               EUROPEAN COMMISSION
            Brussels, 19.11.2020
            COM(2020) 743 final
            Recommendation for a
            COUNCIL DECISION
            authorising the opening of negotiations for Agreements between the European Union and Algeria, Armenia, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Turkey on cooperation between the European Union Agency for Criminal Justice Cooperation (Eurojust) and the competent authorities for judicial cooperation in criminal matters of those third States

               EXPLANATORY MEMORANDUM

               1.CONTEXT OF THE RECOMMENDATION

               In a globalised world where serious crime and terrorism are increasingly transnational and polyvalent, law enforcement and judicial authorities should be fully equipped to cooperate with external partners to ensure the security of their citizens. Eurojust should therefore be able to cooperate and exchange personal data with the judicial authorities of third countries to the extent necessary for the accomplishment of its tasks. At the current time, Eurojust has cooperation agreements which allow for exchanges of personal data in place with Montenegro, Ukraine, Moldova, Liechtenstein, Switzerland, North Macedonia, the USA, Iceland, Norway, Georgia, Albania and Serbia. Under Article 80(5) of Regulation 2018/1727
                  1
                (the Eurojust Regulation) these cooperation agreements remain valid.

               Since the entry into application of the Eurojust Regulation on 12 December 2019 and pursuant to the Treaty, the Commission is responsible, on behalf of the Union, for negotiating international agreements with third countries for the cooperation with and exchange of personal data with Eurojust. In so far as necessary for the performance of its tasks, in line with Chapter V of the Eurojust Regulation, Eurojust may establish and maintain cooperative relations with external partners through working arrangements. However, these cannot by themselves be a legal basis for the exchange of personal data.

               Taking into account the political strategy, the operational needs of judicial authorities across the EU, and the potential benefits of closer cooperation in this area, the Commission considers it necessary to start negotiations in the short-term with ten third countries to regulate the way Eurojust can cooperate with these.

               The Commission has made its assessment of priority countries taking into account Eurojust's operational needs. The draft Eurojust external relations strategy submitted to the Commission for review indicates that Eurojust has identified that there is a particular operational need for cooperation with the People’s Democratic Republic of Algeria, the Republic of Argentina, Bosnia and Herzegovina, the Republic of Colombia, the Arab Republic of Egypt, the State of Israel, the Hashemite Kingdom of Jordan, the Republic of Lebanon, the Kingdom of Morocco, the Republic of Tunisia and the Republic of Turkey. Other priority third States identified by Eurojust include the Federative Republic of Brazil, the People’s Republic of China, Canada, the United Arab Emirates, the federal Republic of Nigeria, the Republic of Panama, the United Mexican States and the Russian Federation.

               While the Commission recognises these operational needs, it is clear that they are not identical in terms of intensity. The current level of cooperation depends on various factors, such as the availability of a Eurojust Contact Point in the country concerned. Given resource constraints it is not possible for the Commission to enter into negotiations with all these third States at the same time – a further prioritisation is considered necessary. For the Commission the first priority should be to enhance cooperation with candidate countries and potential candidates, as these third States should be best prepared for high-level judicial cooperation in criminal matters as a matter of EU acquis. The Commission’s view regarding Bosnia and Herzegovina and Turkey was set out in the Commission’s 2020 Regular Reports
                  2
               . In both cases, the conclusion of an international agreement, allowing for the exchange of personal data with Eurojust, is subject to both countries making the necessary amendments to their relevant data protection laws.

               The second priority should be to enhance cooperation with other third countries which have not applied for Union membership but have a potentially high security impact on Europe for geographical reasons, such as countries in the Middle East and North African Region. As indicated above, the countries in this Region are all top priority third countries for Eurojust for operational reasons. This choice is also in line with the Global Strategy for the European Union’s Foreign and Security policy.
                  3

               A third priority should be to ensure as much as possible consistency in JHA agencies’ relations with third countries, in particular between Europol and Eurojust, thus ensuring possible follow-up between law enforcement and judicial cooperation. At the current time, the Commission - on behalf of Europol - seeks to conclude agreements with 8 out of the 10 of the above countries. The Commission considers it worthwhile, as far as possible and feasible, to strive towards having both Eurojust and Europol included in these future negotiations, which might also make them more attractive to the third countries concerned.

               Against this background, the Commission therefore recommends to the Council that as a first step, the Commission should be given a mandate to negotiate with the following third States: Armenia, Algeria, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Turkey. Armenia recently indicated its desire to Eurojust to enter into cooperative relations with it.

               Political context

               Armenia

               Armenia is an important partner of the EU within the Eastern Partnership, strategically located in the Southern Caucasus. In 2017 it signed a Comprehensive and Enhanced Partnership Agreement with the EU, which includes legislative approximation in important sectors such as environment, energy, transport and consumer protection. Armenia and the EU signed a Visa Facilitation Agreement in 2012 and a Readmission Agreement in 2013. After a peaceful democratic revolution in 2018, Armenia set on a reform course to improve rule of law and living standards, including judicial reform and fight against corruption. The new government stressed the common values with the EU and termed the agreement with the EU as a blueprint for domestic reform. Armenia is a member of the Russia-led Eurasian Economic Union and Collective Security Treaty Organisation. The EU supports the implementation of the justice and anti-corruption reforms with the EU-Armenia justice policy dialogue. As a result reform strategies were adopted in 2019 in line with European standards. A programme amounting to EUR 30 million under the 2020 budget allocation will support their implementation.

               Algeria

               Algeria is a partner of strategic importance to the EU, due to both its position in the Maghreb area and the role it plays at regional level and in the African Union. From a strategic point of view, Algeria is a focal point in the Mediterranean and a key actor for the stabilisation of the Sahara-Sahel region. The country is very active in the fight against terrorism within its territory.

               The EU-Algeria partnership priorities adopted in March 2017 include migration and security among the identified priorities. In October 2017, the EU and Algeria established a high-level informal dialogue on counter-terrorism and regional security, expressing their willingness to strengthen bilateral cooperation in the field of security and the fight against terrorism. In particular, the following critical areas with high potential of cooperation have been identified: de-radicalisation; cooperation between Europol and Algeria; the fight against organised crime, including illicit trafficking of firearms and cybercrime; counter-terrorist financing; and forensic investigations.

               Algeria and the EU are members of the Global Counter Terrorism Forum. One of the EU-funded regional Centres of Excellence on Chemical, Biological, Radiological and Nuclear Risk Mitigation (CBRN CoE)is hosted in Algiers.

               Bosnia and Herzegovina

               Bosnia and Herzegovina is a key partner for the European Union. Along with other Western Balkans countries, Bosnia and Herzegovina was identified as a potential candidate for EU membership during the Thessaloniki European Council summit in June 2003.

               In February 2016, Bosnia and Herzegovina applied for EU membership and in September 2016 the European Council invited the European Commission to submit its opinion on the merits of Bosnia and Herzegovina's application. In May 2019, the Commission adopted its Opinion and accompanying analytical report on Bosnia and Herzegovina’s EU membership application.
                  4
                The Opinion identifies 14 key priorities for Bosnia and Herzegovina to fulfil in order to be recommended for the opening of accession negotiations, in the areas of democracy/functionality, the rule of law, fundamental rights, and public administration reform.

               Bosnia and Herzegovina signed the Joint EU-Western Balkans Action Plan on Counter-Terrorism in 2018, which sets out concrete steps for enhanced cooperation in countering terrorism and preventing radicalisation over the next two years.
                  5
                In this context, a policy dialogue on counter-terrorism between the EU and Bosnia and Herzegovina takes place regularly. It focusses on the implementation of the strategic framework and internal coordination – in particular on the prevention of violent extremism, appropriate sentencing for foreign terrorist fighters and their subsequent social re-integration, on arms trafficking, border control, terrorism financing, and regional and international cooperation on the full implementation of the agreement with Europol as well as the conclusion of an agreement with Eurojust.

               Bosnia and Herzegovina first established contact points for Eurojust in 2014 to initiate negotiations for the conclusion of a cooperation agreement. Later an expert group for preparation of work in the pre-negotiation phase of the cooperation agreement was also established. In April 2020, after the entry into force of the new Eurojust regulation in December 2019, the Bosnian authorities sent a letter to Eurojust, expressing its intention to initiate the formalisation of their cooperation through a working arrangement.

               Egypt

               Egypt is an important partner for the EU, and could play a central role in promoting peace, prosperity and stability in the Southern Neighbourhood region. The general framework for cooperation between the EU and Egypt is provided by the Association Agreement in force since 2004. The jointly agreed EU-Egypt Partnership Priorities 2017-2020 identify the main areas of cooperation. These include: 1) developing a sustainable and modern economy and social development for Egypt; 2) reinforcing cooperation in foreign policy; 3) enhancing cooperation in the stabilisation process, notably in the fields of good governance, human rights, security and migration
                  6
               .

               The Partnership Priorities refer to possible development of judicial cooperation on criminal and civil matters. At the 7th meeting of the Subcommittee on Justice and Security in November 2019 the two sides conducted a comprehensive dialogue covering several issues of mutual interest in particular, judicial cooperation, combating terrorism, and the fight against drugs and organised crime
                  7
               . At the 2nd meeting of the EU-Egypt Migration Dialogue in July 2019, Eurojust has identified migrant smuggling as a potential area of engagement with Egypt’s judicial and law enforcement authorities.

               The EU recognises Egypt's key role for regional security and stability, managing migration and efforts to counter terrorism and recalls the need to tackle it in full respect of international human rights law. At the UN Human Rights Council on 10 March 2020, the EU recalled the importance of the respect of online and offline freedom of expression, media, peaceful assembly and association in Egypt and the need to stop unduly restricting space for civil society, including through assets freezes, travel bans and long periods of pre-trial detention
                  8
               .

               Israel

               The legal framework for EU-Israel relations is provided by the EU-Israel Association Agreement
                  9
               , which has been in force since 2000. The EU-Israel Action plan, which covers all areas of cooperation, dates back to 2005 and a unanimous Council decision renewed it at the end of 2018.
                  10

               Both the EU and Israel consider a priority to counter security threats and, in their dialogue, express a mutual interest in an effective cooperation. One important area of cooperation is counter-terrorism: three EU-Israel Counter Terrorism and Security Dialogue already took place respectively in March 2015, September 2016 and June 2018. In those meetings, parties agreed to cooperate in areas such as countering violent extremism, terrorism financing, non-conventional terrorism, aviation and transport security as well as cybercrime.

               Israeli expressed interest in enhancing cooperation with EU agencies in the field of justice and home affairs. The EU and Israel discuss Judicial Cooperation in Civil and Criminal Matters in the framework of the yearly Subcommittee on Justice and Home Affairs. The last one took place in December 2019.

               Israel is part of the four-year Cooperation Strategy, which Eurojust put together taking into account operational needs of the Agency. In its dialogue with the EU, Israel reiterated the view that the Eurojust network serves as a very important tool.

               In accordance with Council Conclusions of 2012
                  11
               , in all agreements signed with Israel a “territorial clause” is to be inserted, which explicitly limits the scope of application to Israel itself and excludes the occupied territories: "All agreements between the State of Israel and the EU must unequivocally and explicitly indicate their inapplicability to the territories occupied by Israel in 1967".
                  12

               Jordan

               Jordan is a key partner for the EU in particular for its role in promoting stability, moderation and inter-faith tolerance in the Middle East. Jordan is facing difficult economic, social and security challenges. In particular, Jordan is hosting more than 650,000 registered Syrian refugees (around 10% of the Jordanian population before the Syria crisis), as well as other refugee populations.

               The EU and Jordan have a strong partnership across many sectors and have been linked by an Association Agreement since 2002 (advanced status since 2010).

               The EU and Jordan adopted in December 2016 the EU-Jordan Partnership Priorities, as policy framework valid until 31 December 2020, and the EU-Jordan Compact 2016-2018.
                  13
                Through the Partnership Priorities, the EU and Jordan have confirmed the ambition and advanced to strengthen the cooperation on three main pillars of mutual interest: 1) Foreign and security policy, including the fight against terrorism and preventing violent extremism; 2) The economic domain, to sustain Jordan’s macro-economic stability and enhance its social and economic development; 3) Strengthening governance, the rule of law, democratic reform and human rights. The EU-Jordan subcommittee meeting on Justice and Security held on 15 February 2018 in Amman provided an opportunity to further discuss possibilities to enhance the EU-Jordan judicial cooperation.

               The EU-Jordan Compact includes mutual commitments through which both sides fulfil the pledges made in February 2016 at the London conference on supporting Syria and the region. These commitments were reinforced at the Brussels Conference on Supporting the Future of Syria and the Region on 5th April 2017, including in view of strengthening Jordan's resilience in light of the impact of the Syria's crisis.
                  14

               Jordan remains a key partner for the EU in the Middle East and it is important that Jordan continues to play a constructive role in the stability of the region. The country is under persistent multiple pressures, including of regional, economic and social nature. It has been hosting large numbers of Syrian refugees for a protracted period. The COVID-19 pandemic has added important pressure on the health sector and poses further significant socio-economic challenges.

               Lebanon

               The EU and Lebanon face common challenges linked to protracted crises and instability in the region. The EU-Lebanon partnership is strong and encompasses many sectors, as set out in the Association Agreement in force since 2006.
                  15
                Lebanon is confronted by serious political, economic, social and security challenges, in particular an unprecedented economic and financial crisis aggravated by the impact of the COVID-19 pandemic. Adding to systemic weaknesses, the nine-year old conflict in Syria continues to put pressure on Lebanon’s institutions and infrastructure and adversely affect its socio-economic stability. Lebanon hosts more than one million registered Syrian refugees in addition to the approximately 300,000 Palestinian refugees that were already present and is therefore the country with the highest per capita ratio of refugees in the world.

               In 2016, the EU and Lebanon also signed a Compact containing mutual commitments and priority actions to improve the living conditions of both Syrian refugees and host communities, in line with the Statement of Intent made at the 2016 London Conference.
                  16
                The renewed commitments given at the successive Brussels Conferences (2017 to 2020) on Supporting the Future of Syria and the Region reinforced these shared responsibilities in addressing the impact of the Syrian crisis. The EU and Lebanon enjoy a strong partnership, cooperating across many sectors, as defined by the Association Agreement. On 11 November 2016, the EU and Lebanon adopted the Partnership Priorities setting a policy framework for the years 2016-2020.
                  17

               The Partnership Priorities expressed commitment to furher deepen ties building on three main pillars of mutual interest and challenges: 1) Security and counter terrorism; 2) Governance and rule of law; 3) Fostering growth and job opportunities. The EU-Lebanon Security and Justice cluster meeting held on 3 October 2018 in Beirut recalled the importance of the security and juctice issues as integral to the EU-Lebanon partnership. It was agreeed to further judicial cooperation, also exploring possibilitities to strengthen cooperation with Eurojust to this end.

               Lebanon faces at present severe socioeconomic challenges, which are exacerbated by the Syrian conflict and the COVID-19 pandemic.

               Morocco

               Morocco is a key neighbour and EU partner. In an increasingly volatile regional context, it is an element of stability in the Maghreb and potentially a bridge between Europe and sub-Saharan Africa. For more than fifty years, the EU and the Kingdom of Morocco have built a long-term partnership, underpinned by a number of political and economic agreements. In 1996 Morocco and the EU signed an Euro-Mediterranean Association Agreement, which entered into force in 2000.
                  18
                They boosted bilateral relations in a number of areas, including political and security cooperation, economic and financial relations, and social and human relations. In addition, Morocco has benefited from an Advanced Status with the European neighbourhood policy since 2008. The 2013-2017 Action Plan for the implementation of the Advanced Status, which was extended in 2018 and 2019, covers a wide array of cooperation areas, including cooperation on matters of justice and home affairs such as the fight against organised criminal networks, border management or judicial and police cooperation.

               Following a slowdown in bilateral relations resulting from the judgement of the European Court of Justice of December 2015
                  19
                on the geographic scope of application of the Association Agreement, the EU and Morocco renegotiated the concerned legal instruments in light of the case law of the Court and agreed to relaunch their partnership in early 2019. This relaunch was officially endorsed during the 14th meeting of the Association Council, on 27 June 2019, during which an ambitious Joint Political Declaration was adopted.
                  20
                The Joint Declarations sets out a number of key areas where Morocco and the EU intend to enhance their cooperation in the coming years. These include specifically four strategic areas: values; economy and social cohesion; knowledge; security; and two key horizontal axes (mobility/migration and climate/environment).

               The relaunch of the relations has also allowed for the resumption of the dialogue structures stemming from the Association Agreement, whose sub-committees notably include dialogue in a vast array of areas, such as justice and security or political cooperation. Simultaneously, operational cooperation in fields related to security and border management, including the fight against migrant smuggling, trafficking in human beings and other criminal networks, has been greatly enhanced. Moreover, Morocco has developed close bilateral Counter-Terrorism cooperation with EU Member States. Morocco is a member of the Global Coalition against Daesh and since 2016 co-chairs the Global Counter Terrorism Forum. Morocco also hosts one of the EU-funded regional CBRN Centres of Excellence.

               Tunisia

               Tunisia is a major partner for the EU, an example of democratic transition and a pillar of stability in the region. EU-Tunisia relations date back to 1976 and gained significant momentum when Tunisia and the EU signed an Association Agreement in 1995, establishing closer ties across all sectors of cooperation.
                  21
                Following the 2011 revolution, the EU and Tunisia concluded a Privileged Partnership (2012), comprising enhanced economic and trade integration and a Mobility Partnership.
                  22
                Since 2011, the EU has substantially supported Tunisia, politically and financially doubling its financial assistance, thus making Tunisia one of the first beneficiaries of EU support per capita. The EU strongly supports the consolidation of the democratic transition in Tunisia and the implementation of relevant pending political and economic reforms.

               The security situation remains however delicate, in particular as a result of the unstable regional environment. The EU has committed to strengthening the implementation of its extensive cooperation with Tunisia in the security sector, in the fight against terrorism and in preventing violent radicalisation and extremism, including by strengthening Tunisia's cooperation with relevant EU agencies and bodies, in particular Europol. Two operational/strategic partnerships have been developed in recent years, the former between the Tunisian Garde Nationale and the European Gendarmerie Force (EGF) on counter-terrorism capabilities; the latter between the Police Academy of Carthage Salamboand and the EU Agency for Law Enforcement Training (CEPOL).

               Organised migrant smuggling activity has increased since 2017. Pursuing legal proceedings against smugglers/traffickers is critical and the EU stays committed to offer specialist support from Eurojust and Europol. To this end information and analysis sharing remains important. Moreover, cooperation with regard to document fraud, a crime area linked to migrant smuggling, is a sector where enhanced cooperation would also be greatly beneficial.

               Turkey

               Turkey is a key partner for the European Union. In December 1999 the European Council granted the status of candidate country to Turkey and accession negotiations were launched in October 2005.
                  23

               At the EU-Turkey Summit held on 29 November 2015 it was agreed to expand and intensify the political dialogue across all areas, including foreign and security policy, migration and counter terrorism.
                  24
                Turkey and the EU have reiterated their commitment to tackle the threat posed by Daesh, as well as the threat which continues to be posed by the PKK
                  25
               . The EU-Turkey Statement agreed on 18 March 2016 addressed the migration crisis.
                  26
                On 9 March 2020 the Presidents of the European Council and Commission met with the President of Turkey agreed to strenghen the implementation of the EU-Tukey Statement.
                  27

               Deepening cooperation with Eurojust is relevant in the context of fulfilling all remaining requirements under the Visa Liberalisation Roadmap. The European Union launched the Visa Liberalisation Dialogue with Turkey on 16 December 2013. The Visa Liberalisation Dialogue is based on a Roadmap setting out the requirements that Turkey needs to meet in order to be put on the visa-free list.

               In the interim, Turkey and Eurojust have established contact points to facilitate the exchange of non-sensitive information. The Turkish contact points also take part in the meetings of the European Judicial Network. Eurojust and the Turkish authorities have exchanged letters on further practical cooperation. The Turkish authorities wrote to Eurojust on 2 May 2016 to formally reaffirm their intention to conclude a cooperation agreement as soon as possible and to step up practical cooperation in the meantime. It will be of crucial importance that the Turkish contact points swiftly reply and follow up on requests for information and cooperation sent to them via Eurojust and to participate in strategic meetings on organised crime and terrorism. Eurojust replied to the Turkish authorities on 3 May 2016 to invite Turkey to the Eurojust tactical meeting on terrorism and further proposed the active participation of Turkish judges and prosecutors in Eurojust's events on enhanced cooperation in criminal justice issues and to share information and best practice. Talks did not progress in recent years but contacts were re-established in 2019.

               2.LEGAL ELEMENTS OF THE RECOMMENDATION

               Regulation (EU) 2018/1727 on the European Union Agency for Criminal Justice Cooperation (Eurojust) sets out a legal framework for Eurojust, in particular its objectives, tasks, scope of competence, data protection provisions and ways to cooperate with external partners.

               This Recommendation is consistent with the provisions of the Eurojust Regulation.

               The objective of this recommendation is to obtain from the Council the authorisation for the Commission to negotiate the future agreements on behalf of the EU. The legal basis for the Council to authorise the opening of negotiations is Article 218(3) and (4) TFEU.

               In line with Article 218 of Treaty on the Functioning of the European Union, the Commission shall be nominated as the Union negotiator for the agreements between the European Union and the third countries identified in this Recommendation on the cooperation between the European Union Agency for Criminal Justice Cooperation (Eurojust) and the competent authorities for judicial cooperation in criminal matters in those third countries.

               Recommendation for a

               COUNCIL DECISION

               authorising the opening of negotiations for Agreements between the European Union and Algeria, Armenia, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Turkey on cooperation between the European Union Agency for Criminal Justice Cooperation (Eurojust) and the competent authorities for judicial cooperation in criminal matters of those third States

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union (TFEU), and in particular Article 218(3) and (4) thereof,

               Having regard to the recommendation from the European Commission,

               Whereas:

               (1)Regulation (EU) 2018/1727 of the European Parliament and of the Council
                  28
                was adopted on 14 November 2019 and is applicable as of 12 December 2019.

               (2)This Regulation, in particular its Article 56, sets out the general principles for the transfer of personal data from the European Union Agency for Criminal Justice Cooperation (Eurojust) to third countries and international organisations. Eurojust may transfer personal data to a third country on the basis of an international agreement concluded between the Union and that third country pursuant to Article 218 TFEU that provides for adequate safeguards with respect to the protection of privacy and fundamental rights and freedoms of individuals.

               (3)Negotiations should be opened with a view to concluding such Agreements between the European Union and Algeria, Armenia, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Turkey.

               (4)Where necessary, the Commission should be able to consult the European Data Protection Supervisor (EDPS) also during the negotiation of the Agreements and in any event, before the Agreements are concluded.

               (5)The Agreements should respect the fundamental rights and observe the principles recognised by the Charter of Fundamental Rights of the European Union, in particular the right to private and family life, recognised in Article 7 of the Charter, the right to the protection of personal data, recognised in Article 8 of the Charter and the right to an effective remedy and fair trial recognised in Article 47 of the Charter. The Agreements should be applied in accordance with those rights and principles.

               (6)The Agreements should not affect, and should be without prejudice to the transfer of personal data or other forms of cooperation between the authorities responsible for safeguarding national security.

               (7)Ireland is bound by Regulation (EU) 2018/1727 and therefore takes part in the adoption of this Decision.

               (8)In accordance with Articles 1 and 2 of Protocol No. 22 on the position of Denmark, annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, Denmark is not taking part of the adoption this Decision and is not bound by it or subject to its application.

               (9)The EDPS and European Data Protection Board have been consulted on this Decision and the Annex thereto and issued an opinion on (date).

               HAS ADOPTED THIS DECISION:

               Article 1

               (1)The Commission is hereby authorised to open negotiations for Agreements between the European Union and Algeria, Armenia, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Turkey on cooperation between the European Union Agency for Criminal Justice Cooperation (Eurojust) and the competent authorities for judicial cooperation in criminal matters of those third States.

               (2)The negotiations shall be conducted on the basis of the negotiation directives of the Council set out in the Annex to this Decision.

               Article 2

               The Commission is hereby nominated as the Union negotiator.

               Article 3

               The negotiations shall be conducted in consultation with the relevant Council Working Party and in accordance with the directives contained in the Annex, subject to any directives which the Council may subsequently issue to the Commission.

               The Commission shall regularly report to the Council Working Party on the progress of the negotiations and shall forward all negotiating documents to it without delay.

               Article 4

               This Decision is addressed to the Commission.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        Regulation (EU) 2018/1727 of 14 November 2018, OJ L 295, p. 138, 21.11.2018.

                     (2)

                        Brussels, 6.10.2020  COM(2020) 660 final 2020 Communication on EU enlargement policy.

                     (3)

                  https://eeas.europa.eu/sites/eeas/files/eugs_review_web_0.pdf

                     (4)

                        https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/20190529-bosnia-and-herzegovina-opinion.pdf

                     (5)

                        https://ec.europa.eu/home-affairs/sites/homeaffairs/files/news/docs/20181005_joint-action-plan-counter-terrorism-western-balkans.pdf

                     (6)

                  https://www.consilium.europa.eu/media/23942/eu-egypt.pdf

                     (7)

                     https://eeas.europa.eu/delegations/egypt/71267/eu-egypt-stability-and-social-development-7th-cluster-meeting_en

                     (8)

                  https://eeas.europa.eu/delegations/un-geneva/75884/hrc43-item-4-human-rights-situations-require-councils-attention-eu-statement_en

                     (9)

                        http://www.eeas.europa.eu/archives/delegations/israel/documents/eu_israel/asso_agree_en.pdf

                     (10)

                        https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019D0105&from=EN

                     (11)

                        https://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/foraff/130195.pdf

                     (12)

                        https://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/EN/foraff/134152.pdf

                     (13)

                        https://data.consilium.europa.eu/doc/document/ST-12384-2016-ADD-1/en/pdf

                     (14)

                        https://www.consilium.europa.eu/en/press/press-releases/2017/04/05/syria-conference-co-chairs-declaration/

                     (15)

                        https://ec.europa.eu/neighbourhood-enlargement/neighbourhood/countries/lebanon_en#:~:text=The%20partnership%20between%20the%20European,and%20economically%20strong%20neighbouring%20country.

                     (16)

                        http://www.businessnews.com.lb/download/LondonConferenceLebanonStatementOfIntent4Feb2016.pdf

                     (17)

                        https://www.consilium.europa.eu/en/press/press-releases/2016/11/15/eu-lebanon-partnership/

                     (18)

                        https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:22000A0318(01)&from=EN

                     (19)

                        http://curia.europa.eu/juris/document/document.jsf?docid=172870&doclang=EN

                     (20)

                        https://www.consilium.europa.eu/en/press/press-releases/2019/06/27/joint-declaration-by-the-european-union-and-the-kingdom-of-morocco-for-the-fourteenth-meeting-of-the-association-council/

                     (21)

                        https://eur-lex.europa.eu/resource.html?uri=cellar:d3eef257-9b3f-4adb-a4ed-941203546998.0008.02/DOC_4&format=PDF

                     (22)

                        https://eeas.europa.eu/sites/eeas/files/plan_action_tunisie_ue_2013_2017_fr_0.pdf

                     (23)

                        https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/ACFA4C.htm

                     (24)

                        https://www.consilium.europa.eu/en/press/press-releases/2015/11/29/eu-turkey-meeting-statement/

                     (25)

                        Kurdistan Workers' Party (in Kurdish: Partiya Karkerên Kurdistanê).

                     (26)

                        https://www.consilium.europa.eu/en/press/press-releases/2016/03/18/eu-turkey-statement/

                     (27)

                        https://www.consilium.europa.eu/en/meetings/international-summit/2020/03/09/

                     (28)

                        Regulation (EU) 2018/1727 of the European Parliament and of the Council of 14 November 2018 on the European Union Agency for Criminal Justice Cooperation (Eurojust), and replacing and repealing Council Decision 2002/187/JHA (OJ L 295, 21.11.2018, p. 138).

    ---documentbreak---

               EUROPEAN COMMISSION
            Brussels, 19.11.2020
            COM(2020) 743 final
            ANNEX
            to the
            Recommendation for aCOUNCIL DECISION
            authorising the opening of negotiations for Agreements between the European Union and Algeria, Armenia, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Turkey on cooperation between the European Union Agency for Criminal Justice Cooperation (Eurojust) and the competent authorities for judicial cooperation in criminal matters of those third States

               ANNEX

               Directive for the negotiation of Agreements between the European Union and Algeria, Armenia, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia and Turkey on cooperation between the European Union Agency for Criminal Justice Cooperation (Eurojust) and the competent authorities for judicial cooperation in criminal matters of those third States for judicial cooperation in criminal matters

               In the course of the negotiations the Commission should aim to achieve the objectives set out in detail below.

               (1)The objective of the Agreements shall be to provide the legal basis for the cooperation between Eurojust and the competent authorities of the third countries concerned respectively, including the exchange of operational personal data, in order to support and strengthen the action by the competent authorities of these countries and the Member States as well as their mutual cooperation in preventing and combating the forms of crime for which Eurojust is competent in accordance with the Eurojust Regulation, while ensuring appropriate safeguards with respect to the protection of privacy, personal data and the fundamental rights and freedoms of individuals.

               (2)To guarantee purpose limitation, cooperation and exchange of personal data under the Agreements shall only relate to crimes and related offences falling within Eurojust’s competence in accordance with Article 3 of Regulation 2018/1727 (together “criminal offences”). In particular, cooperation should be aimed at preventing and combating terrorism, disrupting organised crime, notably illicit trafficking of firearms, drug trafficking and migrant smuggling, and fighting cybercrime. The Agreements shall specify their scope and the purposes for which Eurojust may transfer data to the competent authorities of the third countries concerned.

               (3)The Agreements shall spell out clearly and precisely the necessary safeguards and controls with respect to the protection of personal data, fundamental rights and freedoms of individuals, irrespective of nationality and place of residence, in the exchange of personal data between Eurojust and the competent authorities of the third countries involved. In addition to the safeguards set out below, these shall include requiring that the transfer of personal data will be subject to confidentiality obligations and that the personal data will not be used to request, hand down or execute a death penalty or any form of cruel and inhuman treatment, without prejudice to additional safeguards that may be required.

               In particular:

               (a)The Agreements shall contain definitions of key terms, including a definition of personal data compliant with Article 3(1) of Directive (EU) 2016/680.

               (b)The Agreements shall respect the principle of specificity, ensuring that the data will not be processed for other purpose than for the purposes of the transfer. To this end, the purposes of the processing of personal data by the Parties in the context of the Agreements shall be spelt out clearly and precisely, and shall be no wider than what is necessary in individual cases for the purpose of preventing and combating the criminal offences to which the Agreements relate.

               (c)Personal data transferred by Eurojust in accordance with the Agreements shall be processed fairly, on a legitimate basis and only for the purposes for which they have been transferred. The Agreements shall provide the obligation for Eurojust to indicate, at the moment of transferring the data, any restrictions on access of use, including as regards its transfer, erasure, destruction or further processing. The Agreements shall oblige the competent authorities of the third countries concerned to respect these restrictions and specify how compliance with these restrictions will be enforced in practice. Personal data shall be adequate, relevant and limited to what is necessary in relation to that purpose. It shall be accurate and kept up to date. It shall not be retained for longer than is necessary for the purposes for which it has been transferred. The Agreements shall provide for the periodic review of the need for further retention of the transferred personal data. The Agreements shall be accompanied by an annex containing an exhaustive list of the competent authorities of the third States concerned to which Eurojust may transfer data as well as a short description of their competences.

               (d)The transfer of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade-union membership, genetic data and data concerning a person’s health and sex life by Eurojust shall be prohibited, unless it is strictly necessary and proportionate in individual cases for preventing or combating criminal offences covered by the Agreements and subject to appropriate safeguards. The Agreements should also contain specific safeguards relating to the transfer of personal data on victims of criminal offences, witnesses or other persons who can provide information concerning criminal offences, as well as minors.

               (e)The Agreements shall ensure enforceable rights of individuals whose personal data are processed by laying down rules on the right of access, rectification and erasure, including the specific grounds which may allow any necessary and proportionate restrictions. The Agreements shall also ensure enforceable rights of administrative and judicial redress for any person whose data are processed under the Agreements and guaranteeing effective remedies.

               (f)The Agreements shall lay down the rules on storage, review, correction and deletion of personal data as well as on keeping records for the purposes of logging and documentation as well as on information to be made available to individuals. They should also provide for safeguards in respect to automated processing of personal data. The Agreements should also specify the criteria on the basis of which the accuracy of the data should be assessed.

               (g)The Agreements shall include the obligation to ensure the security of personal data through appropriate technical and organisational measures, including by allowing only authorised persons to have access to personal data. The Agreements shall also include the obligation of notification in the event of a personal data breach affecting data transferred under the Agreement.

               (h)Onwards transfers of information from the competent authorities of the third countries concerned to other authorities within their own country, including for use in judicial procedures, shall only be allow for the original purposes of the transfer by Eurojust and shall be made subject to appropriate conditions and safeguards, including prior authorisation by Eurojust.

               (i)The same conditions as indicated under point (h) shall apply to onward transfers of information from the competent authorities of the third country concerned to authorities in another third country, with the additional requirement that such onward transfers shall be allowed only with to third countries to which Eurojust is entitled to transfer personal data on the basis of Article 56(2) of Regulation 2018/1727.

               (j)The Agreements shall ensure a system of oversight by one or more independent public authorities responsible for data protection with effective powers of investigation and intervention to exercise oversight over the public authorities of the third countries concerned that use personal data and other information exchanged under the Agreements, and to engage in legal proceedings. In particular, the independent authorities shall have the powers to hear complaints from individuals about the use of their personal data. Public authorities that use personal data shall be accountable for complying with the rules on the protection of personal data under the Agreement.

               (4)The Agreements shall provide for an effective dispute settlement mechanism with respect to its interpretation and application to ensure that the parties observe mutually agreed rules.

               (5)The Agreements shall include provisions on the monitoring and periodic evaluation of the Agreements.

               (6)The Agreements shall include a provision on their entry into force and validity and a provision whereby a Party may terminate or suspend it, in particular where the third country concerned no longer effectively ensures the level of protection of fundamental rights and freedoms required under the Agreement. The Agreements shall also specify whether personal data falling within its scope and transferred prior to its suspension or termination may continue to be processed. Continued processing of personal data, if permitted, shall in any case be in accordance with the provisions of the Agreement at the time of suspension or termination.

               (7)The Agreements may include a clause addressing its territorial application, if necessary.

               (8)The Agreements shall be equally authentic in the Bulgarian, Czech, Croatian, Danish, Dutch, English, Estonian, Finnish, French, German, Greek, Hungarian, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slovak, Slovenian, Spanish and Swedish languages and shall include a language clause to that effect.


               EUROPEAN COMMISSION
            Brussels, 2.6.2021
            COM(2021) 514 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            delivering a Council opinion on the 2021 Stability Programme of Latvia
            {SWD(2021) 501 final}

               Recommendation for a

               COUNCIL RECOMMENDATION

               delivering a Council opinion on the 2021 Stability Programme of Latvia

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 5(2) thereof,

               Having regard to the Recommendation of the European Commission,

               Having regard to the resolutions of the European Parliament,

               After consulting the Economic and Financial Committee,

               Whereas:

               (1)On 20 March 2020, the Commission adopted a Communication on the activation of the general escape clause
                  2
                of the Stability and Growth Pact.
                  3
                In its Communication, the Commission set out its view that, given the expected severe economic downturn resulting from the COVID-19 outbreak, the conditions to activate the general escape clause were met. On 23 March 2020, the Ministers of Finance of the Member States agreed with the assessment of the Commission. The general escape clause has granted Member States budgetary flexibility to deal with the crisis. It has facilitated the coordination of budgetary policies in times of severe economic downturn. Its activation allows for a temporary departure from the adjustment path towards the medium-term budgetary objective of each Member State, provided this does not endanger fiscal sustainability in the medium term. On 17 September 2020, in its Annual Sustainable Growth Strategy, the Commission announced that the general escape clause would remain active in 2021.
                  4

               (2)On 20 July 2020, the Council recommended Latvia
                  5
                to take all necessary measures, in line with the general escape clause, to effectively address the pandemic, sustain the economy and support the ensuing recovery. It also recommended Latvia to pursue, when economic conditions allow, fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment.

               (3)The Council Recommendation on the economic policy of the euro area indicated that fiscal policies remain supportive in all euro area Member States throughout 2021 and that policy measures should be tailored to country-specific circumstances and be timely, temporary and targeted
                  6
               . When the epidemiological and economic conditions allow, emergency measures should be phased out, while combatting the social and labour-market impact of the crisis. Fiscal policies should be pursued that are aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. Member States should pursue reforms that strengthen the coverage, adequacy, and sustainability of health and social protection systems for all.

               (4)On 18 November 2020, the Commission adopted its Opinions on the 2021 Draft Budgetary Plans of the euro area Member States, which were based on a qualitative assessment of the fiscal measures. The Commission was of the opinion that the Draft Budgetary Plan of Latvia was overall in line with the fiscal policy recommendations adopted by the Council on 20 July 2020, and that most of the measures included in the plan supported economic activity against the background of considerable uncertainty.

               (5)Next Generation EU, including the Recovery and Resilience Facility, will ensure a sustainable, inclusive and fair recovery. Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility
                  7
                came into force on 19 February 2021. This Facility will provide financial support for the implementation of reforms and investment, entailing a fiscal impulse financed by the EU. It will contribute to the economic recovery, to the implementation of sustainable and growth-enhancing reforms and investment, notably to promote the green and digital transitions, and it will strengthen the economies’ resilience and potential growth. In turn, it will also help public finances to return to more favourable positions in the near term and will contribute to strengthening sustainable public finances, growth and job creation in the medium and long term.

               (6)On 3 March 2021, the Commission adopted a Communication providing further policy orientations to facilitate the coordination of fiscal policies and the preparation of Member States’ Stability and Convergence Programmes.
                  8
                The overall fiscal stance, taking into account national budgets and the Recovery and Resilience Facility, should remain supportive in 2021 and 2022. At the same time, given the expectation of economic activity gradually normalising in the second half of 2021, Member States’ fiscal policies should become more differentiated in 2022. Member States’ fiscal policies should take into account the state of the recovery, fiscal sustainability and the need to reduce economic, social and territorial divergences. In view of the need to support a sustainable recovery for the EU, Member States with low sustainability risks should gear their budgets towards maintaining a supportive fiscal policy in 2022, taking into account the impact of the Recovery and Resilience Facility. Member States with high debt levels should pursue prudent fiscal policies, while preserving nationally financed investment and making use of grants under the Recovery and Resilience Facility to fund additional high-quality investment projects and structural reforms. For the period beyond 2022, fiscal policies should continue to take into account the strength of the recovery, the degree of economic uncertainty and fiscal sustainability considerations. A refocusing of fiscal policies towards achieving prudent medium-term fiscal positions, including by phasing out support measures in due course, will contribute to ensuring fiscal sustainability in the medium term.

               (7)The Communication of 3 March 2021 also announced the Commission’s view that the decision on the deactivation or continued application of the general escape clause should be taken as an overall assessment of the state of the economy, with the level of economic activity in the EU or euro area compared to pre-crisis levels (end-2019) as key quantitative criterion. On the basis of the Commission’s 2021 spring forecast, on 2 June the Commission considered that the conditions to continue to apply the general escape clause in 2022 and to deactivate it as of 2023 were met. Country-specific situations will continue to be taken into account after the deactivation of the general escape clause.
                  9

               (8)On 15 April 2021, Latvia submitted its 2021 Stability Programme, in line with Article 4 of Regulation (EC) No 1466/97.

               (9)In 2020, based on data validated by Eurostat, Latvia’s general government deficit was 4.5% of GDP, while general government debt increased to 43.5% of GDP. The annual change in the primary budget balance amounted to -4% of GDP, including discretionary budgetary measures of 3.5% of GDP in support of the economy and the operation of automatic stabilisers. Latvia also provided liquidity support to companies and households (such as guarantees and tax deferrals, which do not have a direct and immediate budgetary impact) estimated at 1.7% of GDP.

               On 2 June 2021, the Commission issued a report under Article 126(3) TFEU. This report discusses the budgetary situation of Latvia, as its general government deficit in 2020 exceeded the 3% of GDP Treaty reference value. The report concluded that the deficit criterion was not fulfilled.

               (10)The macroeconomic scenario underpinning the budgetary projections is cautious in 2021 and 2022. Real GDP growth rates are projected to be lower in the Stability Programme than in the Commission’s 2021 spring forecast, mostly due to lower export growth. Moreover, the Stability Programme expects a further decline in employment in 2021 and a slower recovery in 2022 than in the Commission forecast.

               (11)In its 2021 Stability Programme, the government plans an increase of the general government deficit from 5.4% of GDP in 2020 to 9.3% of GDP in 2021, while the debt ratio is planned to increase to 48.9% of GDP in 2021. According to the programme, the change in the primary budget balance in 2021 compared with the pre-crisis level (2019) is set to amount to -8.7% of GDP, reflecting the discretionary budgetary measures of 2.9% of GDP in support of the economy and the operation of automatic stabilisers. The deficit and debt projections are above the Commission’s 2021 spring forecast. The Stability Programme expects a higher increase in expenditure, in particular in other expenditure, than the Commission’s 2021 spring forecast. Moreover, revenue developments are projected to be more favourable in the Commission forecast, in line with the more upbeat macroeconomic scenario in the Commission forecast.

               (12)In response to the COVID-19 pandemic and related economic downturn, Latvia has adopted budgetary measures to strengthen the capacity of its health system, contain the pandemic and provide relief to those individuals and sectors that have been particularly affected. This forceful policy response has cushioned the contraction in GDP, which, in turn, curtailed the increase in government deficit and public debt. Fiscal measures should maximise support to the recovery without pre-empting future fiscal trajectories. Therefore, measures should avoid creating a permanent burden on public finances. When Member States introduce permanent measures, they should properly fund them to ensure budgetary neutrality in the medium term. The measures taken by Latvia in 2020 and 2021 have been in line with the Council Recommendation of 20 July 2020. Some of the discretionary measures adopted by the government in 2020 and 2021 do not appear to be temporary or matched by offsetting measures. Beyond the horizon of the Commission’s forecast, in 2023, the remaining impact of those non-temporary measures is preliminarily estimated at around 1% of GDP, mainly consisting of public sector wage increases, notably for healthcare workers.

               (13)The 2021 Stability Programme assumes investment and reforms financed by grants under the Recovery and Resilience Facility amounting to 0.1% in 2021, 0.8% in 2022 and 0.8% in 2023. The programme assumes expenditure financed by the Recovery and Resilience Facility to be slightly back-loaded, with higher spending planned in 2024 and 2025. The Commission’s spring forecast includes these grants in its budgetary projections.

               (14)The established indicators of fiscal adjustment set out in Regulation (EC) No 1466/97 need to be considered in the context of the current circumstances. First, there is significant uncertainty surrounding output gap estimates. Second, there is a need for fiscal policy to stand ready to rapidly adapt to the evolution of the pandemic, shifting from emergency relief to more targeted measures once health risks diminish. Third, the current context is characterised by a significant policy response to support economic activity. In the presence of sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility), the established indicators do not capture the full impulse provided by fiscal policies to the economy. Against this background, the structural balance does not appear adequate in the current circumstances. The expenditure benchmark, in turn, needs to be adapted
                  10
                and complemented with additional information in order to fully gauge the fiscal policy orientation.

               First, similarly to the approach pursed in the assessment of the 2021 Draft Budgetary Plans, temporary emergency measures have been excluded from the expenditure aggregate. These crisis-related temporary emergency measures support health systems and compensate workers and firms for the losses in income due to lockdowns and supply chain disruptions; their reversal by the public authorities is contingent on the return of the public health and economic situation to normality.

               Second, to assess the overall fiscal stance at the current juncture, the sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility) should be included in the relevant expenditure aggregate.

               Therefore, the fiscal stance is then measured by the change in primary expenditure (net of discretionary revenue measures and excluding crisis-related temporary emergency measures) including expenditure financed by grants under the Recovery and Resilience Facility and other EU funds.

               Going beyond the overall fiscal stance, the analysis also aims at assessing whether national fiscal policy is prudent and its composition is conducive to a sustainable recovery consistent with the green and digital transitions. For that reason, particular attention is paid to the evolution of nationally financed primary current expenditure and investment.

               (15)In its 2021 Stability Programme, Latvia’s general government deficit is planned to decrease to 2.7% of GDP in 2022, mainly due to a discontinuation of the temporary support measures adopted in 2020 and 2021. The general government debt ratio is planned to increase to 50.3% of GDP in 2022. These projections are above the Commission’s 2021 spring forecast, mainly due to the more favourable macroeconomic scenario in the Commission forecast.

               Based on the Commission’s forecast, the overall fiscal stance as defined above – also including the impact on aggregate demand in 2022 from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility – is estimated at -0.8% of GDP.
                  11
                The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to increase by 0.6 percentage points of GDP. Nationally financed investment is projected to provide a contractionary contribution of 0.3 percentage point of GDP.
                  12
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide an expansionary contribution of 0.5 percentage points of GDP.

               (16)The quality of Member States’ budgetary measures appears particularly important. Fiscal structural reforms aimed at improving the composition of national budgets can support potential growth, create much-needed fiscal space and help ensuring fiscal sustainability over the longer term, including in view of climate change and health challenges. On the revenue side, the COVID-19 crisis has reinforced the importance of reforms for more efficient and fairer public revenue systems. On the expenditure side, it has made even more crucial to increase the level and quality of sustainable and growth-enhancing investments, consistent with serving the objectives of enhancing growth potential, economic and social resilience, and the green and digital twin transition. The Recovery and Resilience Plans will allow to improve the composition of national budgets.

               (17)According to the programme’s medium-term budgetary plans, the general government deficit is planned to decrease from 1.3% in 2023, to 0.3% of GDP in 2024.

               Based on the programme, the overall fiscal stance – also including the impact on aggregate demand from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility –is estimated at +1.4% of GDP in 2023 and 2024 on average. The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to decrease by 0.3 percentage point of GDP in 2023 and 2024 on average. Nationally financed investment is projected to provide a contractionary contribution of 0.1 percentage point of GDP.
                  13
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide a contractionary contribution of 1 percentage point of GDP.

               The current estimate of the 10-year average nominal potential growth is 4¾%
                  14
               . However, this estimate does not include the impact of the reforms that are part of the Recovery and Resilience Plan and can boost Latvia’s potential growth.

               (18)The general government debt ratio is planned to decrease from 48.8% of GDP in 2023 to 48.5% of GDP in 2024. Latvia is considered to face low fiscal sustainability risks over the medium term, as per the latest debt sustainability analysis.
                  15

               (19)In view of the currently still exceptionally high degree of uncertainty, the fiscal policy guidance should remain predominantly qualitative. More precise quantified guidance for the later years should be provided in 2022, if the degree of uncertainty has sufficiently declined by then.

               The Council has assessed the 2021 Stability Programme and the follow-up by Latvia to the Council Recommendation of 20 July 2020.

               HEREBY RECOMMENDS LATVIA TO:

               1.In 2022, maintain a supportive fiscal stance, including the impulse provided by the Recovery and Resilience Facility, and preserve nationally financed investment. Keep the growth of nationally financed current expenditure under control.

               2.When economic conditions allow, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring fiscal sustainability in the medium term. At the same time, enhance investment to boost growth potential.

               3.Pay particular attention to the composition of public finances, both on the revenue and expenditure sides of the budget, and to the quality of budgetary measures, to ensure a sustainable and inclusive recovery. Prioritise sustainable and growth-enhancing investment, notably supporting the green and digital transition. Give priority to fiscal structural reforms that will help provide financing for public policy priorities and contribute to the long-term sustainability of public finances, including by strengthening the coverage, adequacy, and sustainability of health and social protection systems for all.

               Done at Brussels,

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        The clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of severe economic downturn.

                     (3)

                        Communication from the Commission to the Council on the activation of the general escape clause of   the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final.

                     (4)

                        Communication from the Commission on Annual Sustainable Growth Strategy 2021, Brussels, 17.9.2020, COM(2020) 575 final.

                     (5)

                        Council Recommendation of 20 July 2020 on the National Reform Programme of Latvia and delivering a Council opinion on the 2020 Stability Programme of Latvia, OJ C 282, 26.8.2020, p. 89.

                     (6)

                        Pending final adoption by the Council, after endorsement by the European Council. The text agreed by the Eurogroup on 16 December 2020 is available at:
                  https://data.consilium.europa.eu/doc/document/ST-14356-2020-INIT/en/pdf

                     (7)

                     OJ
                      L57, 18.2.2021, p.17.

                     (8)

                        Communication from the Commission to the Council on one year since the outbreak of COVID-19: fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final.

                     (9)

                        Communication from the Commission on Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy, Brussels, 2.6.2021, COM(2021)500 final.

                     (10)

                        In particular, the 4-year smoothing of investment used in the expenditure benchmark does not allow assessing properly the fiscal support to the recovery provided by nationally financed investments.

                     (11)

                        A negative sign of the indicator corresponds to an excess of the primary expenditure growth compared with medium-term economic growth, which indicates an expansionary fiscal policy.

                     (12)

                        Other nationally financed capital expenditure is projected to provide a neutral contribution.

                     (13)

                        Other nationally financed capital expenditure is projected to provide a neutral contribution.

                     (14)

                        Estimated by the Commission, following the commonly agreed methodology.

                     (15)

                        See Commission Staff Working Document – Statistical Annex providing background data relevant for the assessment of the 2021 Stability and Convergence Programmes


               EUROPEAN COMMISSION
            Brussels, 2.6.2021
            COM(2021) 512 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            delivering a Council opinion on the 2021 Stability Programme of Italy
            {SWD(2021) 501 final}

               Recommendation for a

               COUNCIL RECOMMENDATION

               delivering a Council opinion on the 2021 Stability Programme of Italy

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 5(2) thereof,

               Having regard to the Recommendation of the European Commission,

               Having regard to the resolutions of the European Parliament,

               After consulting the Economic and Financial Committee,

               Whereas:

               (1)On 20 March 2020, the Commission adopted a Communication on the activation of the general escape clause
                  2
                of the Stability and Growth Pact.
                  3
                In its Communication, the Commission set out its view that, given the expected severe economic downturn resulting from the COVID-19 outbreak, the conditions to activate the general escape clause were met. On 23 March 2020, the Ministers of Finance of the Member States agreed with the assessment of the Commission. The general escape clause has granted Member States budgetary flexibility to deal with the crisis. It has facilitated the coordination of budgetary policies in times of severe economic downturn. Its activation allows for a temporary departure from the adjustment path towards the medium-term budgetary objective of each Member State, provided this does not endanger fiscal sustainability in the medium term. On 17 September 2020, in its Annual Sustainable Growth Strategy, the Commission announced that the general escape clause would remain active in 2021.
                  4

               (2)On 20 July 2020, the Council recommended Italy
                  5
                to take all necessary measures, in line with the general escape clause, to effectively address the pandemic, sustain the economy and support the ensuing recovery. It also recommended Italy to pursue, when economic conditions allow, fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment.

               (3)The Council Recommendation on the economic policy of the euro area indicates that fiscal policies remain supportive in all euro area Member States throughout 2021 and that policy measures should be tailored to country-specific circumstances and be timely, temporary and targeted.
                  6
                When the epidemiological and economic conditions allow, emergency measures should be phased out, while combatting the social and labour-market impact of the crisis. Fiscal policies should be pursued that are aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. Member States should pursue reforms that strengthen the coverage, adequacy, and sustainability of health and social protection systems for all.

               (4)On 18 November 2020, the Commission adopted its Opinions on the 2021 Draft Budgetary Plans of the euro area Member States, which were based on a qualitative assessment of the fiscal measures. The Commission was of the opinion that the Draft Budgetary Plan of Italy was overall in line with the fiscal policy recommendations adopted by the Council on 20 July 2020, and that most of the measures included in the plans supported economic activity against the background of considerable uncertainty. However, some measures did not appear to be temporary or matched by offsetting measures.

               (5)Next Generation EU, including the Recovery and Resilience Facility, will ensure a sustainable, inclusive and fair recovery. Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility
                  7
                came into force on 19 February 2021. This Facility will provide financial support for the implementation of reforms and investment, entailing a fiscal impulse financed by the EU. It will contribute to the economic recovery, to the implementation of sustainable and growth-enhancing reforms and investment, notably to promote the green and digital transitions, and it will strengthen the economies’ resilience and potential growth. In turn, it will also help public finances to return to more favourable positions in the near term and will contribute to strengthening sustainable public finances, growth and job creation in the medium and long term.

               (6)On 3 March 2021, the Commission adopted a Communication providing further policy orientations to facilitate the coordination of fiscal policies and the preparation of Member States’ Stability and Convergence Programmes.
                  8
                The overall fiscal stance, taking into account national budgets and the Recovery and Resilience Facility, should remain supportive in 2021 and 2022. At the same time, given the expectation of economic activity gradually normalising in the second half of 2021, Member States’ fiscal policies should become more differentiated in 2022. Member States’ fiscal policies should take into account the state of the recovery, fiscal sustainability and the need to reduce economic, social and territorial divergences. In view of the need to support a sustainable recovery for the EU, Member States with low sustainability risks should gear their budgets towards maintaining a supportive fiscal policy in 2022, taking into account the impact of the Recovery and Resilience Facility. Member States with high debt levels should pursue prudent fiscal policies, while preserving nationally-financed investment and making use of grants under the Recovery and Resilience Facility to fund additional high-quality investment projects and structural reforms. For the period beyond 2022, fiscal policies should continue to take into account the strength of the recovery, the degree of economic uncertainty and fiscal sustainability considerations. A refocusing of fiscal policies towards achieving prudent medium-term fiscal positions, including by phasing out support measures in due course, will contribute to ensuring fiscal sustainability in the medium term.

               (7)The Communication of 3 March 2021 also announced the Commission’s view that the decision on the deactivation or continued application of the general escape clause should be taken as an overall assessment of the state of the economy, with the level of economic activity in the EU or euro area compared to pre-crisis levels (end-2019) as key quantitative criterion. On the basis of the Commission’s 2021 spring forecast, on 2 June the Commission considered that the conditions to continue to apply the general escape clause in 2022 and to deactivate it as of 2023 were met. Country-specific situations will continue to be taken into account after the deactivation of the general escape clause.
                  9

               (8)On 30 April 2021, Italy submitted its 2021 Stability Programme, in line with Article 4 of Regulation (EC) No 1466/97.

               (9)In 2020, based on data validated by Eurostat, Italy’s general government deficit was 9.5% of GDP, while general government debt increased to 155.8% of GDP. The annual change in the primary budget balance amounted to 8.0% of GDP, including discretionary budgetary measures in support of the economy and the operation of automatic stabilisers. Italy also provided liquidity support to companies and households (such as guarantees and tax deferrals, which do not have a direct and immediate budgetary impact) estimated at 24.8% of GDP.

               On 2 June 2021, the Commission issued a report under Article 126(3) TFEU. This report discusses the budgetary situation of Italy, as its general government deficit in 2020 exceeded the 3% of GDP Treaty reference value, while its general government debt exceeded the 60% of GDP Treaty reference value and did not diminish at a satisfactory pace. The report concluded that the deficit criterion was not fulfilled and the debt criterion was not complied with.

               (10)The macroeconomic scenario underpinning the budgetary projections of the authorities is realistic in 2021 and 2022. The 2021 Stability Programme projects real GDP to grow by 4.5% in 2021 and 4.8% in 2022. By comparison, the Commission’s 2021 spring forecast projects a moderately lower real GDP growth of 4.2% in 2021 and 4.4% in 2022, mainly due to the lower expected use of Recovery and Resilience Facility grants in 2021 and 2022 based on the more recent indications provided in the National Recovery and Resilience Plan.

               (11)In its 2021 Stability Programme, the government plans an increase of the general government deficit from 9.5% of GDP in 2020 to 11.8% of GDP in 2021, while the debt ratio is planned to increase to 159.8% of GDP in 2021. According to the programme, the change in the primary budget balance in 2021 compared with the pre-crisis level (2019) is set to amount to 10.4% of GDP, reflecting the discretionary budgetary measures in support of the economy and the operation of automatic stabilisers. These projections are in line with the Commission’s 2021 spring forecast.

               (12)In response to the COVID-19 pandemic and related economic downturn, Italy has adopted budgetary measures to strengthen the capacity of its health system, contain the pandemic and provide relief to those individuals and sectors that have been particularly affected. This forceful policy response has cushioned the contraction in GDP, which, in turn, curtailed the increase in government deficit and public debt. Fiscal measures should maximise support to the recovery without pre-empting future fiscal trajectories. Therefore, measures should avoid creating a permanent burden on public finances. When Member States introduce permanent measures, they should properly fund them to ensure budgetary neutrality in the medium term. The measures taken by Italy in 2020 and 2021 have been in line with the Council Recommendation of 20 July 2020. Some of the discretionary measures adopted by the government in 2020 and 2021 do not appear to be temporary or matched by offsetting measures. Beyond the horizon of the Commission’s forecast, in 2023, the remaining impact of those non-temporary measures is preliminarily estimated at around 1% of GDP, mainly consisting of a reduction of social security contributions in poorer regions, the extension of the tax credit on employment income and the introduction of a family allowance. Those non-temporary measures also include investment of approximately ⅓% of GDP, which is expected to support medium-term potential growth, and thus sustainability.

               (13)The 2021 Stability Programme assumes investment and reforms financed by grants under the Recovery and Resilience Facility amounting to 0.6% of GDP in 2021, 0.9% in 2022, 1.4% in 2023, 0.5% in 2024 and 0.2% in 2025. The programme also assumes investment and reforms financed by loans under the Recovery and Resilience Facility amounting to 0.3% of GDP in 2020, 0.8% of GDP in 2021, 0.9% in 2022, 0.7% in 2023, 1.3% in 2024, 1.2% in 2025 and 1.0% in 2026. The Commission’s spring forecast does not fully include these grants in its budgetary projections, in line with the more recent indications provided in the National Recovery and Resilience Plan, which was finalised after the Stability Programme. Instead, the Commission forecast assumes that investments and reforms financed by the Recovery and Resilience Facility grants will amount to 0.3% of GDP in 2021 and 0.7% of GDP in 2022.

               (14)The established indicators of fiscal adjustment set out in Regulation (EC) No 1466/97 need to be considered in the context of the current circumstances. First, there is significant uncertainty surrounding output gap estimates. Second, there is a need for fiscal policy to stand ready to rapidly adapt to the evolution of the pandemic, shifting from emergency relief to more targeted measures once health risks diminish. Third, the current context is characterised by a significant policy response to support economic activity. In the presence of sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility), the established indicators do not capture the full impulse provided by fiscal policies to the economy. Against this background, the structural balance does not appear adequate in the current circumstances. The expenditure benchmark, in turn, needs to be adapted
                  10
                and complemented with additional information in order to fully gauge the fiscal policy orientation.

               First, similarly to the approach pursed in the assessment of the 2021 Draft Budgetary Plans, temporary emergency measures have been excluded from the expenditure aggregate. These crisis-related temporary emergency measures support health systems and compensate workers and firms for the losses in income due to lockdowns and supply chain disruptions; their reversal by the public authorities is contingent on the return of the public health and economic situation to normality.

               Second, to assess the overall fiscal stance at the current juncture, the sizeable transfers from the EU budget (such as those from the Recovery and Resilience Facility) should be included in the relevant expenditure aggregate.

               Therefore, the fiscal stance is then measured by the change in primary expenditure (net of discretionary revenue measures and excluding crisis-related temporary emergency measures) including expenditure financed by grants under the Recovery and Resilience Facility and other EU funds.

               Going beyond the overall fiscal stance, the analysis also aims at assessing whether national fiscal policy is prudent and its composition is conducive to a sustainable recovery consistent with the green and digital transitions. For that reason, particular attention is paid to the evolution of nationally financed primary current expenditure and investment.

               (15)In its 2021 Stability Programme, Italy’s general government deficit is planned to decrease to 5.9% of GDP in 2022, mainly due to a discontinuation of the temporary support measures adopted in 2020 and 2021 and the lower support from the automatic stabilisers. The general government debt ratio is planned to decrease to 156.3% of GDP in 2022. These projections are in line with the Commission’s 2021 spring forecast.

               Based on the Commission’s forecast, the overall fiscal stance as defined above – also including the impact on aggregate demand in 2022 from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility – is estimated at -2.2% of GDP.
                  11
                The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to increase by 0.4 percentage points of GDP. Nationally financed investment is projected to provide an expansionary contribution of 0.3 percentage points of GDP.
                  12
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide an expansionary contribution of 1.3 percentage points of GDP.

               (16)The quality of Member States’ budgetary measures appears particularly important. Fiscal structural reforms aimed at improving the composition of national budgets can support potential growth, create much-needed fiscal space and help ensuring fiscal sustainability over the longer term, including in view of climate change and health challenges. On the revenue side, the COVID-19 crisis has reinforced the importance of reforms for more efficient and fairer public revenue systems. On the expenditure side, it has made even more crucial to increase the level and quality of sustainable and growth-enhancing investments, consistent with serving the objectives of enhancing growth potential, economic and social resilience and the green and digital twin transition. The Recovery and Resilience Plans will allow to improve the composition of national budgets.

               (17)According to the programme’s medium-term budgetary plans, the general government deficit is planned to decrease from 4.3% in 2023, to 3.4% of GDP in 2024. The general government deficit is therefore not planned to return below 3% of GDP over the programme horizon.

               Based on the programme, the overall fiscal stance – also including the impact on aggregate demand from investment financed by both the national and the EU budgets, notably the Recovery and Resilience Facility, is estimated at 0.4% of GDP in 2023 and 2024 on average.
                  13
                The positive contribution of expenditure financed by Recovery and Resilience Facility grants and other EU funds is projected to decrease by 0.4 percentage points of GDP. Nationally financed investment is projected to provide an expansionary contribution of 0.2 percentage points of GDP.
                  14
                Nationally financed primary current expenditure (net of discretionary revenue measures) is projected to provide a neutral contribution.

               The current estimate of the 10-year average nominal potential growth is 2%.
                  15
                However, this estimate does not include the impact of the reforms that are part of the Recovery and Resilience Plan and can boost Italy’s potential growth.

               (18)The general government debt ratio is planned to decrease from 155% of GDP in 2023 to 152.7% of GDP in 2024. In light of the high debt ratio, which is projected to only gradually fall over time, Italy is considered to face high fiscal sustainability risks over the medium term, as per the latest debt sustainability analysis.
                  16

               (19)In view of the currently still exceptionally high degree of uncertainty, the fiscal policy guidance should remain predominantly qualitative. More precise quantified guidance for the later years should be provided in 2022, if the degree of uncertainty has sufficiently declined by then.

               The Council has assessed the 2021 Stability Programme and the follow-up by Italy to the Council Recommendation of 20 July 2020.

               HEREBY RECOMMENDS ITALY TO:

               1.In 2022, use the Recovery and Resilience Facility to finance additional investment in support of the recovery while pursuing a prudent fiscal policy. Preserve nationally financed investment. Limit the growth of nationally financed current expenditure.

               2.When economic conditions allow, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring fiscal sustainability in the medium term. At the same time, enhance investment to boost growth potential.

               3.Pay particular attention to the composition of public finances, both on the revenue and expenditure sides of the budget, and to the quality of budgetary measures, to ensure a sustainable and inclusive recovery. Prioritise sustainable and growth-enhancing investment, notably supporting the green and digital transition. Give priority to fiscal structural reforms that will help provide financing for public policy priorities and contribute to the long-term sustainability of public finances, including by strengthening the coverage, adequacy, and sustainability of health and social protection systems for all.

               Done at Brussels, 2.6.2021

                     For the Council

                     The President

                     (1)

                        OJ L 209, 2.8.1997, p. 1.

                     (2)

                        The clause, as set out in Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in times of severe economic downturn.

                     (3)

                        Communication from the Commission to the Council on the activation of the general escape clause of   the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final.

                     (4)

                        Communication from the Commission on Annual Sustainable Growth Strategy 2021, Brussels, 17.9.2020, COM(2020) 575 final.

                     (5)

                        Council Recommendation of 20 July 2020 on the National Reform Programme of Italy and delivering a Council opinion on the 2020 Stability Programme of Italy, OJ C 282, 26.8.2020, p. 74.

                     (6)

                        Pending final adoption by the Council, after endorsement by the European Council. The text agreed by the Eurogroup on 16 December 2020 is available at:
                  https://data.consilium.europa.eu/doc/document/ST-14356-2020-INIT/en/pdf

                     (7)

                     OJ
                      L57, 18.2.2021, p.17.

                     (8)

                        Communication from the Commission to the Council on one year since the outbreak of COVID-19: fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final.

                     (9)

                        Communication from the Commission on Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy, Brussels, 2.6.2021, COM(2021)500 final.

                     (10)

                        In particular, the 4-year smoothing of investment used in the expenditure benchmark does not allow assessing properly the fiscal support to the recovery provided by nationally financed investments.

                     (11)

                        A negative sign of the indicator corresponds to an excess of the primary expenditure growth compared with medium-term economic growth, which indicates an expansionary fiscal policy.

                     (12)

                        Other nationally financed capital expenditure is projected to provide an expansionary contribution of 0.2 percentage points of GDP.

                     (13)

                        The estimates presented in this paragraph are based on the detailed budgetary projections transmitted by Italy with the 2021 Stability Programme. Except for the overall figures for government deficit and debt, the projections transmitted by Italy do not take into account the fiscal package announced for May 2021. This package, adopted on 20 May 2021, included additional emergency support in 2021 as well as more resources for nationally-financed investment projects in the coming years.

                     (14)

                        Other nationally financed capital expenditure is projected to provide a contractionary contribution of 0.2 percentage points of GDP.

                     (15)

                        Estimated by the Commission, following the commonly agreed methodology.

                     (16)

                        See Commission Staff Working Document – Statistical Annex providing background data relevant for the assessment of the 2021 Stability and Convergence Programmes.