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June 19, 2020

Green policies get a boost from recovery efforts

There was a big fear amongst environmentalists that the pandemic would crowd out environmental issues from the policy agenda. The health emergency made climate change disappear for a while. Exinction-rebellion or Friday-for-future protests were suspended. Economic effects from the pandemic, with the risk of unemployment, were perceived by some as a more imminent threat than the catastrophic effects of global warming for the planet. 

But, now that countries are opening up again, the prospects are much more upbeat. The pandemic mobilised recovery funds to kickstart the economy, and green policies benefited from this money too. Look at the decision from the German government to subsidise electric cars only.  The green rethink in our societies started some time ago already and will not easily be derailed. It could even get a boost through Covid-19. Industries as well as investors are reflecting on how to use the recovery effectively to slow down climate change. 

In politics there is an upward current for environmental issues too. The Green party in Ireland is about to get into government,  with a long list of green projects approved by the two bigger coalition partners. In France, Emmanuel Macron is receiving 150 concrete recommendations to fight climate change from a citizen convention established under the grand débat last year. The environmentalists are set to do well in the second round of local elections, cementing their influence at the local level. All parties are about to put on a green varnish on their party programmes. The only question is how much money there will be to finance all those projects and transitions.

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June 19, 2020

Small Countries, small problems. Austria ready to compromise on recovery fund over Schnitzel

Horse trading is the EU's daily bread and butter. Getting reluctant member states behind the recovery fund is the latest exercise of this kind. There is already some movement there. One of the members of the frugal four, Austria, might be won over with a small favour.

Der Standard reports that Austria could be ready to trade in its reservations against the fund, in return for the European Commission allowing the Austrian government to agree a temporary cut in VAT on gastronomy to 5%. They quote a member of the government who confirmed this indirectly, saying that they do not expect the EU to block the VAT proposal, since after all they are looking to get their support for the recovery fund.

Why would the commission block Austria's plan to lower VAT on Schnitzel and beer? Since 1967 there exists a harmonised system for value-added taxes for goods and services in the EU. VAT revenues from member states also determine the size of the EU budget, which is why there are many rules about this tax. One of these stipulates that, next to the normal value added rate, a member state can only have two reduced rates. Austria already has two lower rates: a 10% rate for medication, food and drink, and rents; and a 13% rate for direct sale for wine producers and airline tickets.

A new 5% rate would usually require the approval of the commission as well as the EU finance ministers. However, since the measure is part of the recovery programme and is intended to last only for six months, a green light from the commission is considered sufficient by the Austrian finance ministry.

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