Investment for jobs and growth

The Investment Plan for Europe

The Investment Plan aims to remove obstacles to investment, provide visibility and technical assistance to investment projects and make smarter use of financial resources. A look at the 2019 results shows that it has had a meaningful macroeconomic impact and has brought tangible benefits to people and businesses.

Since the start of its mandate, the Juncker Commission (November 2014-November 2019) placed social priorities at the core of its action and at the heart of the debate on the future of Europe. There has been significant progress: with more than 241 million people currently working, around 14 million more compared to 2014, the employment rate has never been higher (73.9 %) and the unemployment rate is its lowest since 2000. Although it is also too high, youth unemployment has fallen significantly, from a peak of 24.1 % in 2013 to 14.3 % in November 2019.

Economic and fiscal policy

The European Semester

The European Semester is the annual cycle of economic and social policy coordination between the Member States to boost economic growth and job creation. As part of this process, each year the European Commission proposes to the Council a set of recommendations to Member States. For the first time, and following Greece’s exit from its economic adjustment programme in August 2018, the recommendations were addressed to all 28 Member States.

The overall objective of the Commission’s proposals this year was to encourage Member States to increase their growth potential by modernising their economies and strengthening their resilience. Given the current favourable economic conditions and global uncertainties, all Member States were urged to prioritise reforms that promote sustainable growth that works for everyone, together with well-targeted investment strategies and responsible fiscal policies. The recommendations were adopted by the Council in July.

The content of these recommendations reflects the overall priorities set out in the Annual Growth Survey and the recommendation on the economic policy for the euro area. They draw on the detailed analysis of the country reports published in February 2019 and on the assessment of the national programmes presented in April. The Alert Mechanism Report identified 13 Member States for an in-depth review to assess whether they were affected, or at risk of being affected, by imbalances. The reviews found that 10 Member States were experiencing imbalances and three were experiencing excessive imbalances.

The country-specific recommendations include a stronger focus on identifying and prioritising investment needs at national level and on paying special attention to regional and territorial disparities. This is in line with the thorough analysis of investment needs and bottlenecks identified for each Member State in the reports and should serve to prioritise the use of EU funds in the next long-term EU budget (2021-2027).

The recommendations recognise that to meet current and future challenges, our increasingly digitalised and globalised economies require smarter investments in infrastructure, innovation, education and skills, as well as extra measures to provide sustainable and inclusive social welfare systems for our ageing populations.

The Semester also reflected principles enshrined in the European Pillar of Social Rights: equal opportunities and access to the labour market; fair working conditions; and social protection and inclusion. All Member States received a recommendation on skills, and many received recommendations to implement labour market reforms. Further recommendations focused, for example, on the need for policies to empower disadvantaged groups such as low-skilled workers, younger people, older people, persons with disabilities and people with a migrant background. Although social protection systems are improving, there are still some gaps in coverage and obstacles to access.

Public finances

Healthy public finances are an essential basis for economic stability and sustainable growth. Lowering debt and deficits is important to ensure governments have a fiscal buffer to use to cushion the effects of a downturn. While public debt continues to decline in the EU, progress has been uneven and levels remain too high in several Member States.

Macroeconomic stability is a prerequisite for growth, so the EU has rules and procedures to detect debt and deficits and prevent them from threatening growth in the Member States. Imbalances in the euro area continued to attenuate in 2019, and further policy action is needed. In February, the Commission’s analysis showed that 10 Member States were experiencing imbalances, while those in Greece, Italy and Cyprus were deemed excessive.

In its proposals for country-specific recommendations to each Member State, the Commission sets targets to help them reach their medium-term budgetary objectives. Member States that can afford to do so should use fiscal and structural policies to increase quality public investment, particularly in areas that improve economic growth potential such as education and skills, infrastructure and innovation.

In June, the Commission recommended to the Council an end to Spain’s Excessive Deficit Procedure, meaning that the country’s deficit had been brought to below 3 % of its gross domestic product (GDP) in a durable manner. As a result, there were no Member States left in the corrective arm of the EU’s deficit rules, compared to the 24 in 2011.

At the same time, the Commission looked at several Member States’ compliance with the EU’s public debt and deficit rules to assess whether the opening of an Excessive Deficit Procedure was warranted. The Commission concluded that Belgium, France and Cyprus were in compliance but that an Excessive Deficit Procedure was warranted in the case of Italy. However, with the additional fiscal effort announced by the Italian authorities in July, the Commission concluded that it was no longer necessary to propose the opening of such a procedure.

The Commission also addressed a warning to Hungary and Romania for veering too far from their medium-term budgetary targets and recommended that they take action to meet them. Greece, meanwhile, was considered to have made a reasonable start on its post-programme reforms, although the implementation of some seemed to have slowed and there was a risk that certain commitments might not be met.

Tax avoidance reduces national revenues, disrupts fair competition and negatively impacts growth. As the European Semester is about coordinating national policies to ensure convergence and a strong, competitive and social Europe, fighting aggressive tax planning and working towards tax coordination is essential to protect Europe’s citizens and its competitiveness. As a result, the Commission issued country-specific recommendations to several Member States and to the euro area as a whole to address the issue of aggressive tax planning.

The Capital Markets Union

Stable and efficient capital markets are essential for growth, jobs and investment. The Capital Markets Union (CMU), which comprises a mix of regulatory and non-regulatory reforms to better connect savings to investment, is an integral part of the EU’s strategy for promoting these areas.

The CMU aims to strengthen Europe’s financial system by providing alternative sources of financing and more opportunities for retail and institutional investors. This means more funding opportunities for companies, especially SMEs and start-ups such as venture capital and capital markets. A strong CMU is also necessary to complement the Banking Union in order to strengthen the Economic and Monetary Union and the international role of the euro.

There is a strong focus on sustainable finance, as the financial sector begins to help sustainability-conscious investors to choose suitable projects and companies. The CMU helps to channel investment in this direction, thereby contributing to the EU’s energy, climate and environment agenda.

With 11 out of 13 proposals now agreed, the CMU is set to become a true driver of investment, providing additional sources of financing to EU companies and opportunities for citizens to save for their future. Six proposals are to make the most of the Single Market through new European products, labels and passports; five are to simplify the rules for companies and investors and make them more proportionate; and two are to enhance the supervision of capital markets.

In April, the Parliament and the Council agreed on targeted amendments to two key pieces of financial services legislation: the market abuse regulation and the prospectus regulation. The amendments to the rules on market abuse strike a better balance between cutting red tape for small businesses and safeguarding market integrity and investor protection.

The proposed changes to the prospectus regulation will give issuers in SMEs access to growth markets to produce a lighter prospectus when transferring to a regulated market (i.e. a main stock exchange), which can lead to significant cost saving for growing businesses of this nature.

Another milestone towards achieving the CMU was the introduction of the Pan-European Personal Pension Product (PEPP), a voluntary scheme for saving for retirement to be offered by a broad range of financial providers across the EU. It will complement existing public and occupational pension systems alongside existing national private pension schemes. The regulation was adopted on 14 June and will become applicable in 2 years, when the first such products should come on the market.

The PEPP will offer consumers more choice, the benefit of greater competition, enhanced transparency and flexibility in product options. Mobile citizens will be able to continue contributing to the same product regardless of where they reside in the European Union.

As of 31 July, new rules entered into force to foster a cross-border distribution of investment funds. The updated framework makes this distribution simpler, quicker and cheaper and will ultimately increase competition between investment funds. Investors will enjoy more choice and better value, as well as a higher level of protection.

An agreement was also reached on a directive that will help viable companies in financial difficulties to be restructured efficiently and will allow honest entrepreneurs to benefit from a second chance after overcoming bankruptcy.

In March, the European Parliament and the European Council also agreed on new rules that will make it easier to finance small businesses through capital markets. The rules will cut red tape for businesses trying to access ‘SME growth markets’, a new category of trading venue dedicated to small issuers, by introducing a more proportionate approach to support their listing.

Boosting research, innovation and technology

Scientific excellence and breakthrough innovation

In 2019, the EU’s Horizon 2020 programme launched €11 billion worth of funding to support research and innovation.

Given the growing economic importance of breakthrough and disruptive innovation, and based on the early success of the pilot phase of the European Innovation Council, the remaining 2 years of this pilot phase will see significant expansion. Over €2 billion of funding was approved for 2019-2020, covering the whole innovation chain: from ‘pathfinder’ projects to support advanced technologies from the non-conventional research base, to ‘accelerator’ funding to help start-ups and SMEs develop and scale up innovations to the stage where they can attract private investment.

The EU in space

To ensure that the EU remains a world leader in space technology and to promote a competitive space industry in Europe, in 2019 the European Parliament and the Council of the European Union reached a partial provisional agreement on the EU’s space programme for 2021-2027.

With a proposed budget of €16 billion, the programme would bring all of the EU’s support for space under the one roof and would increase current funding levels by more than a third. It would build on new needs and available technologies as well as reinforce Europe’s access to space and launch a European approach to supporting an innovative and competitive space industry.

Galileo, Europe’s global radio navigation satellite system, is the most accurate global satnav system available. In September, the number of Galileo users, including users of Galileo-enabled smartphones or tablets, reached an estimated 1 billion worldwide. The Copernicus programme, the world’s biggest provider of Earth observation data, helps to monitor climate change and manage border security and large disasters throughout the world. Every day, Copernicus delivers 12 terabytes of data, which are fully, openly and freely available for use by people and businesses, representing a goldmine for big data and cloud processing. Since 2019, Copernicus has enabled improved transfers of data, particularly of images, and allows users to discover, download and process its data more easily thanks to new upgrades to the Data and Information Access Services.

EU defence and industry

Three out of four EU citizens want to see greater security (Eurobarometer, November 2018). The EU has therefore stepped up its ambition and commitment towards a Defence Union. Activated in December 2017, the Permanent Structured Cooperation brings together 25 participating Member States that are willing to make more binding commitments to work together on security and defence and to take part in the most demanding missions. A total of 34 projects have already been launched, including on military mobility, maritime surveillance and cybersecurity. The Commission participates as an observer at the invitation of participating Member States.

The two pilot programmes of the European Defence Fund, with a combined budget of €590 million, were delivered as planned just as the Preparatory Action on Defence Research (2017-2019) entered its final year. The European Defence Industrial Development Programme (2019-2020) co-funds the cooperative development of defence capabilities; its work programme was agreed in March and calls for proposals were published in April.

Investing in regions, cities and rural areas

Throughout 2019, cohesion policy continued to support jobs and growth with thousands of investments, big and small, across the EU. Over the past 5 years, 1 million businesses have been supported, leading to hundreds of thousands of new jobs. Millions of people have received help for training, education or job seeking, their households have been connected to better broadband and they have benefited from improved transport infrastructure and health-sector innovations.

The European Regional Development Fund has also supported two Member States and 10 EU regions in industrial transition: Lithuania, Slovenia, North and East Finland (Finland), Norra Mellansverige (Sweden), Greater Manchester (United Kingdom), Sachsen (Germany), Wallonie (Belgium), Piemonte (Italy), Cantabria (Spain) and Hauts-de-France, Centre-Val de Loire and Grand Est (France). Each of these 12 pilot schemes will receive a €300 000 EU grant to help achieve industrial transition and design development strategies based on their areas of comparative strength, so-called smart specialisation assets.

Cohesion policy funds are also being invested in innovative start-ups. For instance, thanks to €32.5 million from the European Investment Fund, announced in April, the Venture Capital Fund in Croatia will invest in new projects with high growth potential in the country. More than 100 start-ups should benefit from better access to finance.

On a bigger scale, that same month the Commission announced €4 billion of funding from the European Regional Development Fund and the Cohesion Fund for 25 large infrastructure projects in 10 Member States. The projects cover a wide range of themes, from cross-border gas pipelines between Bulgaria and Greece to water management in Malta, research facilities at a university in Germany and modernised railway lines in northern Portugal. With national co-financing, the total investment in these projects amounts to €8 billion.

Agriculture and rural development

The Common Agricultural Policy continued to contribute to growth and investment by supporting viable food production, sustainable management of natural resources, modernisation of rural infrastructure and social inclusion. By the end of the third quarter of 2019, the European Agricultural Fund for Rural Development (EAFRD) had provided support for Rural Development Programmes 2014-2020 worth €8 billion. The funding went to enhancing farm viability and competitiveness of all types of agriculture and promoting innovative farm technologies and sustainable management of forests.

Rural development policy also aims to protect the environment and mitigate and adapt to climate change. Farmers could receive financial support for joining schemes to develop environmentally friendly farm-management practices, create favourable conditions for biodiversity or recreate wetlands for soil carbon sequestration. Overall, EAFRD support for the restoration, preservation and enhancement of ecosystems related to agriculture and forestry amounted to almost €27 billion. Another €2 billion was spent to promote resource efficiency and the shift towards a low-carbon and climate-resilient economy in the agriculture, food and forestry sectors. The EAFRD also provided almost €5 billion to promote social inclusion, poverty reduction and economic development in rural areas.

To help farmers strengthen their position in an increasingly market-oriented agri-food sector, the Commission has been working towards a fairer and more balanced food-supply chain. New rules on unfair trading practices entered into force in April, aiming to protect farmers and agri-food companies from unfair practices. Member States must transpose the rules into national law by May 2021. An initiative to increase agri-food market transparency was also adopted; this will see more information available along the food-supply chain for all market operators.

The Blue Economy

The EU’s Blue Economy, which encompasses all sustainable economic activities related to oceans, seas and coastal areas, continues to grow. According to the second EU Blue Economy Report, published in May, the sector produced gross profits of €74.3 billion in 2017 and employed more than 4 million people. The latest figures indicate high growth rates in both the traditional and emerging Blue Economy sectors. The report aims to help stimulate further growth by providing better data, analysis and knowledge about the sea.

The 2019 annual economic report on the EU fishing fleet, published in August, showed that the sector continued to perform strongly in 2017. This was mainly thanks to sustainable fishing methods as well as higher average fish prices, continued low fuel prices and the improved status of some important stocks. The positive trend is expected to continue.

Transport for a connected Europe

In 2019, 108 projects were selected to receive €538 million in grants from the Connecting Europe Facility (CEF) for safer, smarter and greener transport infrastructure. Of those projects, 39 (€117 million) will reduce the noise generated by freight trains, develop cross-border railway links and upgrade crucial infrastructure in ports. Another €109 million will support multimodal logistics platforms, making it possible to shift freight between different modes of transport. Two other priorities concerned Intelligent Transport Systems for roads (€80 million in funding) and innovation and new technologies (€71 million).

In March, the European Commission, together with the European Investment Bank, launched the new CEF Transport Blending Facility, an innovative financial instrument to support projects contributing to the environmental sustainability and efficiency of the transport sector in Europe. With an initial budget of €200 million, the facility will finance investments in the European Rail Traffic Management System and in alternative fuels infrastructure. Both organisations also joined forces to support investments in transport safety: the Safer Transport Platform will provide easy access to technical and financial advice, in particular for roads.

Investing in businesses

SMEs represent 99 % of all businesses in Europe and are a crucial part of the EU economy. The EU supports them by working to improve the business environment, making it easier to access finance, and by offering different services to help them expand within and beyond the EU.

Particularly through the programme for the competitiveness of small and medium-sized enterprises (COSME), in 2018 the EU helped leverage €10 billion in funding for 140 000 such ventures through a range of financial instruments including the European Fund for Strategic Investments (EFSI).

Investing in people

Reforms to education and training are a high priority in most Member States and featured prominently in the 2019 European Semester. Investing in education and skills is essential to sustain innovation and productivity growth, especially in a rapidly changing world of work with rising skills shortages. Inequality in education outcomes represents a threat to social cohesion and the long-term prosperity of Europe. Equal access to quality education is also essential for disadvantaged groups, and since the world of work is changing quickly, more adults need to be encouraged to continuously improve their skills and embrace lifelong learning. All Member States have received a country-specific recommendation in the area of education and training.

In May, as part of the work to build a European Education Area by 2025, the Council adopted a recommendation on early childhood education and care and the teaching and learning of languages. The following month, under the Erasmus+ programme, the Commission announced the first 17 European Universities alliances involving 114 higher-education institutions in 24 Member States. These alliances will enhance the quality and attractiveness of higher education and boost cooperation between institutions and their students and staff.

The EU also continued to invest in training. Support and co-financing for the Erasmus for Young Entrepreneurs (EYE) programme gives newly established and aspiring entrepreneurs the opportunity to train with an experienced person running an SME in another country. Last year, 1 300 new entrepreneurs took part across Europe and beyond, and 120 stand to benefit from EYE Global, a pilot programme involving Israel, Singapore and two US states, New York and Pennsylvania.

With a budget of more than €3.2 billion, the Erasmus+ programme for education, training, youth and sport provided opportunities for around 650 000 young people and 237 000 members of staff from educational institutions and youth organisations. The Youth Employment Initiative made €350 million available to young people living in regions with particularly high youth unemployment.

Connecting people

Around 35 000 young people had the opportunity to explore Europe with a DiscoverEU travel pass, and more than 90 000 people registered with the European Solidarity Corps, with 12 000 of them taking part in solidarity activities across Europe in 2019.

A healthier Europe

The Commission teamed up with the Organisation for Economic Co-operation and Development and the European Observatory on Health Systems and Policies to work on in-depth studies of health systems in the EU. The State of health in the EU and its Companion report include 30 profiles of national systems and, in 2019, zoomed in on five horizontal themes: vaccination hesitancy; the digital transformation of health promotion and disease prevention; gaps in health system accessibility; task shifting among health workers; and patient access to medicines.

In February, the EU took action to ensure the safety of medicines sold throughout Member States by introducing new verification and safety features on prescription medicines. Since then, manufacturers must put a 2D barcode and an anti-tampering device on boxes of prescription medicines and pharmacies (including online ones) and hospitals must check the authenticity of medicines before dispensing to patients. This is the final step in the implementation of the 2011 falsified medicines directive, which aims to guarantee the safety and quality of medicines sold in the EU.

An EU budget focused on delivery and continuity

The EU budget contributed to the strength and resilience of the European economy and to promoting solidarity and security both within and beyond its borders.

Measures to support economic growth and reduce the economic gaps between regions amounted to nearly half of the funds committed (€80 billion). EU funding contributed €12.2 billion to research and innovation under Horizon 2020, including the new European High-Performance Computing Joint Undertaking. The budget increased for education and training (up 17.8 % for Erasmus+ over 2018) and transport and digital infrastructure (37.0 % more for the CEF). Support for agriculture and rural areas remained stable at almost €60 billion, contributing to the fight against climate change and to the promotion of sustainable growth. The 2019 budget provided the necessary flexibility to address the internal aspect of migration issues, with €386.3 million provided to Member States via national operational programmes out of a total of €1.2 billion support from the Asylum, Migration and Integration Fund, along with €442.7 million for border management and €92.7 million for security from the Internal Security Fund. A total of €5 million was allocated to the creation of the new European Public Prosecutor’s Office to prosecute crimes against the EU budget including fraud, money laundering and corruption.

Safer, cheaper and better connectivity

Connectivity was again a major issue for the EU in 2019. As our economy and society become increasingly digital and more of our time is spent using products and services online, safe, reliable and affordable connectivity is more important than ever.

The cost of calling and messaging between Member States and other parts of Europe has varied significantly. On average, the standard price of a fixed or mobile call to a number in another country was three times higher than the standard price of a domestic call, and the standard price of a text message was more than twice as expensive. Price caps introduced in May set the maximum cost of calls from fixed or mobile phones at no more than €0.19 + value added tax (VAT) per minute, while text messages now cost no more than €0.06 + VAT. After the abolition of mobile roaming charges in 2017, the cap on international calls in Europe brings a clear and immediate benefit to consumers and businesses.

Other tangible benefits came when a scheme was launched to help local authorities install free WiFi hotspots. The WiFi4EU initiative aims to help up to 8 000 communities across the EU to improve their connectivity. EU grants of €15 000 are available for local authorities to finance the installation of hotspots. Two calls for applications took place, with more than 5 000 communities benefiting from the scheme in addition to the 2 800 that already received help in 2018. Each community has 18 months to invest the funding in the necessary equipment to create their public WiFi hotspots.

Connectivity in rural areas was also given a boost during the year. Only 53 % of people living in remote and rural areas have fast internet access compared to 82 % in the EU as a whole. Closing this digital gap is a key priority. The Broadband Competence Offices Network grew significantly in 2019, with 116 national and regional offices now helping to coordinate efforts to expand broadband coverage to the furthest corners of the EU. Better and faster broadband coverage will improve access to education, health, government services and businesses, will facilitate jobs and investment and will support communities in these areas.

The expansion of the network came as Member States pledged in April to work together to unlock the potential of digital technologies so that important and urgent economic, social, climate and environmental challenges facing the wider rural economy, including the EU’s food and farming sector, could be tackled.

In the run-up to the European Parliament elections in May, a campaign to raise awareness about online violence against women, #DigitalRespect4Her, featured testimonies from female parliamentarians, experts and journalists highlighting the particular issues that women face on social media and elsewhere online.

Digitalisation is also helping to underpin the wider work of breaking down barriers within the EU Single Market, of which the launch of the Electronic Exchange of Social Security Information was a tangible example. The project helps social security institutions across the EU, Iceland, Liechtenstein, Norway and Switzerland exchange information on cases involving citizens moving, living and working between countries. It began live operations in January 2019 and 31 countries are now rolling out the system. They had already exchanged information on more than 175 000 cases by the end of the year. The system is designed to help citizens access their information more effectively and have their social security benefits calculated more quickly and more accurately, as well as to help social security administrations fight more effectively against fraud.

In a similar vein, the collection of VAT from online sellers will also improve thanks to new rules agreed in March that will allow online businesses to register just once for VAT purposes rather than in each Member State where they sell. This will significantly reduce the cost in time and money for smaller companies operating online across borders. The new rules will also help national tax authorities more easily collect the VAT due from non-EU companies selling goods to EU consumers from the online marketplaces they use, assisting in the recovery of the €5 billion in tax revenues lost in the sector each year.

Protecting rights in the digital age

Other initiatives designed to protect the rights of consumers and businesses online were introduced, including new rules on contracts for the supply of digital content and digital services and on contracts for the sale of goods, which help make it clearer and simpler to do business online. One single set of rules across the EU will help businesses understand their obligations, while consumers will benefit from clear remedies when digital content, services and goods, including products with a digital element (e.g. smart fridges), are faulty.

New EU rules were also agreed to bring the complex regulations on copyright up to date for the digital world. Music-streaming services, video-on-demand platforms, news aggregators and user-uploaded-content platforms have become the main gateways to access creative works and press articles. The new rules guarantee fairer remuneration for creators, stronger rights for users and clearer responsibility for platforms. The aim is to improve access to online copyrighted material across borders, to set new rights and responsibilities for online platforms hosting copyrighted works, to encourage online press and journalism and improve remuneration for journalists, and to make it easier to use copyrighted material for education and research purposes.

Europe continued to act decisively in tackling unfair business practices in the digital economy. In March, Google was fined €1.49 billion for imposing anti-competitive contractual restrictions on third-party websites, which prevented or deterred rivals from being able to place their search adverts on them. In June, a formal investigation was launched into the practices of Broadcom, a global leader in components for wired communication devices such as modems and TV set-top boxes, to assess whether it illegally excluded competitors. In October, the Commission imposed interim measures on Broadcom with a view to ensuring that serious and irreparable damage to competition does not occur pending its investigation on the merits of certain allegedly exclusionary practices by the company. Qualcomm was fined €242 million in July for selling the chipsets that connect smartphones and tablets to cellular networks below cost with the intention of eliminating its main rival in the market segment. An investigation was also opened into how Amazon uses data from other merchants that sell goods on its websites.

From July, new rules started to apply on online platform-to-business relationships, putting in place a harmonised framework for minimum transparency and redress rights. These rules protect companies that depend on online platforms for reaching consumers while safeguarding the innovation potential of platforms; they are accompanied by the Observatory on the Online Platform Economy.

Making networks more secure

There were also new rules from the EU on the cybersecurity of networks as a whole. This includes recommendations on the security of next-generation 5G networks, where the high performance capacity is expected to lead to a further expansion in the number and range of digital products and services and to estimated revenues of €225 billion in 2025. Between March and June, Member States carried out extensive risk assessments of their 5G network infrastructure and toughened up their rules to improve the security of public networks.

The Cybersecurity Act came into force in June, setting out the future direction of EU cybersecurity policy. This includes starting work on the development of a new cybersecurity certification framework for digital products, services and processes, and a stronger role for the European Union Agency for Cybersecurity. As well as playing a key role in setting up and maintaining the certification framework, the agency is mandated to increase operational cooperation at EU level, which involves helping Member States that request it to handle cybersecurity incidents and supporting the coordination of the EU in case of large-scale cross-border cyberattacks and crises.

The same month saw seven Member States (Belgium, Germany, Spain, Italy, Luxembourg, Malta and the Netherlands) pledge to accelerate the development of ultra-secure quantum networks to boost European capabilities in quantum technologies and cybersecurity and to guarantee the safety and security of the networks of the future. Their ambitious proposals call for a new quantum communication infrastructure that would enable information and data to be transmitted and stored ultra-securely and that would link communication assets all over the EU. It would integrate quantum technologies and systems into conventional communication infrastructures and would consist of two elements: an earth-based component, making use of existing fibre communication networks linking strategic sites at national and cross-border levels, and a space-based component to cover long distances across Europe and other continents.

Using this network for critical infrastructure and encryption systems will help protect smart energy grids, air traffic control, banks, healthcare facilities and more from hacking. It will also enable data centres to store and exchange information safely and will preserve the long-term privacy of government data.

In May, the Council established a framework that allows the EU to impose targeted restrictive measures to deter and respond to cyberattacks that constitute an external threat to the EU or its Member States. This includes cyberattacks against non-EU countries or international organisations where restrictive measures are considered necessary to achieve the objectives of the Common Foreign and Security Policy.

Preparing for the technologies of the future

Artificial intelligence

Also looking to the future, Europe wants to benefit fully from the many potential improvements AI could bring and in recent years has strongly invested in boosting its AI capacity. However, against a backdrop of concerns about the development of AI, in 2019 a high-level group of experts started to develop guidelines for the ethical development of the technology to make sure it continues to serve, and not harm, society. The ethics guidelines for trustworthy AI were drawn up by experts from across the EU and are expected to form part of future proposals on human-centric AI planned for the early part of 2020. They cover issues as diverse as how to avoid discrimination in the development of AI systems and how to make sure they are sustainable and environmentally friendly.

Supercomputing

The quantities of data needed to support the development of AI require considerable amounts of computing power, and Europe has traditionally lagged behind the rest of the world in this regard. In June, eight sites across the continent were chosen to host new European supercomputers, helped by €840 million in EU and Member State funding. The sites in Sofia (Bulgaria), Ostrava (Czechia), Barcelona (Spain), Bologna (Italy), Bissen (Luxembourg), Minho (Portugal), Maribor (Slovenia) and Kajaani (Finland) will eventually host new supercomputers that could boost Europe’s supercomputing capacity four- to fivefold, with the aim of making it a global leader in this field. The supercomputers could be used to help develop personalised medicines, improve drug and material design and develop new bioengineering techniques, as well as for weather forecasting and climate change modelling.

Looking ahead: completing the Digital Single Market

A completed Digital Single Market would help the EU maintain its position as a world leader in the digital economy. Since the launch of the strategy in 2015, 30 different legal proposals have been put forward and, by the end of 2019, 28 of these had been agreed, five more than at the end of the previous year. The two remaining proposals, the first covering online privacy and the second covering the European Cybersecurity Industrial, Technology and Research Competence Centre and the Network of National Coordination Centres, are expected to be agreed in 2020. The European Commission has also prioritised a number of digital issues, including building on the ethical guidelines to put forward legislation for a coordinated European approach on the human and ethical implications of AI, and passing a new Digital Services Act to update liability and safety rules for digital platforms, services and products.

A climate-neutral Europe by 2050

Climate change and environmental degradation present an existential threat to Europe and the world. To overcome this challenge, Europe needs a new growth model that transforms the European Union into a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases by 2050, where economic growth is decoupled from resource use and where no one and no region is left behind.

In 2018, the Commission presented its vision for a climate-neutral EU by 2050 based on seven building blocks: increased energy efficiency; increased use of renewables; a clean and connected mobility system; a competitive circular economy industry; connected high-standard infrastructures; a boost in the bio-economy and natural carbon sinks; and the use of carbon capture and storage. Following an extensive stakeholder debate, and in the light of the Green Deal Communication presented by President von der Leyen, this objective was endorsed by the European Council in December 2019.

The EU already has a strong track record in reducing greenhouse gas emissions while maintaining economic growth: in 2018, emissions were 23 % lower than in 1990, while the economy grew by 61 % over the same period. However, more needs to be done. Given its extensive experience, the EU is leading the way in creating a green and inclusive economy with the European Green Deal, the flagship policy of the von der Leyen Commission, presented in December. At the heart of the Green Deal is a commitment to make Europe the first climate-neutral continent by 2050.

The deal makes a quantum leap forward in making it a reality on the ground. It resets the Commission’s commitment to tackling climate- and environment-related challenges and sets the path for action in the months and years ahead. For more information, see the section ‘The EU in 2019: a year of change’.

To underline the EU’s commitment, the first European climate law will enshrine the 2050 neutrality objective in legislation. Most importantly, the Green Deal sets a path for a transition that is just and socially fair. It is designed in such a way as to leave no individual or region behind in the great transformation ahead.

The European Union is the first major economy to turn its Paris Agreement commitments into binding laws and has already exceeded its target to reduce emissions by 20 % by 2020. If all measures agreed are fully implemented, it would surpass its target to reduce them by 40 % by 2030. However, even more ambitious targets are needed, and the Green Deal will raise this target to at least 50 % (and towards 55 %) compared with 1990 levels.

The EU has already started to modernise and transform the economy. In 2019, climate action continued on all fronts: from making our vehicles and air cleaner and investing in technological solutions to taking action to protect our forests and empowering people to play their individual part.

In line with new rules on the governance of the Energy Union, for the first time Member States developed draft integrated national energy and climate plans. A Commission assessment of the draft plans, published in June, showed that greater ambition was needed in the final plans that Member States were to submit by the end of the year in order to achieve the EU’s climate goals.

Working internationally to fight climate change

With EU emissions making up only around 9 % of the global total, it is clear that Europe cannot tackle climate change alone and that all countries have to work together to find a solution. The UN Climate Action Summit held in New York in September provided the EU with an opportunity to discuss with its partners how to be more ambitious and accelerate action to implement the Paris Agreement. The Commission prepared for the UN Summit by adopting a Communication that reaffirmed the EU’s commitment to accelerated climate ambition.

In December, EU negotiators attended the UN Climate Change Conference COP25 in Madrid. Successful agreements on the second review of the Warsaw International Mechanism and the creation of a Gender Action Plan provided some encouraging news.

Despite the efforts of the EU delegation to achieve consensus on the issue of international carbon markets, COP25 has not delivered the ambitious outcome that the world needs and that many wished for. But that reinforces the need for Europe to take leadership with the Green Deal and to engage with international partners. 2020 will see increased global climate ambitions: by COP26 in Glasgow in November, parties need to update their Nationally Determined Contributions and submit long-term strategies in line with the Paris Agreement objectives. The EU is ready for this.

The global phase-down of hydrofluorocarbons, harmful climate-warming gases commonly used in heating and cooling equipment, began on 1 January 2019. The action, spearheaded by the EU, is expected to make a significant contribution to the Paris Agreement objective of keeping global temperature rise well below 2 °C.

Throughout the year, the EU continued its international outreach and cooperation on climate issues. In June, the Commission, Canada and China co-hosted a major international climate meeting in Brussels; the third Ministerial on Climate Action brought together high-level representatives from over 30 countries, including ministers from the G20.

The EU remains strongly committed to supporting climate action in developing countries. Along with its Member States, it remains the largest provider of public climate finance, contributing €21.7 billion to developing countries in 2018, up from €20.4 billion in 2017.

Completing a modern and ambitious Energy Union

Launched in 2015, the Energy Union strategy set out to give European households and businesses secure, sustainable, competitive and affordable energy. The Fourth report on the state of the Energy Union showed that the Commission has fully delivered on its vision for the strategy. Among the main achievements was the completion in May of the ‘Clean Energy for All Europeans’ legislative package, made up of eight pieces of legislation. This will radically transform Europe’s energy system, making it climate-friendly and putting it at the service of consumers and Europe’s economy and competitiveness.

The package includes new and ambitious targets for 2030: an increase of at least 32.5 % in energy efficiency and a share of at least 32 % from renewables in energy use. It comprehensively reforms electricity markets to help integrate renewables into the grid and ensures everyone can participate in the energy transition by empowering consumers and communities to generate their own electricity. Crucially, the new rules will end subsidies to the most polluting plants.

The EU also adopted a new set of clearer and simpler energy labels that will help consumers save energy (the equivalent to Denmark’s annual energy consumption) and money (on average €150 per year per household) by 2030. In addition, in October, the Commission adopted new measures to make household appliances such as refrigerators, washing machines, dishwashers and televisions more sustainable. For the first time this includes requirements for repairability and recyclability, contributing to a circular economy.

In November, the Commission presented the first results of an initiative launched in 2018 to help 10 EU regions and two Member States in industrial transition build resilient and low-carbon economies. This saw the launch of 12 pilot schemes to overcome specific obstacles, with each scheme receiving an EU grant worth €300 000. The Commission also continued its efforts to support coal regions in transition to foster a ‘just transition’ where no region is left behind.

In February, 26 European islands launched their clean-energy transition. They will publish their agendas by mid 2020. 

Energy security and solidarity

The security of energy supply for EU consumers is an essential element of the Energy Union. As part of this effort, an agreement was reached to ensure that all gas pipelines to and from non-EU countries comply with EU energy legislation.

To strengthen the security of supply in the Baltic states, the Commission and Estonia, Latvia, Lithuania and Poland signed a political roadmap setting electricity markets on their way to being synchronised with the continental European network via Poland. The EU awarded a grant worth €323 million in support of the project.

The EU continued investing in safe and sustainable energy infrastructure through the Connecting Europe Facility, including €800 million for priority energy infrastructure and €750 million for projects with major cross-border benefits. Another €214.9 million was granted to the Baltic Pipe gas infrastructure project connecting Poland and Denmark with Norway.

Tackling cybersecurity issues in the energy sector has become a top priority, as all Europeans depend on the availability of energy. To address potential threats, the EU adopted a recommendation that provides guidance on how to address specific cybersecurity challenges.

The EU continued working on safe, secure and innovative applications of nuclear science and technology for purposes other than generating nuclear energy. Cooperation with non-EU countries to ensure the highest level of nuclear safety continued throughout 2019.

Decarbonising the economy

The EU Emissions Trading System continued to show positive results, with emissions from installations falling by 4.1 % in 2018 compared to 2017.

To address the current surplus of allowances in the system, a market stability reserve began operating in January. This will improve the system’s resilience to major shocks by adjusting the supply of allowances to be auctioned. The EU increased the incentive for businesses to reduce their emissions by placing almost 400 million allowances from the system in the reserve between September 2019 and August 2020, thereby increasing the price of emissions and making clean technologies more cost effective. Higher prices in the European carbon market in 2018 led to a record amount of revenue for Member States, generating some €14 billion – more than double the amount in 2017.

In December, the EU and Switzerland completed the process enabling them to link their emissions trading systems. From 2020, allowances from both systems can be used for compliance to compensate for emissions occurring in either system. This Linking Agreement is the first of its kind and demonstrates that such systems can pave the way to broader international carbon markets. Earlier in the year, the removal of regulatory barriers had enabled Iceland, Liechtenstein and Norway to fully participate in the EU auctioning platform for trading emissions allowances.

To accelerate international progress on building a robust international framework for carbon markets, the Commission hosted several conferences to identify potential solutions to obstacles when setting up reliable international emissions trading systems.

Clean and sustainable transport

A faster shift to clean and sustainable transport is essential to improve Europeans’ health and quality of life, contribute to the EU’s climate objectives and boost the industry’s competitiveness. In March, the Commission presented a roadmap of actions to ensure a faster transition to clean vehicles. Among the major achievements in 2019 under the EU’s agenda for clean, safe and connected mobility was the adoption of the first EU-wide CO2 emissions targets for trucks, new CO2 emission standards for cars and vans, and new rules to encourage public authorities to use environmentally friendly transport.

Following the Dieselgate scandal, the EU has significantly tightened rules to ensure more independent and reliable testing procedures for vehicles. In January, the Worldwide Harmonised Light Vehicles Test Procedure and new Real Driving Emissions rules entered into force. In September, the NOx (nitrogen oxides) measurements carried out using the Real Driving Emissions rules became mandatory for all new cars sold in Europe.

Progress was also made in tackling emissions from maritime transport with the adoption of a proposal to revise the EU system for monitoring, reporting and verifying CO2 emissions from ships, as well as the first-ever publication of these data. This represents an important step towards ensuring that international shipping contributes its fair share of global reductions of greenhouse gas emissions.

Batteries

Batteries are crucial to the transition to clean energy as well as for electro-mobility. The Commission is working with Member States and industry stakeholders to build a competitive, sustainable and innovative battery ecosystem in Europe. This is the main objective behind the European Battery Alliance, an industry-led initiative with around 260 industrial and innovation organisations that is currently evaluating the potential for cross-border projects. In April, the Commission reported on progress in implementing the Commission’s Strategic Action Plan on batteries. In June, the Commission launched a new European technology and innovation platform on batteries to boost support for research and innovation. The EU also made €132 million available in 2019 for battery projects under the Horizon 2020 programme.

Towards a circular economy

While transforming how we produce and use energy is essential for tackling climate change, it is only part of the solution. The circular economy has already become a central element in the EU’s industrial and economic strategy and underpins EU action for waste prevention, better design and higher rates of recycling. All 54 actions under the Commission’s Circular Economy Action Plan have now been delivered or are being implemented, laying the foundations for further development.

Tackling plastics has been a top priority, as the way they are produced, used and discarded too often harms the environment and fails to capture the economic benefits of a more ‘circular’ approach. The million tonnes of plastic litter that end up in the oceans every year is one of the most visible and alarming signs of this problem.

In July, new EU rules came into force to tackle marine litter coming from the 10 items that are most often found polluting European beaches, such as single-use plastic plates, cutlery, straws, balloon sticks and cotton buds, which will be banned by 2021. Member States agreed to achieve a 90 % collection target for plastic bottles by 2029 and to meet the requirement that they contain at least 25 % of recycled content by 2025 and 30 % by 2030. This action is part of the first-ever Europe-wide plastics strategy launched in 2018 with the vision of having all plastic packaging placed on the EU market as reusable or recyclable by 2030.

While the recycling rate for plastic packaging in Europe has almost doubled since 2005, it still makes up less than 30 % of the 25 million tonnes of plastic waste produced by Europeans every year. As part of efforts to further boost recycling and reuse of plastics, in October more than 170 public and private partners from the plastics industry pledged to use 10 million tonnes of recycled plastic in new products by 2025. The initiative comes from the Circular Plastics Alliance, which held its first meeting in February.

After assessing health and environmental risks, the European Chemicals Agency in January concluded that restricting the intentional addition of microplastics in EU products would be justified.

Finance for climate action and new technologies

In 2019, the Investment Plan for Europe helped more European citizens get their energy from renewable sources, bringing the total number of households helped by the plan to 7.4 million. The new Innovation Fund is a key instrument for delivering the EU’s economy-wide commitments under the Paris Agreement and for supporting the Commission’s strategic vision of a climate-neutral Europe by 2050. In February, the Commission announced over €10 billion worth of investment for low-carbon technologies in several sectors to boost their global competitiveness through the fund. Revenues will come from the auctioning of 450 million EU Emissions Trading System allowances from 2020 to 2030. Initiatives financed under the Horizon 2020 programme also make an important contribution to bringing new technologies to market.

Public money alone will not be enough to fight climate change, so the EU is making it easier to help investors identify and seize green investment opportunities worldwide. In October, it launched the International Platform on Sustainable Finance together with relevant authorities from Argentina, Canada, Chile, China, India, Kenya and Morocco.

In June, the Commission published new guidelines on corporate climate-related information reporting as part of its Sustainable Finance Action Plan. This provides around 6 000 EU-listed companies, banks and insurance firms with practical recommendations on how to report more accurately the impact their activities have on the climate as well as the impact climate change has on their business.

Protecting the environment

In April, the Commission published the second Environmental Implementation Review, as part of its 2016 initiative to improve the implementation of EU environmental policy and commonly agreed rules in all Member States. Doing so is not only essential for a healthy environment but also opens up new opportunities for sustainable economic growth, innovation and jobs. Full implementation of such legislation could save the EU economy around €55 billion every year in health costs and direct costs to the environment. The package includes a general communication and 28 country reports showing the state of play in the implementation of EU environmental law as well as opportunities for improvement in each Member State.

The mid-term review of the EU forest strategy concluded that significant progress has been made towards its 2020 objectives. Since its adoption, the strategy has facilitated the coordination of all EU policy areas relevant to forests and the forest-based sector, promoting a consistent approach in both domestic and international policies. In July, the Commission set out a new framework of action to protect and restore the world’s forests, which host 80 % of biodiversity on land, support the livelihoods of around a quarter of the world’s population and are vital in fighting climate change.

The EU is leading international cooperation for safer, more secure, cleaner and more sustainably managed oceans in Europe and around the world. In March, it published a joint report taking stock of the EU’s international ocean governance agenda. So far, 50 concrete actions, including fighting illegal fishing and legislation countering marine pollution, have been successfully implemented.

Celebrating 25 years of the European Economic Area

After celebrating the 25th anniversary of the EU’s Single Market in 2018, the following year marked another important milestone: 25 years since the creation of the European Economic Area. The EEA Agreement, which was signed in 1992 and entered into force in 1994, extends the four freedoms of the Single Market and related policies to Iceland, Liechtenstein and Norway. People, goods, services and capital can now move around the EEA’s 31 countries almost as freely as within a single country. EEA citizens can study, live, shop, work and retire in any of its countries. Hundreds of technical, legal and bureaucratic barriers to free trade and free movement between these countries have been removed. This has allowed companies to expand their operations and competition has brought prices down and given consumers more choice.

Making the Single Market work better for people and businesses

The EU is continuously working on strengthening and deepening the Single Market to ensure it can respond to new challenges and deliver benefits for our citizens and businesses.

As part of these efforts, in June the EU agreed on new rules to ensure better compliance with Single Market legislation on non-food products. Applicable from 2021, these rules will strengthen checks by national authorities and customs officers and improve checks on products on the EU market. They will also intensify cooperation between authorities and facilitate rapid action against illegal products.

The EU also adopted a new regulation strengthening the application of the mutual recognition principle for products not covered by EU-wide legislation. This will open up more opportunities for companies to expand across EU borders. From April 2020, companies will be able to quickly find improved information on applicable national technical rules in another Member State and use simplified procedures to demonstrate that their product meets relevant national requirements.

In addition, the new standard on electronic invoicing, which came into force in April, will help public authorities to process all companies’ payments automatically and promptly.

A strong and innovative industrial base

European industries are global leaders in many areas but they need to adapt to new challenges such as fast-developing technologies, climate change and a changing global geopolitical context. To provide a new vision for European industry, the Commission set up the Industry 2030 High-Level Industrial Roundtable and published its recommendations in June. These focus on how European industry should build its competitive advantage through cutting-edge and breakthrough technologies, respect for the environment and biodiversity, investment in people, and smart European and global alliances.

Europe therefore needs to build on its strengths and assets to develop its industrial base. Artificial intelligence, batteries and cybersecurity are some of the many strategic and future-oriented areas where boosting Europe’s competitive advantage can generate growth. To identify areas of strategic importance, the Commission set up the Strategic Forum of Member States and industry representatives which, in its report published in November, identified six priority areas, provided recommendations for future policy action and coordinated transnational investments.

Strong industries also need to constantly adapt and innovate. The 2019 European Innovation Scoreboard report found that the EU continues to improve, with innovation performance up in 24 Member States. The EU’s leader in innovation was Sweden, followed by Finland, Denmark and the Netherlands. The fastest-growing innovators were Lithuania, Greece, Latvia, Malta, the United Kingdom, Estonia and the Netherlands. Importantly, the EU’s innovation performance surpassed that of the United States for the first time and has a considerable lead over Brazil, India, Russia and South Africa.

Ensuring a level playing field in the Single Market

EU competition policy aims to support growth, investment and job creation by protecting consumers and law-abiding companies from anti-competitive and illegal business behaviour. As companies vie with each other to offer lower prices and a wider choice of innovative products, consumers are better off and Europe’s economy grows stronger, more competitive and more attractive to investors.

In 2019, the Commission took 362 merger decisions, 10 antitrust decisions, five cartel decisions and 248 State aid decisions. In total, it imposed fines of over €4 billion on companies found to be in breach of EU competition rules and ordered Member States to recover at least €65 million in unlawful and incompatible aid from beneficiaries.

The Commission uses merger control to ensure the Single Market delivers its potential by preventing risks to competition. The majority of mergers submitted to the Commission are cleared. So far, only 10 have been prohibited, three of which in 2019. These include Siemens’ acquisition of Alstom in the rail industry and Wieland’s acquisition of Aurubis Rolled Products and Schwermetall, both in February, and the joint venture between steel giants Tata Steel and ThyssenKrupp in June. In these cases, the companies failed to propose remedies to protect consumers and companies from possible risks. In other high-profile cases, such as Praxair/Linde and GSK/Pfizer, the merging parties offered suitable remedies and the Commission was then able to clear the transactions.

The Commission also acts against companies that attempt to gain an unfair competitive edge. In January, Mastercard was fined €570 million for imposing cross-border restrictions in the use of payment cards. In May, AB InBev, the world’s largest beer brewer, was fined €200 million for abusing its dominant position on the Belgian beer market. Other companies that the Commission fined were restricting cross-border sales of the merchandising products of some of Europe’s best-known football clubs and of products featuring Hello Kitty owned by Sanrio. In cases involving several major Hollywood film studios, these pledged to remove restrictions that prevented cross-border competition between pay-TV broadcasters and offered commitments that the Commission made legally binding in March.

The Commission continued to break up cartels and impose heavy fines on the companies involved. In March, it sanctioned three companies supplying seatbelts and other safety equipment to Europe’s car manufacturers by imposing fines of €368 million and, 2 months later, five major banks – Barclays, RBS, Citigroup, JPMorgan and MUFG – settled for over €1 billion for participating in a foreign-exchange spot-trading cartel.

In addition, the Commission makes sure Member States’ support to companies does not unfairly favour some companies over others. In April, the Commission took a State aid decision ordering the United Kingdom to recover the selective tax advantages that authorities granted to multinational companies resulting from waivers to provisions designed to fight corporate tax avoidance.

Competition policy can also help the EU pursue a modern industrial policy, as shown by the €3.2 billion in public support offered by seven Member States and approved by the Commission for an Important Project of Common European Interest (IPCEI) for research and innovation in battery production. This is the second major IPCEI investment approved after the €1.7 billion microelectronics one involving Germany, France, Italy and the United Kingdom and cleared in December 2018.

Removing barriers to the free movement of goods and services

The EU worked on strengthening rules in specific sectors to make it easier for businesses to sell their goods and services across borders and improve the safety of products on the EU market.

Improving rules in the chemicals and pharmaceutical sectors

In June, the Commission also published a review of the EU chemicals legislation. It found that harmonisation and common standards have made the single market for chemicals stronger and more efficient, while offering the world’s highest levels of protection for human health and the environment. The EU also took a series of measures to protect workers and consumers from harmful chemicals, including 29 REACH authorisation decisions setting conditions for the use of certain chemicals, one refusal of authorisation and one restriction on thulium-doped fibre amplifier, a substance causing respiratory problems when used in sprays. In addition, the carcinogens and mutagens directive was updated with the addition of five substances to the list of recognised cancer-causing chemicals in the workplace. This means that 27 such chemicals are now covered by the directive.

The EU also adopted new rules to improve the level playing field in the pharmaceutical sector. These will make it easier for EU companies to export generic and biosimilar medicines to non-EU countries where intellectual property protection has expired or never existed, while preserving the strong existing rights within the EU to encourage innovation and research.

A Single Market for public procurement

The EU has an open procurement market, which is the biggest in the world at an estimated €2 trillion per year. Given the increasingly global nature of public procurement, the EU is taking a strategic approach to ensure all bidders, domestic and foreign, comply with EU rules. To this end, in July the Commission published guidance on the participation of foreign bidders in the EU market.

Better financial services

As part of the efforts to create a deeper and more integrated Capital Markets Union in Europe, the EU adopted a revised regulation on cross-border payments, ensuring that charges for cross-border payments in euro within the Union are aligned with charges for corresponding national payments made in the currency of the Member State in which the payment service provider of the payment service user is located. This allows consumers and businesses in non-euro countries to benefit from low-cost euro transactions across borders, just like in the euro area. As a result, for example, the price of an intra-EU transaction in euro from Bulgaria to Finland is expected to decrease, from between €15 and €24 to about €1. The regulation will ensure that currency-conversion charges are transparent and comparable at an ATM or point of sale, allowing consumers to save money on conversion costs when they travel or shop abroad. In addition, the EU stepped up its efforts to support the development and availability of cross-border instant payments.

Ensuring a fair tax system

EU tax policy aims to support the competitiveness of the EU and stimulate investment, growth and entrepreneurship in its Single Market. By making tax systems simpler, it should be easier for businesses to operate and citizens to work across borders. Moreover, the EU aims at taxes that are fair and socially just, notably by fighting tax abuse at EU and international levels and by curtailing unfair tax competition in the Single Market and beyond.

In order to fight tax fraud and facilitate administrative cooperation for EU and national revenue collection, in May the Commission launched the Transaction Network Analysis tool, which provides the EU’s network of anti-fraud experts with fast and easy access to information on cross-border transactions, leading to quick and coordinated action when potential VAT fraud is flagged. In September, the first meeting took place of the Tax Administration EU Summit, which is a cooperation network for the Member States’ heads of tax administrations and the Commission.

To tackle VAT fraud related to new and second-hand cars, in July the Commission adopted implementing measures supporting the automated exchange of customs and vehicle-registration information between national authorities. The EU list of non-cooperative jurisdictions for tax purposes, a common tool for Member States to tackle external risks of tax abuse and unfair tax competition, was adopted in March. In September, the Commission published evaluations of two directives: on administrative cooperation in the field of taxation and on energy taxation.

Towards fair labour mobility

The EU is working to strengthen labour mobility by establishing clear and fair rules, facilitating cooperation between Member States and fighting causes of abuse. As part of this, the European Labour Authority was set up in July, with its first activities kicking off in October. Its role is to help enforce labour-mobility rules across Member States. It will do this by facilitating the provision of information to citizens and businesses about their rights and obligations regarding opportunities to live, work or operate in another country, strengthening cooperation between Member State authorities and mediating solutions in cross-border disputes. The authority will be based in Bratislava, Slovakia, and is expected to reach full operational capacity by 2024.

Making progress on safe, clean and connected mobility

Mobility plays a big role in connecting and integrating the Single Market. The EU is working to modernise Europe’s transport systems, which will allow people to benefit from safer traffic, cleaner vehicles and better technological solutions and will support the transport industry’s competitiveness.

In March, the Parliament and the Council reached an agreement on the revised general safety regulation, which aims to introduce new mandatory safety technologies in all vehicles sold, registered or put into service from 2022. This will improve the protection of EU citizens, help reduce the number of accidents on roads and improve the legal framework for approving automated and connected vehicles. In February, the Commission also prepared guidelines for the approval of automated vehicles and, in June, launched an EU platform to coordinate experiments involving automated and connected vehicles.

Earlier in the year, the EU also delivered measures to ensure assessments of infrastructure safety for primary roads, help better target investments and pave the way for autonomous driving across the EU. The Commission also adopted new harmonised rules on drone traffic to cope with the increasing numbers across Europe.

Several measures were also adopted to ease the administrative burden across the transport sector. In June, the European Union Agency for Railways delivered the first European vehicle authorisation, valid in multiple countries across the continent. An agreement was also reached on a proposal for electronic freight transport information, which will help save the millions of hours previously spent on managing paper documents.

To improve the interoperability of transport systems, in May the Commission adopted a set of measures addressing rail interoperability, train accessibility and rail noise. The electronic tolling systems directive entered into force and will enhance interoperability of electronic tolls, simplify administrative procedures and reduce fraud.

Deepening the Economic and Monetary Union

A deeper Economic and Monetary Union (EMU) is a priority for the EU because it would strengthen its economic stability, resilience and potential for growth.

In June, euro-area Member States took another step towards achieving this goal by agreeing on the main features of a budgetary instrument for the area. Known as the Budgetary Instrument for Convergence and Competitiveness, it is intended to support structural reforms and investment with the aim of boosting growth and enhancing the economic resilience of euro-area economies as well as their ability to rebound from shocks. In October, further decisions were taken on details of how the instrument will work. An agreement on its size will be made in the context of discussions over the EU’s next long-term budget.

Euro-area Member States also agreed to allow the European Stability Mechanism to provide a financial backstop that would only be activated as last-resort insurance in the event of a bank resolution. It would take the form of a credit line or guarantees to the Single Resolution Fund so that taxpayers would not be forced to pay for the resolution of failing banks. Use of the backstop would ultimately be repaid through contributions from the European banking sector.

The European Union has made great progress in deepening the EMU since the 2008 financial crisis. A communication from the Commission in June took stock of how far the EU has come since first setting out its vision for a deeper EMU in the 2015 five presidents’ report. According to the communication, particular progress has been made in the economic governance framework and in the application of fiscal rules, which have been improved, with a greater emphasis on social priorities such as more opportunities for social partners at all levels to discuss them. In addition, the European Fiscal Board (established in 2015) has become an integral part of the EU fiscal framework, providing independent assessments and advice to the Commission.

The key elements of a Banking Union and a Capital Markets Union (CMU), such as the banking package to strengthen the resilience and resolvability of EU banks and a proposal for a European Deposit Insurance Scheme, have also been firmly established. The Commission has tabled all the legislative proposals set out in the CMU Action Plan and mid-term review to put in place the key building blocks of the CMU. The Commission has proposed six legislative measures to introduce new EU-wide rules for products, labels and passports, and five legislative measures to provide simpler, clearer and more proportionate rules for entrepreneurs, businesses and financial institutions (see Chapter 1).

It has also proposed two legislative measures to ensure a more integrated and more efficient supervision of capital markets, which is central to the CMU and necessary for more financial integration and more private risk sharing. The Commission has also adopted three legislative proposals to enable the financial sector to lead the way towards a climate-neutral, more resource-efficient and more resilient circular economy.

The European Parliament and the Council have reached political agreement on almost all of these proposals; still, more needs to be done. The Commission’s June report called for further improvements to the transparency and effectiveness of the EU’s policy coordination framework and its social dimension. Institutional changes could also be made to strengthen democratic accountability in the EU and economic decision-making in the euro area, and to bring the European Stability Mechanism into the EU legal framework. Mechanisms to stabilise the euro area in the event of shocks would also be beneficial and could include an Investment Stabilisation Function and a common unemployment reinsurance scheme.

Completing the Banking Union

The EU’s banking and capital markets are vital elements of its EMU. Together, they promote a more integrated and stable EU financial system. They increase the resilience of the EMU against adverse shocks by facilitating private risk sharing across borders at the same time as reducing the need for public risk sharing. Work on both projects continued throughout the year.

In particular, significant progress was made in lowering risks in the Banking Union. The adoption of the banking package in April was an important milestone in strengthening the EU’s banking sector. The package sets out a comprehensive set of reforms that will further strengthen the resilience and the resolvability of banks, in addition to the proposal for a European Deposit Insurance Scheme. It also puts in place a series of important international standards and aims to contribute to the completion of the post-crisis regulatory agenda.

The Commission has been working together with Member States concerned to address the high level of non-performing loans (NPLs), including through the European Semester, and to come up with comprehensive solutions to deal with bad loans, in line with State-aid rules. Member States’ supervisors and banks have also made considerable progress in bringing down their debt levels, improving the quality of their loan portfolios and increasing liquidity since the crisis.

The Commission’s latest progress report showed that the ratio of NPLs for all EU banks continued to decline towards pre-crisis levels and was down to 3.3 % in the third quarter of 2018. In 2019, the European Parliament and the Council agreed on new rules to apply capital requirements to banks with NPLs on their balance sheets. The aim of the reform is to ensure that banks set aside sufficient own resources when new loans become non-performing and to create appropriate incentives to avoid the accumulation of NPLs.

An important next step in the Banking Union and in deepening the EMU will be to make progress on a common deposit insurance scheme for the euro area.

The international role of the euro

The EU’s efforts to promote the use of the euro internationally are closely linked to the deepening of the EMU. A deeper, stronger financial sector and EMU would make the euro a more attractive international currency, and a more globally important euro would strengthen Europe’s financial system. The euro area is also growing within the EU as Croatia and Bulgaria decided to start preparations to enter the European Exchange Rate Mechanism ERM II, as a first step to membership of the euro area.

Greater international use of the euro would also have many benefits for European businesses, consumers and governments, such as lower trading costs, lower interest rates, better access to financing, greater legal autonomy and a more resilient financial system that would be less vulnerable to exchange-rate shocks.

In 2019, the European Commission consulted extensively with representatives of foreign exchange markets and the energy, raw materials, agriculture and transport sectors. These consultations confirmed that there is broad support for using the euro more internationally and that it is the only viable alternative international currency to the US dollar. Those consulted also agreed that there was potential to denominate more transactions in euro, particularly in energy commodity and natural gas markets, and the Commission agreed to work on any impediments that were identified.

The EU also made progress on measures to support the euro’s use, including regulatory amendments to increase the resilience and liquidity of financial market infrastructures, improve the reliability of interest-rate benchmarks and promote the use of instant payments.

Fair opportunities and fair competition

A deep and fair EMU rests on fair opportunities and fair competition. In order to improve the former, the restructuring and second chance directive was adopted by the EU in June to allow viable businesses in distress to be rescued and honest but bankrupt individuals to be given a second chance.

The new directive will help viable companies with financial difficulties to access preventive restructuring frameworks at an early stage so that they can avoid insolvency, continue their activity and preserve jobs.

Under the new rules, the EU is giving reputable bankrupt entrepreneurs a second chance, fully discharging them of their debt after a maximum period of 3 years, with justified exemptions in order to prevent abuse.

The rules will also increase the efficiency of insolvency, restructuring and discharge procedures, reducing excessive procedural length and costs in many Member States.

These rules will contribute to removing important barriers to the development of capital markets by providing more legal certainty to cross-border investors and companies operating across the EU.

The EU is always vigilant in ensuring the fairness of competition in the banking sector and 2019 was no exception. Although the sector has largely recovered since the crisis, pockets of vulnerability remain, with banks in some Member States still burdened by a high proportion of NPLs. The Commission continued its role in helping them to restructure and deal with temporary liquidity constraints or structural problems without unduly distorting competition. For example, Slovenia’s banks completed the restructuring process that they had begun in 2012/2013. Slovenia privatised 75 % of NLB and 100 % of Abanka – two former lenders in difficulty. Italian banks took further steps to reduce the amount of NPLs. The implementation of a guarantee mechanism was instrumental in this regard in allowing banks to off-load NPLs on market terms. Also in Italy, the Commission approved support to deal with the temporary liquidity needs of up to €3 billion for Carige, a medium-sized regional bank in the north-west of the country.

Greater social fairness in the Economic and Monetary Union

The European Pillar of Social Rights has become an integral part of the European Semester, the EU’s annual cycle of economic and social policy coordination. Numerous social-policy measures on work–life balance, transparent and predictable working conditions and fair cross-border mobility have been promoted with the help of the pillar. It enshrines a set of 20 future-oriented social-policy principles that Member States have agreed.

A new start to support work–life balance for parents and carers

The directive on work–life balance was adopted in June and encourages more equal sharing of caring responsibilities between women and men. It sets minimum requirements for Member States and gives each parent the right to at least 4 months of parental leave, of which 2 months cannot be transferred from one parent to another and should be compensated at an adequate level set by Member States. The directive also introduces a right to paternity leave of at least 10 days after the birth of a child, compensated at least at the same level as sick pay. The new legislation also gives working carers the right to take 5 days per year to care for family members. In addition, all working parents of children aged up to at least 8 years have the right to request flexible working arrangements (reduced working hours, flexible working hours and flexibility at place of work). These new rules are aimed at increasing women’s participation in the labour market and at improving equality between men and women.

New rights for more workers

The directive on transparent and predictable working conditions was also adopted in June. Its aim is to broaden and modernise existing obligations to inform each worker, including those in non-standard forms of employment, of their working conditions. The directive also introduces a number of new minimum rights, for instance a limit to the length of probationary periods at the beginning of a job. Member States have until mid 2022 to transpose the new rules into their national legislation.

Better access to social protection for all workers

Member States have committed to ensure that all working people have effective access to social protection regardless of their employment status. The Council adopted a recommendation in November to help them close the gaps affecting atypical workers and the self-employed and to address the challenges stemming from the fast-paced digitalised world of work.

Upholding multilateral rules

Trade policy must be effective, transparent and based on values. The fundamentals of the 2015 Trade for All strategy continued to guide the approach taken in 2019: openness combined with high standards remains the most appropriate way to make globalisation work.

Challenges to the rules-based multilateral trading system, underpinned by the WTO, continued to mount in 2019. The rise of nationalism and protectionism brought an increase in unilateral measures as well as the threat of a global trading system based on strength, not fairness. Building on its initiatives of 2018, the EU made proposals to the WTO to improve transparency and to solve Member States’ concerns about specific trading practices in a more efficient manner.

The EU worked with major trading partners to strengthen rules on subsidies and forced technology transfers. To uphold the WTO’s system for resolving disputes, it made proposals to unblock pending appointments to the Appellate Body. The body no longer has a quorum, since the terms of two of the last three members expired in December, rendering it powerless to hear appeals in disputes. The European Commission reacted by proposing to amend the EU’s enforcement regulation so that if trade partners hinder effective dispute settlement resolution, the EU will be able to act resolutely to protect its interests. Based on existing WTO rules, the EU also agreed an interim appeal arbitration arrangement with Canada and Norway to preserve a binding dispute settlement system and the right to an appeal in disputes between them as and when the Appellate Body ceased to function.

A Europe that protects

When diplomatic interventions fail, the EU does not hesitate to use the WTO’s dispute settlement mechanism to enforce its rights and get the full benefits of membership for its businesses, workers and farmers. In 2019, the EU launched procedures against Turkey relating to pharmaceutical products, against India on its treatment of information and communication technology products, against the United States on its countervailing duties and anti-dumping measures on Spanish olives and against Colombia on its anti-dumping measures on frozen fries from Belgium, Germany and the Netherlands.

The EU also used its bilateral agreements for dispute settlements, starting proceedings against South Korea to defend core labour standards, against Ukraine over a wood export ban and against the Southern African Customs Union’s restrictions on poultry imports.

In line with WTO rules and EU legislation, the EU opened 15 new investigations into, and imposed seven new trade defence measures against, dumped and subsidised imports. These included electric bicycles from China and biodiesel from Argentina and Indonesia. The EU also opened six new review investigations and renewed 16 existing measures for another 5 years.

In 2019, the EU imposed definitive safeguard measures on imports of 26 categories of steel products to address the potential trade diversion of steel to the EU from other countries caused by additional tariffs in the United States. It reviewed them towards the end of the summer to adapt them to the most recent situation.

The EU also defended its industries when non-EU countries opened trade defence investigations against its exports. Examples include Turkey’s safeguard investigation regarding imports of tyres, India’s anti-dumping investigation regarding imports of coated paper and Colombia’s measures on imports of frozen fries.

In March, the WTO confirmed that in 2020 the EU would be granted retaliation rights in the trade dispute with the United States over subsidies to the aircraft manufacturer Boeing. The United States had not complied with earlier rulings on its illegal subsidies to the company, causing significant harm to its European competitor Airbus. In October, in a parallel trade dispute, the WTO granted the United States retaliation rights in the Airbus case. The United States introduced additional tariffs on a range of products from Member States. The EU remains committed to reaching a balanced negotiated settlement with the United States on the disputes.

The Commission finished adapting its trade defence procedures to the modernised anti-dumping and anti-subsidy legislation that came into force in 2018 and 2017. Similarly, it closed a loophole so that from autumn 2019 it could apply trade defence measures to goods (for example, undersea pipelines) imported into the continental shelf/exclusive economic zone of Member States. The Commission stepped up its fight against the circumvention of trade defence measures and launched related investigations into Chinese exports of corrosion-resistant steel, persulphates and ceramic tableware, imposing measures on the latter.

In April, a new regulation for the first EU-wide framework for screening foreign direct investment came into force. From October 2020, it will enable Member States and the Commission to identify and address security concerns related to specific investments from outside the EU.

Intellectual property rights are important for economic growth and crucial for the EU’s ability to stimulate innovation and stay competitive globally. The EU increased its efforts to protect and enforce such rights internationally, including by implementing cooperation programmes with China, south-east Asia and Latin America and launching a new assistance project for Africa. It also held dialogues with priority countries such as China, Thailand, Turkey and Ukraine. As part of its work on the Counterfeit and Piracy Watch List, the Commission strengthened its cooperation with the European Union Intellectual Property Office, the European Union Agency for Law Enforcement Cooperation (Europol) and the European Union Agency for Criminal Justice Cooperation and held regular dialogues with EU businesses.

Growing protectionism meant these businesses faced an increasing number of barriers to international trade. The Annual Report on Trade and Investment Barriers showed that the EU’s market access strategy was effective in tackling them.

Throughout the year, the EU continued trilateral talks with Japan and the United States on key global trade issues, including how to level the playing field for traders by developing new multilateral rules on industrial subsidies and forced technology transfer.

As a founding member of the Alliance for Torture-Free Trade, set up in 2017, the EU continued to take a clear stand on goods used for capital punishment and torture. Further to the alliance’s 2018 commitment to push for a United Nations resolution on the issue, in June the UN General Assembly passed one aimed at abolishing trade in equipment used for torture.

A forward-looking trade policy

The EU’s trade agreements aim not only to open new markets but also to ensure that trade works for everyone. The agreements uphold EU standards for the environment, food safety, and workers’ and consumer rights and help partner countries fulfil their international obligations. For example, the EU launched capacity-building and outreach programmes worth €9 million to help developing countries address labour and environmental challenges throughout responsible supply chains in both Asia and Latin America.

The EU played a leading role in United Nations discussions on reforming how investors can settle disputes with countries. In January, it submitted a proposal to the United Nations Commission on International Trade Law to establish a multilateral court for settling such disputes, which represents a major innovation in global governance.

In September, the European Commission hosted a high-level conference in Brussels on empowering women through trade.

A transparent and inclusive negotiating process

Transparency and engagement with the public remain essential ingredients of the EU’s trade policy to ensure a democratic process, public trust and accountability. This must exist before, during and after negotiations, as well as when agreements are implemented.

The Commission continued to publish reports of negotiating rounds, position papers and proposals for texts in trade agreements under negotiation. It also published its third comprehensive Annual Report assessing the implementation of the EU’s trade agreements. This enabled stakeholders, civil society and other EU institutions to scrutinise how the EU is implementing its agreements and provided lessons for ongoing and future trade negotiations.

The Expert Group on Trade Agreements met six times in 2019 to discuss issues such as electronic commerce, reform of the WTO and implementation of trade agreements. Made up of 28 organisations representing businesses, trade unions, consumers and environmental bodies, the group aims to foster dialogue and gather views from a wide range of stakeholders.

The EU–Mercosur Trade Agreement

In June, the EU reached a political agreement on a comprehensive trade agreement with Mercosur comprising Argentina, Brazil, Paraguay and Uruguay.

As part of the wider Association Agreement between the two blocs, the new agreement will cement the close political and economic relations between them and create a market of 780 million people. The EU is Mercosur’s largest trade and investment partner and the first to strike a comprehensive trade deal with it.

Once in force, the agreement will cut tariffs, increase business opportunities, widen consumer choice, cut red tape, boost growth and competitiveness, promote shared values like sustainable development and create jobs. It will also promote high labour and environmental standards. In addition, the EU and Mercosur have committed themselves to effectively implement the Paris Agreement on climate change.

The Economic Partnership Agreement with Japan

On 1 February 2019, the EU–Japan Economic Partnership Agreement signed in July 2018 entered into force, creating an open trading zone covering more than 570 million people. It removes nearly all of the €1 billion in Japanese import duties paid every year by EU companies exporting to Japan as well as a number of long-standing regulatory barriers.

The agreement increases EU exports, creates new opportunities for European companies, such as making it easier for them to access Japanese public procurement markets, brings more choice for consumers and contributes to their joint efforts to shape global trade rules. It is the first EU trade agreement to include a specific commitment to comply with the Paris Agreement. Throughout the year, the EU continued negotiations with Japan on investment protection standards and dispute resolution.

Asia and Australasia

On 30 June, the EU and Vietnam signed agreements on free trade and investment protection, marking a milestone in their partnership. The agreements are the most ambitious ever to be negotiated between the EU and an emerging economy. Pending ratification, the free trade agreement could enter into force in mid 2020, while the EU–Singapore Free Trade Agreement entered into force on 21 November.

The agreements with these two countries further reinforce the EU’s engagement with the region. It also held three rounds of negotiations for a trade agreement with Indonesia. Three rounds of talks were held in the negotiations for trade agreements with Australia and four with New Zealand.

United States

The focus with the United States continued to be on developing a positive trade agenda, addressing issues of common interest and avoiding trade disputes. This was based on the joint statement issued by the Commission President Jean-Claude Juncker and the US President Donald Trump in 2018, which established an Executive Working Group to facilitate trade and develop a positive transatlantic trade agenda.

In 2019, the group focused on regulatory issues. In April, the Council mandated the Commission to negotiate with the United States on industrial tariffs and conformity assessment.

In July, the Commission published a progress report on the joint statement’s implementation, showing positive results, particularly in sectors such as energy, soybeans, pharmaceuticals, cybersecurity and medical devices. In 2019, EU imports of liquefied natural gas from the United States reached the highest volume ever, making its energy supply more diverse and secure. Further work focused on conformity assessment, standards for new and emerging technologies and continuing progress in specific sectors. While this work continues, both sides agreed not to introduce new tariffs on their trade.

In July, the EU agreed to increase the United States’ share of its import quota for hormone-free beef. In return, the United States accepted not to reinstate action against the EU in the Section 301 investigation of EU measures concerning meat and meat products. The agreement for mutual recognition of inspections of manufacturing sites for human medicines also came into force.

China

The EU–China summit in April resulted in several joint commitments. China agreed to dismantle various trade barriers and undertook to conclude an agreement to protect geographical indications (the names of traditional European food and drink products) and to complete comprehensive negotiations on investment by 2020.

In November, negotiations on the protection of these indications concluded after 9 years. This agreement should provide a high level of protection for 200 names when it enters into force, and for a further 175 names within 4 years from then. China is the EU’s second-largest market for agri-food products and a growing market for products with a specific geographical indication.

The EU and China held six rounds of talks for an investment agreement and continued to work on WTO reform.

Southern and eastern neighbourhoods

The EU–Morocco Association Agreement was amended to include the people of Western Sahara, paving the way for restarting talks on deepening the EU–Morocco trade agreement. In May, negotiations for a Deep and Comprehensive Free Trade Area with Tunisia were suspended due to the country’s political situation.

The EU held bilateral discussions on trade and investment with some of the Gulf Cooperation Council countries. Improvements negotiated with Jordan in the Rules of Origin scheme to support employment of Syrian refugees came into effect in early 2019.

With its Deep and Comprehensive Free Trade Areas with Georgia, Moldova and Ukraine, the EU’s focus was on implementation. It also reached an agreement with Ukraine to limit its poultry exports to the EU. On 6 July, the EU initialled an Enhanced Partnership and Cooperation Agreement with Kyrgyzstan, which includes important trade chapters.

Latin America

In 2019, work continued with Mexico towards signature and conclusion of the Modernised Global Agreement. The EU and Chile held three rounds of negotiations to update their 2002 trade agreement. The aim is to agree an ambitious, balanced and progressive agreement that will further liberalise trade and investment, promote EU values and take up issues like trade and gender. Provisions for the latter will strengthen the understanding of the constraints and opportunities faced by women in international trade and share best practices aimed at making it easier for them to participate.

In June, as part of the implementation of trade agreements, the EU–Central America Association Committee held its fifth meeting and, in October, the trade committee grouping the EU and Colombia, Ecuador and Peru met.

African, Caribbean and Pacific countries

Economic Partnership Agreements are trade and development agreements between the EU and African, Caribbean and Pacific countries and regions. They are currently provisionally in force with 31 of them. The agreements can be seen as building blocks towards a future continent-to-continent free-trade area, one of the long-term aims of the new Africa–Europe Alliance for Sustainable Investment and Jobs, which supports African efforts towards a continental free-trade area. In February, Comoros joined the Eastern and Southern Africa agreement and, in October, the EU launched talks with the five countries that are implementing the current agreement to broaden it beyond tariff cuts in order to tackle other trade and investment barriers and create opportunities. The EU also discussed trade and investment as part of ongoing negotiations for a framework agreement to replace the Cotonou Agreement.

Strengthening the rule of law

The rule of law is one of the common values upon which the European Union is founded; upholding it is a shared responsibility of all Member States and EU institutions.

Observance of the rule of law is essential for the functioning of the EU in all areas. This ranges from the internal market to cooperation in justice and home affairs. Upholding the rule of law also means ensuring that national judges, who are also EU judges, can fulfil their role when dealing with matters concerning the application of EU law.

In April, the Commission launched a stocktaking exercise looking at the available tools to monitor, assess and protect the rule of law in the Union. It looked back at the experience of the past years and called for a wider European debate on how it could be further strengthened. Past experience pointed to the need for better promotion of the rule of law, early prevention of risks or breaches and an effective response when these occur.

In July, the Commission adopted a second communication setting out its own proposals in the three areas of promotion, prevention and response.

Concerning the first area (promotion), the Commission will strengthen its communication on the rule of law to the general public, reinforce cooperation with the Council of Europe and other international organisations and provide funding for stakeholders, including civil society, that promote a common rule of law culture.

For the second area (prevention), the Commission will establish an annual rule of law review cycle to monitor the situation in all Member States. To support this process, it will prepare an annual Rule of Law Report, further develop the EU Justice Scoreboard and strengthen the dialogue with other EU institutions, Member States and stakeholders.

For the third area (response), the Commission will pursue a strategic approach to infringement procedures, building on the developing case-law of the Court of Justice of the European Union.

The Commission has also called for the swift adoption of the proposal presented in the context of the Multiannual Financial Framework on the protection of the EU’s budget in case generalised rule of law deficiencies pose a risk to EU financial interests.

The Commission pursued several infringement proceedings related to the rule of law. On 24 June and 5 November 2019, the Court of Justice issued final rulings in infringement proceedings initiated by the Commission against Poland, confirming that the Polish legislation concerning the lowering of the retirement age of Supreme Court judges and of ordinary court judges is in violation of EU law regarding judicial independence. Moreover, on 10 October 2019, the Commission decided to refer Poland to the Court of Justice in infringement proceedings concerning the new disciplinary regime for judges, as this regime undermines judicial independence by not offering the necessary guarantees to protect Polish judges from political control.

In the context of the European Semester and based on a Commission proposal, the Council issued country-specific recommendations on the functioning of the justice system to Croatia, Italy, Cyprus, Hungary, Malta, Portugal and Slovakia.

Protecting rights and fighting discrimination

Ensuring the rights of persons with disabilities

The European Accessibility Act was adopted in April and ensures that certain products and services such as mobile phones, computers, e-books, e-commerce, transport websites and consumer banking services will be accessible for persons with disabilities.

An awareness-raising campaign, ‘How the EU helps fight discrimination at work’, informing people and companies about their rights and obligations, was launched by the Commission in May.

Protecting whistle-blowers

In October, EU-wide standards were adopted to guarantee a high level of protection for whistle-blowers who report violations of EU rules. The directive covers a broad range of key areas such as public procurement; product, food and transport safety; environmental protection; public health; and nuclear safety. The new rules establish channels for confidential reporting, both within private and public organisations and to public authorities, and will protect employees against dismissal and other forms of retaliation.

Fighting disinformation, hate crime and hate speech

In January, the fourth evaluation of the EU Code of Conduct on countering illegal hate speech online signed in 2016 with major IT companies showed that the initiative continues to deliver positive results. IT companies review 89 % of the flagged content within 24 hours and remove it in 72 % of the cases, compared to 40 % and 28 %, respectively, when the code was first launched in 2016. The evaluation also showed the areas where companies need to improve their feedback to users.

Ahead of the European elections, the Commission published monthly reports by Facebook, Google and Twitter that showed some progress as regards the scrutiny of advertisement placement, transparency of political advertising, closure of fake accounts and marking systems for automated bots. However, signatories need to intensify their efforts, in particular with a view to developing tools to increase the transparency and trustworthiness of websites hosting ads.

Stronger protection of personal data

In the first year after the launch of the General Data Protection Regulation (GDPR), the Commission’s priority was to ensure its proper application. The Commission concluded in a July report that most Member States had set up the necessary legal framework and it will monitor how they comply with the GDPR and limit the fragmentation of the data-protection framework.

Businesses are developing a compliance culture, while citizens have become more conscious of the importance of data protection and of their rights and are increasingly exercising them. At the same time, convergence towards high data-protection standards is progressing at international level.

An example of the benefits brought by this global convergence is the EU–Japan mutual adequacy arrangement that entered into force in February, creating the world’s largest area of safe and free data flows. Europeans will benefit from high privacy standards when their data are transferred to Japan, and EU companies will benefit from privileged access to the Japanese market.

The Commission is also monitoring the transposition of the data-protection law-enforcement directive into Member State national law and as a result has launched several infringement procedures against Member States.

Equality

The new directive on work–life balance adopted in June will encourage equal sharing of caring responsibilities between women and men. See Chapter 5 for more information.

The Commission continued to raise awareness of the rights of lesbian, gay, bisexual, transgender and intersex (LGBTI) persons. The latest annual report on advancing LGBTI equality, published in March, provides an overview of the Commission’s set of measures to combat discrimination.

The Commission advanced the preparation of the EU Framework for National Roma Integration Strategies after 2020. This framework is essential for the development of EU and national instruments and structures aiming to promote the inclusion of Roma people.

European Union citizenship

In January, the Commission published a report on ‘golden passport’ schemes, operated by certain Member States. These investor citizenship and residence schemes allow a person to obtain the nationality or residence permit of a Member State by making an investment and without proving a genuine link to that Member State. This affects citizenship of the EU. Member States generally make such a link a condition for national citizenship and on this basis have accepted that EU citizenship accrues automatically to anyone who becomes a citizen of a Member State.

The Commission’s report identified the risks that the investor citizenship and residence schemes pose to the EU, specifically in terms of security, money laundering, tax evasion and corruption, and expressed concerns that the measures taken by Member States are not always enough to mitigate such risks. The Commission set up a group of experts from Member States to examine the risks arising from the schemes and address the issues of transparency and good governance, and will continue to monitor the compliance of these schemes with EU law. Refer to Chapter 8 for more information.

As part of broad efforts to protect the 2019 European Parliament elections, the Commission supported Member States in establishing and organising meetings of a European cooperation network on elections. This network brings together representatives of Member State authorities responsible for electoral matters and enables practical exchanges on issues relevant to free and fair elections including data protection, cybersecurity, transparency and awareness raising. It will continue to address potential risks, identify solutions and contribute to building more resilient electoral and democratic systems across the EU.

In June, as part of its actions to facilitate exercising the right to move and reside freely within the Union, the EU adopted a regulation on the security of identity cards and residence documents. The new rules define minimum common standards for EU citizens’ identity cards and non-EU family members’ residence cards as well as minimum content for the residence documents of EU citizens. This will make these documents more secure and reliable and will increase trust and acceptance, allowing citizens to travel more easily throughout the EU, reducing obstacles to exercising the right of free movement and closing loopholes that terrorists and other criminals might seek to exploit.

With a view to strengthening the right of EU citizens to consular protection in non-EU countries where their own Member State is not represented, new rules were adopted to create a modern EU emergency travel document. These rules will ensure that EU citizens can quickly receive this secure and widely accepted document from any Member State, allowing them to return home safely.

Protecting consumers

In July, to increase awareness of protection against unfair terms in consumer contracts, such as undue limitation of consumers’ legal rights and unilateral changes, the Commission issued guidance on the application of the unfair contract terms directive.

In November, the directive on better enforcement and modernisation of EU consumer protection rules was adopted as part of the New Deal for Consumers proposed by the Commission in April 2018. It adapts consumer rights to new technologies by introducing important new online requirements. These include prohibiting hidden advertising in search results and ‘fake’ consumer reviews; providing information about the identity of the counterpart on online platforms (private consumer or professional retailer); and providing information about the parameters used in ranking and the personalisation of prices by automated decision-making.

The new rules also set deterrent fines for ‘widespread infringements’ of consumer rights subject to coordinated actions under the consumer protection cooperation regulation. A separate proposal for a European system of collective redress when groups of consumers have suffered harm is still under negotiation between the Parliament and the Council.

Following negotiations with the Commission and national consumer protection authorities, the platform Airbnb brought its sales practices and conditions into full compliance with EU consumer protection rules. For instance, the final price and whether a property is offered by an individual or a professional are now clearly presented on the results pages.

Following a call from the Commission and EU consumer authorities, five industry leaders – Avis, Europcar, Enterprise, Hertz and Sixt – have changed the way they present car rental prices, making them fully transparent to consumers.

In the aftermath of the Cambridge Analytica scandal and after a long dialogue with the Commission and EU consumer authorities, Facebook modified its terms of service. They now explain more clearly how the company uses its users’ data to develop profiling activities and target advertising, as a source of its revenue and to acknowledge the company’s responsibility in case of negligence.

The EU facilitates online shopping by enabling consumers to make informed decisions and buy safely. The awareness campaign #YourEURight was launched in 2019 to remind consumers that they have significant rights when buying from any online store selling to European consumers. 

New rules were adopted to better tackle dual quality of consumer goods. In parallel, the Commission worked on clarifying when the sale of dual-quality products (goods sold across Europe with different compositions in identical or similar packaging) constitutes an illegal commercial practice, developing a common methodology and publishing the results of an EU-wide testing campaign in June 2019 that compared several food products from different Member States. This showed that while almost a third of tested food products had an identical or similar presentation but different composition, no specific geographic pattern could be identified. The results do not reach a conclusion on whether the differences affect quality or whether they are associated with a misleading practice in individual cases.

Following the adoption of guidelines to help national authorities apply EU consumer and food legislation with regard to dual quality food products, the Commission dedicated over €4.5 million to limit dual quality and strengthen consumer organisations. In addition, the directive on unfair trading practices in the agricultural and food supply chain entered into force in April.

In June, the Commission published the final report of the High-Level Forum for a Better Functioning Food Supply Chain, which provides recommendations on fair and efficient trading practices and transparency. The report also highlights problems with territorial supply constraints that prevent retailers from sourcing their products where they want. The Commission also launched a project to increase consumer awareness about the distribution of money along the food supply chain.

Civil justice

Also in June, the Council adopted a revision of the Brussels IIa regulation, which improves the legal rules protecting children in cross-border parental-responsibility disputes, such as those related to custody, access rights and child abduction. With the new rules, judicial cooperation will be faster and more efficient to make sure that the best interests of the children come first.

Company law

June also saw the adoption of new EU rules to make it easier for entrepreneurs to register their companies online and across borders, set up new branches or submit documents to a business register. A complementary set of EU company law rules adopted in November facilitates cross-border conversions, mergers and divisions of companies while ensuring better protection of the rights of employees, minority shareholders and creditors. The new rules create legal certainty, save money, reduce the administrative burden and give the necessary powers to block any abuse.

New rules adopted in November on the governance of investment firms and remuneration of their management aim to be proportionate to the size, risks and activities of the investment firms while ensuring appropriate supervision of all large institutions that could pose a systemic risk. In May, the rules on the governance of banks and remuneration of their management were updated. In particular, they strengthened the powers of authorities to remove members of a bank’s management body if there is any suspicion of being involved in money laundering or terrorist financing.

Tackling terrorism and money laundering

In 2019, the Commission ramped up its financial, operational and political support to Member States to help accelerate their implementation of the Security Union. By the end of the year, 16 out of the 22 Security Union legislative initiatives had become law. The EU led the way in tackling terrorist content online with a proposed regulation obliging internet platforms to take down terrorist content within 1 hour of receiving a removal order. The European Parliament and the Council made important progress on the Commission proposal and the work will continue in the first quarter of 2020.

In parallel, the Commission, Member States’ ministers for home affairs and representatives from the private sector endorsed an EU Crisis Protocol on responding to the viral spread of terrorist or violent extremist content on the internet as part of the global response to the Christchurch Call for Action. Measures under the 2017 Action Plan on the protection of public spaces, including from terrorist threats, continued to be implemented.

The EU continued vital work to deprive terrorists of the means to commit their acts with updated rules on marketing and access to chemicals used by terrorists as components in homemade explosives as well as with new measures cracking down on terrorist financing. The EU continued to cooperate internationally, including by exchanging Passenger Name Records (PNR) data with Australia and the United States, working to finalise a new draft agreement with Canada and signing the United Nations framework on counterterrorism cooperation.

At the end of the year, the Commission proposed to open negotiations with Japan on the exchange of PNR data and with New Zealand on the exchange of personal data for law-enforcement purposes with the European Union Agency for Law Enforcement Cooperation (Europol). The Commission also endorsed bilateral arrangements with the authorities of Albania, Bosnia and Herzegovina, Kosovo (this designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence), Montenegro, North Macedonia and Serbia for the implementation of the Joint Action Plan on Counterterrorism in the western Balkans.

The EU adopted a number of measures to fight against money laundering and terrorist financing. In 2019, it reinforced the supervisory role of the European Banking Authority. Uniform EU-wide rules will be introduced to empower Member State authorities to access national centralised bank account registries or data-retrieval systems and improve cooperation between authorities. In addition, four Commission reports stressed the need to fully and correctly implement the fourth and fifth anti-money laundering directives. In December, the Council adopted conclusions on strategic priorities on anti-money laundering and countering the financing of terrorism. The text is ambitious as regards the need for more detailed rules and the allocation of certain tasks to EU bodies.

Stepping up the fight against crime

The Council authorised the Commission to negotiate, on behalf of the EU, an agreement with the United States on cross-border access to electronic evidence in criminal matters as well as to participate in the negotiation of a second additional protocol to the Council of Europe Convention on Cybercrime.

In 2019, the Commission worked on setting up the European Public Prosecutor’s Office, which should become operational at the end of 2020. The Parliament and the Council appointed Laura Codruţa Kövesi as the first European Chief Prosecutor.

The EU acted to prevent the illegal trafficking of cultural goods. The regulation on the introduction and import of such goods into the EU, adopted in April, aims to put an end to illicit trafficking that often supports terrorism and other criminal activities.

A stronger European system to tackle natural disasters

Because the trend of more frequent and often simultaneous disasters across Europe made it harder for Member States to help each other in responding to natural disasters, the EU established rescEU, strengthening the existing EU Civil Protection Mechanism. In 2019, the Commission continued working on the operationalisation of rescEU. The rescEU transition fleet proved crucial in battling forest fires in Greece in August 2019.

The European Agenda on Migration

In September 2017, Member States made the largest collective commitment on resettlement so far, pledging to resettle over 50 000 people in need of international protection. Implementation progressed throughout 2019 and the Commission continued to assist Member States to deliver on their pledges. With global resettlement needs remaining high, continued European efforts are key. By December, 43 800 people had been resettled under the scheme, more than 87 % of the overall pledge by Member States.

Border management

In December, new rules strengthening how the EU manages its external borders became law and will enable the European Border and Coast Guard Agency to set up a standing corps of 10 000 operational staff.

Members of the standing corps will have executive powers and their own equipment to intervene wherever needed along the EU’s external borders as well as in non-EU countries willing to accept Border and Coast Guard teams on their territory. Member States (and the non-EU countries concerned) retain their sovereignty and the responsibility for operations carried out at their borders and over their return procedures at all times. Forty fundamental rights officers will be appointed to ensure that members of the standing corps respect the rights of non-EU-country nationals who cross the external borders (whether regularly or not) or who are subject to return operations.

The Commission successfully negotiated with five western Balkan countries status agreements that allow European Border and Coast Guard teams to be deployed. The agreement with Albania entered into force on 1 May 2019, followed 3 weeks later by the teams’ operational deployment. The Commission and the Finnish Presidency of the Council signed a status agreement with Montenegro on 7 October, and with Serbia on 19 November. The finalisation of such agreements with Bosnia and Herzegovina and North Macedonia is still ongoing.

Information systems on security, migration and border management

In June, new European legislation entered into force, allowing various information systems that support the Area of Freedom, Security and Justice without internal border controls to exchange data and share information. Once this interconnected platform is in place (expected in 2023), border, migration, visa, judicial and police authorities will be able to cross-check identity data against all relevant EU information systems on a single screen and immediately be able to flag anyone trying to use multiple identities.

Work continued on the implementation of the Entry/Exit System (EES) and the European Travel Information and Authorisation System (ETIAS). The former will replace the current method of manually stamping passports with an electronic record of identity and travel document data, as well as places and dates of entries and exits. It will help to ensure that non-EU-country nationals do not stay longer than authorised, improve the quality and efficiency of external border controls and help Member States to deal with increasing numbers of travellers. The ETIAS will also ensure that national authorities have more information on whether persons travelling visa free to the EU could pose a security or irregular immigration risk before they arrive at the external borders. If needed, their travel authorisation could be denied.

Managing migration and saving lives at sea

EU joint operations and naval missions contributed to the rescue of over 760 000 people at sea and supported Member States hosting new arrivals from the Mediterranean.

In line with the 2015 EU Action Plan against Migrant Smuggling, in August the revision of the regulation on immigration liaison officers networks entered into force. This will ensure better cooperation and coordination among the immigration liaison officers that Member States, the Commission and EU agencies deploy in non-EU countries in order to respond more effectively and prevent and combat irregular immigration and related cross-border criminality.

The Commission continued its contribution towards efforts to prevent prospective migrants from embarking on irregular migratory journeys towards the EU and having their lives put in danger by smugglers. It financed eight information and awareness-raising campaigns, directly targeting prospective irregular migrant communities in non-EU countries as well as their trusted diaspora communities in Europe with objective information to allow migrants to make informed decisions. The Commission also increased its financing of Common Operational Partnerships, which include Joint Investigation Teams, to €22.5 million. These partnerships between Member States and non-EU-country law-enforcement authorities target migrant smugglers in west and north Africa.

Temporary arrangements

Disembarkation events in the central Mediterranean have clearly demonstrated the need for common European solutions based on solidarity, taking responsibility and respect for fundamental rights. The Commission has been actively supporting the conclusion of temporary arrangements between Member States that facilitate disembarkation following search-and-rescue operations in the Mediterranean pending an agreement on a long-term sustainable system in the reform of the European asylum system. The Commission, with the support of EU agencies and at the request of Member States, has also been coordinating voluntary relocation throughout 2019, with 1 608 people relocated.

Return and readmission

The European Parliament and the Council continued negotiating on the Commission’s 2018 proposal to strengthen the Return Directive. The changes to the EU’s common rules on return include simplifying returns for those who are refused asylum during border procedures, introducing clearer and faster procedures for issuing return decisions and requiring that a return decision be issued immediately after a decision to terminate a legal stay is taken.

The European Border and Coast Guard Agency’s ability to assist returns was strengthened in December by a new regulation becoming EU law. This gives the agency a more proactive role in assisting Member States based on their needs and broadening the scope of potential assistance to all stages of the return procedure.

The European Union has concluded 23 readmission instruments with non-EU countries. In 2019, the work continued, with ongoing negotiations of agreements or wider migration cooperation frameworks with six other countries.

Protecting those in need

Asylum reform

Despite intense efforts by the Romanian and Finnish Presidencies of the Council, Member States failed to find a consensus and the proposals to reform the EU’s asylum policy remain stalled. Immediately upon taking office in December, Vice-President Margaritis Schinas and Commissioner Ylva Johansson took to the road and began a listening tour of Member State governments, with visits to Denmark, Germany, Greece, France, Italy and Hungary. Each also held a structured debate with the European Parliament. The consultation is an important aspect of President von der Leyen’s commitment to finding a way forward on the issue of migration and will help to shape the New Pact on Migration and Asylum that will be proposed in 2020.

Hotspots and support for Greece, Cyprus, Malta, Italy and Spain

Since 2015, the Commission has provided €2.2 billion in financial support to assist the Greek authorities, international organisations and non-governmental organisations (NGOs) with migration management. This was provided under the Asylum, Migration and Integration Fund (AMIF), the Internal Security Fund (ISF) and the Emergency Support Instrument. In addition, the Commission continued to provide structural support to the Greek authorities with a permanent presence on the Aegean islands.

Since September 2019, the Commission has had a permanent presence in Cyprus to support the Cypriot authorities in efficiently managing migration. EU funding to the country since 2014 has reached €103.5 million. EU support totalling €112.85 million was provided to Malta under AMIF and ISF funding between 2014 and the end of 2019.

As regards Italy, the €59.4 million allocated in 2019 brought the total amount of emergency assistance to €285.2 million. This complements the €737.4 million in EU support provided to Italy under its national programmes for the AMIF and ISF between 2014 and 2020.

The Commission continued to support Spain by awarding over €52 million in emergency assistance since 2018 to provide support to migrants, set up local registration and pre-reception centres and deploy extra Guardia Civil forces.

Migrants arriving at hotspots in Greece and Italy, as well as at registration centres on the southern coast of Spain, continued to be properly registered, identified and fingerprinted.

Financial support for the efficient management of migration

The EU supports national efforts to improve migration and border management with significant funding channelled through the national programmes of action managed by Member States. In 2019, it provided €467 million under the AMIF, €442.7 million under the ISF (Borders and Visa) and €92.7 million under the ISF (Police).

The EU–Turkey Statement

The EU–Turkey Statement continued to provide alternatives to dangerous routes and save lives in the Aegean Sea. The number of irregular migrants from Turkey to Greece arriving by sea in 2019 (around 60 000) was considerably lower than before the statement (pre-October 2015). Member States have opened up organised, safe and legal pathways for Syrian refugees in Turkey to come to Europe by resettling around 25 700 of them (up to the end of 2019). In 2019, 3 854 voluntary returns from Greece to non-EU countries took place under the Assisted Voluntary Return and Reintegration programme, of which 3 260 from the mainland and 594 from the islands. Since 2016, 17 900 migrants have returned voluntarily from both the Greek islands and the mainland with the support of the programme.

At the same time, the EU has continued to support Turkey in its efforts to host refugees with €6 billion for 2016-2019 through its Facility for Refugees in Turkey.

By the end of 2019, the full budget had been allocated to activities. Of the €4.7 billion that had been contracted, €3.2 billion had been paid out. Over 1.7 million refugees continue to benefit from a monthly cash assistance called the Emergency Social Safety Net to help them meet their basic needs, and more than 500 000 refugee children have access to education.

Enhancing safe, orderly and legal pathways to Europe

Visa policy

The EU continued to update and streamline its visa policy for non-EU-country nationals travelling to the Schengen area. From February 2020, the revised Visa Code will reduce red tape and facilitate visa procedures for trusted short-stay travellers while maintaining security. The revised code establishes a new mechanism that triggers stricter conditions for processing visas when a partner country does not cooperate sufficiently on the readmission of its own nationals who are staying in the EU irregularly. For certain categories of travellers, Member States will be able to slow down visa-processing times, reduce the length of validity of visas issued and increase the level of the visa fee, as well as modulating the exemption from such fees.

Visa facilitation and visa suspension

In June, the negotiations between the EU and Belarus on Visa Facilitation and Readmission Agreements were finalised and the agreements were initialled by chief negotiators. Both sides are now working to complete their internal procedures in order to enable the signature and conclusion of the agreements. The two agreements will be signed and will enter into force simultaneously.

The Visa Suspension Mechanism was strengthened in 2017 to allow a swift response in case of urgency. In June 2019, the Commission received a notification from the Netherlands under the mechanism concerning Albania. After careful consideration of the content of the notification and based on the available information and relevant data, the Commission considered that the circumstances required to trigger the mechanism had not been met, and committed to monitor the situation.

Visa reciprocity

Today, citizens of around 60 countries from around the world can travel to the EU without needing a visa. In turn, EU citizens should have the same ability to travel to these countries. This principle of reciprocity is central to our common visa policy. Progress was made with the United States when, in September, the US administration announced that Poland qualified to join its Visa Waiver Program. While the United States continued to require visas for citizens of Bulgaria, Croatia, Cyprus and Romania, this development explains why the Commission takes the approach of patient diplomacy with the US administration.

The United States has indicated a willingness to admit these Member States into the Visa Waiver Program once they meet the requirements set out by US legislation, for example regarding security cooperation and lowering the visa-refusal rate.

Golden passports and golden visas

In January, the Commission presented a comprehensive report on investor citizenship and residence schemes operated by a number of Member States. These schemes, commonly known as ‘golden passports’ and ‘golden visas’, respectively, allow a person to obtain a new nationality or residence permit based on an investment alone. As regards countries that enjoy visa-free access to the EU, the Commission’s report underlined that these countries must carry out security and background checks of applicants for investor citizenship schemes to the highest possible standards. The Commission is monitoring this as part of the Visa Suspension Mechanism. As concerns candidate countries and potential candidates, citizenship schemes are also monitored in the context of the EU accession process. Please refer also to Chapter 7.

Encouraging needs-based migration

In 2019, the EU strengthened bilateral cooperation with countries of origin and transit and with international organisations to address the root causes of irregular migration and forced displacement, improve border management and support voluntary returns and human mobility. It also worked with the African Union and the United Nations through their joint Taskforce.

The Commission continued to work on developing pathways for legal migration in order to help bring to the EU the people with the skills and talents that the labour market needs. In spring, the Commission completed an overall evaluation of the EU’s legal migration rules. The results of this ‘fitness check’ confirmed the importance of an effective legal migration policy as a key plank of a comprehensive European migration policy.

Throughout the year, the Commission continued to work in cooperation with Member States on the development of labour migration pilot projects with key partner countries, starting with African countries. To this end, the Commission has provided financial support, including under the Emergency Trust Fund for Africa.

Integration

Integration policy is a national responsibility. Nevertheless, in 2019, the Commission continued to support the efforts of Member States, local and regional authorities, NGOs and other actors through policy coordination, exchange of practices, monitoring and funding. These measures were put in place to foster the integration of non-EU-country nationals who have been given refugee status. In 2019, the Commission financed eight large transnational networks of cities and regions, bringing together more than 40 European cities and 10 regions to cooperate on integration issues. In the context of the European Integration Network, the Commission supported several mutual learning activities for national authorities including an innovative programme of support between Member States to put in place or improve a specific policy or programme on integration.

The European Union’s neighbourhood

The eastern neighbourhood

In 2019, the EU continued to support and foster stability, security and prosperity under the European Neighbourhood Policy and to develop strong partnerships with neighbouring countries to the east and south.

In May, a Ministerial Meeting and a High-level Conference in Brussels celebrated 10 years of the Eastern Partnership. Progress has been made on reforms in all areas of the 20 Deliverables for 2020 agenda, in particular in the economy, digital, transport, connectivity, energy and mobility, while challenges remain in the areas of governance and institution building. Following a wide consultation in 2019 on the future of the partnership, long-term policy objectives should be presented in advance of the Eastern Partnership Summit due to take place in the first half of 2020.

Relations with Ukraine

At their summit in Kyiv in July, the EU and Ukraine issued a joint statement and the EU reaffirmed its commitment to Ukraine’s independence, sovereignty and territorial integrity. The EU also affirmed its support for the implementation of the Minsk agreements and for the work of the Normandy Format, the Trilateral Contact Group on Ukraine and the Organisation for Security and Co-operation in Europe (OSCE) aimed at reaching a peaceful and sustainable solution to the conflict. The Commission and the Ukrainian government signed four programmes worth €109 million from the Commission’s 2019 annual support package to the country. These will focus on decentralisation, the fight against corruption, supporting civil society and technical cooperation on key reforms and implementing the Association Agreement and its Deep and Comprehensive Free Trade Area.

Russia

The EU continued to implement a double-track approach to Russia, which remained a strategic challenge: sanctions in response to Russia’s violations of Ukrainian sovereignty and territorial integrity and selective engagement as necessary on issues of interest to the EU, such as youth and cultural exchanges and EU–Russia educational cooperation.

The southern neighbourhood

EU financial and technical assistance in 2019 helped tackle the main challenges of the region: the conflicts in Syria, Libya and between Israel and Palestine (this designation shall not be construed as recognition of a State of Palestine and is without prejudice to the individual positions of the Member States on this issue), persistent migratory pressure, poor governance and a weak business environment. A renewed impetus was given to EU–Morocco relations in June with a joint political declaration aimed at developing a partnership for shared prosperity. The External Investment Plan has been instrumental in funding the private sector and boosting economic development and job creation in the southern neighbourhood region and Africa.

The western Balkans and the enlargement process

The EU institutions continued to support the EU membership perspective of the western Balkans in 2019, in line with the Western Balkans Strategy and the Sofia Priority Agenda, which are aimed at strengthening the region’s political, economic and social transformation. The EU also continued to support cooperation to fully unleash the region’s economic and social potential and to overcome the legacy of the past. For example, the western Balkans regional roaming agreement entered into force in July, significantly lowering roaming charges in the region and leading to zero roaming costs in 2021. The entry into force of the historic Prespa Agreement between Greece and North Macedonia in February was a major breakthrough in the region.

The first EU–western Balkans ministerial meeting on employment and social affairs took place in Luxembourg on 12 June. Ministers from the troika Presidency of the Council (Romania, Finland and Croatia), together with the Commission, met with their western Balkans counterparts to discuss a range of employment and social policy issues. Expected to take place every year, the aim of the meeting is to exchange views on challenges to employment and social reforms that benefit all citizens in the region.

In October, the European Council analysed the Commission’s recommendations to open accession negotiations with Albania and North Macedonia and decided to revert to the issue of enlargement before the EU–western Balkans summit in Zagreb in May 2020.

Turkey

Relations between the EU and Turkey continued to be challenged by the critical situation of the rule of law, fundamental rights and the independence of the judiciary in Turkey, as well as mounting tensions in the eastern Mediterranean. The EU has continued to assist refugees under the Facility for Refugees in Turkey, which manages €6 billion in funding to help over 4 million refugees hosted in the country.

Africa–Europe relations

The EU has embarked on an unprecedented partnership with Africa, investing in a true political relationship between equals. The EU–Africa partnership spans a variety of fields, including development, peace and security, migration, climate, energy, agriculture, trade, sustainable investment and jobs, innovation, education, youth, democracy and human rights.

In 2019, the implementation of the 2018 Africa–Europe Alliance for Sustainable Investment and Jobs progressed. The EU has already mobilised €3.7 billion under the External Investment Plan, which is expected to leverage €37.1 billion of investments in the EU neighbourhood and in sub-Saharan Africa. The commitment to dedicate over €300-350 million each year between 2018 and 2020 to strengthen the business environment and investment climate is also on track, with €718 million invested by the EU in 2018 alone.

As regards mobility, the EU’s commitment to support 35 000 students and staff by 2020 is on track, with around 25 000 benefiting by the end of 2019. As regards economic integration and trade, the EU will support the African Continental Free Trade Area with €62.5 billion until 2020. Finally, the work of the four task forces set up with African and European experts in the areas of agriculture, the digital economy, energy and transport has borne fruit.

North America and Latin America

The EU has continued to work with one of its core partners, the United States. Examples of this cooperation are on the western Balkans and Ukraine, on energy, counterterrorism and cybersecurity. The EU’s strengthened partnership with NATO testifies to an increasingly interconnected transatlantic security space.

The EU joined forces with Canada to uphold multilateralism and the rules-based global order, including a free and fair international trade system. At their summit in Montreal in July, both sides committed to the full implementation of the EU–Canada free trade agreement.

In April, the Commission and the High Representative of the Union for Foreign Affairs and Security Policy and Vice-President of the Commission published a joint communication setting out a vision for a stronger and more modern partnership with Latin America and the Caribbean that would be focused on trade, investment and sectoral cooperation. In 2019, the EU continued to lead support for the peace agreement in Colombia, consolidated the new phase in its relationship with Cuba at the second ministerial-level EU–Cuba Joint Council under the Political Dialogue and Cooperation Agreement and established the International Contact Group on Venezuela to help overcome the crisis there. In October, the International Solidarity Conference on the Venezuelan refugee and migrant crisis brought together the countries of the region, the EU, the UN Refugee Agency (UNHCR) and the UN Migration Agency (IOM) to try to improve coordination of peace and the humanitarian response.

Asia and the Pacific

The EU and the five central Asian countries – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – have a longstanding relationship based on strong mutual interests. In May, the EU set out its vision for a stronger partnership with these countries, focusing on resilience, prosperity and better cooperation.

Japan

The 2018 EU–Japan Strategic Partnership Agreement, provisionally applied since February 2019, and the Economic Partnership Agreement, in force since then as well, started to bear fruit in 2019. The 26th EU–Japan summit took place in Brussels in April. On 7 September, President Juncker and Prime Minister Abe signed a Partnership on Sustainable Connectivity and Quality Infrastructure. It is the first of its kind and underlines the strategic importance of this relationship, which both parties have committed to strengthen.

China

In March, against the backdrop of China’s growing economic power and political influence, the European Commission and the High Representative reviewed EU–China relations and the related opportunities and challenges in a joint communication. They set out 10 concrete actions that were then discussed by leaders at the European Council on 21 March.

At their summit in April, the EU and China committed to deepen the strategic partnership and to adopt a new cooperation agenda beyond 2020 by their next summit. Both sides agreed to identify common EU–Asia railway corridors and are working on local development in transit countries. The two are more engaged on Asian security, from military cooperation with the Association of Southeast Asian Nations to supporting the denuclearisation of the Korean peninsula.

A more strategic approach to Asia in 2019 was part of the EU’s aim to pursue a coherent approach to China’s connectivity drive westwards. The EU’s connectivity strategy promotes a policy that includes infrastructure projects creating fair economic opportunities and fostering sustainable connectivity.

The Middle East

Iran

In 2019, the EU continued to support the Iran nuclear deal and its full and effective implementation in all its aspects. The EU regrets the withdrawal of the United States from the Joint Comprehensive Plan of Action and its reimposition of sanctions and has been deeply concerned that Iran started to pursue activities inconsistent with its commitments under the deal. In line with the Council conclusions of 4 February 2019, the EU is pursuing a comprehensive approach with Iran in order to address all issues of concern and to balance elements of relevant criticism with constructive high-level dialogue, including through the EU-led political dialogue with Iran on regional issues.

Israel, Palestine and the Middle East peace process

The EU continued to defend and promote the principle of a two-state solution to the Israeli–Palestinian conflict based on the agreed international parameters. The EU also provided almost €350 million in financial support to the Palestinians, with much of the funding aimed at efforts to build the foundations of the future Palestinian state.

Syria

At the Brussels III Conference on Syria in March, the EU pledged €560 million for 2020 to support humanitarian, resilience and development activities in the country as well as in Jordan and Lebanon.

Libya

EU engagement in 2019 focused on supporting international and regional efforts to find a sustainable solution to the political crisis in Libya and to promote its economic development.

Security and defence

Member States can now better protect citizens, invest in cooperation on defence, spend more efficiently and engage with partners and neighbours even more than before.

In 2019, the EU continued its efforts to counter hybrid threats. The High Representative and the Commission reported on the implementation of the 2016 joint framework on countering hybrid threats and the 2018 joint communication on increasing resilience and bolstering capabilities to address them.

The EU has further strengthened the three dedicated Strategic Communications Task Forces (East, western Balkans and South). Progress was also made in tackling disinformation from external and internal sources. The 2018 Action Plan against Disinformation guided this work, focusing on detecting and analysing disinformation activities, supporting cooperation between Member States by establishing a Rapid Alert System, working with social media platforms in the framework of the 2018 Code of Practice and enhancing awareness-raising activities. The EU also cooperated with international partners in the field, such as the G7 and NATO. See also Chapter 7.

The European Centre of Excellence for Countering Hybrid Threats made progress in 2019 with more members, an approved work programme and a working budget. The centre continued to provide support in key areas such as training and exercises.

The year saw a stocktake of Member States’ progress in fulfilling their commitments under Permanent Structured Cooperation (PESCO). The EU noted that participating Member States made progress in increasing defence budgets and joint defence investment, with aggregated defence budgets rising by 3.3 % in 2018 and 4.6 % in 2019. Participating Member States are increasingly using EU instruments in national defence planning, such as the revised Capability Development Plan and the Coordinated Annual Review on Defence, which have informed the work programme for the European Defence Industrial Development Programme.

Development aid and humanitarian assistance

Development aid

The EU continued to be one of the driving forces behind the 2030 Agenda for Sustainable Development. In New York in September, it gathered with world leaders for the first-ever UN Sustainable Development Goals Summit and reported on progress in the Joint Synthesis Report.

‘Inequalities’ was the theme of the 2019 European Development Days and the Commission issued a staff working document on the topic. Furthermore, the EU helped fight gender-based violence under the ‘Spotlight’ initiative, joining forces with the UN and new partner countries to continue vital work on regional programmes, including the launch of a consultation in the Pacific regarding the design of the €50 million programme for the region.

The EU continued to build on its partnership with Africa. The Africa–Europe Alliance for Sustainable Investment and Jobs made significant progress, notably leveraging over €40 billion in investments under the External Investment Plan so far.

Responding to humanitarian crises and emergencies

The EU’s humanitarian budget of €1.6 billion helped millions of people worldwide in 2019. The biggest share went to refugees and internally displaced persons created by the Syrian and Yemeni conflicts. More than 10 % of the budget went to ‘forgotten crises’, such as the situation with regional refugees in Burundi, the conflict in Ukraine and humanitarian issues in Colombia.

The EU allocated a record 10 % of its humanitarian budget to provide safe and good-quality education for children in emergencies. It was also a leading donor in the Ebola response.

In 2019, the EU activated its Civil Protection Mechanism on 17 occasions to respond to sudden disasters in Albania, Africa, Asia and Latin America. When Cyclone Idai struck Mozambique in 2019, eight teams of civil protection specialists were sent, together with water purification equipment, tents, hygiene kits and food.

Human rights and democracy

The EU remained deeply engaged in promoting and defending human rights and democracy around the world: from joint actions with the UN, such as the flagship EU–Unicef campaign #TheRealChallenge to mark the 30th anniversary of the UN Convention on the Rights of the Child, to the new EU guidelines on combating torture on a global scale. The EU was active in the seventh World Congress against the Death Penalty, sent numerous election observation missions and adopted new conclusions on democracy in October.

EU support for multilateralism, global governance and the rules-based system

EU–United Nations relations

In times when the UN system has been questioned, the EU has stepped up its commitment to multilateralism and to the international organisation. The EU is the largest contributor to UN peacekeeping missions and the UN budget. It has supported UN-led peace talks, from Syria to Libya, and has set up initiatives such as the trilateral partnership between the EU, the UN and the African Union. The annual UN General Assembly showed the depth of this support.

A stronger EU–NATO partnership

EU–NATO cooperation constitutes an integral part of the EU’s work in strengthening European security and defence. Published in June, the fourth progress report on the implementation of the common set of proposals endorsed by NATO and the EU in 2016 and 2017 highlighted concrete deliverables in all areas of cooperation and notably in the key areas of strengthening political dialogue, military mobility, countering hybrid threats, parallel and coordinated exercises and defence capabilities.

The EU in the G7 and G20

The European Union is a member of the G7 and G20. In these fora, it fights to preserve the rules-based international order, which is currently under great strain, in terms of trade, security, climate change and human rights. As in previous years, throughout 2019 the EU remained a strong supporter of international cooperation. At the G20 Summit in Osaka, Japan, coordination among European leaders was instrumental in achieving a final declaration that preserves past commitments regarding the implementation of the Paris Agreement and the 2030 Agenda for Sustainable Development and pushes for ambitious progress on the World Trade Organization’s reform and on a global solution for digital taxation. In August in Biarritz, France, G7 leaders agreed on a declaration that addresses a number of foreign-policy challenges such as the situation in Iran, Ukraine, Libya and Hong Kong. In line with its priorities for cooperation with Africa, the EU also endorsed new G7 initiatives aimed at improving conditions for public procurement, promoting digitalisation, increasing access to finance for female entrepreneurs in Africa, reinforcing cooperation in the Sahel, fighting pandemic diseases and supporting women victims of sexual violence in conflict areas.

The European Parliament

In its last sessions before the elections in May, the outgoing Parliament adopted legislation banning single-use plastic items and ensuring better protection of the EU’s external borders. The Parliament pushed through an ambitious target of reducing CO2 emissions for new cars and vans by 2030. It agreed on new copyright rules, gave its consent to the EU’s trade agreement with Japan and supported plans to improve the quality of drinking water. It also updated its internal rules of procedure.

The new legislative term started on 2 July following the Parliament elections from 23 to 26 May. The turnout of 50.7 % was the highest since 1994 and up from 42.6 % in 2014.

On 16 October, the Parliament adopted its list of ‘unfinished business’, which is essential for continuing informal negotiations between the EU institutions on draft EU rules that could not be finalised before the Parliament’s end of mandate. On 22 October, Commission President Juncker made a statement before Members of Parliament reviewing his Commission’s key actions and achievements over the previous 5 years.

The European Council

In March, the European Council discussed economic issues, climate change, disinformation and external relations. The meeting of the 27 Member States that discussed Brexit addressed the extension of Article 50 until 12 April or 22 May, depending on whether the Withdrawal Agreement would be ratified by the United Kingdom during the week following the meeting. Later in April, the 27 EU leaders agreed to extend Article 50 until 31 October 2019.

EU leaders met informally in Sibiu, Romania, on 9 May to reflect on the Strategic Agenda for 2019-2024. More information on these discussions can be found in the section ‘The future of Europe’.

At an informal dinner later in the month, Members of the Council took stock of the results of the European Parliament elections and started the nomination process for the new heads of the EU institutions.

In June, leaders continued discussions on the EU high-level appointments, the Multiannual Financial Framework, climate change, disinformation and hybrid threats, enlargement, the European Semester and external relations. They also adopted the Strategic Agenda.

EU leaders met again later in the month to discuss and agree on the nominations for high-level appointments in the EU institutions.

In October, leaders discussed the EU’s future budget (2021-2027) and the follow-up to the Strategic Agenda, as well as climate change, the enlargement of the EU, Turkey and the downing of Malaysia Airlines flight  MH17. The European Council met in an Article 50 format to discuss the latest developments in relation to Brexit. At the end of October, the EU-27 (all Member States except the United Kingdom) leaders agreed to extend Article 50 until 31 January 2020.

Leaders then met in December to discuss climate change and returned again to the EU’s long-term budget.

The Council of the European Union

Romania and Finland held the rotating Presidency of the Council of the European Union. During the first half of the year, Romania focused on subjects such as migration and security, the Multiannual Financial Framework, economy and Europe as a global player. During the second half of the year, Finland focused on climate action and security and on strengthening common values, including the rule of law, to make the EU more competitive and socially inclusive.

The European Economic and Social Committee and the European Committee of the Regions

The European Economic and Social Committee supported the Parliament’s campaign ‘This time I’m voting’ with a number of activities. These included the February event Civil Society for rEUnaissance, with the participation of Commission President Jean-Claude Juncker and the climate activist Greta Thunberg.

The theme of the 2019 Civil Society Days was ‘sustainable democracy’, with corruption and fake news identified as the main threats to Europe’s democracy. In November, the committee held a conference on the rule of law calling for a structured dialogue between governments and civil society to reverse backsliding on the rule of law in the EU.

In March, it presented ‘Sibiu and beyond’, its vision for the future in which Europe would become the global leader in sustainable development. In a series of future-oriented opinions, it offered ideas on how to achieve sustainability, a just transition to a digital economy and fair taxation.

At the eighth European Summit of Regions and Cities in Bucharest in March, the European Committee of the Regions adopted a declaration on ‘Building the EU from the ground up with its regions and cities’, arguing that EU decisions and policies must be anchored locally in order for the EU to regain citizens’ trust and be properly resourced. It strongly advocates active subsidiarity, stressing the importance of engaging national, regional and local authorities at each phase of the EU decision-making process. The committee marked its 25th anniversary by holding a ceremony during its December plenary session.

In the field of better regulation, the committee initiated a regional hubs network (‘RegHub’) to evaluate the implementation of Union legislation at local and regional levels. It includes 20 regions that report on the implementation of policies. Three evaluations were organised in 2019: on public procurement, air quality and cross-border healthcare.

Throughout the year, both committees organised activities to promote their joint idea of a permanent mechanism for structured consultations and dialogues with citizens as well as their participation in the planned Conference on the Future of Europe.

See also the section entitled ‘The future of Europe’.

Completing the Better Regulation Agenda

Working to simplify legislation

The Interinstitutional Agreement on Better Law-Making

In 2016 and 2017, the European Parliament, the Council and the European Commission agreed on two joint declarations on the EU’s legislative priorities. They highlighted 89 initiatives for which priority treatment in the legislative process was required. This represented a common commitment by the three institutions to ensure substantial progress and, where possible, delivery before the European elections in May.

By the first half of 2018, the Commission had adopted all the initiatives announced in the joint declarations and, by the time of the European elections, 61 of the 89 initiatives in the joint declaration had been politically agreed upon or formally adopted by the Parliament and the Council. At the end of the year, 22 were still outstanding.

In 2019, the European Commission successfully concluded negotiations with the Parliament and the Council on non-binding criteria for the choice between implementing and delegated acts. This choice often complicates legislative negotiations and the criteria should help the process. These negotiations led to the conclusion of the Interinstitutional Agreement on Better Law-Making, published in July. Furthermore, the co-legislator agreed to the alignment of 68 existing acts to the Treaty of Lisbon by changing the regulatory procedure used. This is done with scrutiny to control how the Commission exercises its implementing powers on delegated acts and implementing acts according to Regulation (EU) No°182/2011 of the European Parliament and of the Council.

Monitoring the application of EU law

The annual report on monitoring the application of EU law, published in July, sets out how the Commission monitored and enforced EU law in 2018.

For example, the Commission acted firmly in enforcing rules in the areas of environment, mobility and transport, as well as internal market, industry, entrepreneurship and small and medium-sized enterprises. It supported national and regional authorities in implementing clear air and clean water rules. It also took action against Member States that failed to live up to their commitments and implement EU rules on passenger name records, combating terrorism and anti-money laundering. In addition, the Commission used enforcement powers when some Member States did not move fast enough to improve access to websites and other mobile applications for persons with disabilities. If EU law is not applied properly, citizens and businesses will not be able to enforce their rights or enjoy the benefits provided by such laws.

Better regulation at the heart of the EU’s decision-making

The Commission is committed to act only where the EU adds value and provides benefits for people and businesses while avoiding unnecessary costs. It does so on the basis of the best available evidence looking at economic, social, environmental and other significant impacts. Before revising existing EU legislation, it evaluates it to understand what does and does not work, thereby helping to improve the performance of the legislation.

As part of its Better Regulation Agenda, the Commission is listening more closely to the views of citizens and stakeholders to address their needs. Since 2015, it has organised over 400 public consultations, engaging millions of Europeans. The number of contributions to public consultations received since then has more than quadrupled.

The new ‘Have your say’ portal, a ‘one-stop-shop’ system for Europeans to contribute to EU policymaking, was visited almost 900 000 times in 2018 and exceeded 1 million visits in 2019. In April, the Commission issued a report to take stock of the measures introduced under the Juncker Commission to deliver better results for EU citizens and businesses through more open, transparent and evidence-based policymaking. The results of the stocktaking were clear: better regulation has improved the way EU policy is made and should remain at the heart of its working methods for the future while continuing to improve its tools, in particular the outreach and feedback of citizens and stakeholders, the analysis of impacts and the quality of evaluations.

Transparency and accountability

The joint Transparency Register

Contact with stakeholders and civil society is part of the EU institutions’ work. At the same time, transparency and accountability are essential to maintain the trust of European citizens in the legitimacy of the political, legislative and administrative processes of the EU.

The transparency of interest representation is especially important in order to allow citizens to follow the activities of those seeking to influence the EU lawmaking process. This is why the Commission tabled a proposal in 2016 for a new interinstitutional agreement on a mandatory Transparency Register covering the Parliament, the Commission and, for the first time, the Council of the European Union. Negotiations on this proposal are currently underway.

Nearly 12 000 entities are listed on the register. They are bound by a Code of Conduct, which sets out the ethical norms that representatives must observe when interacting with the EU institutions.

Code of Conduct for the Members of the Commission

In 2018, the Commission adopted a new Code of Conduct for Commissioners, which sets stricter rules and higher ethical standards and introduces greater transparency in a number of areas. Every 2 months since February 2018, the Commission publishes information on the Commissioners’ travel expenses on their respective websites.

In June 2019, the Commission published the first annual report on the application of this Code of Conduct. It confirmed that since the adoption of the updated code, the Commission has achieved an even greater level of transparency when it comes to the conduct of its members.

Furthermore, under the new code, a reinforced Independent Ethical Committee composed of three high-calibre external members was set up to give advice on all ethical issues.

Earlier in the year, the Commission published ethical guidelines for Commissioners participating in the European parliamentary elections. These came after the new code enabled them to participate in the election campaigns without having to take a leave of absence, as had previously been the case.

The Commission also put into practice a new provision of the code, which provides that decisions shall be published on activities after the term of office of Members of the Commission and on related opinions of the Independent Ethical Committee. October saw the first publication, with others following before the end of the year.

Access to documents

In July, the Commission adopted its report on access to documents. The report shows that the number of initial requests for access to documents submitted under the relevant rules on public access to them increased by almost 9.5 % (from 6 716 in 2017 to 7 257 in 2018) and the number of confirmatory requests by 4.4 % (from 288 in 2017 to 318 in 2018).

The Commission remains the EU institution that handles the largest number of requests for access, with a steadily upward trend since 2016. EU citizens and other applicants are therefore making active use of this right to access documents.

In 2018, the Commission disclosed the requested documents fully or partially in more than 80 % of the cases, and wider or even full access was granted in almost 41 % of the 288 cases reviewed at the confirmatory stage.

In parallel, the Commission continued to proactively publish large amounts of documentation and information on its web pages and in its various public registers, covering all areas of EU activity. The data not only confirm the openness of the Commission but also the importance of the right of access to documents as part of the institution’s overall transparency policy.

Control of the EU budget

A control framework and a performance framework are in place to provide reasonable assurance that EU funds are paid in accordance with the relevant rules and that measures are taken to prevent, detect and correct errors while increasing the focus on achieving results.

In March, following a positive recommendation from the Council, the Parliament gave its final approval to the way the Commission implemented the EU budget in 2017. Through the annual discharge procedure, the Parliament and the Council hold the Commission politically accountable for the implementation of the budget and ensure that the management of taxpayers’ money is under democratic control.

In July, the Commission presented its Integrated Financial and Accountability Reporting package, which puts together all the available information on the implementation, performance, results, sound financial management and protection of the 2018 EU budget. The reports demonstrated that the budget delivered results in line with the Commission’s priorities and was properly implemented.

The Commission continued to work towards the establishment of the European Public Prosecutor’s Office, which will prosecute cross-border crime affecting the EU budget, including fraud, money laundering and corruption, in the 22 participating Member States. The Office is expected to be operational by the end of 2020.

In October, for the 12th year in a row, the European Court of Auditors issued a clean bill of health on the EU’s annual accounts, finding them to be true and fair. The Court confirmed its qualified (rather than adverse) opinion on the regularity of expenditure. The overall level of estimated error, 2.6 %, was slightly higher than in 2017 (by 0.2 % points), but well below that of preceding years. For roughly half of the EU’s spending the error rate did not even reach the level considered by the Court to be material. No material errors were found on the revenue side of the budget or in administrative expenditure.

National parliaments

In July, the Commission adopted the 2018 annual report on its relations with national parliaments and on the application of the principles of subsidiarity and proportionality. The report gives a comprehensive picture of the national parliaments’ intensive and fruitful relations with the Commission and other EU institutions. National parliaments submitted 569 opinions, a similar number to 2017. This shows that most of them are very actively engaging with the Commission on its initiatives and on a wide range of topics.

Only 37 ‘reasoned opinions’ flagged concerns about how Commission proposals respected the subsidiarity principle, meaning that European policies are decided and implemented at the most appropriate level, whether European, national or regional. The Task Force on Subsidiarity, Proportionality and Doing Less More Efficiently, set up in 2018 by President Juncker and chaired by First Vice-President Timmermans, looked at ways to better involve national parliaments as well as regional and local authorities in the preparation and follow-up of EU legislation and policies. Measures by the Commission to achieve this include giving aggregated responses if a significant number of national parliaments express subsidiarity concerns, thus presenting in one public document the full picture of all such concerns raised and the Commission’s position on them.

The visits that Members of the Commission made to national parliaments or that delegations from national parliaments made to the Commission (55 visits in 2019 and 915 visits during the whole mandate of the Juncker Commission) reinforced the dialogue between the parties.

The European Ombudsman

The European Ombudsman’s inquiries into alleged maladministration in the institutions and bodies of the European Union covered a variety of topics, such as transparency of the decision-making process, the ‘revolving doors’ phenomenon, post-mandate activities of former Commissioners, access to documents, fundamental rights, ethical issues, contracts, grants or individual staff matters. On average, the Commission complies with around three quarters of the Ombudsman’s proposals (proposals for a solution, suggestions for improvement and recommendations) and no maladministration is found for around 95 % of inquiries.

In June, the Ombudsman gave its second European Award for Good Administration to Commission initiatives to reduce plastics pollution and to promote awareness raising. The award aims to recognise initiatives, projects and other types of work by different departments of the EU’s institutions that have a visible and directly positive impact on the lives of people in Europe and beyond.

In October, the Commission also adopted an opinion on the draft regulation of the Parliament, laying down the regulations and general conditions governing the performance of the Ombudsman’s duties (their revised statute).

In December, the Parliament reelected Emily O’Reilly as the European Ombudsman. Her second mandate will last for 5 years.