The Economy Brief - The Berlin debate on public procurement reforms is coming for Brussels

The Berlin debate on public procurement reforms is coming for Brussels

Hello and a big welcome to our new friends from Gallimard, Statkraft, cKinetics and others.
A debate over how public procurement rules should be reformed and whether they should include social conditionalities such as mandatory collective agreements clauses seems poised to move from Berlin to Brussels in the upcoming months.

After the German SPD—the oldest workers’ party in Europe—recently lost two of three regional elections, its Secretary General, Kevin Kühnert, said the group needs to become more visible in the government coalition. It has often been squeezed between its more outspoken partners, the Greens and the pro-market liberal party FDP.

Alongside a promised stabilisation of public pension levels and retirement ages, for the SPD, this would mean finally get one of its remaining pet projects from the coalition treaty over the finish line:

In 2021, Germany's three ruling parties agreed to strengthen the position of trade unions by encouraging more firms to conclude collective agreements. More specifically, they looked at public procurement rules as a route to achieve that.

For companies to participate in public tenders at the federal level, the coalition agreed to make it mandatory to pay their workers’ wages bases on existing collective agreements.

Three years on, however, the rules haven't been implemented yet, and several deadlines have been missed when the responsible Labour Minister, Hubertus Heil (SPD, S&D), wanted to adopt the draft law.

While the federal level only accounts for 12% of public procurement in Germany - more specifically, 22% of public construction projects - multiple German Länder (states) already have similar laws.

As the European Commission is considering revising its own public procurement rules—which the director of the EU executive's internal market unit, DG Grow, said will be one of her key upcoming tasks—it would be well advised to note the sticking points within the Berlin debate.

Twenty EU countries to call for single market push after Letta, Draghi ‘sidelined’ integration goals. Ahead of a meeting of industry ministers in Brussels on Thursday (26 September), twenty member states have signed an initiative to remove single market barriers, an effort they feel has been largely neglected in the recent high-level reports by former Italian Prime Ministers Enrico Letta and Mario Draghi. During the meeting, three more countries (Italy, Spain, and Greece) joined the call. Read more.

EU industry ministers broadly agree with former European Central Bank President Mario Draghi’s “valid” diagnosis of Europe’s economic problems but remain deeply divided on how to fund the bloc’s investment needs. Hungarian Minister of Industry Máté Lóga said after chairing a meeting of his EU counterparts in Brussels on Thursday (26 September) that member states acknowledged that low productivity, high energy prices and excessive administrative burdens are significantly hampering Europe’s ability to compete with China and the US – as highlighted by Draghi’s recent report. However, he noted that the discussion had yielded only a “reflection” – but no consensus – on the potential extension of the post-pandemic relaxation of state-aid rules. Read more.

Italy’s Minister for Enterprises, Adolfo Urso, will seek a broad alliance with other industry ministers on Thursday (26 September) to move the review of car reduction targets forward but also shield the EU’s 2035 zero-CO2 emissions goal. The Italian minister (Fratelli d’Italia-ECR) thus signalled an unexpected shift of his country’s position towards upholding the objective of phasing out all new gasoline cars by 2035 – which his party’s leader, Giorgia Meloni, had repeatedly rebuked. “We would want to pursue this route” of 100% emission reduction by 2035, Urso said, “as it is also the one on which there could be broader convergence,” he said, pointing to bilateral talks he recently held with his counterparties from Spain, Czechia and Austria – and most notably, from Germany. Read more.

Nearly two-thirds of foreign-made components in Russian weapons are produced in or re-exported from China, Ukraine says. Vladyslav Vlasiuk, an advisor on sanctions policy to President Volodymyr Zelenskyy, told reporters in Brussels on Tuesday (24 September) that roughly 60% of foreign-made microchips, circuit boards and other critical components used in Russia’s military apparatus, including drones and missiles, are manufactured or re-sold by Chinese firms. Vlasiuk also warned that EU and US sanctions on Moscow have failed to prevent “a lot” of these components – many of which he said were originally intended for civilian use – from being sourced from Western companies. Read more.

The head of the EU financial markets supervisor threw her weight behind calls to cut requirements on the bloc’s securitisation market on Monday (23 September), signalling that policymakers will propose to loosen current rules “in the coming weeks.” “It’s clear the regulatory framework has not produced the expected results,” Verena Ross, Chair of the European Securities and Markets Authority (ESMA), said at an industry conference in London this morning – pointing to the hefty decline seen in Europe’s securitisation markets compared to the pre-2008 financial crisis era. “Therefore, we need to look at this again [and] improve the regulatory incentives for markets participants” she said. Read more.

Germany’s Lindner curbs hopes for EU bias in CMU retail investment plans. While EU policymakers make efforts to convince Europeans to invest more of their savings into European assets rather than abroad, German Finance Minister Christian Lindner said on Tuesday (24 September) that citizens would be well-advised to invest globally. “Financial literacy means that if you invest in capital markets, it makes sense to do so in a globally diversified manner in different asset classes and different currency areas,” Lindner said while presenting the results of an OECD report commissioned by his ministry on strengthening the financial literacy of German citizens. Read more.

Scholz shuts door to UniCredit after ‘unfriendly attack’ on Commerzbank. German Chancellor Olaf Scholz slammed as “an unfriendly attack” UniCredit’s move to become the biggest investor in rival Commerzbank with a potential 21% stake, marking growing hostility towards the Italian bank. Read more.

German Economy Minister Robert Habeck (Greens) had little time on Monday (23 September) to digest the results of the third round of regional elections as he held talks with car sector leaders on getting the country’s largest industry back on track. Habeck met with the heads of industry association VDA, trade union IG Metall, large producers and suppliers at a virtual meeting in reaction to the recent batch of job cuts and downsizing announcements by several car industry heavyweights – including Europe’s largest producer, Volkswagen. “The automotive industry is facing major challenges and is undergoing a major transition and restructuring,” a ministry spokesperson told journalists on Friday (20 September). Read more.