthened by expanding the scope to include siblings, as well as families formed in transit countries, within the criteria for family reunification and by applying the principle of the best interests of the child. |
| --- | --- |

1.4.

| 1.5. | The EESC recognises the importance of the proposals having the legal status of a regulation — as opposed to a Directive — which is binding in its entirety and directly applicable in the Member States under the Treaties. However, all the relevant proposed regulations need to be adopted concurrently in order to represent a fully-fledged policy: if one of them should not be adopted, that would have a dire impact on the implementation of the others. Furthermore, past non-compliance with binding EU law on the part of some Member States leaves ample room for doubt as to the implementation of several provisions of the proposed regulations. |
| --- | --- |

1.5.

| 1.6. | The EESC welcomes the fact that the proposals are a product of thorough consultations with stakeholders, national and local authorities (1), civil society organisations, and non-governmental and international organisations, such as the United Nations High Commissioner for Refugees (UNHCR) (2) and the International Organisation for Migration (IOM) (3), as well as think tanks and academia. |
| --- | --- |

1.6.

| 1.7. | The EESC is pleased that the regulations invoke the principles of solidarity and fair sharing of responsibility, but feels that this burden is not sufficiently balanced by a corresponding degree of solidarity. Put simply, solidarity, in the form of relocation, cannot be voluntary. Solidarity needs to be binding, in the form of mandatory relocations. |
| --- | --- |

1.7.

| 1.8. | The EESC shares a dual concern for the safety of people who seek international protection or a better life, on the one hand, and the well-being of countries at the EU's external borders, which worry that migratory pressures exceed their capacities, on the other. |
| --- | --- |

1.8.

| 1.9. | The EESC agrees that the Dublin III Regulation was not designed to deal with situations of migratory pressure or a fair sharing of responsibility across the Member States. Nor did it take into account the situation of migration management of mixed migratory flows and the consequent pressure those flows put on Member States' migration systems. |
| --- | --- |

1.9.

| 1.10. | However, because the overall concept of the Pact on Migration and Asylum (PMA) relies on border control and avoidance of secondary movements, it increases the burden of responsibility and inconvenience for the countries of first entry, along with obligations envisaged in the pre-screening and border control proposals. These obligations are onerous for those countries, since they increase the numbers of people that should remain at the border, with possible grave consequences for their own well-being, but also for that of the host societies. |
| --- | --- |

1.10.

| 1.11. | The EESC is encouraged by the recognition that a wider solidarity concept is needed and that solidarity should be compulsory in nature to guarantee a predictable and effective response to the changing situation, in which an increasing share of mixed migration flows towards the Union, and to ensure fair sharing of responsibility in line with the Treaty. However, this falls short of expectations for a solidarity mechanism that would really alleviate the burden of the states of first entry. |
| --- | --- |

1.11.

| 1.12. | The EESC proposes that the proposed return policy to countries of origin is backed by a system of clear incentives and disincentives to third countries. In addition, the return policy should be dealt with by providing for a stronger role and involvement from the EU, with national policies assisting in cases where the Member State concerned has leverage over a particular third country. More effort needs to be made regarding the so-called triple nexus of humanitarian action, development and peace in the countries of origin of asylum seekers. |
| --- | --- |

1.12.

| 1.13. | The EESC would endorse immediate and mandatory action as provided for in the European Commission proposal, given that a continent as big and wealthy as Europe should be able to contribute more to the effective protection of refugees. |
| --- | --- |

1.13.

| 1.14. | Given the voluntary nature of the choice between relocation and sponsored returns, the EESC could accept a mandatory allocation of relocations, in the sense that if all states choose to finance returns but do not choose to relocate or only accept a very small number of relocations, this will further aggravate the current situation in the countries of first entry. |
| --- | --- |

1.14.

| 1.15. | The EESC would give consideration to the proposal concerning the need to establish monitoring mechanisms in order to oversee the procedure, from screening to return, and its compliance with fundamental rights. Such mechanisms could, among other things, avoid the use of so-called pushbacks. In addition, sufficient time must be given for the mechanism to be set up, as the overall procedures proposed in the screening regulation and the asylum procedures regulation and the timeframes involved appear somewhat difficult to achieve. |
| --- | --- |

1.15.

| 1.16. | The EESC favours strengthening the crisis and force majeure regulation by introducing substantive legal provisions on personal data protection. Furthermore, it would suggest extending the time limit for the suspension of the international obligations of a state that is in crisis, for as long as the crisis lasts. |
| --- | --- |

1.16.

| 1.17. | The EESC expresses its scepticism concerning the effective application of the provisions envisaged in the proposed regulations under scrutiny, and voices its concern that people in need of asylum might not be able to benefit from their rights due to the dysfunctional procedures envisaged. |
| --- | --- |

1.17.

2.   Background

| 2.1. | The 2015 crisis exposed significant structural weaknesses and shortcomings in the design and implementation of the European asylum and migration policy, including the Dublin system, which was not designed to ensure a sustainable sharing of responsibility for applicants for international protection across the EU. The conclusions of the European Council of 28 June 2018 called for a reform of the Dublin Regulation based on a balance of responsibility and on solidarity with respect to persons disembarked following search and rescue operations. |
| --- | --- |

2.1.

| 2.2. | The New Pact on Migration and Asylum, presented together with the proposal for a new Regulation on Asylum and Migration Management, is intended to represent a fresh start on migration based on a comprehensive approach to migration management. This proposal puts in place a common framework for asylum and migration management at EU level as a key contribution to the comprehensive approach and seeks to promote mutual trust between the Member States.
  The following challenges in particular are highlighted from recent migratory crises. |
| --- | --- |

2.2.

The following challenges in particular are highlighted from recent migratory crises.

| 2.2.1. | Lack of an integrated approach to implementing the European asylum and migration policy:






  — | lack of a level playing-field across Member States, hampering efforts to ensure access to procedures, equal treatment, clarity and legal certainty. |
| --- | --- | --- |

2.2.1.

—

lack of a level playing-field across Member States, hampering efforts to ensure access to procedures, equal treatment, clarity and legal certainty.

| 2.2.2. | National inefficiencies and lack of EU harmonisation in asylum and migration management:






  — | challenges of the return and asylum nexus; |
| --- | --- | --- |

2.2.2.

—

challenges of the return and asylum nexus;

| — | limited use of assisted voluntary return programmes; |
| --- | --- |

—

limited use of assisted voluntary return programmes;

| — | lack of streamlined procedures on arrival; |
| --- | --- |

—

lack of streamlined procedures on arrival;

| — | delays in accessing the appropriate asylum procedure and slow processing of applications; |
| --- | --- |

—

delays in accessing the appropriate asylum procedure and slow processing of applications;

| — | difficulty in using the border procedure. |
| --- | --- |

—

difficulty in using the border procedure.

| 2.2.3. | Absence of a broad and flexible mechanism for solidarity:






  — | relocation is not the only effective response to deal with mixed flows. |
| --- | --- | --- |

2.2.3.

—

relocation is not the only effective response to deal with mixed flows.

| 2.2.4. | Inefficiencies in the Dublin system:






  — | lack of sustainable sharing of responsibility under the current system; |
| --- | --- | --- |

2.2.4.

—

lack of sustainable sharing of responsibility under the current system;

| — | current rules on the shift of responsibility contribute to unauthorised movements; |
| --- | --- |

—

current rules on the shift of responsibility contribute to unauthorised movements;

| — | inefficient data processing. |
| --- | --- |

—

inefficient data processing.

| — | procedural inefficiencies of the Dublin system create an administrative burden. |
| --- | --- |

—

procedural inefficiencies of the Dublin system create an administrative burden.

| 2.2.5. | Lack of targeted mechanisms to address extreme crisis situations:






  — | difficulty for the EU of ensuring access to asylum or other procedures at the borders during situations of extreme crisis. |
| --- | --- | --- |

2.2.5.

—

difficulty for the EU of ensuring access to asylum or other procedures at the borders during situations of extreme crisis.

| 2.2.6. | Lack of a fair and effective system for exercising fundamental rights and difficulties in defining new legal pathways to asylum and in effectively tackling the reasons for migration, including humanitarian, development and peace issues. |
| --- | --- |

2.2.6.

| 2.3. | It is hoped that the proposals will address these challenges in the following manner. |
| --- | --- |

2.3.

| 2.3.1. | A more efficient, seamless and harmonised migration management system:






  — | a comprehensive approach for efficient asylum management (the proposal for a Regulation establishing a common framework for the EU's asylum and migration management); |
| --- | --- | --- |

2.3.1.

—

a comprehensive approach for efficient asylum management (the proposal for a Regulation establishing a common framework for the EU's asylum and migration management);

| — | a seamless asylum-return procedure and easier use of accelerated and border procedures ( |
| --- | --- |

—

a seamless asylum-return procedure and easier use of accelerated and border procedures (

| — | a coordinated, effective and rapid screening phase (proposal for a Regulation introducing the screening of third-country nationals apprehended in connection with irregular crossing of external borders, disembarked following search and rescue operations or who request international protection at border crossing points). |
| --- | --- |

—

a coordinated, effective and rapid screening phase (proposal for a Regulation introducing the screening of third-country nationals apprehended in connection with irregular crossing of external borders, disembarked following search and rescue operations or who request international protection at border crossing points).

| 2.3.2. | A fairer, more comprehensive approach to solidarity and relocation:






  — | a solidarity mechanism providing for compulsory solidarity with a broader scope (proposal for a Regulation on asylum and migration management). |
| --- | --- | --- |

2.3.2.

—

a solidarity mechanism providing for compulsory solidarity with a broader scope (proposal for a Regulation on asylum and migration management).

| 2.3.3. | Simplified and more efficient rules for robust migration management:






  — | a wider and fairer definition of responsibility criteria, limiting the cessation and shift of responsibility (proposal for a Regulation on asylum and migration management); |
| --- | --- | --- |

2.3.3.

—

a wider and fairer definition of responsibility criteria, limiting the cessation and shift of responsibility (proposal for a Regulation on asylum and migration management);

| — | more efficient data collection/processing, allowing for counting applicants rather than applications, and including a specific category for search and rescue operations (recast Eurodac Regulation); |
| --- | --- |

—

more efficient data collection/processing, allowing for counting applicants rather than applications, and including a specific category for search and rescue operations (recast Eurodac Regulation);

| — | improved procedural efficiency (proposal for a Regulation on asylum and migration management). |
| --- | --- |

—

improved procedural efficiency (proposal for a Regulation on asylum and migration management).

| 2.3.4. | A targeted mechanism to address extreme crisis situations (proposal for a Regulation addressing situations of crisis). |
| --- | --- |

2.3.4.

| 2.3.5. | More effective upholding of the fundamental rights of migrants and asylum-seekers (4). |
| --- | --- |

2.3.5.

3.   Comments on the proposal for a Regulation of the European Parliament and of the Council on asylum and migration management and amending Council Directive 2003/109/EC and the proposed Regulation (EU) XXX/XXX [Asylum and Migration Fund]

| 3.1. | The PMA correctly highlights the inconsistencies between Member States' asylum and return systems, and emphasises the need to boost solidarity within the EU by overcoming shortcomings in implementation and to improve and strengthen cooperation with non-EU countries. However, it is not clear if the principle of voluntary and selective solidarity will help solve the major coordination challenges of the last decade, especially in the light of the fact that the burden falls to a disproportionately large extent on the states of first entry. |
| --- | --- |

3.1.

| 3.2. | As noted in EESC opinion SOC/649 (5), under the new solidarity mechanism Member States would be able to participate in the relocation or sponsored return of persons in an irregular situation. The EESC doubts the feasibility of the mechanism, which is based on hypothetical voluntary solidarity. No mention is made of the incentives that would be needed to induce Member States to participate in this mechanism, especially following the refusal of some of them to participate in the previous relocation programme (6), or of the lack of express obligation. This ‘solidarity-based’ mechanism may also have the contrary effect of relocating the individual concerned to the sponsoring Member State, if the return is not actually carried out within eight months, resulting in accountability gaps regarding the rights of returnees. Furthermore, under the proposed new solidarity mechanism, Member States are incentivised to not participate in relocation — the more pressurising, difficult and costly option — but to choose return instead (7). Therefore, binding solidarity measures in the form of compulsory action as provided for in the European Commission communication need to be put in place. |
| --- | --- |

3.2.

| 3.3. | The EESC welcomes the shortening of the periods for securing long-term residence from five to three years for persons benefiting from international protection when they decide to stay in the Member State that has provided them with such protection. The aim is clearly to facilitate integration into local communities, although it could be deemed to be limiting mobility within the EU, thus confirming that the burden still remains with the countries of first entry. |
| --- | --- |

3.3.

| 3.4. | The EESC welcomes the concept put forward of fair sharing of responsibility; however it feels that the burden of this responsibility is not sufficiently balanced by a corresponding degree of solidarity. |
| --- | --- |

3.4.

| 3.5. | The EESC welcomes the measures to improve coordination between national strategies on asylum and return policies, but regrets that more proposals have been made on coordinating return instruments than on coordinating asylum and refugee reception procedures. |
| --- | --- |

3.5.

| 3.6. | The EESC notes the difficulties that EU countries face in ensuring effective returns, as well as the Commission's willingness to move towards a common and effective European system of returns. The proposal is based on improving operational support for returns and provides for national return coordinators to be appointed. The EESC regrets that problems in the operation of return programmes are not properly identified (8), which makes this approach — considered to be of strategic importance — dependent on the willingness to collaborate of non-EU countries, whether of origin or transit. The EU therefore, should take on a stronger role in relation to an overall return policy. |
| --- | --- |

3.6.

| 3.7. | The EESC suggests that solidarity needs to be automatic. The solidarity obligations of the states of first entry are disproportionate. Procedures remain complex and lengthy, and provide no assurances for relocation. There are only mandatory border procedures without an automatic sharing mechanism. The measures that Member States have to take are to strengthen infrastructure (tents, in-kind assistance, etc.), financial support or voluntary returns. There are no clear-cut criteria as to how each country is going to contribute. This is not effective — all it does is to increase pressure on the state of entry — and it takes a long time (8 months) to implement, so there is a risk of applicants absconding. What is required is a mechanism that is more automatic and provides for a better distribution of applicants to all Member States. |
| --- | --- |

3.7.

| 3.8. | In the same light, the EESC suggests that having three different categories of emergencies (cases of pressure or threat of increased pressure, cases of crisis, and cases of search and rescue operations) for solidarity purposes is not practical. Member States will have to apply for support in one of the three categories. The Commission will determine whether the request is valid (with 21 evaluation criteria) and will ask other countries for practical assistance, which can take two main forms: relocation and return sponsorship. It is a dysfunctional and time-consuming process: first one has to request solidarity, then the opinion is formulated, then one can contribute in voluntary solidarity and then the decision for mandatory solidarity. Even in the case of mandatory solidarity, the Commission's decision depends on the opinion of a special committee and if that committee does not give a positive opinion then no measures are taken. |
| --- | --- |

3.8.

| 3.9. | According to the EESC, apart from the lack of precision in the definitions provided (especially in the crisis and force majeure regulation), the concept of migration pressure is not clearly defined, despite the frequent reference to it throughout the proposed text of the regulation. |
| --- | --- |

3.9.

| 3.10. | Although the idea of returns by Member States according to their relations with third countries may be appealing, this may not work because conditions in the country of origin may change or the countries in question may just prohibit returns. There is also the issue of essentially creating detention conditions; inevitably those who are to be returned remain at the border, transforming the country of first entry into a large pre-departure centre. In practice, it is not even certain that fast-tracking the procedures (as envisaged in the screening regulation) will have a real impact in terms of increasing the numbers of returns, since returns depend mainly on the cooperation of third countries with whom the EU has yet to negotiate and bargain (for instance on visa issuance), increasing the chances for human rights breaches but also of pressure put on local communities. |
| --- | --- |

3.10.

| 3.11. | The EESC understands that the country responsible for the asylum application — which constitutes the backbone of the new asylum management procedure — could be determined as the one in which an immigrant has a sibling or siblings, in which he/she has worked or studied, or the one in which a visa was issued. Although this broadening of criteria is welcome, it nevertheless only confirms the heavy burden that still falls on the shoulders of the countries of first entry. |
| --- | --- |

3.11.

4.   Comments on the Regulation of the European Parliament and of the Council addressing situations of crisis and force majeure in the field of migration and asylum

| 4.1. | The EESC welcomes the introduction of a crisis and force majeure component in the field of migration and asylum. The EESC feels, however, that the very definitions are not clear or adequate. This fact, along with the absence or existence of objective indicators, creates a lack of legal certainty. |
| --- | --- |

4.1.

| 4.2. | The EESC points out that although the crisis and force majeure regulation provides a window of opportunity for binding solidarity, it covers procedural support rather than emergency solidarity measures. Solidarity is undermined by the complex and bureaucratic procedures required to implement it. It is clear that in a crisis situation or situation of pressure, relocations need to be ensured. In addition, measures should be put in place to prevent Member States from reaching a crisis situation. |
| --- | --- |

4.2.

| 4.3. | The EESC points out that establishing procedures and mechanisms addressing situations of crisis and force majeure in the field of migration and asylum should also be compatible with fundamental rights and the general principles of Union, as well as international, law. |
| --- | --- |

4.3.

| 4.4. | The EESC welcomes the fact that in times of crisis, the Member State that activates the mechanism will be able to suspend its international obligations (e.g. for processing asylum applications) for up to three months. In addition, this timeframe should be extendable for as long as the crisis is in place. Clarity on how crisis situations will be determined and clear benchmarks for when a country's capacity is/might become overburdened might be useful. |
| --- | --- |

4.4.

| 4.5. | The EESC welcomes the proposal to provide Member States with the additional time needed to deal with the crisis situations while also ensuring effective and prompt access to the relevant procedures and rights, and the Commission's ability to authorise the application of the asylum crisis management procedure and the return crisis management procedure for a period of six months, which can be extended up to a period not exceeding one year. After expiry of the relevant period, the extended deadlines provided for in the asylum and return crisis management procedures should not be applied to new applications for international protection. |
| --- | --- |

4.5.

| 4.6. | However, the EESC feels that the limited scope of the proposal, i.e. to extend or accelerate procedures, weakens its function as a mechanism to be deployed in the case of emergency solidarity measures. |
| --- | --- |

4.6.

| 4.7. | Although, the EESC believes that this proposal may serve as an opportunity to make the case for binding solidarity, it is not included in the body of the relevant regulation. Therefore, the EESC feels that it should be incorporated in the body of the Regulation of the European Parliament and of the Council on asylum and migration management and amending Council Directive 2003/109/EC and the proposed Regulation (EU) XXX/XXX [Asylum and Migration Fund] to avoid any uncertainties and to remove the risk of it not been adopted, as the one cannot exist without the other. |
| --- | --- |

4.7.

Brussels, 25 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  For example, the Berlin Action Plan on a new European Asylum Policy, 25 November 2019, signed by 33 organisations and municipalities.

1

(2)  UNHCR Recommendations for the European Commission's proposed Pact on Migration and Asylum, January 2020.

2

(3)  IOM Recommendations for the new European Union Pact on Migration and Asylum, February 2020.

3

(4)  SWD(2020) 207 final.

4

(5)  OJ C 123, 9.4.2021, p. 15.

5

(6)  Judgment in Joined Cases C-715/17, C-718/17 and C-719/17 Commission v Poland, Hungary and the Czech Republic.

6

(7)  Unfortunately, there are no safeguards against situations in which some governments decide to become key players of return as part of populist mobilisation against migrants and refugees.

7

(8)  Communication COM(2017) 200 final.

8

---

| 30.4.2021 | EN | Official Journal of the European Union | C 155/64 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/64

---

Opinion of the European Economic and Social Committee on:

Amended proposal for a Regulation of the European Parliament and of the Council establishing a common procedure for international protection in the Union and repealing Directive 2013/32/EU

(COM(2020) 611 final – 2016/0224 (COD))

Proposal for a Regulation of the European Parliament and of the Council introducing a screening of third-country nationals at the external borders and amending Regulations (EC) No 767/2008, (EU) 2017/2226, (EU) 2018/1240 and (EU) 2019/817

(COM(2020) 612 final – 2020/0278 (COD))

Amended proposal for a Regulation of the European Parliament and of the Council on the establishment of ‘Eurodac’ for the comparison of biometric data for the effective application of Regulation (EU) XXX/XXX [Regulation on Asylum and Migration Management] and of Regulation (EU) XXX/XXX [Resettlement Regulation], for identifying an illegally staying third-country national or stateless person and on requests for the comparison with Eurodac data by Member States’ law enforcement authorities and Europol for law enforcement purposes and amending Regulations (EU) 2018/1240 and (EU) 2019/818

(COM(2020) 614 final – 2016/0132(COD))

(2021/C 155/10)

Rapporteur:
  Panagiotis GKOFAS

| Referral | European Commission. 27.11.2020 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| | |
| Section responsible | Employment. Social Affairs and Citizenship |
| Adopted in section | 8.2.2021 |
| Adopted at plenary | 25.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 210/9/28 |

Referral

European Commission. 27.11.2020

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Employment. Social Affairs and Citizenship

Adopted in section

8.2.2021

Adopted at plenary

25.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

210/9/28

1.   Conclusions and recommendations

| 1.1. | The EESC takes note of the New Pact on Migration and Asylum, which aims to tackle a multifaceted and complex phenomenon. The EESC believes that the new regulations make a positive contribution to more effective EU border security. A better and safer process is being set up to control those entering the EU. Nevertheless, an integrated, common EU strategy, one that is resilient and forward-looking, is much-needed and long overdue. Unfortunately, concerning the migration issue and asylum as a whole, the current proposals cannot be defined as the clear step forward that is very much needed. What is more, the four or five Member States concerned will have to create ‘closed centres’, based on the principle of non-entry (1)
  , for human beings for a period of up to six or seven months, if not more, until the outcome of the procedures is known, resulting in situations that are much worse than before. |
| --- | --- |

1.1.

| 1.2. | Greater and further efforts are needed by the European Commission and the EU Member States. Recent EESC opinions (SOC/649 (2) and SOC/669 (3)) criticise key aspects of both the Asylum and Migration Management Regulation (AMR) and the Asylum Procedures Regulation (APR). The EESC would also like to point out that from its examination of the nine regulations and its contact with Commission, the prospects for implementing these nine different regulations appear problematic in several aspects. A more comprehensive strategy on migration is needed to ensure better synergies between the different EU regulations and to secure answers to important issues in the Member States that are more impacted by migration. |
| --- | --- |

1.2.

| 1.3. | The EESC wishes to express its concerns about the new border procedures, especially relating to the need to protect the right to request asylum and to the following issues:






  — | the flawed concept of ‘countries with low asylum recognition rates’, |
| --- | --- | --- |

1.3.

—

the flawed concept of ‘countries with low asylum recognition rates’,

| — | the use of ill-defined legal concepts (‘security threat’, ‘public order’) that give rise to legal uncertainty, |
| --- | --- |

—

the use of ill-defined legal concepts (‘security threat’, ‘public order’) that give rise to legal uncertainty,

| — | foreign children between the ages of 12 and 18, who are also considered to be ‘children’ according the 1989 UN Convention on the Rights of the Child, |
| --- | --- |

—

foreign children between the ages of 12 and 18, who are also considered to be ‘children’ according the 1989 UN Convention on the Rights of the Child,

| — | how and where people are going to be kept during the border procedure, and how to avoid legal limbo by guaranteeing the right to effective judicial protection. |
| --- | --- |

—

how and where people are going to be kept during the border procedure, and how to avoid legal limbo by guaranteeing the right to effective judicial protection.

| 1.4. | The EESC recognises the added value of and need for common, comprehensive and effective asylum procedures that comply with international conventions and legal guarantees, for EU and Member State confidence derived from tangible solidarity mechanisms and for fairly shared responsibilities/commitments. Yet such a common asylum system — one that is comprehensive, demonstrates solidarity and apportions responsibility fairly among the Member States — is not included in this Commission proposal. The provision regarding solidarity should also be included in the APR, right after screening has taken place, and with IT help from Eurodac. If ‘mandatory solidarity’ does not take the form of ‘mandatory relocation’ under the APR provisions, or if procedures are not created that allow people to apply for asylum in EU Member States without the need to cross EU borders, in practical terms the regulation will not be operational. There should be also incentives and disincentives for relocation, and in any case it should be possible for the APR process to be conducted in other Member States and not exclusively in the country of first entry. |
| --- | --- |

1.4.

| 1.5. | The EESC underlines that the effectiveness of the proposed new procedures need to be constantly measured through systems monitoring respect for fundamental rights, particularly as regards the rights of vulnerable people and children, the individual assessment of asylum claims and effective remedies. However, the question arises as to where and how the improved New Pact and the accompanying proposals are going to be implemented, and with what kind of solidarity, relocation or resettlement arrangements. |
| --- | --- |

1.5.

| 1.6. | The EESC supports a more integrated and balanced IT migration management system based on an improved Eurodac database focusing on applications and applicants. The EESC was under the impression that the Commission recognises the need for a common approach to compulsory pre-entry screening of finger prints and of health and security risks, but despite the sophisticated system proposed, there is unfortunately no possibility for a person to apply for asylum in a Member State other than the country of first entry — something that should be possible. The rules on determining the Member State responsible for processing an asylum application, at present laid down in the AMR, should be set out in the APR, providing an opportunity through Eurodac for claims to be processed by other Member States as well. |
| --- | --- |

1.6.

| 1.7. | Although the EESC is in favour of new, faster decision-making procedures at EU borders, respecting all fundamental rights, human rights and legal procedures, there are a multitude of questions that arise, such as: How do we implement and secure these procedures? How do we implement returns? Where is the solidarity in the APR, not to mention the AMR — if indeed it makes any provision for solidarity? When a person is granted asylum, can they go to another Member State instead of the country of first entry (4)? Can the Member States grant asylum to protect people in need or will they start to reject them? The EESC therefore calls on the Commission to thoroughly verify and explain every part of the proposal, and especially to answer the question: ‘How does this New Pact improve the common asylum procedure and meet the right to request asylum?’ |
| --- | --- |

1.7.

| 1.8. | The EESC is concerned by the implementation of the new screening procedures of third-country nationals at the external borders. This new mechanism increases pressure on those EU Member States with the EU’s external maritime borders, and promotes the creation of closed centres at, or in the proximity of, the external borders. Similar centres have raised serious concerns in terms of protecting human rights and ensuring acceptable living conditions for the residents. |
| --- | --- |

1.8.

| 1.9. | The outcome of the border procedures will be either the granting of asylum or rejection and return. In the case of asylum, the Member State granting it is responsible for integrating the persons concerned. In the New Pact scenario, however, this means integrating them in the countries of the south, without any possibility of relocation to, or solidarity from, the other Member States. If asylum is not granted, the Member State must return the rejected asylum seeker. This approach must look at ways of establishing EU agreements with the third countries of origin and transit and ensuring effective procedures, as provided for under international law and human rights instruments. No single agreements can be established between Member States individually, and nor does the Commission make any mention whatsoever of such a procedure. |
| --- | --- |

1.9.

| 1.10. | The challenges of migration management — related in particular to ensuring rapid identification of those in need of international protection or implementing returns in practice (for those who are not in need of protection) — are supposed to be dealt with in a ‘uniform manner’ by the EU as a whole, but the current proposals cannot be considered to be doing this. In actual fact, this is a matter to be dealt with by the Member State of first entry only and fair burden-sharing is lacking e.g. via mandatory relocation of asylum applicants during the APR and the examination of the asylum claim. |
| --- | --- |

1.10.

| 1.11. | In particular, it is important to create a better procedure allowing for persons who are unlikely to receive protection in the EU to be identified (5). The Commission proposal puts in place pre-entry screening that should be applicable to all third-country nationals (TCNs) who are present at the external border without fulfilling the entry conditions or upon disembarkation, following a search and rescue (SAR) operation. Unfortunately, however, this ‘pre-entry screening’ is conducted in the territory of the country of first entry in the EU at the border. The ‘pre’ means that the person concerned goes to a ‘closed detention centre’ and stays there, without any possibility of moving until the Member State authorities decide either to grant them asylum (6) or return them to the country of origin or of transit, and only if this return is possible — which it is not, in most cases. |
| --- | --- |

1.11.

| 1.12. | The EESC supports the EU framework putting in place uniform rules for the screening of irregular migrants apprehended within the territory and who eluded border controls on entering the Schengen area. This aims to protect the Schengen area and ensure efficient management of irregular or illegal migration. |
| --- | --- |

1.12.

| 1.13. | The EESC calls on the EU institutions, agencies and social partners to participate in drawing up further policies and programmes (such as Talent Partnerships), exchanges of best practice and multilateral twinning programmes regarding existing ‘humanitarian corridors’. It also requests that new legal frameworks be developed, that rapid procedures be introduced enabling the humanitarian visa to be used more widely and by a greater number of people (through adjustments to the current provisions of Article 25 of Regulation (EC) No 810/2009 of the European Parliament and of the Council (7)), and that ‘sponsorship’ also be included as an ordinary legal channel for entry in the field of immigration policies, applicable to TCNs from non-EU countries. The EESC draws the attention of the co-legislators to the fact that previously existing EU legislation, such as the Schengen Agreement and the Lisbon Treaty, already provide for ‘subsidiary and temporary protection’ for those fleeing wars or natural disasters. This demonstrates how, using legislative instruments already available to the Member States of the European Union, regular entry can be guaranteed for vulnerable persons in need of international protection. |
| --- | --- |

1.13.

2.   General concerns and comments

| 2.1. | The European New Pact advocates integrated policy-making, bringing together policies in the areas of asylum, migration, returns, external border protection, combatting trafficking in migrants and relations with key third countries, reflecting a whole-of-government approach. Ultimately, however, the proposed regulations under examination will place a huge burden on the Member States of southern Europe, with the inevitable consequence that the regulations will be inapplicable and will fail to achieve their intended result. After a reasonable period of time, Member States will be forced de facto to reject many asylum applications, even those that meet the conditions for asylum to be granted, in order to avoid increasing numbers of people being held together in inhumane conditions. |
| --- | --- |

2.1.

| 2.2. | The Member States in the south of Europe have no choice but to be converted into either detention or pre-departure centres. |
| --- | --- |

2.2.

| 2.3. | This opinion will focus on three of the nine instruments contained in the New Pact: (i) a new screening regulation; (ii) an amended proposal revising the asylum procedures regulation; (iii) an amended proposal for a recast Eurodac regulation. |
| --- | --- |

2.3.

3.   Specific comments on the new screening regulation

| 3.1. | The new screening regulation proposes a pre-entry screening procedure in the territory of the country of first entry, one that should be applicable to all TCNs who are present at the external border without fulfilling the entry conditions or after disembarkation, following a search and rescue operation. |
| --- | --- |

3.1.

| 3.2. | The available data demonstrate that the arrival of third-country nationals with clear international protection needs as observed in 2015-2016 has been partly replaced by mixed arrivals of persons. |
| --- | --- |

3.2.

3.3.   Specific comments on the objectives and main elements of the screening procedure

| 3.3.1. | The objective of the screening is to contribute to the new comprehensive approach to migration and mixed flows by ensuring that people’s identity, but also any health and security risks, are quickly established and that all third-country nationals who are present at the external border without fulfilling entry conditions or after disembarkation, following a search and rescue operation, are swiftly referred to the applicable procedure. The objective should also be to provide a useful tool and to enable the rest of the EU counties to participate and also evaluate the applicant during the APR. |
| --- | --- |

3.3.1.

| 3.3.2. | The proposal provides that the fundamental rights of the persons concerned should be protected by a mechanism to be set up by the Member States. |
| --- | --- |

3.3.2.

| 3.3.3. | The screening should consist in particular of:






  (a) | a preliminary health and vulnerability check; |
| --- | --- | --- |

3.3.3.

(a)

a preliminary health and vulnerability check;

| (b) | an identity check against information in European databases; |
| --- | --- |

(b)

an identity check against information in European databases;

| (c) | registration of biometric data (i.e. fingerprint data and facial image data) in the appropriate databases, to the extent it has not occurred yet; and |
| --- | --- |

(c)

registration of biometric data (i.e. fingerprint data and facial image data) in the appropriate databases, to the extent it has not occurred yet; and

| (d) | a security check through a query of relevant national and Union databases, in particular the Schengen Information System (SIS), to verify that the person does not constitute a threat to internal security. |
| --- | --- |

(d)

a security check through a query of relevant national and Union databases, in particular the Schengen Information System (SIS), to verify that the person does not constitute a threat to internal security.

| 3.3.4. | The screening should be mandatory and should apply not only in the countries of first entry, but in every Member State, in line with the principle of EU solidarity. As described in the new Pact, the APR will only be conducted in the countries of first entry. If ‘mandatory solidarity’ does not take the form of ‘mandatory relocation’ under the APR provisions, or if procedures are not created that allow people to apply for asylum in EU Member States without the need to cross EU borders, in practical terms the regulation will not be operational. There should be also incentives and disincentives for relocation, and in any case the APR process should be conducted in other Member States and not exclusively in the country of first entry. |
| --- | --- |

3.3.4.

| 3.3.5. | The proposed screening is expected to add value to current procedures and, with the exception of health issues, should not be conducted only in countries with external borders. |
| --- | --- |

3.3.5.

| 3.3.6. | An independent, effective and ongoing monitoring mechanism should cover in particular the respect of fundamental rights in relation to the screening, as well as the respect of the applicable national rules in the case of detention and compliance with the principle of non-refoulement. It should furthermore ensure that complaints are dealt with expeditiously and in an appropriate way. |
| --- | --- |

3.3.6.

| 3.3.7. | The proposal recognises the role of the EU agencies — Frontex and the European Union Agency for Asylum, which may accompany and support the competent authorities in all their tasks related to the screening — but is not clear enough. It also gives an important, but totally opaque, role to the Fundamental Rights Agency in supporting Member States in development of the independent monitoring mechanisms of fundamental rights in relation to the screening, as well as the respect of the applicable national rules in the case of detention and compliance with the principle of non-refoulement. |
| --- | --- |

3.3.7.

4.   Amended proposal revising the asylum procedures regulation

| 4.1. | The EESC considers the choice of a new, amended legislative proposal in the form of an EU regulation instead of a directive, as is the case today, to be appropriate. Nevertheless, for the EESC there is a clear question as to how it can be enforced and implemented in all Member States, in particular those which have been the subject of infringement procedures. It can only endorse this proposal if it does not turn the Member States in the south into detention or pre-departure centres for human beings. |
| --- | --- |

4.1.

| 4.2. | The EESC welcomes the intention of the Commission proposal to improve coordination and common procedures for the granting and withdrawal of international protection, and for further harmonisation of asylum and return decisions. However, it regrets that more proposals have been made to coordinate the implementation of closed detention centres in countries of first entry than have been made on the common asylum system, imposing the exclusive obligation to manage asylum seekers on the countries of first entry. This gives the over-riding impression that the proposals to be implemented are addressed to the countries of the south, without any referral to relocation during the application of ‘border procedures’. |
| --- | --- |

4.2.

| 4.3. | Furthermore, the EESC regrets that potential problems in operating the return programmes have not been properly identified in the proposal, above all as regards the willingness in practice of non-EU countries, countries of origin or countries of transit to cooperate with the EU. |
| --- | --- |

4.3.

| 4.4. | The EESC underlines the urgent need for a more comprehensive strategy based on a system of balanced and shared responsibility for the governance of migration flows between the EU and non-EU countries. |
| --- | --- |

4.4.

| 4.5. | Moreover, the EESC stresses the need to provide adequate protection for families with children and urges the Commission to take special care with regard to unaccompanied minors, the overall effectiveness of asylum guidance procedures, indicators of operational standards and the compilation of examples of best practice (published by the European Asylum Support Office (EASO)). It is not acceptable that a child is only considered as such if under the age of 12, and not 18, in accordance with international law. According to the 1989 UN Convention on the Rights of the Child, a child means every human being below the age of 18. |
| --- | --- |

4.5.

| 4.6. | In recent consultations, civil society organisations proposed revising certain rules on the determination of responsibility and providing for a mandatory solidarity mechanism, including for persons disembarked following a SAR operation. Non-governmental organisations also advocated defining a common understanding of ‘responsibility’ among Member States and called for the revised Dublin rules to include a more permanent relocation mechanism (8)
  . The EESC asks how a properly-functioning solidarity mechanism among Member States could be realistically implemented under the new amended proposal. The rules on determining the Member State responsible for processing an asylum application, at present laid down in the AMR, should be in the APR, providing an opportunity through Eurodac for claims to be processed by other Member States as well. |
| --- | --- |

4.6.

5.   Amending the 2016 proposal for a recast Eurodac regulation

| 5.1. | The amendment to the 2016 proposal for a recast Eurodac regulation aims to create a link between specific individuals and the procedures to which they are subjected in order to improve the control of irregular migration and the detection of unauthorised movements. |
| --- | --- |

5.1.

| 5.2. | The main goal of Eurodac is to identify asylum seekers and to facilitate, through finger print and facial image data (‘biometrics’), the provision of evidence to assist with determining the Member State responsible for examining an asylum application lodged in the EU. |
| --- | --- |

5.2.

| 5.3. | The EESC is not convinced that using Eurodac (9) would be the appropriate tool for combatting irregular migration, nor that it would effectively support Member States in monitoring the granting of assistance for voluntary return and reintegration (10). |
| --- | --- |

5.3.

| 5.4. | The proposal amending the 2016 proposal builds on the provisional agreement between co-legislators, complements these changes and aims at transforming Eurodac into a common European database to support EU policies on asylum, resettlement and irregular migration. |
| --- | --- |

5.4.

| 5.5. | Moreover, it aims to gather more accurate and complete data to inform policy-making and thereby better assist with the control of irregular migration and the detection of unauthorised movements by counting individual applicants in addition to applications. However, the EESC believes that this sophisticated system must also provide the migrant with the possibility of applying for asylum in another Member State, without being limited to the country of first entry. |
| --- | --- |

5.5.

| 5.6. | Eurodac also aims to support the identification of appropriate policy solutions in this area by allowing statistics to be drawn up combining data from several databases. |
| --- | --- |

5.6.

| 5.7. | The EESC agrees that common rules on the taking of fingerprints and facial image data for third-country nationals for the purposes of Eurodac need to be applied in the same way in all the Member States. |
| --- | --- |

5.7.

| 5.8. | The EESC is in favour of a creating knowledge instrument providing the European Union with information on how many third-country nationals enter the EU irregularly or following search and rescue operations and apply for international protection, something that is indispensable for sustainable and evidence-based policy-making in the field of migration and visa policy. |
| --- | --- |

5.8.

| 5.9. | Another objective of Eurodac is to provide additional support to national authorities dealing with asylum applicants whose applications have already been rejected in another Member State, by marking rejected applications, but national authorities must be given the right to re-examine an application processed by another Member State. |
| --- | --- |

5.9.

Brussels, 25 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

(1)  The concept of non-entry is something that has existed both in Schengen and the asylum acquis (Article 43 of the Asylum Procedures Directive (APD)).

1

acquis

(2)  OJ C 123, 9.4.2021, p. 15.

2

(3)  See page 58 of this Official Journal.

3

(4)  In accordance with the provisions of the Qualification Regulation, the rights and benefits entailed by refugee/subsidiary protection status are linked to the Member State that granted the status.

4

(5)  The share of migrants arriving from countries with recognition rates lower than 25 % has risen from 14 % in 2015 to 57 % in 2018.

5

(6)  As regards the use of detention during the border procedure, see paras 179 and 183 of ECJ judgment C-808/18: ‘Member States are authorised to place in “detention”, within the meaning of Article 2(h) of Directive 2013/33, applicants for international protection arriving at their borders, before granting them a right to enter their territory, on the conditions set out in that same Article 43 and in order to ensure the effectiveness of the procedures for which Article 43 provides’; ‘it follows from Article 43(1) of Directive 2013/32 that detention based on that provision is justified only in order to allow the Member State concerned to examine, before granting the applicant for international protection the right to enter its territory, whether his or her application is not inadmissible [...] or whether that application must not be rejected as unfounded [...]’.

6

‘Member States are authorised to place in “detention”, within the meaning of Article 2(h) of Directive 2013/33, applicants for international protection arriving at their borders, before granting them a right to enter their territory, on the conditions set out in that same Article 43 and in order to ensure the effectiveness of the procedures for which Article 43 provides’; ‘it follows from Article 43(1) of Directive 2013/32 that detention based on that provision is justified only in order to allow the Member State concerned to examine, before granting the applicant for international protection the right to enter its territory, whether his or her application is not inadmissible [...] or whether that application must not be rejected as unfounded [...]’.

(7)  Regulation (EC) No 810/2009 of the European Parliament and of the Council of 13 July 2009 establishing a Community Code on Visas (Visa Code) (OJ L 243, 15.9.2009, p. 1).

7

(8)  CEPS Project Report, Search and rescue, disembarkation and relocation arrangements in the Mediterranean. Sailing Away from Responsibility?, June 2019.

8

Search and rescue, disembarkation and relocation arrangements in the Mediterranean. Sailing Away from Responsibility?

(9)  It will improve Member States’ monitoring capacities in this field and prevent assisted voluntary return and reintegration (AVRR) ‘shopping’, as Member States will have immediate access to this information and a person granted assistance in one Member State will have to refrain from moving to another Member State with the objective of obtaining another type of, or better, assistance. Currently, Member States have no common database or any way to find out if a returnee has already benefitted from return and reintegration support. This information is essential in combatting misuse and double-benefits.

9

(10)  The Entry/Exit System allows Member States to detect third-country nationals who have been staying on illegally although they have entered the EU legally. However, no such system exists for identifying illegally present third-country nationals who enter the EU irregularly at the external borders. The current Eurodac system is the ideal database for hosting this information as it already contains such data. For the time being, the purpose of collecting such data is limited to assisting in the determination of the Member State responsible for examining an asylum application. The identification of illegally present third-country nationals and those who have entered the European Union irregularly at the external borders will, in particular, assist Member States in re-documenting a third-country national for return purposes.

10

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ANNEX

The following amendment, which received at least a quarter of the votes cast, was rejected during the discussions (Rule 43(2) of the Rules of Procedure):

Point 2.2

Amend as follows:

| 2.2. | The Member States in the south of Europe have no choice but to be converted into either detention or
  establish closed pre-departure centres where asylum seekers’ situations are very problematic in terms of living conditions and rights. |
| --- | --- |

2.2.

Reason

The current text is very easy to misinterpret as the countries themselves are not converted into either a detention centre or anything else. Pre-departure centres are established in the countries.

Outcome of the vote:

| In favour: | 96 |
| --- | --- |
| Against: | 100 |
| Abstention: | 47 |

In favour:

96

Against:

100

Abstention:

47

The following paragraphs of the section opinion were amended to reflect the amendment adopted by the assembly but received more than one quarter of the votes cast (Rule 43(2) of the Rules of Procedure):

| 1.1. | The EESC takes note of the New Pact on Migration and Asylum, which aims to tackle a multifaceted and complex phenomenon. The EESC believes that the new regulations make a positive contribution to more effective EU border security. A better and safer process is being set up to control those entering the EU. Nevertheless, an integrated, common EU strategy, one that is resilient and forward-looking, is much-needed and long overdue. Unfortunately, concerning the migration issue and asylum as a whole, the Commission is serving up the same old soup, reheated and yet, as is standard practice, ladled out cold to the countries of southern Europe.

  What is more, the four or five Member States concerned are going to become ‘closed detention centres’
   (1)

  for human beings for a period of at least six or seven months, if not more, until the outcome of the procedures is known, resulting in situations that are 20 times worse than before
  . |
| --- | --- |

1.1.

Outcome of the vote:

| In favour: | 105 |
| --- | --- |
| Against: | 99 |
| Abstention: | 43 |

In favour:

105

Against:

99

Abstention:

43

| 1.2. | The EESC wants to point out that there seems to be lack of goodwill on the part of the Commission regarding its suggestions. All its opinions (SOC/649, SOC/669 and SOC/670) criticise the adoption of both the Asylum and Migration Management Regulation (AMR) and the Asylum Procedures Regulation (APR). The EESC would also like to point out that from its examination of the nine regulations and its contact with Commission, the prospects for implementing these nine different regulations appear dysfunctional. It is typical of the Commission that it fails to treat immigration as a single issue, stating rather that any proposals or suggestions come under another regulation. As a result, no issues can be substantially linked, meaning that they are instead considered individually within the scope of each exclusive regulation. Put simply, ‘we throw the ball to another rule in every observation’, or the Commission simply bats away all the comments on the grounds that they come under different rules. |
| --- | --- |

1.2.

Outcome of the vote:

| In favour: | 101 |
| --- | --- |
| Against: | 97 |
| Abstention: | 41 |

In favour:

101

Against:

97

Abstention:

41

---

(1)  The concept of non-entry is something that has existed both in Schengen and the asylum acquis (Article 43 of the Asylum Procedures Directive (APD)).

---

| 30.4.2021 | EN | Official Journal of the European Union | C 155/73 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/73

---

Opinion of the European Economic and Social Committee on ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A Renovation Wave for Europe: greening our buildings, creating jobs, improving lives’

(COM(2020) 662 final)

(2021/C 155/11)

| Rapporteur: | Pierre Jean COULON |
| --- | --- |
| Co-rapporteur: | Aurel Laurenţiu PLOSCEANU |

Rapporteur:

Pierre Jean COULON

Co-rapporteur:

Aurel Laurenţiu PLOSCEANU

| Referral | European Commission, 11.11.2020 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Transport, Energy, Infrastructure and the Information Society |
| Adopted in section | 11.2.2021 |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 212/0/5 |

Referral

European Commission, 11.11.2020

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Transport, Energy, Infrastructure and the Information Society

Adopted in section

11.2.2021

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

212/0/5

1.   Conclusions and recommendations

| 1.1 | The EESC welcomes the European Commission's adoption of a proposal for a European strategy on A Renovation Wave for Europe — greening our buildings, creating jobs, improving lives. Such a strategy is an absolute and indispensable necessity for the European Union and its citizens — a strategy that the EESC intends to support and actively nourish with its reflections and proposals. |
| --- | --- |

1.1

| 1.2 | The EESC takes the view that, accounting for 40 % of total energy consumption, homes and other buildings across the EU need to undergo this kind of renovation wave, spurred on by the European Union, as part of a holistic approach to long-term investment in the general interest, sustainable development, health protection (including the handling of asbestos in such work), the green transition and the effective implementation of the European Pillar of Social Rights with regard to sustainable and affordable housing. |
| --- | --- |

1.2

| 1.3 | The EESC therefore supports the renovation wave strategy, as it is a ‘win-win-win’ strategy for the European Union — a threefold win for the climate, for the recovery thanks to the local jobs created, and finally for the fight against the pandemic and energy poverty and in favour of sustainable housing for all, including vulnerable people. |
| --- | --- |

1.3

| 1.4 | The EESC takes the view that, given the strategy's specific nature and its trajectory to 2050, it needs to be set within a clear, stable and tailored legal and financial framework, both by deploying a dedicated European investment fund, multiannual investment plans and a new ‘green semester’, and by establishing a dedicated, tailored legal framework relating for example to State aid, applicable VAT rates, public procurement, green mortgages and energy performance standards. |
| --- | --- |

1.4

| 1.5 | The EESC calls on the Commission to put in place incentives for the development, at local level, of the industrialisation and mass roll-out of energy-efficiency renovation processes, and at the same time to establish a new ‘Erasmus for energy-efficiency renovation 2050’ so as to attract young people in Europe to these new jobs of the future. |
| --- | --- |

1.5

| 1.6 | The EESC also calls for the Member States to be encouraged to follow the example of the EIB's ELENA programme and implement public diagnostic, technical support and advice services, particularly for households, so as to prevent abusive doorstep selling and fraudulent practices in connection with the energy-efficiency renovation support schemes. |
| --- | --- |

1.6

| 1.7 | The EESC considers, above all, that this strategy needs to bring the European Union closer to its citizens and the places where they live, through appropriate communication concerning the schemes in force and how to access them. |
| --- | --- |

1.7

| 1.8 | The EESC calls for genuine synergies between the Building Stock Observatory and the Energy Poverty Observatory. |
| --- | --- |

1.8

2.   General comments

| 2.1 | The EESC welcomes the European Commission's adoption of the Communication on A Renovation Wave for Europe — greening our buildings, creating jobs, improving lives. The large-scale renovation of buildings in the European Union — private and social housing, public and professional-use buildings — is now an absolute necessity, given the structural long-term under-investment in this area and the climate, environmental, economic and social consequences involved, as well as the costs of failing to take action. |
| --- | --- |

2.1

| 2.2 | The Committee supports the strategy proposed by the Commission, which is underpinned by the climate neutrality objective, applies circularity principles, contributes to the Sustainable Development Goals and Europe's competitiveness, safeguards cultural heritage, and protects the right of everyone to have affordable, liveable, accessible and healthy housing, in accordance with Principle 19 of the European Pillar of Social Rights. |
| --- | --- |

2.2

| 2.3 | Accounting for 40 % of total energy consumption, homes and other buildings across the EU need to undergo a wave of renovations as part of a holistic approach to long-term investment in the general interest, sustainable development and the green transition. |
| --- | --- |

2.3

| 2.4 | The pandemic has also highlighted the key role of housing in managing the health crisis and the need to rethink how homes are used, and therefore how they are designed, taking into account the constraints of lockdown. |
| --- | --- |

2.4

| 2.5 | Above all, the pandemic has highlighted the unacceptable link between the degree to which housing is healthy, energy poverty and resilience to the pandemic. |
| --- | --- |

2.5

| 2.6 | The building renovation wave strategy is thus a win-win-win initiative, given the scale and effectiveness of its contribution to climate action, the volume of long-term investment and local jobs that it can bring about and that can actively contribute to the recovery, and given its contribution to combating energy poverty and promoting social cohesion and inclusion through the development of affordable housing for EU citizens. |
| --- | --- |

2.6

| 2.7 | The building renovation wave should therefore be driven by permanent and converging winds and currents, both in terms of EU regulation and support and in terms of Member States' multiannual investment plans. These must be both clear and accessible, while taking into account the diversity of players involved and their particular investment rationale, ranging from European households occupying their own home, fully owned or in co-ownership, households letting out one or more properties on the market, social housing organisations governed by specific general interest mandates and associated public service obligations, public authorities and their public buildings, protected historic buildings, and companies and their buildings. There are so many potential ‘surfers’ on the renovation wave who will have to be persuaded to make long-term investments in their homes and other buildings by 2050, by means of financing mechanisms tailored to the types of buildings, combining long-term loans or ‘green loans’, public guarantees and the indispensable non-repayable grants, particularly for households. |
| --- | --- |

2.7

| 2.8 | The building renovation wave will need to be driven in particular by a European movement towards the industrialisation and mass roll-out of renovations at local level, in order to reduce the cost and duration of renovation work for the households living in the dwellings affected, and by outsourcing and digitalising processes. This industrialisation must go hand in hand with new construction models based on appropriate technical requirements and construction standards, and above all with a European campaign to promote this new wave of industry and these potential new jobs to the younger generations by launching an ‘Erasmus for energy-efficiency renovation 2050’, an initiative that the Committee would very much like to see. Particular attention must also be paid to the risks of social dumping inherent in such outsourcing and other means of subcontracting the work. |
| --- | --- |

2.8

| 2.9 | The Commission must ensure convergence not only of the existing provisions, but also of the provisions to be revised and the proposed new provisions, not only towards the Member States and their long-term investment strategies, but also towards households, social landlords, public authorities and businesses — all of the final decision-makers making individual long-term investments that will feed into the surge between now and 2050 with their own rationale. |
| --- | --- |

2.9

| 2.10 | This need for convergence applies both to the revision of existing provisions relating, for example, to the Energy Performance of Buildings Directive, public procurement and state aid schemes, particularly for social housing, specific applicable VAT rates, ‘green’ mortgages, and the provisions and conditionality elements of the NextGenerationEU recovery plan for Europe and the 2021-2027 cohesion policy, which must be clear for the European households they target. The recovery plan needs to be revitalised via a genuine policy of concrete proposals and recommendations, and by coordinating existing national observatories. |
| --- | --- |

2.10

| 2.11 | The Committee calls for the EU Building Stock Observatory to work in coordination with the Energy Poverty Observatory. |
| --- | --- |

2.11

| 2.12 | The Committee calls for a public service to be set up in the Member States to promote the energy-efficiency renovation wave and to offer diagnostics and technical support for energy-efficiency renovation work, particularly for households, so as to avoid any malicious practices with regard to the misselling of renovation works. |
| --- | --- |

2.12

3.   Comments — Boosting building renovation for climate neutrality and recovery

| 3.1 | The large-scale renovation of buildings in the European Union — private and social housing, public and professional-use buildings — is now an absolute necessity, given the structural long-term under-investment in this area and the climate, environmental, economic and social consequences involved. |
| --- | --- |

3.1

| 3.2 | The Committee agrees with the Commission's analysis of the urgency from the climate perspective of taking action on renovating housing and other buildings and of the opportunity presented by the COVID-19 crisis to rethink, redesign and modernise our buildings, taking an environmental, social and economic win-win-win approach. This is indeed a unique opportunity to take action simultaneously on climate neutrality, recovery and social cohesion.
  The Committee would raise the issue of the diversity of the buildings concerned — in particular the diversity of housing to be renovated, ranging from individual houses to large soviet-era housing estates and working-class suburbs. In this great housing diversity, Eastern European housing blocks, very old houses from undervalued city centres, suburban housing and rural housing can be subject to specific prioritisation. In connection with the fact that the housing stock has become obsolete and requires renewal processes both to improve the quality of life of citizens and for building technical advancement, it is necessary to ensure access to financing for citizens as it is currently a major barrier for renovation. Similarly, accessibility for people with disabilities will have to be taken into account. The European Union also needs to seize this opportunity for large-scale action to get closer to its citizens and the areas in which they live by means of appropriate communication. |
| --- | --- |

3.2

The Committee would raise the issue of the diversity of the buildings concerned — in particular the diversity of housing to be renovated, ranging from individual houses to large soviet-era housing estates and working-class suburbs. In this great housing diversity, Eastern European housing blocks, very old houses from undervalued city centres, suburban housing and rural housing can be subject to specific prioritisation. In connection with the fact that the housing stock has become obsolete and requires renewal processes both to improve the quality of life of citizens and for building technical advancement, it is necessary to ensure access to financing for citizens as it is currently a major barrier for renovation. Similarly, accessibility for people with disabilities will have to be taken into account. The European Union also needs to seize this opportunity for large-scale action to get closer to its citizens and the areas in which they live by means of appropriate communication.

| 3.3 | The Committee supports the proposed objective of doubling the annual energy renovation rate of residential and non-residential buildings by 2030, while spurring on deep energy renovations. This would amount to 35 million building units renovated by 2030, and this rate would be maintained in order to achieve EU-wide climate neutrality by 2050. Ideally, it should be possible to exceed this doubling target and move towards a tripling of the rate. |
| --- | --- |

3.3

| 3.4 | The Committee underlines the ambition of this objective, its 30-year projection, and the need for a thorough alignment of the existing legislative and regulatory provisions in this area and of the financial support mechanisms for the households concerned, social landlords, public authorities and other building owners concerned, all of which are potential investors to be persuaded to make long-term investments in line with their own rationale and capacities. This is evident from the efforts being made by Member States and their regional managing authorities to link up the NextGenerationEU recovery instrument and the 2021-2027 cohesion policy. |
| --- | --- |

3.4

4.   Comments — Key principles for building renovation towards 2030 and 2050

| 4.1 | The Committee agrees with the need to adopt an encompassing and integrated strategy involving the stakeholders concerned on the basis of seven principles: energy efficiency first; affordability, decarbonisation and integration of renewables; lifecycle thinking and circularity; high health and environmental standards; tackling the twin challenges of the green and digital transitions; and, finally, respect for aesthetics and architectural quality. |
| --- | --- |

4.1

| 4.2 | In line with Principle 19 of the European Pillar of Social Rights, the Committee would stress the particular importance that should be given to the affordability of housing and of the investments to be made by the households concerned, whether they be owner-occupiers, tenants, or co-owners in a co-ownership in difficulty, particularly when it comes to poorly insulated buildings and combating energy poverty, but also on the part of social landlords whose rent levels fall under public service financial accessibility obligations imposed in accordance with the specific public service tasks assigned by the Member States. |
| --- | --- |

4.2

| 4.3 | The EESC points out that cavity wall and floor insulation are the most CO2-saving measures, the simplest and the least costly. But even these relatively inexpensive measures are too expensive for many home owners, despite the lower energy costs they generate. That is why the EESC advocates that national governments make a subsidy scheme for these measures. Calculations carried out in the Netherlands show that a subsidy of EUR 2 000 per home is sufficient to carry out these measures. In addition to the substantial CO2 emission reduction, such a scheme also provides substantial employment in the construction sector badly affected by COVID-19. The same is true in France, thanks to the recent expansion to all households of the ‘MaPrimeRenov’ allowance for energy-efficiency renovations to their homes. |
| --- | --- |

4.3

| 4.4 | The conclusions and recommendations from the EESC opinion on Working with asbestos in energy renovation are also to be followed in order to promote the removal of asbestos during energy renovation processes where needed and possible (1). |
| --- | --- |

4.4

5.   Comments — Delivering faster and deeper renovation for better buildings

| 5.1 | The Committee agrees with the Commission's analysis of the multiple barriers to individual investment decisions and the complexity of access to financing, particularly at local level, which applies both to national schemes and to the Structural Funds, particularly in the project appraisal phase, but also in view of the delays in the payment of grants. This complexity and these shortcomings must be resolved as a matter of priority in order to achieve the objectives set, including in the context of the implementation from 2021 on of the provisions specific to the 2021-2027 cohesion policy. |
| --- | --- |

5.1

| 5.2 | The Committee takes note that the Commission has identified these obstacles in its public consultation and its proposals on strengthening information, legal certainty and incentives for investing, ensuring adequate and well-targeted funding, increasing the capacity to prepare and implement projects, promoting comprehensive and integrated renovations, making the construction ecosystem fit to deliver sustainable renovation and, finally, using renovation as a lever to address energy poverty and on promoting affordable housing through a specific European initiative. The implementation of these proposals should underpinned by the principles of simplicity, pre-establishing a blend of complementary financing that can be mobilised by public authorities, and proportionate State aid controls. |
| --- | --- |

5.2

| 5.3 | The Committee supports the Commission's proposal to task the European Building Stock Observatory with managing a European repository for data on energy performance and supporting the design of incentives in this area. That observatory will need to work together with the Energy Poverty Observatory, which needs to be revitalised at this point. |
| --- | --- |

5.3

| 5.4 | The Committee recognises the specific nature of the current situation regarding the potential mobilisation of European resources for energy-efficiency renovation under the NextGenerationEU recovery instrument, on the one hand, and the 2021-2027 cohesion policy on the other. There are no fewer than 13 schemes in existence to help co-finance renovations for energy efficiency, either by means of non-repayable subsidies or through long-term loans with preferential interest rates and public guarantees. |
| --- | --- |

5.4

| 5.5 | The Committee considers that this exceptional situation should lead the EU, in addition to setting quantitative renovation targets, to strengthen the Member States and their annual programmes for investment in energy-efficiency renovation, and to assess these programmes on an annual basis under the European semester, by establishing specific ‘green governance’ alongside economic governance or under the open method of coordination. |
| --- | --- |

5.5

| 5.6 | The Committee considers that this unique situation should also be seized to tackle and eradicate energy poverty by making it a priority in mobilising financing. The remit of the European Energy Poverty Observatory should be stepped up, and this body should lead a European network of energy poverty observatories in the Member States. |
| --- | --- |

5.6

| 5.7 | However, the Committee would like to make the Commission aware of the difficulty faced by potential investors, in particular households and social landlords, in combining these different funding channels and in linking them to the various regulations, eligible bases and controls that apply. In view of the 2050 horizon, these schemes should be unified in order to make them clearer and more accessible to the households and public authorities they target. |
| --- | --- |

5.7

| 5.8 | Given the duration of the investment in question and the 2050 objective, and with a view to simplification and clarity for the European households concerned, the Committee suggests that the Commission explore the feasibility of a specific European Investment Bank (EIB) investment fund, which would provide technical assistance, blend the existing schemes and guarantee continuity up to 2050. |
| --- | --- |

5.8

| 5.9 | The Committee supports the Commission's initiative to revise the State aid schemes for energy-efficiency renovation investments along these lines. These State aid schemes for energy-efficiency renovation should be simplified so as not to constitute a barrier to investment decisions given their absolute necessity. The Committee also welcomes the Commission's decision to undertake an assessment during 2021 of Commission Decision 2012/21/EU (2) on State aid in the form of public service compensation. Support measures for energy-efficiency renovation of social housing fall within these rules applicable to the discharge of public service obligations. |
| --- | --- |

5.9

| 5.10 | The Committee supports the Commission's proposal to launch a European initiative for affordable housing by funding 100 innovative and participatory flagship projects focusing on the thorough renovation of social housing districts in order to serve as a model for a large-scale roll-out across the European Union. Given the capacity of social landlords to invest, in their capacity as services of general economic interest and with EIB support, the mass roll-out of projects and the industrialisation of building renovation schemes will not only create local jobs but will lead to a reduction in renovation costs for other housing and public buildings thanks to the establishment of new local industries. |
| --- | --- |

5.10

| 5.11 | The Committee proposes that the Commission, drawing on the experience of ELENA, and with the support of the EIB, encourage the Member States to set up a public technical support service for energy-efficiency renovations, particularly aimed at the households concerned, in order to prevent the abusive doorstep selling and fraudulent practices already observed in some Member States in connection with energy-efficiency renovation work. |
| --- | --- |

5.11

| 5.12 | The Committee fully supports the ‘New European Bauhaus’ initiative launched by Ms von der Leyen in her State of the Union address and further elaborated in the communication, which will bring together professionals from a range of disciplines to design the buildings of tomorrow and reinvent a sustainable way of life for the future. The Committee invites all stakeholders to take part in the public consultation launched by the Commission. |
| --- | --- |

5.12

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

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(1)  OJ C 240, 16.7.2019, p. 15.

1

(2)  Commission Decision 2012/21/EU of 20 December 2011 on the application of Article 106(2) of the Treaty on the Functioning of the European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (OJ L 7, 11.1.2012, p. 3).

2

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| 30.4.2021 | EN | Official Journal of the European Union | C 155/78 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/78

---

Opinion of the European Economic and Social Committee on Proposal for a Directive of the European Parliament and of the Council on the initial qualification and periodic training of drivers of certain road vehicles for the carriage of goods or passengers (codification)

(COM(2021) 34 final – 2021/0018 (COD))

(2021/C 155/12)

| Referrals | Council of the European Union, 8.2.2021
  European Parliament, 8.2.2021 |
| --- | --- |
| Legal basis | Articles 91 and 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Transport, Energy, Infrastructure and the Information Society |
| Adopted at plenary | 24.2.2021 |
| Plenary session No | 558 |
| Outcome of vote
  (for/against/abstentions) | 234/0/8 |

Referrals

Council of the European Union, 8.2.2021

European Parliament, 8.2.2021

Legal basis

Articles 91 and 304 of the Treaty on the Functioning of the European Union

Section responsible

Transport, Energy, Infrastructure and the Information Society

Adopted at plenary

24.2.2021

Plenary session No

558

Outcome of vote

(for/against/abstentions)

234/0/8

Since the Committee unreservedly endorses the content of the proposal and feels that it requires no comment on its part, it decided, at its 558th plenary session of 24 and 25 February 2021 (meeting of 24 February), by 234 votes with 8 abstentions, to issue an opinion endorsing the proposed text.

Brussels, 24 February 2021.

The President of the European Economic and Social Committee

Christa SCHWENG

---

Corrigenda

| 30.4.2021 | EN | Official Journal of the European Union | C 155/79 |
| --- | --- | --- | --- |

30.4.2021

EN

Official Journal of the European Union

C 155/79

---

Corrigendum to Opinion of the European Economic and Social Committee on ‘Proposal for a Regulation of the European Parliament and of the Council establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021-2027 (the “Pericles IV programme”)’ (COM(2018) 369 final – 2018/0194 (CNS))

(
  Official Journal of the European Union C 440 of 6 December 2018
  )

(2021/C 155/13)

On the cover, in the table of contents, and on page 199, in the title:

| for: | ‘Opinion of the European Economic and Social Committee on “Proposal for a Regulation of the European Parliament and of the Council establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021-2027 (the “Pericles IV programme”)”(COM(2018) 369 final — 2018/0194 (CNS))’, |
| --- | --- |

for:

‘Opinion of the European Economic and Social Committee on “Proposal for a Regulation of the European Parliament and of the Council establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021-2027 (the “Pericles IV programme”)”(COM(2018) 369 final — 2018/0194 (CNS))’,

| read: | ‘Opinion of the European Economic and Social Committee on “Proposal for a Regulation of the European Parliament and of the Council establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021-2027 (the “Pericles IV programme”)” (COM(2018) 369 final — 2018/0194 (COD))’. |
| --- | --- |

read:

‘Opinion of the European Economic and Social Committee on “Proposal for a Regulation of the European Parliament and of the Council establishing an exchange, assistance and training programme for the protection of the euro against counterfeiting for the period 2021-2027 (the “Pericles IV programme”)” (COM(2018) 369 final — 2018/0194 (COD))’.

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