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					ZDS BRUSSELS UPDATE
    nd                                                                                                          st
2        Edition                                                                                             31 October 2008


IN THIS ISSUE                                                   LEADER

                                                                European Business fully accepts its part of the responsibility
Leader .................................................... 1   for protecting the climate. Compared to other regions Europe
                                                                has undertaken to achieve the greatest reductions in
Upcoming Events ................................. 2
                                                                greenhouse gases. European industry has made the largest
Employment and Social Affairs ........... 3                     contribution here. The ETS package is the most important and
                                                                certainly also most threatening EU-dossier with direct impact
Energy, Climate Change Policy ........... 5
                                                                on European industry we ever had in EU-history. We are
Transport ............................................... 8     facing the question whether the manufacturing industry in
                                                                Europe will have a future under the new ETS regime. The
ECOFIN ................................................10
                                                                regulations proposed for amending the EU ETS Directive are
                                                                not well suited to achieve the goals adopted by the Spring
                                                                Council in March 2007 in a cost-effective manner. This is all
                                                                the more serious since the political and economic environment
                                                                has changed dramatically since the beginning of 2007. Given
                                                                the yet incalculable consequences of the crisis of the financial
                                                                markets no additional cost must be imposed on European
                                                                industries.

                                                                The Conclusions of the European Council last week opened a
                                                                new window of opportunity: The package has now to be
                                                                applied in a rigorously established cost-effective manner to all
                                                                sectors of the European economy and all Member States,
                                                                having regard to each Member State´s specific situation. On
                                                                the other hand the European Council decided to support
                                                                European industry in this difficult economic situation and
                                                                asked the Commission to make appropriate proposals by the
                                                                end of the year, in particular to preserve the international
                                                                competitiveness of European industry. Industry expects that
                                                                the adoption of the Green Package will lead to a solution that
                                                                will be acceptable to all industry branches.

                                                                European industry is committed to climate protection and to
                                                                the EU CO2 reduction target of -20%, and also accepts the
                                                                overall cap for the ETS sector (-21%, 2005 – 2020).
                                                                Concerning the ETS-regime industry asks for 100% free
                                                                allocation for manufacturing industry based on technology and
                                                                efficiency benchmarks as long as there is no international
                                                                agreement which puts comparable burden on non-EU
                                                                industry. The reason for that is that carbon leakage criteria
                                                                cannot be developed in a way so that they sufficiently protect
                                                                those industries exposed to international competition. A
                                                                solution to the indirect effects of EU ETS for energy intensive
                                                                industries is needed.


                                                                Maja Soba Tovsak


ZDS Brussels Update                                                                                                           1
Association of Employers of Slovenia (ZDS)
Rue du Commerce 31, 1000 Brussels
Tel.: +32 2 290 86 60   Fax: +32 2 792 10 00
Contact: maja.soba@zds.si
UPCOMING EVENTS

BUSINESSEUROPE
5/11/2008
Industrial Affairs Committee meeting

20/11/2008
Social Affairs Committee meeting

23/11/2008
High-Level Conference "The Services Directive: State of Play of National Transposition"




ZDS Brussels Update                                                                       2
EMPLOYMENT AND SOCIAL AFFAIRS

Tripartite Social Summit
On 15 October 2008, the French EU Presidency convened a Tripartite Social Summit. The aim of the
meeting was to have a discussion with social partners on the financial crisis and the EU climate change and
energy package, its impact on employment and the involvement of the social partners in this debate.

The participants agreed the seriousness of the financial crisis where the degree of uncertainty for companies
and households has increased tremendously and the knock-on effect on growth and job creation will
unfortunately be appreciable. A degree of collective responsibility to be shared by European Heads of State
and Government is needed. European governments must send an unambiguous signal proving their
attachment to a coordinated European but also global approach. More coordination of market supervision,
state guarantees and other measures to limit the crisis is vital at present. The social consequences of the
crisis should not be neglected. A good way to reconcile wage policies and companies’ competiveness is the
development or further improvement of financial participation schemes which give employees a stake in the
success of a business.

BUSINESSEUROPE stressed that European employers support the general objectives of the EU energy and
climate policy. Nevertheless, all measures must be designed to contribute to three policy objectives and not
just one: environmental protection obviously, but also energy security and competitiveness of European
industry. The transition towards a low-carbon economy could have negative effects on employment.
Additional costs imposed by EU climate and energy policies will hurt the international competitiveness of
energy-intensive industries in particular. But it is essential that companies stay in Europe. European Social
partners can play an important role in helping to control the negative impact on employment and have just
started discussions on the content of the next social dialogue work programme.

A lot of work remains to be done, also by the social partners. At EU level, the challenge is to work harder to
reconcile the economic and the social. The Commission is ready to work with the social partners. Different
options are currently being considered by Commissioners Spidla and Dimas on how to involve the social
partners in the field of energy and climate change.


European pact on immigration and asylum
At the meeting of the European Council on 15-16 October Heads of State and Government approved the
European pact on immigration and asylum. This pact has no direct legal impacts, but sets out common
guidelines and priorities for future work. This adoption will give fresh political impetus to a European
immigration and asylum policy which takes account of both the collective interest of the European Union and
the specificities of each individual Member State. The pact continues the common immigration and asylum
policy based on the Tampere (1999–2004) and Den Haag (2004–2009) programmes.

The pact comprises five fundamental obligations which will be translated into concrete measures in the
programme that will take over from the Den Haag programme from 2010:

       legal immigration should be shaped to take account of self-determined priorities, needs and
        absorption capacities of each Member State and the need to promote integration;
       illegal immigration should be combated, in particular by ensuring that illegally staying foreigners
        return to their home countries or move to a transit country
       border controls should be made more effective;
       a “Europe of asylum” should be created;
       a close partnership should be built up with home and transit countries in order to stimulate synergies
        between migration and development.

For each of these five obligations, the pact sets out specific objectives in the area of illegal immigration –
referring to the so-called “return directive” that has already been adopted – in particular stricter return rules
(collective return flights, improved return agreements) and more effective border controls. In the framework
of creating a “Europe of asylum”, a uniform asylum procedure should be put in place by 2010 if possible but
by 2012 at the latest, and a European support bureau for asylum issues should be introduced by 2009. In the
area of legal migration, the particular aim is to improve the European Union’s attractiveness for highly


ZDS Brussels Update                                                                                            3
qualified workers. To this end, the pact integrates both the blue card directive already under discussion and
the action plan for legal migration. At the same time, promotion of temporary or circular migration as agreed
in the conclusions of the European Council on 14 December 2007 must ensure that European measures do
not encourage emigration of skilled workers. The home countries of immigrants should be involved in
implementation of the EU concept.


A European framework for action
On 29 October, the European Commission published a Communication entitled "From financial crisis to
recovery: A European framework for action". The aim of the text is to contribute to the ongoing debate on
how to best respond to the current crisis and its consequences. The Communication sets out a three part
approach which will be developed into an overall EU recovery action plan/framework.

As part of the chapter on "dealing with the impact on the real economy", the European Commission
highlights its intention to work with the social partners to find the best response to address the employment
and social impact of the crisis. In addition, the Commission highlights a series of measures to be
taken/further pursued in the context of the Lisbon Strategy, including pursuing flexicurity, and highlights in
particular the importance of active labour market policies to respond to the crisis.


Initiatives on work-life balance
On 3 October 2008 the European Commission presented a package of initiatives on compatibility of work
and family life. The social package comprises a proposal for amendment of the pregnant workers directive
92/85/EEC, a proposal for a directive on application of the principle of equal treatment between self-
employed men and women and repeal of directive 86/613/EEC, a report on implementation of the Barcelona
objectives concerning pre-school childcare as well as a communication on active inclusion of persons
excluded from the labour market.

Proposal for a revised directive on maternity leave

The proposal for amendment of the pregnant workers directive (92/85/EEC) seeks to update and extend the
existing EU legislative provisions. The goal pursued by the European Commission with the new version is
improvement in the safety and health at work of pregnant workers and workers who have recently given birth
or are breastfeeding. This is intended to enable female workers to recover better from the direct
consequences of giving birth. At the same time, it should be made easier for them to return directly to the
labour market at the end of maternity leave without the need to take to parental leave.

Amendment of the directive on equal treatment of self-employed women

Under the draft proposal for application of the principle of equal treatment between men and women
engaged in a self-employed capacity and repealing directive 86/613/EEC, Member States are supposed to
take measures to eliminate discrimination based on gender in a series of cases. For instance, the European
Commission proposal asks Member States to take measures to ensure that assisting spouses or partners
enjoy at least the same level of social protection as self-employed persons.

Communication on childcare

In its report on implementation of the Barcelona objectives for pre-school childcare, the European
Commission points out that, despite some progress, the offer of childcare places is still insufficient to meet
the needs of parents.

It points out in its communication that the Barcelona objectives (by 2010, childcare places for at least 90% of
children aged three to school-going age and 33% for children under three) have still not been met by most
Member States. The supply is a long way from matching demand. The Barcelona objectives were adopted
by Heads of State and Government in 2002 and are intended to help parents, especially mothers, to work if
they want to, as part of the EU growth and jobs strategy.

In its report, the European Commission makes a direct link between the volume of childcare provision and
the number of parents in employment. In addition, the European Commission explains that the opening times
of childcare facilities are often incompatible with employment. In particular, the European Commission calls
on national and local authorities as well as social partners to create an easily accessible, affordable and high

ZDS Brussels Update                                                                                           4
quality care offer for small children. In order to support Member States in their efforts to further expand
childcare offers, Commissioner Spidla has announced that the EU will make half a billion euros available by
2013.

Communication on a Commission recommendation on active inclusion of persons excluded from the
labour market

According to the European Commission, social exclusion in the consequence of many problems ranging
from unemployment or absence of qualifications through to a poor housing situation, social isolation or family
breakdown. In the communication the European Commission proposes a range of common principles which
are intended to serve as pointers for Member States when framing their strategies for combating poverty.
The principles constitute a voluntary framework for the Member States. They have been drawn up on the
basis of a comprehensive consultation of Member States and all relevant stakeholders.

The European Commission’s recommendation has three key aspects:

       Appropriate income support;
       Inclusive labour markets, and
       Access to high quality services

The aim is that all persons capable of working should be reincorporated in the labour market and that those
who are incapable of working receive the payments they need for a life of dignity. For sustainable integration
in the labour market, disadvantaged persons must be supported with adequate payments and personalised
employment and social services. Only in this way can it be ensured that they participate in society and are
capable of working. On the basis of these common principles, national governments should draw up
concepts for “active inclusion” in order to combat exclusion from society and from the labour market more
effectively.



ENERGY, CLIMATE CHANGE POLICY

Trilogue negotiations in November: emission trading amendment may go into second
reading
Between 4 November and 3 December 2008 there will be informal trilogue negotiations between Council,
Parliament and Commission on the energy and climate package. Both Heads of State and Government in
the last European Council and Environment Ministers in the last Environment Council once again confirmed
the intention of reaching political agreement on all parts of the package by the end of the year.

However, the European Parliament is now considering bringing forward the date of the plenary vote on the
climate and energy package from 18 to 3 or 4 December. The Parliament fears that its discretion for political
action will be unduly restricted if its plenary vote comes after the European Council scheduled for 11 and 12
December. If the Council were to agree a unanimous solution between all Member States, the Parliament
would be under massive pressure to accept this compromise without amendment.

If the Parliament were to decide to follow this new timetable, this would probably mean that the climate and
energy package would go into a second reading, since it is thought unlikely that Council and Parliament will
reach agreement on all politically sensitive issues in the climate and energy package by the beginning of
December.

For the package to be adopted in second reading before the end of this legislative period of the European
Parliament, the Council’s common position would have to be submitted to the Parliament by the end of
January at the latest. That would pose a major challenge for the Council’s translators and linguist-jurists, who
usually need several months to transform a political agreement into an official legislative text in all 23 official
languages.

Regarding revision of the Emission Trading Scheme directive, rapporteurs Avril Doyle (EPP-ED, Ireland) and
Lena Ek (ALDE, Sweden) in the European Parliament’s Environment and Industry Committees respectively
have managed to push through their reports with the support of Socialists, Greens, Liberals and
Communists. In so doing, Doyle went against the great majority of her own political group. A majority of EPP
MEPs headed by Karl-Heinz Florenz (EPP-ED, Germany) and Eija-Riitta Korhola (EPP-ED, Finland) have


ZDS Brussels Update                                                                                              5
been working for a solution which takes greater account of the competitiveness of European industry –
without making any concessions on the climate protection targets.

A majority of MEPs in both the Environment and Industry Committees are in favour of auctioning for emission
allowances to manufacturing industry rising in a straight line to 100% by 2020 – irrespective of whether non-
European companies are subjected to similar burdens in the framework of an international agreement. The
Parliament rejected an offset for the indirect costs of energy-intensive sectors particularly affected by higher
electricity prices, for instance the aluminium industry. Instead, the Environment Committee wants to retain
the option of introducing border adjustment measures for goods imported from countries not subject to
emission trading rules comparable to those imposed on goods produce in the EU.

Exemptions from auctioning would apply only to a very limited extent for sectors which can demonstrate that
they are exposed to international competition. The Committee believes that criteria for identifying these
sectors should only be decided in the comitology procedure.

Moreover, the draft adopted by the European Parliament’s Environment Committee provides that 50% of the
auctioning proceeds should be paid into a fund administered centrally by the EU. The fund would finance
global measures to combat climate change. The other 50% of the proceeds would be paid to Member States
with an obligation to use the resources for climate protection measures.

The situation in the Council of Ministers on revision of the Emission Trading Scheme directive is still
confused. At the last meeting of the Environment Committee on 20 October 2008, it was agreed that an
effort would be made to reach agreement by the end of the year. However, this depends on a unanimous
solution being found by then. In particular, Italy and Poland supported by seven other Member States called
for greater account to be taken of economic interests in the revision of the Emission Trading Scheme
directive at the last European Council.

At the last meeting of the Environment Committee, it was stressed that the appropriate precautions should
be taken against carbon leakage, i.e. the transfer of production and associated jobs to locations outside the
EU. Several Member States want the directive itself rather than a subsequent comitology procedure to define
which energy-intensive industries should be eligible for 100% free allocation of emission allowances on the
basis of benchmarks. The rest of manufacturing industry would have to bid for only 20% of emission
allowances until 2020 and would receive the rest free on the basis of benchmarks. They are also calling for
compensation for particularly energy-intensive industries which are affected indirectly by the consequences
of emission trading through higher electricity prices. But it is still unclear whether they will ultimately prevail.


Climate-friendly power stations thanks to geological storage of CO2
In the “climate-friendly” power stations of the future, the CO 2 released when electricity is generated from
fossil fuels will not be pumped into the atmosphere but will be separated and stored in suitable geological
sinks (known as carbon capture and storage, CCS). There are three procedures for separating CO 2 in power
stations: before (pre-combustion), during (oxyfuel) and after (post-combustion). The three procedures differ
in the level of complexity and degree of effectiveness. However, all three procedures are associated with
efficiency losses during the generation process. Experts believe that CCS technology will probably be ready
for the market from 2020.

Even in this research and development phase of CCS, it is of decisive importance that technological
progress goes hand in hand with formulation of a uniform European legislative framework in order to offer
companies the certainty they need to make investments and to create economic incentives for the
development of CCS technology. Some Member States are against the obligatory introduction of a CO 2 limit
value for coal-fired power stations. The European Parliament’s Environment Committee had proposed a limit
value of 500g CO2/KWh for new power stations starting in 2015. The CO 2 emissions of highly efficient new
installations are currently 950g CO2/KWh for brown coal and 750g CO2/KWh for hard coal; this means that
the Parliament’s proposal would make it essential to introduce CCS technology while it is still in the research
and demonstration phase. Such regulatory requirements on top of the Emission Trading Scheme would lead
to economic inefficiencies and would in the first instance hamper a modernisation of the stock of power
stations and hence run counter to lower CO2 emissions.

They therefore urges the Parliament and the Council to make the necessary corrections. In addition, they call
for a flexible validity period for storage sink exploration permits in order to ensure a comprehensive
examination of suitability for creation of a geological CO 2 store. With a short permit validity period,
companies would face the risk of having to break off incomplete explorations because their permits have not


ZDS Brussels Update                                                                                               6
been prolonged, forfeiting their capital investment. Furthermore, they rejects the proposal that the
Commission should have the power to vet storage applications as bureaucratic and bound to slow down the
procedure. In this area, the treaty infringement procedure is completely adequate to ensure that the
requirements of European law are complied with.

Some Member States are also against establishment of a rigid purity grade for the CO 2 flow in the framework
directive. The purity grade must be oriented on the situation of the relevant transport infrastructure and
storage facilities, and accordingly can only be defined in the individual permitting procedure. The lower level
would allow the use not only of incidental substances but also of aromatics needed for safety reasons.

After the Environment Committee voted on the report by the British Liberal MEP Davis on the CCS directive
on 7 October 2008, the Environment Committee is now defining its position. On 20 October 2008 there was
an exploratory debate on CCS but this concentrated mainly on how to finance the twelve planned EU-wide
demonstration projects. By the end of December an agreement between Council and Parliament is
supposed to be reached on the legislative framework for geological CO 2 storage as part of the climate
package. As things currently stand, Council of Ministers and Parliament are a long way apart on the issue of
introducing an emission limit value of 500 g CO 2/kWh and on setting a purity grade for the CO 2 flow. The
Environment Committee’s calls an emission limit value for coal-fired power stations and establishment of a
specific purity grade are rejected by a majority of Member States.

Regarding finance for the twelve EU-wide demonstration projects, on 20 October 2008 Environment
Ministers only managed to agree that the demonstration installations should be promoted using a
combination of EU funds, national contributions and private resources.


Political agreement on the third internal energy market package
On 10 October 2008 Energy Ministers reached a political agreement on the third internal energy market
package. They had already achieved consensus on the main elements at their previous meeting on 6 June
2008, and the joint orientation agreed then (see Brussels Update, In addition, they reached an accord on the
still controversial level playing field clause and on a diluted version of the third-country clause as compared
with the Commission proposal.

Under the level playing field clause, energy production or supply companies would not be allowed to have
direct or indirect control over a network operator from a Member State that has opted for ownership
unbundling. Furthermore, EU Member States can protect their energy supply companies from takeover if
compelling reasons of the public good so require. However, these safeguard measures must be compatible
with EU law and here in particular the right of free movement of capital, and need to be approved in advance
by the European Commission.

The third-country clause comes into play if companies from third countries, i.e. states outside the European
Union, plan to acquire networks within the European Union. The national regulatory authority of the EU
Member States in question must verify whether the planned takeover infringes European unbundling rules
and whether it poses a threat to security of energy supply in the Member State and the EU as a whole. To
this end, the national regulatory authority must ask the European Commission for its position and take this
position into account to the greatest extent possible. However, the Commission’s position is not binding so
that the ultimate decision remains with the Member State.

This means that the compromise found allows enhanced organisational unbundling as a third option
alongside ownership unbundling and the model of transmission network operator. The possibility of
protecting domestic energy supply businesses against takeover or control by energy groups from other EU
Member States should only be deployed in a few exceptional cases bearing in mind the strict link to EC law.
In this case, involvement of the Commission in the decision-making process is more of an advantage aimed
at countering one-sided assertion of national interests.

At the level of distribution networks, the Council has rejected additional competences whereby the
Commission would have given concrete form to the unbundling plans of transmission network operators in
the framework of a comitology procedure. The Council approved establishment of a European agency to
strengthen cooperation between national regulatory authorities (ACER). The agency is intended to ensure
uniform application of the legal provisions governing the internal electricity and gas market within the EU,
and to coordinate national regulatory tasks between Member States and complement them at Community
level if necessary. In addition, it will have power to decide on individual cases in cross-border issues. This
power will extend to regulatory mechanisms for cross-border energy infrastructures, to exceptions from


ZDS Brussels Update                                                                                          7
internal market rules for new electricity connections and to new natural gas infrastructures. Within the
agency, each Member State will be represented with an equal vote.

The third internal energy market package will now go into second reading. Council and Parliament are a long
way from each other in particular on the issue of unbundling of energy groups. In first reading the European
Parliament voted for ownership unbundling of energy supply and grid management in the electricity sector.
MEPs approved the so-called “third way” with more marked organisational unbundling only for the gas
sector, and only accepted even this with enhanced safeguard mechanisms. However, European
Commission, Council and Parliament are pursuing the same goal of completing negotiations on the package
before the end of this legislative period. Hence, an agreement by March 2009 is likely.


Conclusions of European Council on energy security adopted
At their summit on 15-16 October 2008 European Heads of State and Government declared that the security
of energy supply is a priority of the European Union. In this context, the Council followed the Commission’s
lead and assigned particularly high importance to improving energy efficiency within Europe.

The French Presidency presented a Presidency paper to the summit on the basis of which the Council
adopted guidelines for improving the security of energy supply and invited the European Commission to
prepare proposals and initiatives accordingly. The guidelines relate to accelerating implementation of the
energy efficiency action plan, further diversification of energy sources development and financing of
infrastructure plans as well as development of solidarity and crisis mechanisms. For better functioning of
energy markets, the third internal energy market package should be flanked by greater transparency in
energy flows and in oil and gas stocks, and by preparation of long-term forecasts of energy needs.

On 12 November 2008 the European Commission is to present its second strategic energy report, which
examines EU energy security within the EU as well as the external policy aspect of European energy policy.
The report is likely to be accompanied by a green paper on revision of the guidelines for trans-European
energy networks (TEN-E) as well as proposals for amendment of the gas security directive and the
provisions on oil stocks. It is planned that European Heads of State and Government will adopt the second
strategic energy report at the spring summit in March 2009.

A secure and affordable energy supply is one of the main concerns of European industry. It has repeatedly
called for a total energy policy concept. The demand includes a balanced energy mix and an energy supply
that is secure in the long term at competitive prices, modernisation of infrastructures as well as an
intensification of research and development of new technologies and procedures for improving energy
efficiency.



TRANSPORT

The First Railway Package
On 26 June, the European Commission took dramatic action aimed at ensuring the full implementation of EU
railway legislation across Europe by launching infringement procedures against twenty-four Member States.

The First Railway Package, sometimes known as the railway infrastructure package, is a set of EU laws
designed to:

       liberalise international rail freight;
       establish a transparent regulatory regime for the allocation of capacity and charging for access to rail
        infrastructure across the EU;
       create a framework for the licensing of train operators in each Member State.

The Package thus forms the legal framework for the rail sector in Europe today, being the basis for the
introduction of competition, the independence of Infrastructure Managers and the opening up of the
international freight market. Since its adoption in 2001, the measures set out in the package have had
results in some European countries; volumes transported have been stabilised, as opposed to the decline
seen through the previous decades, and market share has even been regained from the roads in some
Member States. As the then EU Transport Commissioner Jacques Barrot said of the measures in 2006,
“market integration in the rail freight sector already shows positive results in some Member States – we have

ZDS Brussels Update                                                                                           8
witnessed new market entry and improved traffic performance. The modal share of rail freight has stabilised
in Europe.”
However, as a study carried out by the European Commission in May of 2006 highlighted, many
governments have not properly implemented the legislation, or had implemented it in such a lacklustre
fashion that the existence of an effective regulatory framework, and indeed properly functioning railways,
was not ensured. This was despite warnings having been sent to a number of Member States on several
occasions in the years after the initial adoption of the First Rail Package. This has resulted in the rail sector
not reaching its full competitive potential.

The Commission’s study identified a number of specific shortcomings, which included:

       a lack of independence of Infrastructure Managers from Railway Operators
       insufficient implementation of the rules of the Directive on track access charging
       the absence of performance regimes to improve the efficiency of the railway network and the lack of
        incentives for infrastructure managers to reduce costs and charges
       the failure of governments to set up independent Regulatory Bodies with sufficiently strong powers to
        tackle competition problems in the railway sector

As a result, the Commission sent letters to 24 Member States (all EU countries with railways, apart from the
Netherlands), identifying specific shortcomings that each country needs to remedy. If the Member States do
not take satisfactory action within a specified time limit -generally two months - the Commission has the
ability to take action against them in the European Court of Justice, which can impose serious financial
penalties.

While the launching of the infringement procedures may help to solve some of the shortcomings identified in
the Commission’s report, many in the rail industry continue to call for a complete overhaul of the First
Package, in order to solve the failures in the market that have become apparent in recent years, and which,
in the eyes of the industry, cannot be solved solely by the more rigorous application of existing texts.

The Commission is indeed expected to publish a first draft of the recast of the First Railway package in July
of 2009. The recast will aim at simplifying the existing legislation by merging the three current texts into one
legal act. According to the European Commission, the political goal of the recast is to enhance the
competitiveness of rail transport in Europe and to hence contribute to achieving the objectives of the “Lisbon
strategy,” which aims to make Europe the world’s most competitive economy.

Amongst the changes called for by industry are:

       a strengthening of the separation between infrastructure management and operations;
       a clarification of arrangements related to ownership and access to services and facilities;
       a legislative framework to oblige Member States to use Multi-Annual Contracts, and to provide a
        clear definition of these contracts;
       the strengthening of regulatory bodies, and rules to ensure the independence from government
        ministries;
       the mandatory introduction of schemes to ensure the payment of external costs in all Member States
        to ensure the implementation of the “user pays” and “polluter pays” principles.


Results of Council of EU Transport Ministers
On 9 October 2008 EU Transport Ministers met in Luxembourg for a Transport Council and adopted
conclusions on the “Greening transport” dossier. The legislative package on making the transport sector
sustainable consists of three elements: internalisation of external costs, revision of the Eurovignette directive
and an initiative to reduce noise in rail freight transport. It also presents a snapshot of EU measures in the
area of transport policy already in place and a communication on further initiatives that the Commission
wants to adopt before the end of 2009. Some Member States are critical of the planned new version of
directive on road use charges for heavy goods vehicles (Eurovignette directive). In light of the banking and
financial crisis, they would first like to see an economic analysis of the impact of the directive in the current
economic situation. Despite, this, the French Presidency aims to secure political agreement by the end of the
year.

The Transport Council also reconfirmed the intention of realising a “Single European Sky”, details of which
are currently being negotiated in Council working groups. The aim is to start the five-year development



ZDS Brussels Update                                                                                            9
phase of the SESAR project (“Single European sky air traffic management research programme”) in order to
create greater efficiency in European air space management.

There was also agreement on the inclusion of air transport in the emission trading scheme. On this occasion
EU Transport Ministers once more underlined that the directive was designed to bring all flights that take off
from a European airport or land in the EU into the European emission trading scheme. This would mean that
non-European airlines would also be affected by EU emission trading unless the non-EU countries in
question had put in place comparable climate protection measures. With this decision, Transport Ministers
confirmed their demand for a global system for reducing greenhouse gases and called on the Commission to
negotiate a framework agreement with non-EU countries in order to bring about fair competitive conditions
for the European air transport industry.

Lastly, EU Transport Ministers agreed on better cooperation on prosecution of cross-border traffic offences,
an official legal basis for which is to be decided in December 2008. EU Transport Commissioner Antonio
Tajani also announced that he would present a green paper on revision of directives on trans-European
networks (TENs) in early 2009 and would launch a public consultation procedure in parallel.



ECOFIN

Commission facilitates state aid to stabilise financial markets
On 13 October 2008 the European Commission published a communication on application of state aid rules
to government support measures in relation to financial institutions in the context of the current financial and
banking crisis. After the first national stabilisation and rescue plans prompted by the financial crisis were sent
to Brussels for verification, the Commission reacted very rapidly and flexibly and set up more than twenty
teams in the Competition Directorate-General to check that these national rescue plans are compliant with
state aid law. In this way, many decisions could be taken within 24 hours. The new communication, which
was issued directly after the agreement of Eurozone Heads of State and Government on a joint European
action plan on 12 October 2008, constitutes a further step by the Commission to support Member States in
their efforts to stabilise financial markets.

In the communication – which draws on the principles of the existing guidelines for rescue and restructuring
state aid but takes account of the particular circumstances of the banking and financial crisis – the
Commission explains how it contemplates applying European state aid law to state aid arrangements and
individual measures to help financial institutions. An essential element is the Commission’s finding that
article 87.3(b) TEC whereby state aid deployed to address a considerable disruption in the economic life of a
Member State can be regarded as compatible with the common market is applicable to the financial crisis.
Hitherto the Commission has allowed application of this treaty provision only on an extremely restrictive
basis, in order to avoid an expansive interpretation of its scope.

In order to fall within the scope of article 87.3(b) TEC, however, national arrangements must meet several
conditions. The principle of non-discrimination must be applied. In particular, governments must ensure that
all banks established on their territory have access to the rescue measures, irrespective of whether the
bank’s headquarters is located in another country. In principle, permitted state aid must be temporary and
must be halted as soon as market conditions improve. Providing guarantees is allowed for a period of up to
two years. With the Commission’s consent, this period can be extended if the situation on financial markets
so requires. The extent of state aid must be clearly defined and limited to the degree necessary to manage
the crisis. The private sector should be appropriately involved in the introduction of relief measures and
should be paid appropriate compensation for any support it provides. National arrangements must include
rules for the behaviour of beneficiaries and any abuse of state aid should be ruled out. As a complement to
relief measures, Member States should carry through structural adjustments in their financial sector or
restructuring of individual financial institutions.

The Commission will fast-track national rescue plans that meet these conditions, aiming at approval within 24
hours if possible. Soon after publication of the communication, the Commission approved the English and
Irish rescue packages for financial institutions on the basis of the new guidelines.

The communication gives Member States legal certainty about their initiatives to stabilise financial markets,
which are also important for the real economy. However, good state aid discipline at national level and
effective state aid supervision by the EU are indispensable. For that reason, recognition of permissible state
aid in accordance with article 87.3(b) TEC should continue to be restricted to special exceptional situations.

ZDS Brussels Update                                                                                            10
EU grants Hungary €6.5 billion in financial aid
Brussels, 29/10/2008 (Agence Europe) - The European Commission and the French Presidency of the
Ecofin Council have confirmed that they intend to provide a €6.5 billion loan to Hungary in order to stabilise
the country's economy which has been severely affected by the financial crisis (with the Hungarian currency
plummeting). The Community assistance facility has been activated to redress the balance of payments
situation (governed by regulation (EC) 332/2002). The money for the European loan will be borrowed on the
markets. The loan will be provided as part of a joint response with the International Monetary fund (IMF) and
the World Bank, which will provide €12.5 billion (by means of a 17 month loan) and €1 billion respectively.

The concrete modalities will shortly be finalised in cooperation with the Hungarian authorities, The financial
assistance package will be provided in the context of a strong commitment by the Hungarian authorities to
implement a flanking policy programme to be included in the forthcoming Convergence Programme update.
Implementation of the policy conditions to be agreed in the context of the EU facility will be monitored by the
Commission in collaboration with the Economic and Financial Committee.

The last time the facility was used was at the start of the 1990s to help the Italian economy. Now this
medium-term support mechanism for member states which have not adopted the euro could be
strengthened.

French President Nicolas Sarkozy stressed on the sidelines of his meeting with British Prime Minister
Gordon Brown that the European Union itself, which has €12 billion in liquidity to support a number of
member states, increase that sum to at least €20 billion to increase our capacity to respond to the crisis. The
first priority at the moment is to stop the unfavourable situation to other countries, including in Eastern
Europe, where problems are emerging and where action has to be taken. The purpose of the meeting of the
two men was to prepare for the forthcoming meetings to try to recast the international financial system and
the role of the IMF.




For further questions please contact:

Ms Maja Soba Tovsak, e-mail: maja.soba@zds.si
Association of Employers of Slovenia (ZDS) – Rue du Commerce 31, 1000 Brussels
Tel.: +32 2 290 86 60       Fax: +32 2 792 10 00




ZDS Brussels Update                                                                                         11

				
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