How EU economic sovereignty is re-politicizing the market –

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One legislative proposal at a time, the European Commission is trying to strengthen its economic resilience and strengthen the economic sovereignty of the EU. But to increase the EU’s influence on the world stage, the power relations between public and private interests within the EU will also have to evolve.

On Monday, the Commission finally presented its proposal for a Single Market Emergency Tool (SMEI) which should allow the Commission to identify critical products and sectors, to request information from companies in these sectors and, in the event urgently, to redefine their priorities.

Analyzing the Commission’s proposal, Klaas Hendrik Eller, an assistant professor specializing in the legal governance of global supply chains, told EURACTIV that supply chains would increasingly be understood as “a kind of public infrastructure”. instead of “the mysteriously complex assemblage of private companies, composed in such a way as to maximize efficiency.”

According to the Commission’s reasoning, secure supply chains have proven to be a European security interest, which is why they cannot simply be left to the whims of the free market. A previously private company becomes public.

This change is not only visible in the SMEI, but in many other EU policies that aim to increase the EU’s resilience in the face of global tensions. The foreign investment screening mechanism makes investment and financing decisions public; the law on raw materials, announced last week, does the same for the most important materials which must supply industry.

When politicians talk about European sovereignty, they usually mean the transfer of certain powers and competences from the national level to the EU level. There is certainly some of this in the SMEI – for example, the obligation to keep intra-EU borders open to products and workers in the event of an emergency or the possibility of organizing public procurement at EU level. EU.

However, increasing EU economic sovereignty also means increasing control over EU economic actors.

Naturally, the companies are not very fond of it, complaining of the excesses of the Commission. For example, the possibility for the Commission to reprioritize orders in an emergency situation within the framework of the SMEI will certainly be resisted by the companies.

While the SMEI may appear as a seizure of power by the State to the detriment of freedom of enterprise, the Commission has stressed that the powers it proposes to give itself within the framework of the SMEI are still much weaker than the interventionist powers available to other states, for example, the United States.

“And I don’t think we can call the United States a planned economy,” Commissioner Thierry Breton said.

The Commission does not give itself outrageously rare powers. On the contrary, it recovers certain aspects of the economy under political tutelage which were freed up for the market when the creation of the single market reduced national political tutelage over economic actors without replacing this tutelage at EU level.

What we are witnessing is not a whole new politicization of the market. It is the repoliticization of the economy on a new, more European level.

Price increases across Europe are felt by everyone, but especially by those who have the least. And for them, a price development is particularly worrying: on average in the EU, the price of bread increased by 18% from August 2021 to August 2022.

The price of bread is influenced by disruptions in wheat supply following Russia’s invasion of Ukraine, soaring energy prices and the related increase in fertilizer prices. While prices have generally increased more in Eastern Europe than in Western Europe, the case of Hungary is particularly shocking – with a price increase of 66% in one year.

The evolution of Hungarian prices has been particularly surprising since, earlier this year, the Hungarian government introduced price controls on certain basic food products, wheat flour being one of them. On Saturday, the Hungarian government announced it would extend price controls until the end of the year, but data on bread prices cast doubt on their effectiveness.

The Hungarian Bakers’ Association argued that the price increases were due to rising energy prices. However, rising energy prices are a reality across the EU, and Hungary was supposed to have fewer problems with energy prices, thanks to its special gas deals with Russia.

Something is wrong, either with the price controls or with the data. If you, dear Economy Brief reader, have any idea what could be the reason for the price spike in Hungary, let us know!

Finally, the graph below also hides a positive message. With bread prices in Switzerland increasing the least compared to the rest of Europe, the continent’s unambiguously best bread has become relatively cheaper over the past 12 months.

Graphic by Esther Snippe

European Parliament and Member States give green light to €5 billion macro-financial assistance for Ukraine: On Thursday (15 September), a large majority in the European Parliament gave the go-ahead for macro-financial assistance to Ukraine in the form of cheap long-term loans backed by member state guarantees. EU member states also gave their consent at the General Affairs Council on Tuesday 20 September. The €5 billion is part of the pledge of macro-financial assistance of up to €9 billion that the European Commission pledged in May.

CETA is five years old: On Wednesday, September 21, the European Commission celebrated the fifth anniversary of the EU-Canada Comprehensive Economic and Trade Agreement (CETA), saying that trade in goods had increased by 31% over the past five years. CETA entered into force provisionally in 2017. However, 11 of the 27 EU member states have still not ratified the agreement.

Commission’s ban on products of forced labor should include remedies, says MEP. According to Maria Arena (S&D), Chair of the Sub-Committee on Human Rights, the EU executive should include remedies for victims in its proposal to ban products of forced labour. Remedies could have “a chilling effect” on companies, ensuring that they are not incentivized to put products tainted with human rights abuses on the EU market, she told EURACTIV. . However, the Commission argues that the costs of product removal will be sufficient to deter companies from eliminating forced labor from their operations.

The Commission is threatening to block €7.5 billion of EU cohesion funds for Hungary due to rule of law concerns. Citing concerns over corruption in Hungary, the European Commission proposed on Sunday (September 18th) to suspend a third of the cohesion funds allocated to the country if its reform efforts remain insufficient in the next two months. Read more.

Austria in violation of European labor market laws. The European Commission has notified the Austrian government of its failure to report the transposition of new EU labor market directives, launching the bloc’s infringement proceedings that could end up in the European Court of Justice. Read more.

Spain fines delivery app Glovo €79m for violating labor law. Delivery company Glovo has been fined 79 million euros by Spain’s labor ministry for violating a law that requires food delivery platforms to officially hire employees. Read more.

The Commission should not accept Orbán’s decision to release EU money, said the mayor of Budapest. Budapest Mayor Gergely Karácsony says the Commission is unlikely to approve corrective measures taken by Hungary to reverse the EU’s decision to suspend funds due to corruption concerns. Read more.

The Swedish Central Bank is raising interest rates with the biggest hike in 30 years. Sweden’s Riksbank decided on Tuesday to raise the interest rate to 1.75%, the biggest increase in about three decades and is expected to announce further additions this fall, the bank said on Tuesday. Read more.

Teleworkers have more than doubled in four years in Belgium. Telework is developing in Belgium and is impacting mobility habits, explains the FPS Mobility and Transport in a press release published on Monday based on a survey of 1,250 Belgian workers between June and July this year. Read more.

Poland will oppose EU sanctions against Hungary. After six months of cooler relations, Polish Prime Minister Mateusz Morawiecki announced on Sunday that his country would oppose EU sanctions against Hungary proposed by the European Commission. Read more.

Beneficial corporate tax reduction, Portuguese Minister of Economy. Reducing corporate tax for companies would be an important signal for the whole sector and beneficial given the current crisis, Economy Minister António Costa Silva said on Sunday. Read more.

Dutch anti-poverty social program gets green light from EC. The Netherlands will receive 413 million euros from the European Social Fund to help people in vulnerable employment and fight poverty until 2027, the Ministry of Social Affairs and Employment announced on Thursday after the European Commission approval. Read more.

Central Bank of Zugzwang: In this FT column, Daniela Gabor explains the impossible situation in which the European Central Bank finds itself. She argues that “macrofinancial stability requires a new framework for coordination between central banks and treasuries that can support a state that is more willing, and able, to discipline capital.

Zugzwang: Are we on the verge of a central banking paradigm shift? In a response to Gabor’s FT column, Adam Tooze shows some skepticism about whether the paradigm shift Gabor is advocating for is imminent.

Technocracy and crisis: Stagnation and technocratic regime in Italy. Ahead of this Sunday’s elections in Italy, this long read by Lucio Baccaro is a well-argued but rather depressing account of how Italian politics and economic policies have interacted in recent years.

What Giorgia Meloni would mean for Europe: CER’s Luigi Scazzieri looks at what a triumph of Italy’s far-right would mean for Italy’s relations with the EU. Especially when it comes to the national stimulus package, where the right-wing coalition wants to reallocate some of the spending, tensions are to be expected.

SME Envoy Report: How are European SMEs impacted by the Russian invasion of Ukraine? European SMEs are finding it harder than large companies to cope with the consequences of the Russian invasion of Ukraine.

Silvia Ellena and Vlad Makszimov contributed reporting.

[Edited by Nathalie Weatherald]

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