Europe s moment - Brussels update

Marking the end and the start of one of the new “COVID normals”, yesterday the European Commission published the proposal for a new EU budget / Recovery Package.  A new funding mechanism called Next Generation EU (€750 billion), the pandemic crisis response fund (€540 billion) and the EU core budget (€1.1 trillion Multiannual Financial Framework), moving from emergency measures to measuring the economy, opening up and now planning for the future.

We’d like to share the main headlines with you, following the earlier updates we provided. Attached you will find the main political communication -

Europe's moment: Repair and Prepare for the Next Generation.

The Cefic Team spent yesterday reading the many pages of underlying documents. For those interested – the more detailed analysis will be made available to the advocacy forum and advocacy hub and the COVID pages.

Some headlines to share:

1. Imagine you are VP Timmermans. You have a Green Deal and no money pre-COVID. Now you have the largest ever state aid and support package in EU history in your hands. What a change. The Commission intends to spend the funds on a combined agenda of economic support to key sectors in Europe, digitalization and the Green Deal. A quarter (!) of the EU budget is now under his control, focused on climate change and the circular economy.
2. The Parliament mostly agrees. There is a saying that when a horse enters, a camel comes out. There are always add-ons and wishes. But in headlines – the EP will ask for more funding, not less. There will be many titles, words, packages, funds, for what in normal terms is called Money. Someone has to pay, someone will spend. And someone decides who gets it. That in short, was yesterday’s proposal.
3. The real news is that in addition to a normal EU budget, the EU will use this budget as guarantee to collect 750 Billion Euro on the capital markets and combine it into one package. €750 billion is the same amount as the EU28 chemicals sales (including pharmaceuticals) generated in 2008. It’s huge.
4. On top, the European Commission ask to be allowed more direct tax revenues to increase the budget further. A digital tax, a plastic tax, a carbon tax, a non-recycled plastic tax and -  new – a turnover tax for large companies benefitting from the Single Market. Large being all CEFIC ACOM members plus a few more in our world.
5. Finance and Prime Ministers will analyse what it means for each of them for the next weeks. You will see them being careful. Grants versus Loans? Playing American football – e.g. kicking the ball as far away as they can, to create time for negotiations. It is likely these will last this year. Using ETS revenues for the EU Budget? That is less income for Germany and Poland. Spending less on farming? The French. A plastic tax? Which countries landfill the most, pay the most. We believe that of all the taxes proposed the plot is to end up with the Digital tax. Which conveniently would mean large US TECH will pay.

Closer to home and positive:

• The plan includes a huge stimulus for renovation of buildings, which will boost demand for our products.
• The automotive sector will be put on its feet, be it electric feet.  Demand should come back.
• There is a completely new tool proposed to re-shore strategic value chains, including specifically named, API’s.
• The new push for strategic procurement of essential supply chains such as biocides;
• Promotion of recycling. The now technology-neutral wording for plans to promote recycling can now also cover chemical recycling.
• The proposed funding boost for hydrogen.
• A strong boost to bring more and low costs renewable energy to the table
• New measures to incentivize private sector investments including a €31 billion Solvency Support Instrument (with particular support for SMEs).

In the Commission work programme deadlines shift, but the Green Deal programme goes more or less unchanged.

We hope this gives you a first idea of what is coming. The Cefic team is going full speed through the material and sorting the work for the different Cefic structures. We will keep you posted.

Wishing you a great day,

The Cefic Team!

Marco Mensink

Director General