Welcome to Better Europe’s weekly update on EU Affairs.
DIGITAL EURO RUNNING OUT OF CREDIT
The ECB’s digital euro project was already facing challenges, but last month’s significant payment system outage has raised even more concerns. At the end of February, the ECB’s TARGET 2 system that settles payments between banks suffered a major breakdown for a day. The outage, caused by an initial misdiagnosis of the problem, raised alarms about the central bank’s ability to manage a complex, high-stakes digital currency. As MEP Markus Ferber put it: “this is a blow to the credibility of the ECB”. Others, such as Green MEP Rasmus Andresen, stressed that rebuilding trust is key – or the project could collapse before it even gets off the ground. Even digital euro fanboy MEP Jussi Saramo called for urgent improvements. Meanwhile, at the Eurogroup meeting, finance ministers echoed growing concerns. While the ECB sees the digital euro as a counter to US President Trump’s new love for stablecoins, EU finance ministers explored alternatives during their last Eurogroup gathering, from private sector solutions to tokenized deposits. As scepticism grows in the Council, with many questioning whether the digital euro is worth the risk, the future of the digital euro hangs in the balance. And we haven’t even mentioned the unresolved conflicts about offline use and holding limits…
OMNIBUS STOP-THE-CLOCK FAST TRACK LIKELY BUT SUBSTANCE MORE CONTROVERSIAL
The Council is moving fast on omnibus reform, but the real action is now in the European Parliament, where the EPP is pushing for fast-tracking of the “stop-the-clock” part via Rule 170. This would significantly speed up the legislative process on the part of the proposal that aims to buy time for negotiations on the substantive part of the process. A decision is now expected in plenary on 1 April. On substance, the plenary session earlier this week revealed deep divisions between the political groups. The EPP supports simplification, arguing that cutting red tape is crucial for economic growth, especially for SMEs. And the Omnibus I process is a test case for further “simplification” including on landmark legislation in other fields such as the GDPR and more recent digital legislation. The S&D strongly opposes the Commission proposal, accusing von der Leyen of deregulating environmental protection under the guise of simplification and criticizing the rushed procedure. The Greens and the Left share these concerns, warning that deregulation could undermine environmental standards and increase dependence on fossil fuels. Renew, while open to simplification, opposes any reckless deregulation and stresses the need for cooperation with centrist forces. On the far right, the ECR and Patriots for Europe want radical deregulation, calling for a “chainsaw” approach to bureaucracy: “cut, cut, cut”. Whatever happens on the substance, it seems that the proposal to stop the clock is likely to make it through in Strasbourg next month.
COMMISSION’S DEFENCE DREAMS ON FRUGAL ICE
It sounded easy at the Summit last week: let’s develop a unified EU defence strategy in light of the geopolitical crisis we’re facing. But as the debate intensifies over a joint debt to fund military rearmament, German Finance Minister Jörg Kukies raised concerns signalling scepticism about using euro-obligations to fund national defence projects. The German government remains open to funding joint European defence initiatives but is wary of funding separate, uncoordinated national projects. Meanwhile, the Dutch government has gone even further, rejecting the idea outright. “The Commission is not rearming the EU – that’s the responsibility of national governments and the Netherlands is not in favour of euro obligations for additional joint debt,” said Minister of Economic Affairs Eelco Heinen, encouraged by a motion in his national parliament where the right-wing majority’s Euroscepticism turned out to be bigger than their love for the arms industry. Adding to the financial stalemate, the €250 billion in frozen Russian assets that some EU countries want to use to support Ukraine’s defense and reconstruction, cannot be taken just like that: Belgium and Luxembourg, which hold much of the money, fear financial instability. France and Germany oppose outright confiscation, citing legal risks and potential diplomatic fallout. The good news is that there is already a Summit again next week, a great convenience in times where the world order changes more in two months than in two decades…