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Issuance of green bonds will strengthen the international role of the euro

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Eurogroup ministers discussed the international role of the euro (15 February), following the publication of the European Commission's communication of (19 January), ‘The European economic and financial system: fostering strength and resilience’.

President of the Eurogroup, Paschal Donohoe said: “The aim is to reduce our dependence on other currencies, and to strengthen our autonomy in various situations. At the same time, increased international use of our currency also implies potential trade-offs, which we will continue to monitor. During the discussion, ministers emphasized the potential of green bond issuance to enhance the use of the euro by the markets while also contributing to achieving our climate transition objective.”

The Eurogroup has discussed the issue several times in recent years since the December 2018 Euro Summit. Klaus Regling, the managing director of the European Stability Mechanism said that overreliance on the dollar contained risks, giving Latin America and the Asian crisis of the 90s as examples. He also referred obliquely to “more recent episodes” where the dollar’s dominance meant that EU companies could not continue to work with Iran in the face of US sanctions. Regling believes that the international monetary system is slowly moving towards a multi-polar system where three or four currencies will be important, including the dollar, euro and renminbi. 

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European Commissioner for the Economy, Paolo Gentiloni, agreed that the euro’s role could be strengthened through the issuance of green bonds enhancing the use of the euro by the markets while also contributing to achieving our climate objectives of the Next Generation EU funds.

Ministers agreed that broad action to support the international role of the euro, encompassing progress on amongst other things, Economic and Monetary Union, Banking Union and Capital Markets Union were needed to secure the euros international role.

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coronavirus

Commission approves €500,000 Portuguese scheme to further support the passenger transport sector in Azores in the context of the coronavirus outbreak

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The European Commission has approved a €500,000 Portuguese scheme to further support the passenger transport sector in the Region of the Azores in the context of the coronavirus outbreak. The measure was approved under the State Aid Temporary Framework. It follows another Portuguese scheme to support the passenger transport sector in Azores that the Commission approved on 4 June 2021 (SA.63010). Under the new scheme, the aid will take the form of direct grants. The measure will be open to collective passenger transport companies of all sizes active in the Azores. The purpose of the measure is to mitigate the sudden liquidity shortages that these companies are facing and to address losses incurred over 2021 due to the coronavirus outbreak and the restrictive measures that the government had to implement to limit the spread of the virus.

The Commission found that the Portuguese scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid (i) will not exceed €1.8 million per company; and (ii) will be granted no later than 31 December 2021. The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions of the Temporary Framework. On this basis, the Commission approved the measure under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.64599 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Organisation for Economic Co-operation and Development (OECD)

EU collaborates with other OECD countries to propose ban on export credits for coal-fired power projects

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Organization for Economic Co-operation and Development (OECD) countries hold an extraordinary meeting today (15 September) and Thursday (16 September) to discuss a possible ban on export credits for international coal-fired power generation projects without measures compensation. Discussions will focus on a proposal presented by the EU and other countries (Canada, Republic of Korea, Norway, Switzerland, UK and US) earlier this month. The proposal supports the greening of the global economy and is an important step in aligning the activities of export credit agencies with the goals of the Paris Agreement.

Export credits are an important part of promoting international trade. As a participant in the OECD Arrangement on Officially Supported Export Credits, the EU plays a major role in efforts to ensure a level playing field at international level and to ensure the coherence of the common objective of combating climate change. The EU has pledged to end aid for export credits for coal without offsetting measures, and at the same time commits at the international level to a just transition.

In January 2021, the Council of the European Union called for the global phasing out of environmentally damaging fossil fuel subsidies on a clear timetable and for a resolute and just global transformation. towards climate neutrality, including the gradual phase-out of coal without compensatory measures in energy production and, as a first step, the immediate end of all funding for new coal infrastructure in third countries. In its February 2021 Trade Policy Review, the European Commission pledged to propose an immediate end to export credit support for the coal-fired electricity sector.

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In June this year, G7 members also recognized that continued global investment in non-reduction coal-fired electricity generation was inconsistent with the goal of limiting global warming to 1.5 °C and pledged to end new direct government support for global coal-fired power generation internationally by the end of 2021, including through government funding.

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EU

Week ahead: The state we’re in

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The big set piece of this week will be European Commission President von der Leyen’s ‘State of the EU’ (SOTEU) address to the European Parliament in Strasbourg. It’s a conceit borrowed from the US, when the President of the United States addresses Congress at the start of each year laying out his (and it has always been a he to date) plans for the year ahead. 

I am always amazed by American self-confidence and almost indestructible belief that America is the greatest nation on earth. While thinking you’re just great must be an enjoyable state of mind, the parlous state of the US on so many levels at the moment makes me think that the excessively critical eye Europeans cast on their lot may be a healthier perspective. Still, sometimes it would be nice if we could acknowledge the many pros of the EU and be a bit more ‘European and proud’.

It’s hard to gauge how much interest SOTEU exerts outside those most engaged in the EU’s activities. As a rule Europeans, other than a small group of the most devout, don’t go around bumming about how just bloomin’ great the EU is, or generally being enthused about its direction. While we might have mused on the counterfactual, the UK has provided every EU citizen with a very stark look of “what if?” 

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Looking at where the world, the EU looks like it is in a healthier state than most - this also has a literal meaning this year, we are probably the most vaccinated continent on earth, there is an ambitious plan to turbo charge our economy out of its pandemic slump and the continent has stuck its chin out and decided to do nothing short of lead the world on tackling climate change. I personally feel a great surge of hope from the fact that we appear to have collectively decided enough is enough with those within the EU who want to backslide on democratic values and the rule of law. 

Several proposals will be coming from the Commission this week: Vestager will be presenting the plan for ‘Europe’s Digital Decade’; Borrell will lay out the EU’s plans for links with the Indo-Pacific region; Jourova will outline the EU’s plan on protecting journalists; and Schinas will present the EU’s package on health emergency response and preparedness. 

It is, of course, a plenary session of the Parliament. Other than SOTEU, the humanitarian situation in Afghanistan and the EU’s relations with the Taliban government will be debated; media freedom and the rule of law in Poland, the European Health Union, the EU Blue Card for highly skilled migrants and LGBTIQ rights are all up for discussion.

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