The Week in Europe 11-17/06/03

EU news in brief

Czech Republic adds its "yes" to accession

"The people have spoken, and Europe has heard their voice. In the clearest possible way they have gone to the polls and given a decisive 'ANO" to Czech membership of the European Union." Ramiro Cibrian, Head of Delegation of the European Commission welcomed the vote in the Czech Republic as it joined the wave of approval for EU membership that is sweeping across the acceding states. Its people voted heavily in favour of accession at the weekend, with 55.2% of voters going to the polls, and 77.3% of them saying "yes". The question in the referendum was: "Do you agree that the Czech Republic should become a member state of the European Union according to the Treaty of Accession of the Czech Republic to the European Union?"

This latest vote has confirmed the enthusiasm of the population of the acceding states for becoming part of the European Union as from next May - and, coming on top of the "yes" vote in Poland just days earlier, has countered the gloomy prognostications about indifference in some of the key candidates in central and eastern Europe.

The Czech Prime Minister Vladimir Spidla said the result marked "an end to the results of the Second World War".

The European Commission paid tribute to the Czech citizens "for their unambiguous support". European Commission President Romano Prodi said: "This is a good day for Europe, another proof that our peoples belong together. I warmly welcome the Czech people as a member of the European democratic family." And European Enlargement Commissioner Günter Verheugen, in typically personal vein, commented: "The 'Prague spring' in 1968 convinced me that there is not much anyone can teach the Czechs about freedom, democracy and human rights". He predicted that the entire EU would benefit from the particular Czech sensitivity on questions of equal treatment, human rights, and equal opportunities and in the handling of relations with neighbours.

The Commission statement depicted the outcome of the ballot as "the achievement of Czech society itself, which, during the dark years of communist dictatorship and since the velvet revolution, was at the forefront of changes and courageously carried out tough reforms to transform the country into a modern democracy and a functioning market economy". It expressed the conviction that "the Czech Republic, located at the heart of Europe, with its rich historic and cultural heritage, will take full advantage of EU membership and play a central role in the forthcoming developments of the European Union."

The chair of the European Parliament's EU-Czech Republic joint parliamentary committee, Austrian EPP-ED group member Ursula Stenzel, offered wholehearted congratulations to the Czech citizens for their "clear decision for Europe". She said: "This clear result is good for the Czech Republic, but it is also good for Austria being a direct neighbour and for the whole European Union. Today Austria is not only surrounded by friends, but also by European partners. Together we will be a strong heart in the midst of Europe". Acknowledging some of the conflicting views that have characterised Czech-Austrian relations recently, she added: "I am convinced that open questions and remaining problems are best solved in the community of the European Union".

Hans Gert Poettering, chairman of the EPP-ED group in the European Parliament, noted with relief that at last the Czech Republic "will be a part of a democratic Europe where comebacks of past totalitarian regimes will not be possible. The Czech Republic and the European Union will now have a common future."

The Czech vote means the population of seven of the ten acceding states have now given a clear "yes" to EU membership. Now only Estonia - on September 14 - and Latvia - on September 20 - still face accession referendums. Cyprus plans no referendum.

Commission denies negligence in Eurostat fraud probe

A Commission spokesman rejected as "sheer rubbish" allegations by the Financial Times newspaper that Romano Prodi ignored warnings of possible fraud at Eurostat, the EU's statistics office.

Meanwhile, the three Commissioners who the Financial Times said were also implicated in what the newspaper called a "looting scandal at Eurostat" also strongly rejected the accusations. In a public hearing at Parliament's Budgetary Control Committee on 17 June, Budget Commissioner Michaele Schreyer, Monetary Affairs Commissioner Pedro Solbes and Administration Commissioner Neil Kinnock stated repeatedly that they had not received any suspicious information prior to the publication of reports on the alleged fraud by OLAF, the EU's anti-fraud unit. However, they did concede that there appeared to be problems "far more significant" than previously thought. Mr Solbes, who is responsible for Eurostat, said communication breakdowns between the EU fraud fighting team OLAF and the European Commission on the one hand, and within the Commission itself on the other, lay behind the problem. Mr Solbes assured MEPs that "action is being and will be taken" to remedy the shortcomings.

OLAF opened a probe into Eurostat's activities in October 2000. Eurostat's two top officials, Yves Franchet and Daniel Byk, are under investigation for the alleged looting of about 1 million euro of EU funds. Both Mr Franchet and Mr Byk were removed from their posts at their own request in May, and both deny any wrongdoing.

OLAF alleged Eurostat's Datashops - commercial outlets for the selling of statistical data composed by Eurostat - and a French subcontractor called Planistat only in mid-May of this year, after it had informed judicial authorities in Paris on 19 March. Mr KINNOCK added that OLAF had informed the Commission's secretary general of allegations about Eurostat on 1 April, without, however, going into detail or mentioning any names and under strict confidentiality.

On two other cases concerning Eurostat subcontractors, Eurogramme and Eurocost, Ms Schreyer was informed of the details only when she requested to see the relevant internal audit reports in May of this year so that she could answer questions from the European Parliament in the context of the budget discharge for 2001 and of a report by Herbert Bösch (PES, A) on the fight against fraud involving EU budget funds. She was informed in a general sense in July 2002 when OLAF handed the results of its investigation into the two cases to the Luxembourg authorities.

Mr Kinnock and Ms Schreyer both flatly denied that they had ever had discussions with Eurostat's director-general Yves Franchet about possible problems with the financial management of the statistical office.

Environment and health; the European Commission launches a strategy to reduce diseases linked to environmental factors

There is a strong link between poor health and environmental problems. A recent report from the European Environmental Agency, EEA, shows that as many as 60 000 deaths per year in large European cities are caused by long-term exposure to air pollution. Children are more exposed to environmental risks than adults. One child in seven is affected by asthma. Compared to 30 years ago this is a dramatic increase. In order to reverse this alarming trend the European Commission is launching A European Environment and Health Strategy. With this new strategy the Commission expects to achieve a better understanding of the complex relationship between environment and health and to identify and reduce diseases caused by environmental factors. For details see http://www.eea.eu.int

[Background paper IP/03/823]

VAT: public consultation on place of taxation of the supply of services

The European Commission has launched an open consultation for views on how the EU's Value Added Tax (VAT) rules concerning the place of taxation of the supply of services should be improved. The consultation is based on a paper prepared by the Commission's Taxation and Customs Directorate-General. The paper considers the idea of shifting taxation from the place where the supplier is established or has a fixed place of business to the place where the customer is located, when the customer is a trader. The rule of taxation in the place where the supplier is located worked adequately when the VAT system was first introduced but, with increasing supplies of services across borders, this rule can now lead to administrative complexities, distortions of competition and double or non-taxation of international supplies of services. The Commission intends to launch a proposal in this field in autumn this year, taking into account the opinions expressed by stakeholders during the present public consultation. More information, including the consultation document, is available on the Europa website at:

http://europa.eu.int/comm/taxation_customs/taxation/consultations_en.htm

[Background paper IP/03/829]

Eurobarometer: poll shows strong support for Constitution but low knowledge of Convention

As the Convention on the Future of Europe prepares to report to the European Council later this week, there is strong support across the EU for a European Constitution, according to early results from the latest Eurobarometer survey. The poll, which questioned more than 16,000 people across the EU between March 18 and April 30, found that a large majority of people want to keep at least one Commissioner per Member States and also back the idea of an EU Foreign Minister. However, the survey did reveal considerable ignorance about the Convention's work. Support for the euro within the eurozone has increased since the last survey carried out in the autumn.

[Background paper IP/03/850]

Eleven ways to prevent cancer

A new European Code against Cancer was launched at a conference of the European Institute of Oncology in Milan. The basic message is that certain cancers may be avoided and general health improved if people adopt a healthier lifestyle. The two main reasons for revising the code are scientific progress and Enlargement. An enlarged Europe will see a much greater degree of divergence in lifestyle habits and disease risk. The original code was drawn-up by a high-level Committee of Cancer Experts in 1987. This revised Code draws on the results of a Europe-wide consultation process, which attracted contributions from public health specialists and oncologists as well as representatives of the Cancer Leagues and the Ministries of Health. Although the Code has changed more than once since its introduction, its underlying philosophy remains the same. The eleven recommendations of the revised European Code Against Cancer should, if followed, also lead to improvements in other aspects of general health.

[Background paper IP/03/853]

Eurostat news releases

Education in Europe 2000-2001 In EU Member States, between 55% and 95% of 18 year olds are in education

In the school year 2000-2001, 71% of 18-year-olds living in the European Union were still in the education system1. The proportion who remained in education was highest in Sweden (95%), Finland (89%) and Belgium (85%). The lowest proportions of 18-year-olds still in education were observed in the United Kingdom (55%) and Portugal (66%). Amongst the Acceding Countries, the proportion of 18-year-olds who were still in education varied from 32% in Cyprus, where most tertiary students study abroad, to 86% in the Czech Republic.

[Background paper STAT/03/65]

Taxation in the EU from 1995 to 2001 : a modest decline in the EU overall tax burden since 1999 ; EU tax burden on labour started to ease

According to a publication issued by Eurostat, in 2001, the overall tax burden (i.e. the total amount of taxes and social security contributions) stood at 41.1% of GDP in the EU, decreasing compared to 41.8% in 1999 and almost stable compared to 40.8% in 1995. Among the Member States, Sweden recorded the highest tax-to-GDP ratio (54.1% in 2001), followed by Denmark (49.8%), Finland and Belgium (46.0% each). At 31.2%, Ireland had the lowest tax-to-GDP ratio, followed by Spain (35.6%), Portugal (35.9%) and Greece (36.8%).

Enlargement News

Denktash critical EU aid for Northern Cyprus

The recently-announced EU plan to provide assistance and open up trade for the northern part of Cyprus (see previous issue of ENLARGEMENT WEEKLY) has been turned down by Turkish Cypriot leader Rauf Denktash. He dismissed the scheduled aid - €12 million in funding, trade facilitation, and mechanisms to help integration in the Turkish occupied part of the island - as a plot to subjugate Turkish Cypriots: "This is not help, it is not support. It places us under the control of the Greek Cypriot government", he said last week. The plan had been welcomed by the government in the Greek Cypriot southern part of the island. The foreign minister, George Iacovou, said that the EU and Cyprus agreed that Turkish Cypriot products could be exported through Republic of Cyprus ports.

Separately, European Enlargement Commissioner Günter Verheugen expressed optimism in Brussels last week that a window of opportunity in the coming months might still allow a united Cyprus to join the EU on 1 May 2004. “We have to maintain momentum in this process,” Verheugen said. He said he would be presenting a good-will package to the Turkish leadership in Cyprus on a trip he plans to make in the near future. The Commissioner regretted the Denktash response, and he hoped for a reconsidered decision. Political dialogue with Ankara was “very, very, very satisfying,” he said.

Meanwhile, Britains special envoy to the island, Lord David Hannay, has indicated he wants to step down from his task. “Should events again make it appropriate for a special representative to be appointed, the government will not hesitate to do so,” UK foreign secretary Jack Straw told the UK parliament last week.

For more on the Cyprus issue, see

http://www.europa.eu.int/comm/enlargement/cyprus/index.htm#countryprofile

Looking ahead to new euro member states

The European Union's economic and financial committee a key advisory committee to the EU Council has been looking at the prospects and challenges for new member states of the EU to become new member states of the Euro too.

Acceding countries will enter the EU as member states with derogation from the Euro (i.e. from Article 122 of the EC Treaty). This means that competitive devaluations will not be allowed, and that they will be expected to work towards real and nominal convergence. They will also be expected to join the ERM-II, although not necessarily immediately after accession: in certain cases, staying outside ERM-II for a time may be useful in the face of large and volatile capital flows, large fiscal imbalances, or risks of large economic shocks. And eventually, when they have met the necessary conditions, they will be required to adopt the Euro.

The EU has already agreed that new member states will have to treat their exchange rate policy as a matter of common EU interest, and will have to pursue "disciplined and responsible monetary policy directed towards price stability".

When the economic and financial committee held a high-level meeting with candidate countries recently they also agreed an action plan on economic, monetary and financial statistics for candidate countries and acceding states. The plan specifies where urgent progress is required on providing information on the key economic indicators, and urges commitments towards improvements. The meeting noted that the completeness and timeliness of statistical information from candidate countries and acceding states has been steadily improving. But it did insist that "without major efforts, at the point of accession the acceding countries will not be in a position to comprehensively meet the requirements concerning timeliness, level of detail and other quality aspects in specific areas".

Areas singled out for particular attention included completeness of data on national accounts (with full historic data on GDP and main aggregates for the years 1995-2002 supplied by 1 May 2004, and for the years 1991-1994 by 31 December 2004), better quality data on government debt and deficit (with proper delimitation of the government sector and an appropriate distinction between non-financial and financial transactions), and full implementation of the EU's Harmonised Consumer Price Index regulations. More work is also needed on long term interest rates statistics for the purpose of assessing convergence, and "remaining weaknesses in data on external trade in goods should urgently be dealt with".

The meeting also singled out Cyprus and Malta, where "most urgent progress is required" on deficit and debt data. And it said Bulgaria, Romania and Turkey, "need to step up their efforts".

Fulfilling obligations so that acceding states can be integrated as early as possible into the EU's economic policy co-ordination and fiscal surveillance procedures was also emphasised at a separate high-level meeting recently. By 15 August 2003, acceding states will have to submit the 2003 updates of their pre-accession economic programmes to the Commission, to allow adoption by ministers of a joint opinion in autumn 2003. Acceding states are also being invited to provide reports on structural reforms in product, labour and capital markets for the first time in October 2003.

The acceding states will be included for the first time in the update of the EU's Broad Economic Policy Guidelines in 2004, with a two-year horizon for 2004-5. Country chapters for the new member states will be added, and they will be included for the first time in the implementation report on the BEPGs in January 2005. The new member states are invited to submit their first Convergence Programmes by 15 May 2004. For an explanation of the EMU, see

http://europa.eu.int/scadplus/leg/en/cig/g4000e.htm#e1

Enlargement for EEA too

After difficult and intense discussions since the beginning of the year, agreement was finally reached last week on the negotiations to enlarge the European Economic Area. The ten acceding states are obliged to join the 18-nation EEA an expanded single market, which currently consists of the EU15, Iceland, Norway and Liechtenstein. But what should have been a relatively simple technical exercise of adjusting trade agreements ran into problems when the EU also sought a more significant financial contribution from Iceland, Norway and Liechtenstein as a gesture of solidarity as the EU (and the EEA) takes on many much less prosperous member states. The EU wanted help from its richer EEA partners "to alleviate structural and social disparities in the enlarged internal market". Future trade in marine products was another key element in the negotiations.

In the end, Iceland, Norway and Liechtenstein will contribute €600 million over five years to the EEA financial mechanism for the alleviation of social and economic disparities in the ten new member states and in Portugal, Spain and Greece. The money will be made available for projects in the environment, improved resource use and management, cultural heritage, human resource management and health and child care.

The new money will be distributed according to a scale based on wealth and population, as follows: Greece: 5.71%, Spain 7.64%, Portugal 5.22%, Cyprus 0.21%, Czech Republic 8.09%, Estonia 1.68%, Hungary 10.13%, Lithuania 4.50%, Latvia 3.29%, Malta 0.32%, Poland 46.80%, Slovenia 1.02%, and Slovakia 5.39%.

In addition, Norway will provide a further €567 million over five years through a bilateral financial instrument, which will be closely co-ordinated with the EEA financial mechanism, but with emphasis on facilitating the integration of the new member states in the internal market. This money will be distributed on the same basis as the agreements already reached on EU accession negotiations on the Cohesion Fund: Cyprus 0.6%, Czech Republic 11%, Estonia 4%, Hungary 13.1%, Lithuania 7.1%, Latvia 6%, Malta 0.3%, Poland 49%, Slovenia 2.2%, and Slovakia 6.7%.

Iceland and Norway have won new EU quotas for marine products that are vital for their economies, linked to the deals they have at present with the acceding states. According to the EU "substantial" quotas for frozen herring, mackerel and shrimps have been accepted, "allowing for the continuation of these trade patterns". Some of the new member states and notably Poland had been demanding a deal that would help their fish processing industries.

The deal also covers transition periods, agricultural products, processed agricultural products, and Liechtenstein's special arrangement on the free movement of persons.

Legal instruments are it is hoped to be initialled by the end of June, and formally signed in July. This should allow for the necessary ratification in the current and new member states so that they can enter into force at the same time as the EU Accession Treaty, in May next year.

European External Relations Commissioner Chris Patten said: "I am very pleased that we have been able to reach a mutually satisfactory result within the necessary timeframe. The overall outcome of the negotiations is well balanced, and I would like to thank all parties for their flexible and constructive approach to the difficult issues at hand. I am very encouraged that the EEA-EFTA countries, and Norway in particular, are taking on a more substantial share of our efforts to reduce social and economic disparities in the enlarged internal market. This will contribute to realise the full potential of the enlarged single market and be to the benefit of us all".

Norwegian press coverage of the deal pointed out that Norway would now be paying ten times what it was paying before for membership of the EEA and still without any real influence on the decisions taken there. "After enlargement, Norway will give a net subsidy to the EU which is in line with the average for countries who have full membership. This is much more of a political than an economic problem. In particular, the fact that we will now contribute such a large sum without having any opportunity to influence the EU's political development should give Norwegian EU opponents something to think about", commented Aftenposten.