From 1 January to 30 June 2023, Sweden will hold the Presidency of the Council of the European Union. Climate transition and EU competitiveness are mentioned in the Presidency’s programme. FEDIL welcomes these priorities. In this opinion, I outline the main priorities for Luxembourg’s industry and business operators that the Swedish Presidency should take into account in the performance of its tasks.

1) EU level action to preserve industrial competitiveness and address the energy crisis while maintaining a level playing field within the internal market

EU and Luxembourg companies need a coordinated EU level response to mitigate skyrocketing energy prices and to ensure enough supplies in the EU, while at the same time, responding the US Inflation Reduction Act (IRA). Common solutions can prevent the EU Single Market from being further weakened and preserve its economic power at global level.

In this context, the Commission presented its communication “A Green Deal Industrial Plan for the Net-Zero Age” which is to be welcomed. However, the Presidency should push for more efforts to strengthen the competitiveness of European businesses and ensure the transition to net zero. Notably, the Commission proposes to amend the Temporary State aid Crisis and Transition Framework and to revise the General Block Exemption Regulation. This is equally to be welcomed in order to facilitate and accelerate the EU ecological transition. However, such guidance should not focus solely on supporting sectors where subsidies from other jurisdictions undermine the level playing field and which risk offshoring. It must support all EU production sectors that have been identified as strategic. In other words, the Presidency must not let subsidies from third countries determine which sectors the EU should support but support all sectors which are vital for a competitive and sustainable energy transition.

Likewise, we welcome the Commission’s proposal to make the General Block Exemption Regulation more flexible in light of the Green Deal. However, this revision should not further delay the transposition and practical application of said regulation. It is now essential to ensure speed and ease of access to existing European financing instruments and we note that companies are often faced with difficulties linked to access to these instruments and their use. The Presidency should make the rules to access to these instruments follow the rhythm and the needs of the industry.

Also, we remind the Presidency that aid to industry should not be limited exclusively to ‘green technology’, which is certainly important, but also to make supply chains more resilient, which in recent years have suffered shipping disruptions and supply shortages. Definitely, the proper functioning of the Internal Market plays a crucial role for the proper functioning of supply chains, in particular for Luxembourg’s economy due to the small size of the country.

More generally, constructive dialogue with the United States will be necessary to continue to work with them to find an agreement and avoid a global race for subsidies, in particular between the European Union and its Member States and the United States.

2) Offsetting burdens on companies to give regulatory breathing space

On top of this, we are worried that systematic addition of legislative and administrative burdens for companies of often unworkable EU legislation might further aggravate EU deindustrialisation. European companies urgently need regulatory breathing space. We therefore urge the Presidency to take into account the importance of respecting the “one in, one out” principle set out by the Commission in accordance with the “Better Regulation” principles. This principle requires EU legislation to offset any new burden on businesses by removing an equivalent existing one in the same policy area. So far, there have not been enough reductions. It is essential that, in this period of crisis and uncertainty, legislation is adapted to current crises (non-business-as-usual). A useful instrument to reach this could be a “competitiveness check” to take into account the cumulative effect of all policy and legislative initiatives on companies.

3) Ensuring a healthy and harmonised EU internal market without unnecessary barriers

We always say that a harmonised and healthy internal market is essential for a small country like Luxembourg. Therefore, the Single Market cannot be continuously paralysed by national and European regulatory barriers. On the contrary, in its 30th anniversary, it must be promoted through a market-driven European standardisation and harmonisation system, also covering the protection of the four fundamental freedoms.
For example, we find of outmost importance that posting of workers is not subject to restrictive applications to allow competitive practices to foster economy growth in all EU Member States. In addition, this could create distortions to the level playing field among Member States. The Swedish Presidency should guide Member States towards harmonised practices and rules to avoid these situations.

4) Accelerating the digital transition while maintaining an attractive EU digital market

The Presidency should also make similar considerations as those above concerning the digital transition. European and Luxembourg industry and business operators need legislations that ensure a competitive technological development in the global markets and enhance EU innovation to be scalable globally, while making Europe an open and attractive market for new and existing businesses. This means that ongoing legislative initiatives in the digital policy area should have flexible requirements and avoid excessive burdens on companies.

Therefore, one size does not fit all. Particular attention should be given to the creation of clear and objective criteria for participating in Regulatory Sandboxes, as provided for by the Artificial Intelligence Act, which should take into account the complexity and variety of digital businesses and applications. Realistic and proportionate rules are also needed in the context of data sharing and cloud switching rules introduced by the EU Data Act. This regulation should have proportionate, fit for purpose and clear critical definitions as well as stronger legal safeguards to protect our businesses’ intellectual property rights and trade secrets and to not negatively affect their competitiveness in global markets.

5) The 2023 European Year of Skills to solve recruitment problems and skills shortages

Finally, it is evident how recruitment problems and skills shortages keep hampering companies’ development and competitiveness. Notably, Luxembourg companies need to recruit non-EU employees, but disproportionate administrative constraints and slow procedures create barriers that make this process slow and sometimes not possible. The Presidency should take opportunity during this 2023 European Year of Skills to effectively address these issues. In this context, the Swedish Presidency should urge Member States remove any unnecessary burdens and formalities to the employment of both EU and non-EU nationals within the Single Market.

Francesco Fiaschi
Adviser European Affairs for FEDIL