Shutting Down Social Media During Riots Thanks to the DSA? Breton Reacts.
But Also — Transparency backlash, Italy holds a grudge against ESM Reform, ECB goes on a hike again
Hi! This is Monday, 31 July 2023, and here’s the EU news you need this week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and Linkedin.
Your newsletter will be off in August and looks forward to seeing you at the beginning of September. Thank you to all those trust us every week, and to our experienced editors for the quality of their work. In the meantime, don't hesitate to reach out to give us your opinion or if you'd like to work with What's up EU — contact@whatsupeu.co
The Briefing
After Emmanuel Macron and Thierry Breton said about the possibility of 'shutting down' social networks in the event of a crisis, 65 NGOs wrote a letter to the Commissioner for the Internal Market asking him to clarify his comments on the Digital Services Act.
DSA • Under the Digital Services Act, Facebook, Twitter, Snapchat and TikTok of this world will be subject to additional moderation obligations, including the swift removal of hateful content online, as 'very large online platforms'. For these 'very large online platforms', these obligations come into force on 25 August.
In the event of a crisis, the Commission may – on the recommendation of a committee – oblige platforms to take crisis measures, for a maximum period of three months. These measures may include adapting algorithms to prevent the spread of fake news, the rapid removal of online content or the promotion of reliable information.
The DSA defines a crisis as 'extraordinary circumstances resulting in a serious threat to public security', e.g. natural disasters, acts of terrorism, pandemics – urban riots are not mentioned. In any case, such measures must be 'specific, effective and proportionate'.
Large online platforms can face significant fines for non-compliance with the DSA. Sanctions can go as far as banning operating on European territory.
FRENCH RIOTS • On July 4, Emmanuel Macron had spoken about the riots: "We need to have a reflection on social networks, on the bans that must be put in place. And when things get out of hand, maybe you have to put yourself in a position to regulate or cut them."
A reflection taken up by the Secretary of State for Digital Affairs, Jean-Noël Barrot, who proposed during a parliamentary debate that this reflection be included in the framework of the DSA. The 'Secure and regulate the digital space' bill is currently under consideration in France, and is expected to be voted on this autumn.
BRETON • The French government quickly backtracked, but the comments made noise in Brussels.
On July 27, Thierry Breton said that the DSA could lead to the suspension or temporary restrictions of social networks in "extreme cases" if the platforms are in breach of DSA rules.
Saying that the DSA allows social networks to be shut down in the event of riots -- which Breton did not say -- is not exactly the same as saying that platforms that do not comply with DSA rules in the event of a serious crisis will be subject to sanctions up to temporary restrictions.
NGOs STRIKE BACK • 65 non-profits took the pen in reaction to Thierry Breton's remarks. The signatories, including AccessNow, ARTICLE19, and La Quadrature du Net are concerned about the potential use of the DSA for repressive purposes. The list of signatories also includes many African association defending internet freedoms.
'These comments could reinforce the weaponisation of internet shutdowns, which includes arbitrary blocking of online platforms by governments around the world', adding 'By no means should arbitrary blocking of Instagram, TikTok, or other social media platforms be viewed as a solution to any event or perceived crisis in a Member State or across the EU.'
'We therefore ask for clarification to confirm that the DSA does not, in fact, provide for the possibility of shutting down online platforms as a sanction for failing to remove "hateful content," as implied by your comments. While the DSA allows for some temporary restrictions on access to services, these are last resort measures that may only be considered after repeated non-cooperation and non-compliance with this Regulation. In addition, they have to be backed by significant procedural safeguards to comply with international human rights standards'.
EU Member States are entrusted with a big role in implementing the DSA. This carries a risk of misappropriation for the signatories of the letter. 'We also urge the European Commission to ensure that national implementation and enforcement of the DSA by Member States does not lead to an overly broad interpretation of DSA measures, which would go against the regulatory objectives of the law and violate the EU Charter of Fundamental Rights.'
In Case You Missed It
TRANSPARENCY • Commissioner Vera Jourova confirmed to the Financial Times last week that the Commission intends to put its directive on the transparency of covert interference by third countries back on track, following the backlash caused by the proposal in March.
The consultation period ended in mid-April, with over 1,200 opinions sent to the Commission. The Commission subsequently decided to postpone adoption of the proposal in order to carry out a prior impact assessment. The proposal is now expected in the autumn.
The proposal would require NGOs, law firms, consultancies or academic institutions to declare all funds received and contracts over €4 million signed with non-European states. The aim is to create and/or harmonise national registers shedding light on cash received from extra-EU states by associations or corporations to influence decision-making at European level.
While the Commission's aim is to increase transparency in the wake of Qatargate, many voices — such as Transparency International and Open Society — were raised to highlight the risk of the directive being used as a tool, particularly in Hungary, where foreign NGOs are the target of Viktor Orban.
Some had expressed surprise at the proposal, given the European External Action Service's firm condemnation of a similar bill aimed at limiting foreign funding of NGOs in Georgia.
EUROZONE • Italy remains the only eurozone country not to have ratified the reform of the European Stability Mechanism (ESM). On July 5, the Italian Chamber of Deputies decided to postpone ratification for a further four months.
Entering into force on October 8, 2012 during the sovereign debt crisis, the ESM is an intergovernmental organisation set up to provide financial assistance to eurozone countries if they experience or are at risk of experiencing serious financing problems on the markets. In return for this assistance, structural reforms must be implemented to ensure the future stability of the economies of the countries benefiting from this mechanism.
On January 27 and February 8, 2017, the eurozone states signed a reform of the ESM's founding treaty aimed at strengthening its prerogatives, particularly in drawing up and monitoring future assistance programs, preparing for crises and supporting the Single Resolution Fund to be set up in 2022.
Italy has the highest debt-to-GDP ratio in the eurozone after Greece, and the Italian Treasury declared on June 21 that ratification of the ESM reform could improve the state's credit rating.
Nevertheless, the treaty has still not been ratified by Italy, preventing its execution. The Forza Italia party denounces the lack of "democratic control" over the mechanism, while Prime Minister Giorgia Meloni proposes making Italy's approval of the ESM treaty conditional on the relaxation of fiscal rules for EU member states.
As Moritz Kraemer from LBBW, a German bank, points out in the Financial Times, the ESM has become synonymous with economic suffering and austerity in Italian politics. The Greek debt crisis and the austerity measures advised to the Italian government by the ECB in 2011 have contributed to a strong reluctance to the ESM on the part of Italian citizens.
INTEREST RATES • Continuing its policy of monetary tightening, the European Central Bank (ECB) on Thursday raised its benchmark interest rate for the ninth time in a row, to its highest level since May 2001. This 25-basis-point increase, equivalent to the one in June, takes the deposit rate for bank liquidity to 3.75%. In the U.S., the Fed also decided on a further increase in its key rate to 5.5%, the eleventh since March 2022.
This increase is motivated by "weak domestic demand linked to persistently high inflation and tighter financial conditions, which are reducing spending", according to Christine Lagarde. The ECB has opted for a firm stance in the face of inflation, which, despite a relative slowdown, remains above the 2% target.
Expected on Monday, new figures on the eurozone's economic situation should indeed set inflation at 5.3% in July. For the first time since January 2021, core inflation, which excludes volatile and transitory items such as energy, should exceed general inflation and reach 5.4%.
With recession looming, this latest rate hike came as little surprise, even if it is bound to be criticised. The markets fear that this monetary tightening policy will have an adverse effect on the already stagnant German economy, at a time when demand for credit from European companies is at its lowest level for twenty years.
Breaking with its policy of "forward guidance", which consists of giving indications of the future direction of monetary policy, the Frankfurt-based institution is leaving its next decisions in doubt. Nevertheless, analysts expect the benchmark interest rate to rise for the last time in September, before a possible plateau.
What we’ve been reading
In an opinion piece for El País, Sander Tordoir of the CER examines the consequences for Europe of the collapse of the Dutch government.
For some background on the transparency law, we suggest you read this article by Ancal Vohra in Foreign Policy from March, "The EU Is Turning Against NGOs, Too".
We also strongly suggest reading this op-ed in the FT by Moritz Kraemer, chief economist at German bank LBBW: "Italy harms itself by blocking changes to crisis-fighting in eurozone".
This week’s newsletter is brought to you by Luna Ricci, Marwan Ben Moussa, Kimia Vaye, Maxence de La Rochère and Augustin Bourleaud. See you in early September, and enjoy the break!