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Tuesday, 11 July 2017

EU Commission: Joint statement following the 12th EU-Jordan Association Council

Joint statement following the 12th EU-Jordan Association Council

The twelfth session of the Association Council of the European Union and Jordan took place in Brussels on 10 July 2017. The session was co-chaired by Federica Mogherini High Representative of the Union for Foreign Affairs and Security Policy / Vice-President of the Commission, and by Ayman Safadi, the Minister of Foreign Affairs and Expatriates of Jordan. 

The session confirmed the strong partnership with Jordan and the solid diplomatic relationship that has been established. The European Union and Jordan see mutual benefit in working together addressing a number of global challenges such as the fight against terrorism and climate change. The EU and Jordan have worked effectively together as co-Presidency of the Union for the Mediterranean since 2012, as well as in the context of the United Nations and other fora. The Association Council confirmed that the European Union and Jordan share the same views on key regional issues, from the Middle East Peace Process to the situation in Iraq and the Syria conflict. The EU and Jordan agreed on the need to find political solutions to the crises affecting the region. Both underlined the importance of effective multilateral and regional cooperation, and agreed to continue working together. 

A resolution of the Israeli-Palestinian conflict remains a priority for the EU and Jordan. The EU and Jordan see no viable alternative to the two-state solution; the only way to fulfil legitimate aspirations of both parties and allowing them to live side-by-side, in peace and security, and in mutual recognition. The regional context makes it even more urgent to end this conflict. 

The EU and Jordan reviewed the outcome of the Brussels Conference on Supporting the Future of Syria and the Region of 5 April. With the Association Council coinciding with the 7th round of intra-Syrian talks in Geneva, the EU and Jordan reiterated their full support to UN initiatives in view of a political solution to the Syria conflict as the only way ahead. The EU and Jordan also reviewed the mutual commitments between the Conference co-chairs and Jordan agreed at the Brussels Conference, as per the Jordan Output Document. 

Recognising the impact of the Syria crisis on Jordan and the country's exceptional hospitality to Syrian refugees, the EU confirmed its willingness to maintain the level of support allocated for 2016-17 in 2018 and committed to a similar level for 2019, in support of Jordan's Executive Development Programme 2017-2019, Economic Growth Plan 2018-2022 and the Jordan Response Plan 2017-2019. Jordan confirmed its commitment to continue providing education and livelihood opportunities for Syrian refugees, with the support of the international community. 

The EU indicated that it has allocated EUR 1.63 billion to Jordan since the start of the Syria crisis, across different instruments. The support includes bilateral aid as well as assistance addressing the impact of the Syrian crisis and which has benefited both host communities and the refugee population. In line with the spirit of the Partnership Priorities adopted in December 2016 between the EU and Jordan, the EU confirmed that it will continue to apply the different tools at its disposal in support of Jordan's holistic economic reform strategy. 

The EU and Jordan  reached an agreement at technical level on a Memorandum of Understanding on the EU's second programme of macro-financial assistance to Jordan. Following this important step, the entry into force of the Memorandum will enable a first disbursement of EUR 100 million.  

The EU and Jordan discussed the implementation of the Partnership Priorities and EU-Jordan Compact and confirmed their ambition to intensify dialogue on issues of mutual interest and cooperate across inter-related domains from counter-terrorism and countering violent extremism to knowledge-based and inclusive growth, job creation, innovation, employability, strengthening the rule of law and democratic governance. 

The Association Council provided an opportunity to identify areas where the EU and Jordan could enhance cooperation. The EU and Jordan noted with satisfaction the increasing dialogue on security-related matters, including on issues related to the Common Security and Defence Policy, and scope for continuing working together in the context of the rule of law, notably on integrated border management or countering violent extremism. 

Reviewing developments since the decision adopted by the 10th Association Committee on the relaxation of rules of origin between the EU and Jordan, both parties welcomed that companies have started to export under the new scheme and confirmed that cooperation will be intensified to implement the scheme, publicise its benefits to potential investors in the private sector and take forward initiatives and address the different challenges, in view of enhancing the investment climate and creating job opportunities for Jordanians as well as Syrian refugees. 

Jordan highlighted the economic challenges it faces and the EU confirmed its support to creating an environment conducive to the creation of jobs by the private sector, notably for youth and women. The EU referred to significant support to both private sector development and for education and vocational and technical education and training in that regard. Increased connectivity between the labour market and the educational system is a priority in the EU-Jordan cooperation. The Association Council noted the importance of student, staff and researcher exchanges and of cooperation on research and innovation. The Association Council welcomed the forthcoming participation of Jordan in the Partnership on Research and Innovation in the Mediterranean Area (PRIMA) and stressed that the international agreement on terms and conditions of Jordan's participation in PRIMA initialled today is an important step to enable Jordan's membership in the Partnership. PRIMA is expected to mobilise joint research on two challenges relevant to Jordan: efficient and sustainable food production and water provision. 

As regards the latter, the EU and Jordan also confirmed the importance of the implementation of the Red Sea/Dead Sea project, with the involvement of all parties. 

The EU welcomed the ratification by Jordan of the Paris Agreement on climate change in November 2016. This Agreement demonstrates that countries all around the world with very different interests can come together to address shared concerns that will affect the entire world. 

The EU and Jordan exchanged views on human rights and agreed to pursue regular dialogue. The EU commended Jordan's efforts in the area of freedom of religion or belief. On women's rights, the EU looks forward to the abolition of article 308 of the penal code.

Jordan informed on the forthcoming local elections. The EU reiterated the overall positive findings of the Election Observation Mission on last September's parliamentary elections and encouraged Jordan to take up its recommendations. The EU will continue to support Jordan's democratic governance.

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Capital markets union: Council agrees on action plan adjustments

On 11 July 2017, the Council adopted conclusions on the Commission's review of the EU's capital markets union action plan.

The Council renewed its commitment to the action plan, which is aimed at securing a fully-fledged capital markets union by the end of 2019. It supported a number of priority initiatives set out by the Commission.

The conclusions highlight good progress made on the plan so far, with nearly two thirds of actions already delivered. However a number of challenges have emerged since it was launched in September 2015, and with them comes a need to strengthen the plan.

"The European economy is steadily improving. What we now need most of all is more investment. That's why the capital markets union is top of the Estonian agenda", Mr Tõniste said. "To ensure sustainable economic growth in the longer term, it is essential to broaden the range of sources available for financing, in particular for young and innovative companies."

The Council reconfirmed the plan's priorities, which are to:

-           strengthen capital markets so as to attract more investment, including foreign investment, for European companies and infrastructure projects;

-           improve access to finance in particular for European SMEs and start-ups, and especially in innovative industries.

Nearly two years into the plan, economic recovery in the EU is gaining momentum. However investment rates are still below pre-crisis levels, and this continues to drag on growth in the longer term.

The Commission outlines the mid-term review in a communication issued on 8 June 2017.

It puts a specific focus on actions related to sustainable finance and financial technology. The communication sets out three categories of actions to be pursued:

-           actions announced in 2015 and not yet delivered;

-           the follow-up to actions completed under the 2015 action plan;

-           new priority actions.

The conclusions were adopted at a meeting of the Economic and Financial Affairs Council.

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Banking: Council sets out action plan for non-performing loans

On 11 July 2017, the Council agreed an action plan to address the problem of non-performing loans in the banking sector.

It outlined a mix of policy actions to help reduce stocks of non-performing loans (NPLs), which remain at high levels within the EU, and to prevent their future emergence.

"Non-performing loans are a problem for the banking industry for which solutions have until now been mainly defined at the national level", said Toomas Tõniste, minister for finance of Estonia, which currently holds the Council presidency. "We need to free up these resources, make our financial system more resilient and prevent the re-emergence of NPL issues in the future".

NPLs are bank loans that are subject to late repayment or unlikely to be repaid without requiring the sale of collateral.

The financial crisis and ensuing recessions have left banks in some member states with particularly high levels of NPLs. These can generate negative cross-border spill-overs and can affect market perception of the EU banking sector. High NPL levels can drag heavily on investment, and hence on the economy.

Resolving NPLs, on the other hand, can help reduce financial fragmentation and facilitate capital flows within the single market.

On the basis of an expert report, the Council highlighted the need for action as regards:

-           bank supervision;

-           the reform of insolvency and debt recovery frameworks;

-           the development of secondary markets for NPLs ('distressed assets');

-           restructuring of the banking industry.

According to the report, prepared by a sub-group of the Council's financial services committee, NPLs amounted to nearly €1 trillion at the end of 2016. That is the equivalent of roughly 6.7% of the EU's GDP and 5.1% of total bank loans.

But there are large variations within the EU, where ratios range from 1% to 46%. In some countries NPLs are concentrated in real estate, whilst in others they are scattered across the economy.

Persistently high NPL levels pose a problem, as they:

-           are a drag on bank profitability due to administrative costs and higher funding costs for banks. Provisioning needs deplete banks' capital base;

-           pose a risk for the viability of high-NPL banks;

-           lock up capital to back unproductive assets, thus weighing down on monetary policy transmission and on the financing of the economy.

Banks are primarily responsible for restructuring their business models and resolving their NPL issues. However, given their current magnitude, NPL stocks in some member states may not decline at a sufficient pace, despite the economic recovery.he Council agreed that measures to address the issue would be beneficial for the EU as a whole. Incentives for banks to deal with NPLs proactively should be enhanced, whilst avoiding the disruptive effects of fire sales. Measures should both address existing stocks of NPLs and prevent a further accumulation of NPLs in the future.

The conclusions were adopted at a meeting of the Economic and Financial Affairs Council.

The Council agreed to revert to the issue regularly, to take stock of the evolution of NPLs in Europe and of actions taken.

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Economic, employment and fiscal policies: 2017 country-specific recommendations

On 11 July 2017, the Council issued its 2017 recommendations and opinions on the member states' economic, employment and fiscal policies.

This was the final stage of the 2017 'European Semester', an annual policy monitoring process. The recommendations had been endorsed the European Council in June.

In March 2017, the European Council approved the following priorities:

  • boosting investment;
  • pursuing structural reforms;
  • responsible fiscal policies.

The European Semester involves simultaneous monitoring of the member states' economic, employment and fiscal policies during a six-month period every year.

In the light of policy guidance given by the European Council annually in March, the member states present each year in April:

  • national reform programmes for their economic policies. These set out a macroeconomic scenario for the medium term, national targets for implementing the EU's "Europe 2020" strategy for jobs and growth, identification of the main obstacles to growth, and measures for growth-enhancing initiatives in the short term;
  • stability or convergence programmes for their fiscal policies. Eurozone countries present stability programmes, whereas non-euro member states present convergence programmes. These set out medium-term budgetary objectives, the main assumptions about expected economic developments, a description of fiscal and economic policy measures, and an analysis of how changes in assumptions are susceptible to affect fiscal and debt positions.

The Council then adopts country-specific recommendations (CSRs) and opinions. It provides explanations in cases where the recommendations do not correspond with those proposed by the Commission.

The 2017 CSRs are addressed to 27 of the EU's 28 member states. To avoid duplication there is no CSR for Greece, as it is subject to enhanced policy surveillance under an economic adjustment programme.

The recommendations were adopted at a meeting of the Economic and Financial Affairs Council, without discussion.

In March 2017, the Council adopted a specific recommendation on the economic policies of the euro area. It did so at an earlier stage so that eurozone issues be taken into account when approving the country-specific recommendations.

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Ukraine: Council adopts EU-Ukraine association agreement

On 11 July, the Council adopted a decision to conclude the Association Agreement with Ukraine on behalf of the European Union. This takes place on the eve of the EU-Ukraine summit in Kyiv, on 12 and 13 July.

This is the final step of the ratification process through which the EU and Ukraine commit to a close, long-term relationship in all main policy areas. It will allow the full implementation of the agreement as of 1 September 2017.

Most of the Association Agreement is already operational. Many political and sectoral parts of the agreement have been provisionally applied since 1 September 2014, while its trade part, the deep and comprehensive free trade area (DCFTA), has been provisionally applied since 1 January 2016. The conclusion and entry into force of the agreement will now give a new impetus to the cooperation in areas such as foreign and security policy, justice, freedom and security (including migration) taxation, public finance management, science and technology, education and information society.

In 2014, the European Union and Ukraine signed an Association Agreement marking a new state in the development of EU-Ukraine relations. The Association Agreement is the main tool for bringing Ukraine and the EU closer together: it promotes deeper political ties, stronger economic links and the respect for common values. The economic part of the agreement, the DCFTA, offers Ukraine a framework for modernising its trade relations and for economic development by opening up markets and harmonising laws, standards and regulations in various sectors. This will help align key sectors of the Ukrainian economy with EU standards.

On 15 December 2016, the European Council reconfirmed its commitment to the conclusion of the EU-Ukraine Association Agreement and clarified the understanding of a number of aspects of the agreement. The decision by the EU heads of state and government paved the way for all EU member states to confirm the ratification of the agreement.

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