Apart from the already delightful weather, Croatia will face legislative elections on Wednesday that have the potential to turn from “warm” to “hot” in a blink.
Voters will be called to the polls in elections to determine the political future of conservative Prime Minister Andrej Plenkovic, who has been in office in Zagreb for almost eight years. His Croatian Democratic Union (Hdz) party is favored in the polls but risks being unable to form a coalition without the support of the far right.
Plenkovic’s Hdz had gained over 37 percent and 66 seats in 2020. According to polls, it now enjoys less than 30 percent of the voting intentions and could fall well below the 60-seat threshold. In second place, the center-left coalition is expected to exceed 23 percent and win around 45 seats. The far-right party Patriotic Movement is in third place with around 8 percent (between 9 and 14 seats), ahead of another center-right party, the Bridge and the Greens, both at around 7 percent (around 10 seats). Plenkovic, who is already at the head of a minority government, needs the support of 76 MPs to remain Prime Minister.
The electoral campaign
The electoral campaign has been quite “spicy,” to put it mildly.
The head of state, Zoran Milanovic, has been at the center of the election campaign with fierce rhetoric and has repeatedly accused the outgoing government of corruption.
Indeed, Milanovic took the field shortly after dissolving the government by announcing that he would run for prime minister himself. Although the Constitutional Court has banned him from running for office without first resigning as president, he has declared that if his party wins, he will be elected to lead the government even though he is not the official candidate of the center-left coalition.
Plenković, a pro-European conservative, has led Croatia since 2016 and has always rejected accusations of corruption. He has also denied claims that he led the country to war on the side of Ukraine. Indeed, tensions with Milanovic date back to the beginning of the Russian invasion of Ukraine, with the president often criticizing EU and NATO efforts to help Kyiv.
For his part, the outgoing prime minister harshly criticized Milanovic for his behavior, which he considered to be in stark contrast to all ethical and legal principles, even dictatorial. Plenković also criticized the decision to set the elections on a midweek day, a choice detrimental to the country’s economy.
The dissolution of parliament was the formal request submitted by eleven opposition parties, led by the SDP and the left-wing environmentalist party Mozemo!, in response to anti-government protests.
The mobilization began in February, when the parliamentary majority appointed former judge Ivan Turudić, considered close to various people accused of corruption, as the new attorney general.
His election had triggered great controversy over corruption in the country, described by many as ‘rampant,’ but also over the figure of Plenković, accused of governing in a manner similar to Hungarian Prime Minister Viktor Orbán.
EU Competitiveness will be the next Green Deal
Goodbye ‘New European Green Deal’. The time has come for the ‘New European Competitiveness Deal.’ The Green Deal in the next legislative period will likely give way to a ‘Competitiveness Deal’ as the top priority of the European Union.
At least that is the goal the EU leaders should set themselves, according to the draft conclusions of the European Council of 17 and 18 April. European public policies will be put in place to strengthen Europe’s economic, manufacturing, industrial, and technological base. Along with defense and democratic values, competitiveness will also be at the heart of the strategic agenda that European Council President Charles Michel is negotiating, and leaders will adopt in June, setting priorities for the next five years.
The two proposals at the core of the discussion
Competitiveness discussions will sound very Italian. Former Prime Minister Enrico Letta will present his report on the future of the internal market to the European Council. Another former Prime Minister and ECB chief, Mario Draghi, is expected to deliver the results of his report on the future of European competitiveness by the end of June.
Letta and Draghi have been tight-lipped about the contents of their reports, both surrounded by great confidentiality. But, on at least a couple of occasions, Draghi gave some indications. He spoke of ‘massive investment needs’ for the dual climate, digital transition, and defense spending. He stressed the need to remain competitive to maintain welfare systems and preserve the core values of the EU.
Behind Draghi’s phrases, a vision pushes the EU towards a discussion on issuing a common debt, as most of the EU capitals need the economic capacity to deal with state aid in the long term.
The Chinese dilemma
Beyond the joint debt, there is another problematic issue that European leaders will discuss this week: relations with China. The economic policy decreed by the Chinese president, Xi Jinping, to revive his economy is focused on supporting industrial production. Instead of focusing on domestic consumption, over-production will be used to increase exports exponentially. The Biden administration has also multiplied its warnings about an invasion of green tech and high-tech products (wind turbines, solar panels, batteries, electric vehicles, chips, and everything else needed for the economy of the next 25 years) in Europe. Washington also asked the EU to agree on ‘defensive and offensive measures’ without hurting each other.
Commission Vice-President Margrethe Vestager stepped up the rhetoric on China last week. “For us, it is simultaneously a partner, an economic competitor, and a systemic rival. But the last two dimensions are increasingly converging,’ Vestager said. “We have seen the strategy by which China has come to dominate the solar panel industry” through foreign investment, technology acquisition, and massive subsidies to domestic suppliers and then exporting excess capacity to the rest of the world at low prices,” Vestager explained. “The result is that today less than 3 percent of the panels installed in the EU are produced in Europe.” According to Vestager, Western economies cannot ‘absorb’ similar behavior in other tech and green tech sectors. “It is not only dangerous for our competitiveness. It also jeopardizes our economic security.”
The German Chancellor, Olaf Scholz, is in China and is accompanied by the usual delegation of business people. In May, the French President, Emmanuel Macron, will host Xi Jinping for a visit to Paris. The Italian Prime Minister Giorgia Meloni is also preparing a Chinese trip to sign a new partnership after abandoning the New Silk Roads.
The feeling is that many more discussions will still be needed to have a common position among the 27 capitals on dealing with China.
About last week’s European Parliament plenary session
Last week’s plenary session of the European Parliament gave the green light to important files just less than two months before crucial European elections.
Energy
Among others, a sweeping reform of EU gas and electricity market regulations to accelerate the clean energy transition and include provisions that could further restrict Russia’s ability to continue selling natural gas to Europe.
MEPs have adopted a package of gas and electricity market reforms intended to bolster energy security, protect vulnerable consumers from wild price fluctuations as seen during the 2022 energy crisis, and create a new hydrogen market, as well as allow individual countries to restrict imports of Russian gas – with a complete ban on the cards due to incoming restrictions imports with excessive upstream methane leakage.
The reforms in the electricity market address the surging electricity bills observed during the 2022 energy crisis, wherein the EU’s market structure resulted in wholesale electricity costs mirroring gas prices, even amid abundant renewable energy. Under the reforms, consumers can opt for fixed-price contracts, and electricity providers are barred from disconnecting financially vulnerable consumers during high prices.
While the core pricing system of the electricity market remains intact, the EU can now declare regional or EU-wide electricity price crises, enabling governments to limit prices for small businesses and energy-intensive industries temporarily. Moreover, the reforms extend until 2028 an exemption from CO2 emissions limits for electricity generation eligible for state support via capacity mechanisms, effectively permitting subsidized coal- and gas-fired power plants.
Additionally, the legislation mandates two-way contracts for difference-in-state support schemes for renewable and nuclear power in response to excessive profits reaped by certain power companies. Like current practices, governments will ensure a guaranteed minimum wholesale price by supplementing revenue if it falls below a predetermined threshold. However, under the new regulations, generators must reimburse the state if the wholesale price surpasses the agreed-upon ‘strike price.’
The European Parliament also endorsed new legislation establishing boundaries on direct methane emissions originating from the oil, gas, and coal industries and biomethane once it integrates into the gas network. Methane, the primary component of natural gas and a potent greenhouse gas, contributes significantly to global warming, estimated to be responsible for nearly a quarter of the ongoing rise in global temperatures.
Under the law, operators within the fossil fuel sectors will be required to develop a methane leak detection and repair plan within nine months and conduct an initial survey for leak detection and repair within a year. Moreover, it prohibits the venting and flaring of methane, including in coal mines, by 2027. Beginning in 2030, imports will be subject to maximum methane intensity limits.
Of notable importance, starting from the same year, new contracts for gas imports into the EU will only be permitted if the source producers demonstrate adherence to similarly stringent monitoring, reporting, and verification standards. This measure will likely exclude gas imports from Russia, potentially impacting imports from the US and other suppliers.
The sweeping reform of EU gas and electricity market regulations, approved by MEPs, has significant implications for businesses operating within and reliant upon these sectors.
The reforms aim to expedite the transition to clean energy sources by promoting the production of biomethane and the development of a hydrogen distribution network aimed at decarbonizing Europe’s energy system. The legislation seeks to boost ‘low-carbon’ gas production and mandates the European Commission to establish criteria for such products. Therefore, we expect the next European Commission to develop a list of criteria as one of the first actions in the energy domain.
Parliament’s position on the EU pharmaceutical reform
MEPs have also endorsed proposals to overhaul EU pharmaceutical legislation, aiming to stimulate innovation and improve the security of medicine supply, as well as its accessibility and affordability.
To incentivize innovation, MEPs propose implementing a minimum regulatory data protection period of seven and a half years, alongside two years of market protection following marketing authorization, during which generic, hybrid, or biosimilar products cannot be marketed. Additional periods of data protection would be available for products addressing unmet medical needs (+12 months), undergoing comparative clinical trials (+6 months), and substantial EU-based research and development collaboration (+6 months). MEPs advocate for a cap on the total data protection period at eight and a half years. A one-time extension of the market protection period could be granted for an additional twelve months if the company secures marketing authorization for a new therapeutic indication offering significant clinical benefits compared to existing therapies. Orphan drugs will enjoy up to 11 years of market exclusivity if they address high unmet medical needs.
Combatting Antimicrobial Resistance (AMR)
MEPs stress the urgency of advancing research and developing novel antimicrobials, proposing market entry rewards and milestone reward payment schemes to incentivize investment. They support a subscription model-based voluntary joint procurement scheme to stimulate investment in antimicrobials. MEPs advocate for introducing a “transferable data exclusivity voucher” for priority antimicrobials, granting a maximum of twelve months of data protection for an authorized product. To promote prudent antimicrobial use, MEPs call for stricter prescription and dispensation regulations, limiting the quantity and duration of prescriptions.
Enhanced Environmental Risk Assessment
Under the proposed regulations, companies must submit an environmental risk assessment (ERA) when seeking marketing authorization. MEPs propose establishing a new ad-hoc environmental risk assessment working party within the European Medicines Agency to ensure a thorough evaluation of ERAs. They emphasize the importance of comprehensive risk mitigation measures throughout the medical life cycle.
Empowering EU Health Emergency Response
MEPs advocate elevating the European Health Emergency Preparedness and Response Authority (HERA) to a separate entity under the European Centre for Disease Prevention and Control (ECDC). HERA’s primary focus would be addressing urgent health threats, including antimicrobial resistance and medicine shortages, to enhance European health resilience and research capabilities.
The implications for businesses stemming from the proposed overhaul of EU pharmaceutical legislation are multifaceted.
Pharmaceutical companies may benefit from extended periods of regulatory data protection and market exclusivity for innovative products. This could incentivize investment in research and development, particularly for treatments addressing unmet medical needs. However, generic, hybrid, or biosimilar manufacturers may need longer wait times before entering the market, potentially impacting their revenue streams.
Antimicrobial research and development companies could benefit from financial incentives and procurement schemes to stimulate investment in new treatments. Nonetheless, stricter regulations on antimicrobial use may necessitate adjustments in pharmaceutical marketing and distribution strategies, potentially affecting sales volumes.
Pharmaceutical companies must allocate resources to conduct thorough environmental risk assessments for their products, which could lead to increased operational costs and potentially longer timeframes for product approvals.
