As a remarkable and challenging 2020 draws to a close hope is on the horizon at least in terms of the roll-out of vaccines despite new variants of COVID-19 emerging. While 2020 was overshadowed by a world transformed by a pandemic, it remained a busy year for EU policymakers. Breakthroughs on the EU-27 multi-annual 2021-2027 1.8 trillion euro budget were achieved thus giving certainty on the financing needed to help communities and the economic recovery. 

These measures come in addition to support measures advanced during 2020. A flurry of programs and stimulus have emerged since March 2020 at the EU level, by the ECB (as well as the new reformed European Stability Mechanism – see our coverage on this) and equally by individual Member States. The EU’s SURE and NextGeneration EU issuances (common backed debt) have transformed the EU and have led it to become one of the largest bond issuers in Europe, on par with the largest sovereigns and larger than the European Stability Mechanism and the European Investment Bank. 

While these measures are welcome and are driving a new EU safe asset benchmark in sorts, new thinking may have to emerge, beyond the EU’s new NPL Action Plan (please see our Eurozone Hub coverage on this) but equally whether EU economies can grow enough individually and collectively to repay the increasing debt. A host of new EU investment treaties, including possibly with China, may open up external trade but further work may be needed closer to home. 

While the German helm of the EU’s rotating presidency (and Chancellor Merkel’s last) helped steer the EU-27 through undoubtedly the most challenging times in generations it is now for Portugal to deliver the plan ahead as it assumes the rotating presidency on January 1st.

The 2021 Priorities of the Portuguese Presidency

Building on the EU’s Strategic Agenda for 2019-2024 as well as the Trio Programme Priorities of Germany and Portugal and Slovenia (which will hold the presidency in July to end of December 2021) and having already worked together in the 2007-2008 Trio Presidency, Portugal’s Priorities are centered on the following five themes that will despite policymakers continue to combat COVID and its aftermath focus on: 

1. Building a more resilient Europe by:

1. Reinforcing investment and recovery of the economy;
2. Mitigating the effects of the crisis;
3. Implementing the new EU multi-annual budget and the EU Recovery Fund as well as the breadth of NextGenerationEU instruments;
4. Promoting sustainable growth and job creation;
5. Fostering the recovery in line with the European Green Deal and Just Transition Fund;
6. Reinforcing solidarity and values, including democracy and the rule of law, human rights and the fundamental freedoms

2. Creating a more Green Europe by: 

1. Promoting the European Green Deal, making sustainability an integral part of all European Union policies;
2. Implementing the European Climate Law and laws on the decarbonisation of the EU;
3. Promoting the European Climate Pact and the European Union Strategy on Adaptation to Climate Change in conjunction with the new European Union Forest Strategy;
4. Focusing on the “Blue Economy” and the sustainable use of ocean resources;
5. Developing EU transport and energy strategies that support environmental sustainability;

3. Delivering a more Digital Europe as well as a fair and inclusive digital transition

1. Implementing the Digital Markets Act, the Digital Services Act and the EU’s overall Digital Finance Strategy; 
2. Implementing digital best practices in public administration and promoting simplification of administrative, fiscal and governmental services; 
3. Promoting a global digital cooperation strategy and development of a Digital Democracy concept; 

4. Reinforcing and reforming Europe’s social contract

1. Reinforcing the European social model including fighting poverty, social exclusion and inequality as well as mitigating the effects of unemployment; 
2. Strengthening territorial cohesion and the implementation of the European Pillar of Social Rights; 

5. Driving a more Global Europe 

1. Delivering on the commitment to strengthening globalisation regulation mechanisms, international cooperation and a joint response to humanitarian crises and emergencies; 
2. Paying particular attention to building closer, more dynamic relations between the EU and Africa;
3. Reinforcing strategic relations with India;
4. Pursuing strategic relations and an ambitious partnership with the United Kingdom; and
5. Giving a new impetus to EU-US transatlantic relations. 

Raft of rulemaking and institutional changes ahead

In addition to the above, the EU Commission and other EU policymakers’ workplans, as covered in Navigating 2021, will continue to focus on stepping up momentum to finalize the Banking Union, the Capital Markets Union 2.0 and ultimately deepen the EU’s Single Market for financial services and beyond. Some areas, such as reinvigorating efforts on insolvency law harmonization (long thought to be too big to reform but too important to miss) along with tax law reform have begun.

These new efforts all coincide with the EU making amendments to a number of key existing pillars of financial services regulation, from AIFMD to MiFIR/MiFID II to CRR II/CRD V along with BMR and BRRD II/SRMR II as well as Solvency II, policymakers, despite lockdowns have been busier than ever before. Equally, the COVID-19 temporary reliefs from compliance with certain existing rules and/or the delay into new rules coming online are either set to expire or may be removed. Further compliance challenges are also ahead with the EU unveiling its new comprehensive policy on preventing money laundering and terrorist financing. 

In addition to rulemaking changes, we expect 2021 to also introduce further institutional changes with an increase in Europeanisation of supervision across the EU’s financial markets as well as even greater coordination on fiscal policies of Member States. Consequently, With the above in mind, 2021 is likely to be busier than ever before with market participants needing to rapidly move to adapt to a new dynamic beyond the changes of the past decade and Brexit. One thing that does remain certain is that with change there comes a host of opportunities. 

And that’s a wrap!  We’d like to thank our valued clients, readers and friends of the firm for a your support during 2020 and wish you and your loved ones a very good festive season along with a peaceful start to 2021!  

We hope you enjoy this month’s edition as well as this quarter’s edition of the Global Financial Markets Regulatory Review.  We’ll be back in the New Year with a range of events and publications in addition to our flagship “Navigating 2021” review of work plans of supervisors and regulators at the EU and national level and what this might mean for affected firms as well as a range of special “Background Briefings” including on the EU’s Budget and European Semester package set to guide EU economies into calmer waters along with a breadth of Client Alerts as well as webinars.

As always, if you find yourself reading someone else’s copy and wish to be added to the circulation list, please send an email to eurozone-hub@dentons.com and we will do our best to make sure that you will get the next edition and all future editions. It goes without saying that if you have any feedback to give us in relation to this monthly newsletter – positive or negative – we would be delighted to hear from you.