European Council: Agreement on the Use of Frozen Russian Assets
But also — Renew, DSA, DMA, Gaza, Egypt
Hello! It’s Saturday 30th March, and here is your EU news summary. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
During the European Council that took place on March 21 and 22, Member States discussed the issue of military support for Ukraine and the strengthening of the European defence industry. "We must therefore be defence-ready and shift to a “war economy” mode," Charles Michel declared ahead of the Council.
RUSSIAN ASSETS • The European Council has formally approved the use of frozen Russian assets to help Ukraine.
Member States have agreed to allocate €3 billions per year to Ukraine by using the revenue from frozen assets of the Russian central bank located in Europe.
On top of this, approximately €1.7 billion will be added from the tax imposed by the Belgian government on Euroclear, the company holding the frozen assets.
These €3 billions will be allocated 90% to the purchase of military equipment for Ukraine, mainly through the European Peace Facility (EPF). The remaining 10% will be earmarked for reconstruction aid for the country.
The Ukrainian president has urged European leaders to use the assets themselves.
This initiative is opposed by Hungary and Slovakia, who fear a military escalation with Russia.
Austria, Malta, and Ireland, on the other hand, highlight the limits set by their neutrality policies.
Assets frozen by the Russian Central Bank as part of sanctions amount to €260 billion, two-thirds of which are located in Europe.
These measures do not affect the capital itself but the income and interest generated.
The possibility of confiscating these assets is not on the table at this stage.
EIB • The European Investment Bank (EIB) cannot invest in military equipment and can only finance dual-use civil and military equipment if it has a civilian predominance.
Ahead of the Council, 14 European leaders, including France, Germany, the Baltic countries, Finland, and Poland, called in an open letter for the EIB's mandate to be expanded.
Following the March 21-22 Council, member states asked the EIB to "adapt its lending policy to the defence industry and its current definition of dual-use goods."
EUROBONDS • Faced with huge amount of public spending required to rearm Europe and finance the war in Ukraine, France, Estonia, and Poland have proposed using the bond lever through European defence bonds (eurobonds).
The proposal aims to replicate NextGenEU to finance the development of the European defence industrial base. Germany, Austria, the Netherlands, Sweden, Denmark, and the Czech Republic oppose this.
However, European treaties prohibit financing by the Union budget of operations "with military or defence implications." The European Peace Facility (EPF) is a multilateral tool — funds do not pass through the Union budget.
The Commission could, however, present a legislative proposal incorporating the idea of eurobonds by June.
SANCTIONS • European leaders have also asked the European Commission to prepare new sanctions against Belarus, North Korea, and Iran. These countries are accused of contributing to circumventing sanctions against Russia and participating in its armament.
In Case You Missed It
RENEW • On March 20, the Renew parliamentary group officially launched its election campaign by presenting not one but three lead candidates representing the group's three factions: German Marie-Agnes Strack-Zimmermann (Alliance of Liberals and Democrats for Europe, ALDE), French Sandro Gozi (European Democratic Party, EDP) and Valérie Hayer (Renaissance).
The lead candidates — also called Spitzenkandidaten — are the candidates of the Parliament's political groups for the presidency of the European Commission. A few weeks ago, we revisited this controversial concept: check out our Briefing on the subject here.
For context, the President of the European Commission must be proposed by the European Council — that is, the leaders of the Member States — by qualified majority. He or she must then gather the support of the majority of the members of the European Parliament.
This is not the first time that Renew has proposed multiple candidates: in 2019, seven Spitzenkandidaten were announced, with the aim of showing the transnational aspect of the parliamentary group. For these elections, Renew is launching its campaign with a Franco-German banner.
Marie-Agnes Strack-Zimmermann is well-known in Germany for her very critical position on Olaf Scholz's hesitation to send military equipment to Ukraine. Sandro Gozi is the Secretary-General of the EDP (the smallest faction of the Renew group), while Valérie Hayer has been leading the Renew group since Stéphane Séjourné's departure."
The three lead candidates unveiled a 10-point manifesto reflecting liberal priorities. The political group advocates for support for the defence industry, and wishes to reduce administrative burdens on companies to strengthen their competitiveness, as well as put brakes on the creation of new environmental standards while ensuring the implementation of those adopted since 2019.
For Renew, the polls are not looking favourable: the political group could go from 102 seats to 85, neck and neck with Identity and Democracy (81 seats), to which the National Rally (RN) belongs.
DSA • The European Commission has presented guidelines on recommended measures for very large online platforms (VLOP) and very large online search engines (VLOSE) — the two targets of the Digital Services Act (DSA) — to mitigate disinformation risks ahead of European elections, especially those fueled by artificial intelligence and deepfakes.
These guidelines are not legally binding, as companies remain free to choose the actions they wish to take. However, the absence of measures taken will be penalised by fines of up to 6% of their global annual turnover under the Digital Service Act (DSA).
These platforms — including Google, Facebook, and X, for example — will have to set up internal teams during the electoral period to examine online disinformation risks in 23 different languages, or collaborate closely "with national and EU authorities, independent experts, and civil society organisations."
Political advertising must also be clearly labelled as such, in anticipation of the new regulation on transparency and targeting of political advertising (which will not come into effect in time for the elections).
DMA • Surprise. On March 25, the Commission opened investigations for non-compliance with the Digital Markets Act (DMA) against Alphabet, Apple, and Meta. Since March 7, "gatekeepers" must comply with a number of obligations under the DMA, a regulation aimed at making markets in the digital sector more "fair" and "contestable."
The investigations opened by the Commission concern the following subjects:
For Alphabet, the investigation deals with rules on steering in Google Play and self-preferencing practices in Google Search. The DMA requires gatekeepers to allow application developers to "steer" consumers to offers outside the control access stores for free, and the Commission suspects that Alphabet is not compliant with the rule.
Regarding Google Search's self-preferencing, the Commission requires that competing vertical search services (such as Kayak) be treated fairly and non-discriminatory compared to Google's (such as Google Flights) — the Commission fears that the measures implemented by Alphabet to achieve this goal are not sufficient.
For Apple, the investigation is also related to the rules on steering. It also deals with compliance with user choice obligations. Apple is suspected of not allowing users to truly choose their freedom of choice between Apple services and others.
Finally, for Meta, the investigation concerns the "Pay or consent" model, which means the choice for users to consent to their data being used for advertising purposes or pay for an ad-free experience. The Commission fears that the choice offered to users is not truly one, and that it excessively pushes users to consent to the use of their personal data.
These procedures will be closed within 12 months. If the investigations justify it, the Commission will inform the gatekeepers of the measures it intends to take or that the access controllers should take. In case of infringement, fines of up to 10% of the total worldwide turnover of the company can be imposed by the Commission. These fines can be increased to 20% in case of recurrence.
GAZA • Last week, the Union's foreign ministers agreed to impose sanctions against Israeli settlers who have shown violence against Palestinians, while strengthening those already in place against Hamas. The principle agreement reached by the Union's foreign ministers must be adopted to be effective.
This agreement would establish individual sanctions against settlers identified as having committed acts of violence against Palestinians. These sanctions would take the form of travel bans and asset freezes in European territory.
Moreover, last week, the European Council called for "an immediate humanitarian ceasefire leading to a sustainable ceasefire" in the Gaza Strip. This is the first time that European leaders have explicitly called for a ceasefire.
Despite these two agreements, divisions regarding Israel's policy are still visible within the EU. Several member states — Germany, Hungary, and Italy among them — are against the "political orientation debate" wanted by Josep Borrell to discuss the EU-Israel Association Agreement (in force since 2000), while other Member States such as Spain and Ireland demand a revision of this agreement as soon as possible.
EGYPT • A new agreement between Brussels and Cairo was concluded on March 17 as part of the European Neighborhood Policy. This agreement represents €7.4 billion that will be allocated to Egypt in the form of loans, grants, and investments.
While the agreement concerns economic stability, energy, and the fight against terrorism, the key issue for the EU remains the migration question.
In line with the pact concluded with Tunisia last year, the agreement with Egypt is a means for the Union to delegate the management of the migration crisis to third countries in exchange for loans and grants. €200 million in grants will also be paid to Egypt for this purpose.
However, this "model" agreement has been strongly criticised, notably because countries like Egypt and Tunisia are far from global leaders of human rights.
What We’ve Been Reading
The creation of a European regulatory agency is the next step in the construction of the capital markets union, explains Nicolas Véron in a column for Bruegel summarising the report he prepared for the European Parliament.
For the European Policy Centre (EPC), Lena Düpont analyses the measures of the New Asylum and Migration Pact on which the Council and the Parliament agreed last December.
This edition was prepared by Augustin Bourleaud, Thomas Blanda, Gianni Gaboret, Luna Ricci, Marwan Ben Moussa, Maxence de La Rochère and Hana Rajabally. See you next week!