Signal Berlaymont: A weekly roundup of major EU policy events

This week in Brussels: A group of more than 300 prominent scientists have warned against EU plans to force popular messaging apps like WhatsApp to scan messages, in the fight against child sexual abuse images. Meanwhile, during a visit by Chinese President Xi to Europe, EU Commission President von der Leyen has stated that the EU is “ready to make full use of trade defense instruments” against Chinese imports. Furthermore, German CDU leader Friedrich Merz, who may well become the next German Chancellor, has declared Germany and EU are partly to blame for Brexit. European Commissioner Nicolas Schmit has revealed that when it comes to the millions promised by the EU to neighbouring countries for migration deals, “[w]e do not know exactly how the money is used." For the first time, the EU has proposed imposing sanctions on Russian liquefied natural gas (LNG) imports into the EU, and a number of EU member states are pushing to use the European Stability Mechanism (ESM), meant as a Eurozone bailout fund, for defence.

Scientists warn EU plan to force WhatsApp to scan messages creates “unprecedented capabilities for surveillance” 

More than 300 scientists and researchers have warned in a joint statement against EU plans to bypass encryption in the fight against child sexual abuse images, whereby popular messaging apps like WhatsApp or Signal would be forced to scan messages to detect CSAM (child sexual abuse material). The scientists write that the proposal "creates unprecedented capabilities for surveillance and control of internet users. This undermines a secure digital future for our society and can have enormous consequences for democratic processes in Europe and beyond." They also note about the risk of “false positives”: "Given that WhatsApp users send 140 billion messages per day, even if only one in hundred would be a message tested by such detectors, there would be 1.4 million false positives every single day."

The scientists rejected changes introduced by the Belgian EU presidency, saying they did not fix the problem. Cyptography professor Bart Preneel (KU Leuven) commented, "[t]hey make it more complicated, but essentially nothing changes." Last year, the European Parliament already rejected an earlier proposal. This week, EU Member States met to discuss the updated proposal. In response, German Pirate MEP Patrick Breyer stated that the proposed “chat control” methodology “serves to legitimate mass scanning; any privacy-preserving feature is seen as a risk.”

EU “ready to make full use of trade defence instruments” against Chinese imports

During a visit by Chinese President Xi Jinping to Europe, French President Emmanuel Macron and European Commission President Ursula von der Leyen have told him that the EU needed to protect itself from cheap Chinese imports in order to rebalance trade ties; von der Leyen said that “we stand ready to make full use of our trade defense instruments if this is necessary.”

Both also urged China’s president to curb support for Russia in its war in Ukraine. Macron reportedly thanked the Chinese leader for holding off on tariffs at least until the conclusion of China’s probe into an anti-dumping investigation into cognac, seen as a countermeasure to EU investigations into Chinese imports. The Chinese president called the exchanges “fruitful” as French and Chinese companies signed several co-operation agreements, including metro construction contracts for France’s Alstom, but reportedly, no big orders were made. Macron welcomed a pledge underscored by Xi to “refrain from selling any weapons (to Russia), all aid to Moscow and to strictly control exports of dual-use goods” that can be used for military purposes.

German CDU leader Merz declares Germany and EU are partly to blame for Brexit 

Friedrich Merz, the leader of Germany's leading opposition party CDU — currently leading in opinion polls — has stated that both Germany and Brussels are partly to blame for Brexit, hinting in a Financial Times interview that the former German chancellor - Angela Merkel, also from the CDU - could have done more to help David Cameron, who was British Prime Minister at the time, win the 2016 Brexit referendum. Merz said: “I remember that David Cameron asked for changes to EU social policy and came back to London empty-handed,” adding that “the continental Europeans were not entirely blameless when it came to Brexit.”

European Commissioner Nicolas Schmit criticises EU migration deals: “We do not know exactly how the money is used."

Luxembourg’s European Commissioner Nicolas Schmit, who is also the “lead candidate” of the European socialists for the June European Parliament elections, has criticised the multi-million deals signed by the EU to decrease illegal migration. He did so after the EU signed another deal, this time with Lebanon, for €1 billion, following similar arrangements with Egypt, Mauritania, and Tunisia.

He said: “We're spending now huge amounts of money, giving this money to different regimes or governments like the Tunisian government. We know the authorities there are really treating very badly the refugees. (...) I think we have to revise them and see what can be done, how can we do it differently because we do not know exactly how the money is used."

EU proposes sanctions on Russia’s LNG sector

For the first time, the EU has proposed imposing sanctions on Russian liquefied natural gas (LNG) imports into the EU. No outright ban would be imposed, but only a ban for EU countries to re-export Russian LNG after receiving it, this would reportedly hit about a quarter of Russia’s LNG revenues, according to an estimate by the Centre for Research on Energy and Clean Air. Also, EU involvement in upcoming LNG projects in Russia would be outlawed. The EU has dropped its Russian gas imports by around two-thirds since the start of the Russian invasion of Ukraine. However, a Western alliance attempt to cap Russian oil sales at $60 per barrel has largely fallen apart, with the product consistently selling above the desired limit.

Meanwhile, EU member states are reportedly converging on a compromise to transfer windfall profits from frozen Russian assets to Ukraine. Valérie Urbain, the new chief executive of Belgium-based clearing house Euroclear, where many of these assets are frozen, has specified that the plan is to use “87 to 89 per cent of those profits, after deduction of taxes and other costs”. She also, however, cautioned that plans of the G7 to seize Russian assets altogether “could have major consequences not only for Euroclear. It leads to legal uncertainty for the entire European capital market. If foreign investors see that assets can suddenly be seized here, a financial Pandora's box threatens to open. We already see that many central banks from other countries are following this topic very closely. If the Russian assets held here were confiscated, they would risk losing confidence in the EU as well. The dollar is indispensable as an international trading currency, but the euro much less so. Large foreign players could then invest much less in Europe than now.”

EU member states push to use European Stability Mechanism (ESM) for defence

France and the Baltic states are reportedly pushing for the European Stability Mechanism (ESM), a Eurozone bailout fund worth €422 billion, to be used beyond its original role of supporting troubled Eurozone governments. In an influential report to EU leaders last month, former Italian Prime Minister Enrico Letta already suggested that the fund could distribute loans worth up to 2 per cent of a country’s GDP to pay for defence and security.

Separately, it has emerged that also as a result of the Covid recovery fund, Italy’s mafia is moving away from murder and extortion rackets, and is now concentrating on white collar crime. This is what senior Italian prosecutors have told Reuters, which notes that "the shift to tax evasion and financial fraud is being fuelled by billions of euros sloshing around Italy in post-COVID recovery funds that were designed to boost the economy but are proving a boon for fraudsters."