Committee on Economic and Monetary Affairs Ordinary meeting
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ECON European Parliament
Follow its sittingsSpeaker 3
Certainly, have a big data market in which we need to navigate. But, essentially, this is something that nobody can control. It's going to be increasing even faster with the advent of AI, I assure you. And this is something we have to come to terms with. And this is something that will challenge our governance structures.
Definitely, we have to basically engage in this new, I would say, widely advancing data market in order to tap into it, basically see what could be used in order to improve the quality and the timeliness of official statistics. Statistics. And definitely, we need to put in place the right structures in order to, and we're making some recommendations to that effect. A third section deals with the resources that are required to produce statistics. I'm not normally one to mince my words.
Resources are in place. However, they are inadequate. Inadequate in the context of the big budgets that are available both to member states and at a European level. So here, I'm making a case for improved resources both at a national level and especially also at an ESS level, at a European level. You cannot expect, for example, Eurostat to monitor the quality and the ever-increasing supply of data with the same amount of resources.
In any case, the amount of resources that are available, for example, to Eurostat within the broader context are not infinite, infinitesimally small, but they are small by all accounts. So even a small increase, even a small in its budgetary allocation, will go a long way. And I can assure you that the dividends that could be reaped for that, because these statistics are being used for policy. So pro basically, basing your policies, your policy formulation, and your policy evaluation on good quality statistics, which are reliable and timely, pays dividends. Because, I mean, you can you mentioned a policy area, and, basically, there are statistics that would go with it.
So there's definitely here on the allocation of additional resources, that is important. Secondly, what is important is the certainty. Basically, with statistical programs, these are multi-year programs. These are not programs, basically, that begin in one year and end the next. These are pro ongoing programs.
Many are ongoing programs, and the lead time for a program to be experimented with and to be put in place takes a number of years. So you cannot have basically an allocation when one year, in one year, you start programs, and then you have uncertainty as to whether there would be follow-up allocations in the following years. That doesn't work. That doesn't work. And certainly, I think that is something that needs to be addressed.
And we're making a good case in our report for that to be addressed. Something else that needs to be addressed, of course, is basically that when it comes to decisions on the use of those resources, statistical institutions need to have the latitude to use those resources basically according to their needs without external approvals. I mean, we talk about the independence of statistical institutions, and rightfully so, that is extremely important. But then you cannot have that independence, basically. And then when it comes to resources, basically, there is somebody else somewhere who has to approve.
So if that approval doesn't come, then, of course, where is your independence? There are limits to our independence. However, we're not just making a case for this independence. We are also making a case for statistical institutions to become even more accountable. So we do make a case for statistical institutions to have internal audit functions that would basically look after the value for money.
We are making a case for external audits. And here, each country would have, even at the European level, the supreme audit institutions. I would say that most statistical institutions are already subject to the purview of such supreme audit institutions. And we would make a case that wherever that is not the case, then that should be the case, because accountability is extremely important here. Additionally, in order to basically add another level of safeguards, we are making a case for external and ex external audit when it comes to the use of resources only, not when it comes to the production and dissemination of statistics, basically, because that is the remit of the statistical institutions themselves, and we don't think that should be in any way touched by anyone.
So when it comes to the user, external audit institutions could be engaged periodically in order to carry out such audits. So, yes, we're making a strong case for increased allocation of resources. In the grand scheme of things, what we are arguing for is not going to make any difference. So it's not going, it is small pebbles in the grand scheme of things, I can assure you. And I think there shouldn't be too much, basically, worry that this is going to reduce anybody's allocation elsewhere.
I wouldn't tend to think so or break the camera's back. But in statistics, this will make a lot of difference. So that is extremely important. So one last point is that, of course, we reviewed. We have to periodically report on the commitment for our own confidence.
In statistics, we believe that we have come a long way. We have come a long way. And, of course, wherever there needs to be improvements, those need to be had. The code of practice. The code of practice, we are there to monitor the code of practice.
The code of practice is the backbone of the European statistical system, together with its regulation, direct regulation, to the three statistical regulation. So that is extremely important. However, now it's the time to review the code of practice. I mean, so many of the developments have taken place since its adoption, something like 20 years back, that basically now it requires a significant review. So not only SGAP itself requires a review, and I think that it should be the case.
I mean, the establishment of SGAP, it's basically the way it operates, that requires a review after eighteen years, but the code of practice requires another review. And we've committed ourselves later on this year. Hopefully, I'll be able to start publishing the date, a fixed date when our reports will be released so that we will tie everybody's hands, our hands, especially the board's hands. I believe in discipline. This is extremely important.
We cannot have a report that comes six months late. That doesn't work. And it doesn't go then to the council. It goes to the commission. It doesn't go to the European Council, of course, to the Council of Ministers, because it's late.
And, of course, I don't know what used to happen here when that report came late. So that is something that should be in the past, in the past. Clearly, we're committing ourselves and then committing myself, basically, that wouldn't be the case. Hasn't been the case for the past two years, and it won't be the case this year. Okay?
Speaker 2
Thank you very much for your introductory words. And now there is time for question and answer session. And let's start with the first speaker, who is Mr. Fernando Navarreta Rojas. You have 1.5 minutes for the question.
Fernando Navarrete Rojas
Thank you, Chair. Thank you, Mr. Camilleri, for coming to this house. I would like to concentrate on the first part of your presentation, basically on recurrent topics, in particular related to a statutory independence of the National Statistical Institute. It's, and I'm quoting your own report, that you mentioned that one of the unresolved risks is statutory independence that remains insufficiently guaranteed.
And you ask for a change in regulation, in particular in Regulation 223 you've just mentioned. And I think this is just my personal assessment, this call for action is urgent. For me, the last straw was here two weeks ago, I think. Former Vice President of the Spanish government and now President of EIB, proudly was very proud of what she did commingling with the statistical methods of the National Statistical Institute in Spain that prompted the resignation of its chair. So my question is, you're consistently urging changes to this regulation.
My question is why do you think there is a need for change in the regulation and not just for the enforcement of it, in particular Article 5A that already prohibits it? So why do you think it's regulation and not enforcement? And in case it's a change of regulation, what are you specifically recommending to change to make these interferences not just unthinkable, but impossible? And thank you very much.
Thank you. Mr. Kamaledi?
Speaker 3
Thank you. Thank you for your question. First of all, I would like to state unequivocally that any interference or any alleged interference is condemnable. Cannot ever be condoned. Now there's no pride in anyone basically suggesting interference.
If anything, I mean, governments should guarantee independence because it is in their own interest that whatever is produced by the statistical institutions would be of the right quality. Now statistical institutions have the mechanisms themselves, basically, of how to essentially review their own statistical productions because most statistical series are revised. For example, if you take national accounting, that remains open for about 5 years, and you get regular revisions. And that is the strength of the system. So any suggestions of basically outside interference cannot, of course, be condoned and must be condemned.
So that's my first point. A second point is that, basically, there is, of course, enforcement is important. But enforcement, when it comes to anything, starts with the persons themselves. You cannot have the strongest of legislation always, anywhere. But if the people implementing that legislation are weak, if the people implementing that legislation basically succumb to any suggestions, then it's a question of personal integrity.
It's not nothing more than that. And I firmly believe that whilst legislation is extremely important, the strength of the legislation is extremely important, basically, of course, personal integrity is even more important or equally important. That is that's it. Now, in last year's report, not the report, we're the previous report, we did make suggestions, recommendations as to how regulation 223 could be strengthened even further. Certainly, when it comes to the appointment of the director generals of statistics and their dismissal, security of tenure is extremely important, basically.
And we did have occasion within ESCA to discuss these very important points extensively. And we do so with regret. Whilst regulation two to three, its revision has improved things tremendously, we think that there are some additional points, basically, which were not taken on board. Maybe ESCAP itself was a bit to blame for this. I told you, I mean, reports were coming late.
Reports were not even going to the council. That's wrong, this governance. Okay? And that's why I insist our report should go to the council, should be produced in time for the right council. We need to have the resources.
I mean, here's Mariana. We had long discussions with Mariana, basically. She understood my points, and I thank her for that. Once again, I collaborate quite closely. Sometimes we pick a fight.
No problem. But that's not a problem. We are here to improve statistics. So, I mean, the basic what we need to ensure is that the way the g's are appointed is transparent. The way the g's are disposed of or dismissed, basically, should be equally transparent, and they should be safeguards in place.
In any case, in our reports, that's fully explained. If there needs to be further bilateral discussions, both on the basically institutional setup of ESGAP and of the, I would say, any further perhaps improvements to regulation to Tutrisi, those could be had even on a bilateral basis. We are open to that.
Speaker 2
Thank you. Thank you very much. Second on the list is Jonas Fernandez from the Ascendi Group.
Speaker 5
I'm going to speak Spanish. Good morning. Good morning to you, sir. And I thank you, first of all, for being here. It's really a pleasure to have you here in this committee.
Can you hear me now? So I was simply welcoming you and saying it's great to have you here in the committee. And I have a couple of questions for you. The first is linked to what you said in your presentation, in the slides, and the updating of the digital framework which underpins the production of data. And there's a huge quantity of data generated by users, generated by platforms.
The digital economy and AI in recent years has certainly changed the production of statistical data, providing more statistical datasets for academics and policymakers alike. And have you been thinking about the governance approach? How should statistical bodies deal with the fact that things are going to change, data is going to change because of AI? Now my second question, which is about the independence of data-producing bodies and institutes. Would you say a bit more about the need to improve enforcement and the regulatory framework?
But then if we turn our attention to the other side of the pond, the other side of the Atlantic, we have Peronist organization in Argentina or in Venezuela, both those two countries are no longer credible, but the leaders are making decisions based on stats that have been produced. But couldn't all of this lead us down the wrong path?
Speaker 3
I will start with your last question, and then go to the other. Of course. I mean, if statistical institutions are in the business of producing statistics that would please somebody, then there's no need to have them, basically. All you need is somebody who will sing somebody's praises. So, I mean, so that's clear.
Statistics are there as a counterbalance. They are a reality check. They are there to be used basically to calibrate policy, to see how much what you're implementing in the interest of the public is making sense or not, basically. So if you have statistics that would simply tell you what you would wish to listen to, then, of course, all you need is are people who tell you how good you are. So that's useless, of course.
They will drive you into a brick wall, into a hard rock. So there's no need for those. So definitely, there's nothing more to say. But having said that, yes, the statistical environment, the statistical production environment is becoming more challenging because of the onset of the digital economy. Basically, there are, what I call it, the data market.
The data market, I mean, if you look, if you go back some tens of years ago, basically, the statistical institutions were very much themselves in the market, only them in the market. Now there are so many statistical institutions which are private statistical institutions, which generate produced statistics, and they release them even before official statistics come out. So that's a big challenge. And, of course, the availability of statistics because of the digital economy is immense. So the challenge is, of course, I think there's a book, it is a challenge, but it is also a huge opportunity.
A huge opportunity for official statistics in order to integrate even more within that market, basically, but we need to give the tools to official statisticians to really integrate within that market, basically. If you've got this huge digital market, then in order to come to grips with that, statistical institutions should come on board and basically introduce collaborations, platforms, whatever, basically. But in order to do that, you need the right resources. And the right resources, not just financial resources, but the right technical stuff. The digital economy demands and requires the right technical stuff.
It is very often the case that statistical institutions are not in a position to recruit the right technical staff because they wouldn't have the financial resources. You know, they are not competitive when it comes to salaries. They are not competitive when it comes to wages. So if I can't recruit high caliber technical staff who can basically deal with data and produce whatever need is required, essentially. And it's very difficult to essentially compete in this data market.
So that is extremely important. So it's not, I mean, giving statistics the right resources at both European level. And I said, in the grand scheme of things, this is not going to threaten any defense policy, any social policy, or any educational policy. I can assure you. I can assure you.
I mean, if needs be, we can produce data to that effect. It wouldn't threaten any policy in whatever area. So that is extremely important. And then, of course, AI. AI is a new dimension.
We have to deal with it. Incidentally, I also discovered to AI that I can become a music composer essentially, and I can produce a symphony in no time, and I can, you know, push myself as a you know, I am a music follower, but a composer. No. But to AI, I can become a music composer. So having said that, yes, these issues, when it comes to governance, are being discussed, are being dealt with, and this year's report will be exclusively based apart from dealing with the previous year's recommendations, follow-up, and all that.
We will also basically be making recommendations as to what needs to be updated in the governance structure, basically, in order to deal with these, I would say, fast developments in the global data market. Let me put it that way. Thank you.
Speaker 8
Mister Camilleri, I read the annual report really thoroughly, and I identified some key points. And I have to say that some of those questions which I would like to ask you, you answered already, like the resources or you mentioned it. But, let me maybe repeat the same things that your report shows a clear contradiction. You call European statistics a public good, vital for all democracy and new spending. Yet, the 2025 budget is only €75,700,000, just 0.04% of all EU funds.
That's a shame, I say. You call this share tiny. I can call it a shame. Also data, AI, and so on. You mentioned it just now.
The offices can't hire the IT talents with these funds. That's absolutely impossible. So who is responsible for putting pressure on the commission and on all of the decision makers to put more money in the statistics all around? And second thing, that's not about resources, but, as GAAP report stresses that the growing use of privately held data and involvement in common European data spaces risks gradually undermining core principles such as professional independence, impartiality, and transparency. In your view, is the current European statistics code of practice still sufficient to address these challenges, or should there be some revision, something like that?
Speaker 10
And last but not least, we can share then our knowledge about AI and music component compose composition. So.
Room for us.
Speaker 3
You. Indeed, the statistic as to the allocation for European statistics for your stock, basically, from the European budget is definitely tiny. You called it a shame. Well, I tend to agree with you. That's why I said, basically, I repeated that increasing that is not going to break anybody's back.
You can't imagine how a couple of, you know, millions and a couple of millions from this huge European budget shouldn't be that difficult to find, basically. What a long way that would go in order to assist Eurostat and carry out its function more efficiently. Eurostat needs resources. National statistical institutions need resources. What applies to Eurostat applies to the national statistical institutions.
They need them. And a tiny increase, as I said, is not going to break anybody's back. It's not going to make a difference, really, but it would make a huge difference for them. And it would make a huge difference to the quality of statistics. Eurostat is in the business of validating national statistical submissions, basically.
And they are always at the forefront, you know, at the receiving end whenever something doesn't go exactly the way one would wish. And we deal with those issues, basically. And in order to validate somebody's data, you know, a third party's data, you need resources. You cannot have a single person or two persons, basically, validating the national accounting system of any country and being thoroughly involved in the nitty gritty of that. Of course, you can use software.
You can use whatever, basically, but you need some deep knowledge in order to do that. So having said that, that is extremely important. You tell me who is responsible for the state of affairs. Well, the reply is simple. We are all responsible.
SGAP is responsible, and that's why I said it, because I don't want to carry this responsibility. You know, I don't want to basically say it privately and not have the courage to come here to tell you. Eurostat is responsible, of course. They have to make their case. The national statistical institutions have to make their case.
And that's it. I'm sure they are making their case, but they need to be listened to. So I took it upon ourselves. We went to the council and that this report went to the council, and we told them, now look here. They need more resources, and we're not like Oliver.
We need more for the sake of more. It's not because of that. Because what we're saying is, give us some more, not much more, but give us some more. Okay? Do give us some more.
Give us the latitude to use it properly, but hold us accountable for that. We're not saying give us, and we do whatever you like with it. We're not saying that. We want to be held accountable. So the case is there.
Of course, you are responsible. Why would you want to die, you know, have this discussion here unless you intend to, you know, if you're convinced of our case to support this case? So I enjoy you. If you are, if you believe, you know, aware of what I'm saying, if you believe in our report, basically, please do support the statistical institutions. It is in everybody's interest.
One of you said statistics are under assault in a number of countries. Yes. That's the case, and that's unfortunate. And, of course, we cannot condone it. But within that context, if you've got that background, basically, and the Europeans are simply supporting their statistics and doing all it takes in order to basically improve matters, then Europe will stand out.
And that we can lead by example, literally. We are leaders in this area, but we should aspire to continue to be leaders. And it doesn't take that much, believe me. So what I'm asking for is just a little bit more to be used effectively so that matters could be improved and for the better for the benefit of the European countries themselves because they depend so much on statistics.
Speaker 11
Thank you. And the last speaker on the list is Mr. Sigberg Droze from the ESN Group, please. Thank.
Speaker 12
You, chair. I will speak in German. So the translation is in progress. Okay? Okay.
Thank.
Siegbert Frank Droese
Thank you for your report. I know that delivering things on time is very important, and we support the fact that you produced this report on time. You've said that that's what's happening, and it's going to be assessed by a council. Can I link to what mister Navarretti was saying? And I want to hear about the practice of it all.
How does ESCAP ensure that European statistics are truly independent, are methodologically clear, and are free from political guidance, particularly in sensitive areas such as budget deficits, inflation, or employment figures? And, you know, these are issues which have political consequences, and thus, this moves me to my next question. In recent times, has ESCAP identified any shortcomings or any cases where there was a risk to the production of European statistics? And if you did see such cases, what measures were taken to ensure that such cases do not happen again? Thank you.
Speaker 3
Thank you for your question. It's a very important question. First of all, SGAP is not there to validate the data, for example, on the excessive deficit, is not there to validate to ensure that the data on national accounting is correct, is not there to validate. That is EuroStat's function. That is Eurostat's function.
And this gap, of course, monitors and continuously discusses with Eurostat, asks questions. Sometimes, we ask very uncomfortable questions, and it's not easy. It's not easy. Our discussions are not, you know, always, I would say, extremely pleasant, but we are there for the coming good. We are there for the coming good.
So Eurostat has this duty to validate these extremely important statistical compilations. But in order to do that, they need, and I can assure you, it's not an easy task. It's not an easy task. I've spent long years in statistics myself, and I was very conversant, and I'm still conversant even though I moved on with the statistical methodologies. And I can assure you that when it comes to certain compilations, unless you delve deeply into the assumptions that are being made by whoever's compiling those numbers, then there's no way really and truly that you can ensure the right quality.
So that is why you need basically persons and the right persons, right quality, and the right number to continuously monitor statistical compilation in different areas, because you also need experience. In statistics, we always say that, you know, a new statistician will not become a statistician before at least 5 years practice. You go into statistics. Yes. You might be, you know, a doc at a doctorate level, but you won't be able to produce because you won't have the x in order to produce numbers about the economy, you know, you need to know how the economy is functioning, what is happening every day.
So that is extremely important. So that is why there is this need for statistics. Now when it comes to discussions, of course, when it comes to methodology, that is EuroStats' remit. But we do ask significant questions, not just to Eurostat, but also to the national statistical institutions. So throughout the year, we do go whenever we see an allegation, for example, anywhere, we do go into it.
We do ask questions. We do ask questions. We do ask for reports, and we do lots of challenging. So that in itself has got a huge deterrent value. And whenever we feel that there is a need to go public, we do so as well.
And euros and these gaps, s gaps are basically releases on its website. So, ultimately, I always say that it all depends very much on having a system with checks and balances. That is important. I mean, whatever is produced at the national level is counterbalanced by Eurostat's validation process, which is extremely important. But then there are us, basically, who monitor the whole system.
When something is, doesn't feel, you know, that comfortable, we go into it. We ask questions, and we ask serious questions. And frankly speaking, very few would love to have these kinds of discussions with ourselves because it's not because we make people uncomfortable. It's because we are doing our job. We have we are doing our job.
That is what is required. But having said that, I think we could all contribute towards that. Ourselves, Eurostat is doing its job, and you people, please support the statistical system. Without your support, we can never get anywhere. You're supporting basically, when you support statistics, you are supporting the democratic process itself because statistics shine a light on policy formulation, on policy implementation, and it is one of the checks and balances, you know, in the democratic system.
Speaker 14
And that's why I made these cases here, the important case about resources. Thank you.
Speaker 2
Thank you very much, Mr. Kamiri, and we are looking forward to the cooperation in the next period. And now I would like to slowly move to the fourth point on the agenda. I guess within one or two minutes, we can make the switch. Okay.
Speaker 1
So now we are continuing with more or less the same topic. And it's a pleasure to welcome the Director General of Eurostat, Ms. Mariana Kotseva, for the second statistical dialogue of this term. And as it was extensively discussed, quality statistics remain crucial for informed decision-making, effective policy implementation, and ensuring accountability across the European Union. And at the same time, emerging needs continue to require the further development of statistics, such as those supporting the implementation of the EU's revamped economic governance framework, for example, on defense financing or statistics for policy areas such as housing, which is a hot topic also here in the parliament.
At the EU level, Eurostat continues to advance methodological work and is expected to release a proposal on balance of payment statistics later in the year related to the IMF Seventh Manual of Balance of Payment Statistics. At the international level, last year's revision of the system of national accounts had the aim to adapt macroeconomic statistics to the evolving structure of the global economy. The revision of national accounts at UN level consequently requires the adaptation through a legislative proposal of the ESA. Last year, we heard from Eurostadt about the ongoing work on the ESA revision at EU level. We are looking forward to receiving more updates today on this issue.
Therefore, I will now give the floor to Ms. Kotseva to present to us the latest developments in the areas of statistical governance, methodology, and statistical innovation, and inform us about all upcoming initiatives and activities. As it was the case with Mr. Kamieri, first, I will give the floor to Ms. Kotseva to make an introductory statement of five minutes.
So please, Ms. Kotseva.
Speaker 15
Thank you very much, mister chair, honorable members of the European Parliament in the room, and also hopefully others following on the screen. Thank you very much. One year passed very quickly, and it's my pleasure to be here today with you and to engage in a dialogue to share Eurostat priorities and issues we aim to address currently, but also in the near future, in order to advance our ambition to be a trustworthy reference point for data and statistics on Europe. In my very short introduction, I just wanted to share with you the key priorities on which we are currently working in response to the key policy, political priorities of the European Union. Let me start with defense.
You asked me last year many questions about the defense and how Eurostat will respond by providing the necessary and timely statistics to support the EU defense policy. I am very pleased to announce today that in response, in particular to the encouragement of member states to activate the national escape clause in their efforts to increase defense investment, Eurostat, in partnership with national statistical authorities, has concluded intensive preparatory work. And now we are happy to announce that we advance the transmission of defense data from 11 to 3 months after the end of the reference year, putting actually the publication of data in line with the excessive deficit procedure deadlines. You know that in April, every year, the member states are obliged to notify the European Commission and Eurostat about their expenditures. So this year, for the first time, this reporting will also include defense expenditure, including expenditure but also investment.
This will allow the member states to use the national escape clause and to have the discussions with our colleagues in ECFIN in the commission. Next key project for Eurostat, you mentioned, Mr. Chair, is the update of the European system of national accounts and balance of payments, which provide key macroeconomic indicators that underpin many EU policy decisions. So we are quite advanced. We are ready with the draft regulation, which is currently under consultation with the experts in the member states.
And as our ambition is to table out of the commission the proposal for the change of the regulation on European system of national accounts and regulation on balance of payments methodology by the end of this year. The key changes, as we explained last time, are in the areas of better measuring digitalization, globalization, well-being, and sustainability. Then you mentioned as well that a very hot topic in the parliament is about housing and affordable housing in particular. So I am also happy to announce that Eurostat has been very active in support of all these political and public debates. In 2025, what we did, because this was the main criticism, is that there are many data on housing produced by Eurostat, but it's difficult to find them.
So therefore, our main effort was to put them together in a dedicated thematic web page and to have a consolidated database, which now contains more than 200 housing indicators from 14 statistical domains. This integration of data and consolidation has helped the users, hopefully also you and your teams, to have in an easy way access to European statistics on housing. We have been in very active communication with the Special Committee on the Housing Crisis in the European Parliament, making a dedicated presentation upon request. And now, in the coming years, the work will continue to be focused on filling the existing data gaps, especially concerning vulnerable groups like older and young people, and also the affordability of housing. Then a special aspect of work on housing is related to housing investment.
And there, the role of Eurostat, as usual, is to provide methodological guidelines, how to report statistically, how to record different investment schemes in order to ensure that data on investment in housing are comparable across the EU member states. So we also have a work together with you on the commission legal proposal, which was put approximately 1 year ago to the European Parliament, and now it's with Econom Committee for the legal framework for the development, production, and dissemination of commercial real estate statistics. So we are looking forward to knowing when you'll be ready with your mandate for political negotiations and dialogues. And hopefully, we could make good progress in that area as well. Then not surprisingly, energy statistics have kept us busy.
And apparently, it will keep us busy in the coming days and months as well. So there, we also have published new statistics on renewable fuels or on dependency by region from Russia and other major suppliers of energy in the European Union. And we sharply reduced the timing from one year after the timeliness of statistics from one year after the reference period to six months. And now we are aiming for three months after the end of the year to have detailed statistics. Since my time is elapsing, I just want very quickly to mention three points.
We are also planning to table to the parliament and to the council a proposal for the next agricultural census, which is supposed to take place in 2030, and subsequent data collections on agricultural farms, where our ambition will be to reduce administrative burden on farmers. And we will be happy, of course, to provide more information on this. My second point is that I would not be complete in my introduction if I don't mention our continuous efforts to improve the dissemination and communication of European official statistics. But the new focal point, which I could share this year, is that our focus is to find our statistics discoverable and used by AI-based search engines and chatbots, because these are increasingly our clients who are searching in our databases to find our data. And finally, because in the previous round of discussions, there were many references to resources, I just wanted to first say that the budget on European statistics for the next multi-annual financial framework is part of the proposal for the single market and customs program.
And the European Commission in this proposal proposed a 60% increase in the budget for European statistics compared to the current MFF period. And dear honorable members, it's now in the hands of the council and the parliament. And we hope very much that you stick to this proposal as you always have done, at least in my short memory, being responsible for Eurostat, that you support European statistics in terms of resources. Thank you very much for your attention, and I am happy to answer any question and also, of course, listen to your feedback and opinion. Thank you.
Speaker 1
Thank you. Thank you very much for this very comprehensive introduction. And now there is time for a Q and A session. As always, we will have 1.5 minutes for the question and three minutes for the answers. And the first on the speakers list is Mr.
Thomas Bajada
Thank you, Chair, and thank you, dear Miss Kotsava, for being here. I am glad to have you back with us. In our last exchange in May 2025, we had discussed commissioner Dronbrovskiy's mission letter that tasks him with the responsibility to better integrate within Eurostat well-being and sustainability concerns in the national accounts. There you had informed us that Eurostat, together with national statistical authorities, are working to align European accounts with the global update that should accompany GDP indicators with social and environmental indicators. This should also reflect the UN recommendations, including secretary general Guterres' call to integrate beyond GDP concepts in order to create a system of national accounts where both social and environmental aspects are added to the current scenario, that is where only GDP, inflation, and employment statistics are used as indicators measuring the state of well-being of our society.
As you know, I am a strong believer of this and it is also a central part of my political work. And therefore, my call is to have a system of national accounts that gives us policymakers a true picture of the level of well-being of our society and our citizens, and therefore making our politics more tangible and felt. I understood, and you have mentioned that since our latest exchange, you are working on including well-being in the expected update of the regulation on national accounts. So my question is if you can give us more detail on how you envisage to include well-being, social, and environmental indicators, and to what extent should we expect ambition in this regard, and how you see that this updated system can have an impact on the future of EU decision making, including by ourselves in the parliament. Thank you.
Speaker 15
Thank you very much for the great question and for continuous interest in this very important set of topics. Let me briefly answer in this way. First, of course, the focus is on the revision update of the European national accounts to reflect better well-being and sustainability. We are happy, by the way, as usual, to come here and to provide a more detailed explanation about the changes. But shortly, now I could answer that in terms of well-being, what the accounts will include, and this is in the proposal, is that there will be distributional measures to show, for example, how the income, savings, wealth are distributed across the income groups, all different types of households, which could help to address and inform all the policies related to inequality and well-being.
So they are like additional breakdowns because, you know, the main focus when people speak about national accounts means GDP. And GDP is the measure of economic performance. It's how much has been produced. But one of the distinct features of the changes will be to provide additional breakdowns in order to see how this wealth and the production is distributed across the different groups of the society. Concerning the sustainability, maybe the big contribution of the update will be that in addition to the GDP, the classical measure, they will be net GDP, which will take into account the depletion of natural resources, which is crucial because, of course, the consumption of the resources is crucial for the upcoming generations and for sustainability.
There will be also recognition of better classification and also the composition of assets distinguishing, for example, between fossil fuels and renewable energy, which also will, together with their depletion and their consumption, show how sustainable we are in terms of consuming resources. So this is on the national accounts. Again, our proposal will be tabled to the parliament by the end of this year. And we are happy at any moment of time as we do to come in front of the committee with a more detailed explanation on the changes, which you will see afterwards in the proposal. My second point is that this is national accounts, but we have an initiative on GDP and beyond.
And therefore, I wanted to say that better measurement of well-being and sustainability is not constrained only to the national accounts. There are a number of other indicators and statistics which should be used in policy making. And our role as Eurostat is to promote them, to explain them, and to communicate them. And, for example, environmental accounts or any other social statistics. In that respect, as you know, at the United Nations, there is a big discussion.
You refer to Mr. Guterres about the possible big UN agenda after 2030, which could focus on GDP and beyond. And currently, there is a high-level group at the United Nations, which works on the indicators, on the idea to have a kind of dashboard with key indicators, which could be used and could be a leading set of indicators to measure GDP and beyond success. And Eurostat is closely involved in the global scheme. And of course, we are happy also to inform the economy committee and the parliament of our work in that respect.
Thank you.
Speaker 2
Thank you very much for this update on a very important topic. And now the next speaker is Mr. Tomas Kubin from the PFE Group.
Speaker 8
I'm happy that you are with us here, because I think that, what Erastat is giving us, so to say, it's one of the most important things on which you rely our work as maps. So, to the questions. Eurostat is shifting to a multisource model to reduce business burdens. First, on business-to-government data, contractual bans often block national offices from using private sources. What EU legislation is needed to move from voluntary deals to a mandatory framework?
That's question number one. And the second is more to the core, and it's about the resources as ever. The draft for the new ESA regulation significantly expands reporting requirements with new transmission tables. While national accounts are top priority, we cannot ignore that several resource crises are hitting national offices. It's like that.
Many countries are cutting staff by as much as 20%, but the list of the demands grows. It cannot be assumed any longer that the resources will always be found with how we say in the Czech Republic. Finally, you proposed margin statistics to cut the red tape, very popular thing, red tape is everywhere in what we deal with. Which sectors will see reduced duplicate reporting by 2027? How does Eurostat plan to prioritize which new data is truly necessary?
More importantly, are you ready to stop old tasks that no longer have value to make room for these new burdens?
Speaker 15
I was careful to take notes. Thank you very much for the rich set of questions. You touched the core of the issues which are keeping us from sleeping at night. First one, to start with the multi-source model. First of all, thanks also to the European Parliament and this committee, in particular.
We have changed at the 2024 beginning of this mandate of the Parliament, the European law and statistics where one of the main changes was exactly moving to this multi-source model, which was the first step to include in the regulation the obligation of the privately held data owners to provide their data for the sake of official statistics under certain conditions. And these conditions were to demonstrate the need for collecting this data, not to reduce, not to increase the burden, on the contrary, that this access could save, for example, other data collection efforts and in dialogue with the private sector. And this is very important. Why? Not just to please the private data owners, but because this digital data, which we are aiming to tap now, is very specific.
You don't need, for example, a statistical office. We don't need access to every single phone call of the mobile operators. But we need aggregated data. And that's why we need to start a dialogue with the owners, in this case, let's say, operators, that they do data processing for us in order to keep the confidentiality of data. But, of course, this involves costs.
That's why we need to have this sustainably, not just once, but we are, let's say, after honeymoon period of experimentation, we need to be married not forever, but at least for enough sustainable time. So that's why we introduced this idea of having a dialogue. So this was the opening part. And now what we need to do and what we are doing, we need in every sector in statistics to implement this idea. For example, we are planning to table up the change of the legal framework for tourism statistics because tourism statistics and short term accommodations is one of very hot topics where these new sources like mobile data, like bank transactions could be used in order to produce statistics faster, more granular, and also to avoid surveys, to stop asking hotels or people you know about their traveling plans.
So therefore, our plans are now sector by sector to implement and update the sectoral statistical regulation. The answer to your second question is about resources. Yes, this is something we are currently discussing. I am leaving tomorrow for Prague, by the way, where we will have a meeting of director generals of statistical offices to see how we could cope with increasing demands and prioritize and make a kind of assessment whether we should stop something, not only to reduce burden on the businesses, but to reduce burden on the statistical offices. Because if you cannot, Mr.
Camilleri mentioned this as well, you cannot add to the agenda with the same resources. You have to cut somewhere. So, but let me immediately tell you that we cannot decide unilaterally. We are stopping this because we have to do it in cooperation and dialogue with users, including you. And the test of the pudding is in eating it when we were coming to political dialogues on particular regulations where together we are trying to strike the balance between being responsive to the new demands, but at the same time to take care that what we are requiring from the National Statistical Office should be feasible and possible.
So in that respect, what we are planning to do very specifically is to look at what we are doing at every statistical domain and to make a kind of balanced proposal together with NSIs. Listen. We need to, in order to accommodate this and these new demands, to increase the timeliness, to increase the granularity what you get at the end as users, we suggest to cut this statistics or this breakdown, so this frequency, which will give us space for the new things to be developed. But once we do this together with the National Statistical Institute, we need to come to the users in the commission, in the parliament, and at the national level as well, to have really an informed and joint decision how we could accommodate the question, address the issue of availability of resources. Thank you very much.
Speaker 20
Thank you, Chair. And I welcome to the Eagan Committee on behalf of my behalf as well, Madam Kotzawa. My question concerns housing, which you highlighted as an important improvement in the statistics. A few years ago, EuroStats introduced a statistical change that reclassified interest subsidy loans used to develop affordable housing as government debt. This applies even when public bodies have merely acted as guarantors for these loans, with no additional fiscal burden on the public purse.
This technical reclassification has very significant implications. My home country of Finland is a prime example. It is currently experiencing high unemployment, a lack of economic growth, and rising levels of indebtedness fueled by excessive fiscal austerity. Adding insult to injury, the statistical reclassification is jeopardizing the construction of self-funded nonprofit housing. Loan guarantees are now counted as debt, even though the value of the supported buildings will always be multiple compared to the amount of the supported loans.
Speaker 21
So this both distorts the assessment of the state of public finances and prevents the needed new housing production. So my question is straightforward. What is Eurostat doing to reverse this unjustified decision and support the construction of affordable housing? Thank you.
Speaker 15
I really would like to thank you for this question because this gives me the opportunity to clarify some misunderstanding around the statistical treatment of housing and rules by Eurostat. My straightforward answer to the straightforward question, there is no change in the rules by Eurostat in the statistical treating of housing investment. We have not changed the rules. The rules for the treatment of investment, regardless of whether it's in defense, in housing, in education, in migration schemes, the rules are the same. They are fundamental.
They are based on the national accounts. And the simple logic is that when you have a public-private partnership, which means that a public body participates, government and also a private partner, the decision where to classify the investment on the side of the government or on the side of the private sector is based on the risk assessment, who is taking the risk of investment. And in that respect, the rule has not changed. It's in the law. It's in the European system of national accounts.
So what has happened in practice is that, because in different countries, you could have different models or different private partnerships. In one country, it could be on the balance sheet if the analysis shows that the risk is taken by the government. Or in another country, it could be outside the government if the risk is taken by the private sector. And what Eurostat is doing, Eurostat is assessing together with the National Statistical Institute every single case where we have a question, and then we make an analysis, and we advise how the housing should be, how investment in housing should be recorded. What we could do more, and this is what we are trying to do, like with any investment, it's good for the investors to know in advance what are the rules, what are the criteria, to have practical cases, a collection of cases, examples of public private partnership, of different social investment schemes, social housing investment schemes, so that we could publish this, we could provide more detailed guidelines, and then all the countries, all the governments, supported by, of course, their financial analysis, could make a decision in such a way that they know in advance if they undertake certain scheme, how it will result on the balance sheet or out of balance sheet.
In that, we are working once again, we have a special group with the member states, experts from statistical offices who are dealing with investment in housing. But we also created a task force with the European Investment Bank. With them, we are working to collect more cases to see different schemes of social housing investments because in statistics, when you have many cases, you could derive the typical trends, and then you could provide this guidance to everybody publicly so that you know what will be the statistical treatment. So if in your country something has been changed in the way the social housing has been done, it could lead to a different statistical treatment. But this is not because Eurostat has changed the rule.
It is because something has changed in the scheme of investment. And we are happy to provide any kind of advice or to explain what we are doing with any country and with any member of the European statistical system. Yes. Thank you.
Siegbert Frank Droese
Thank you, Mr. Reischer. I will speak in German. Thank.
Thank you very much, Ms. Kurz, for your report and for coming here. Great to see you in the committee. A lot of information there. This has come out previously.
There was a reference to Eurostat previously in terms of independence and methodology that you were talking about in Eurostat. And the issue is how, does Eurostar use the central figures to deal with, doesn't set the statistics and so on, to do with debt, but they use proper transparent methodology. And then secondly on methodology, in what concrete areas have there been methodological adjustments? I'd like to get information on that, adjustments that might have big impacts on central indicators. And how does EURASAT make sure that if this happens, there is proper transparent communication about these changes?
Speaker 15
Thank you very much for the question. It's a fundamental question for the way Eurostat works. Again, thank you for that. Yes, let me answer shortly in this way. So, of course, we are constantly striving to improve our methodologies because statistics measures real life.
And then when you have new phenomena, we have to measure them. For example, now a big question is how to measure the impact of artificial intelligence on the economy, on well-being, on young people, etc. So we work together with the member states. Usually, we create task forces, expert groups. We work with academia.
We develop some methodological guidelines. And then this methodological guidance is discussed and approved by the statistical community. And very often, they are ensuring regulation as well, like is the case of system of national accounts. I couldn't agree more than really strongly with you about the importance of transparency of our work, because we try to do that. If there are suggestions for improvements in being even more transparent, we are happy to listen to them. But our principle is every methodological guidance, every work by a task force or outcome report is publicly available.
And then even more, when there are upcoming important methodological changes, we try to inform the users in advance also. So that's why I am repeating myself already several times that we are happy to explain the methodological changes and the impact which you could see in GDP, for example, due to the methodological update of the national accounts system. So what I'm saying is that we aim to be proactive with users and to explain what are the changes. But I don't have any specific case to report that we did such substantial changes, which profoundly impact the statistics and respectively the decision making. Thank you.
Speaker 22
Thank you. And I have one request for the floor in the KHDI procedure. Yusi Saramo from the left. Yes.
Speaker 20
Yes. Thank you. Thank you, dear chair and Ms. Kotseva. In your answer, you said that nothing has been changed in the rules of statistics.
But the Finnish system, it has been built for 80 years almost. And there were no changes in the system two years ago, only the statistics changed. And suddenly, the public debt rose six percentage points. In one night, even the reality didn't change. So there must be a change somewhere.
You said that you are happy to explain, so I really would like to hear the explanation because in the system, there was no change.
Speaker 15
Okay. I could answer. Of course, I have to check the case specifically, and we are happy to provide a more detailed answer. But once again, yes, the statistics didn't change. The rules didn't change.
But for example, in the housing investment, if you change something in the investment scheme in the way there is disagreement, I don't know the details of the Finnish case, then this could be the reason why, due to the change in the scheme, the statistical treatment has changed. The rule is the same. The rule is, as I said, it's based on assessment of risk, who is taking the risk. So therefore, once again, when there are such kinds of questions, Eurostat is open. We provide detailed explanations.
We could meet the necessary people who are interested in and explain in details based really on the details of the case, because I don't know now the details of the investment scheme. But this should be the logic. Yes. Thank you.
Speaker 1
Thank you. Thank you very much, and thanks once again, Ms. Kotseva, for coming and explaining to us some of the quite interesting developments, which we are having in the field of statistics. And we are really looking forward to our next cooperation. Thank you very much.
Speaker 23
In one or two minutes, we will continue with agenda point number five. Okay, colleagues. So let's start with agenda number five, and this is exchange of views with Erkki Liikanen, Chair of the IFRS Foundation Trustees, Andreas Barco, Chair of the International Accounting Standards Board, and Emmanuel Faber, Chair of the International Sustainability Standards Board. So I would like to welcome all of them to this exchange of views with the European Parliament, especially with the ECON Committee. And I know I have it in my chair's notes, but I know quite well that mister Erkelikanen served Interalya as governor of the Bank of Finland and as minister of finance and has been a governor of the International Monetary Fund and member of the Governing Council of the European Central Bank as well as commissioner at the European Commission.
Speaker 1
So he knows Brussels even more than I. So welcome once again. And the trustees are responsible for the governance and oversight of the IFRS Foundation, the International Accounting Standards Board, and the International Sustainability Standards Board. Mr. Andreas Barco is appearing in his capacity as chairman of the International Accounting Standards Board, an independent, privately organized body that develops the international financial reporting standards.
Mr. Emmanuel Faber is participating in his capacity as chair of the International Sustainability Standards Board. The ISSB was created as the second pillar of the IFRS foundation. The ISSB is tasked with the development of international sustainability reporting standards. Let me recall the importance of this exchange of views. The IFRS accounting standards are developed by the IASB, may, under the IAS regulation, be endorsed by the commission so that they become part of the union law.
They form, therefore, an important part of the EU financial services regulatory framework. While there is no legal mandate for the endorsement of the global sustainability disclosure standards developed by the ISSB, it is important to promote interoperability with its counterpart, the European sustainability reporting standards. This exchange of views, therefore, ensures the involvement of the parliament in an early stage of the development of such standards. Let me shortly outline the procedure to be followed for this agenda item. Our distinguished guests will have 15 minutes in total to make their introductory statements.
I understand that the agreement between the three chairs is that Mister Likanen speaks first for ten minutes, and Mr. Barco and Mr. Faber continues with an intervention of two and a half minutes each. And this will be followed, as usual, by a question-and-answer session. So first, I would like to give the floor to Mr.
Rikainen. Please.
Speaker 24
Thank you, Vice-Chair. It's great to see you again. When I come to Polarines Park Building, it reminds me of some historical moments. Because I came to Brussels in 1990. This was under construction.
We lived in a bipolar world of the Soviet Union and United States. When this building was ready in 1993, we lived anymore in unipolar world of The United States. Well, that's both bipolar and unipolar. And then in 2008, we had a great financial crisis. We became more fragmented again.
We are now in a multipolar world. When you look at the future, various scenarios have been presented in Noel, Brussels Stinktank, Brugiel, and they have presented three versions of this. One is that we will see a collapse of international cooperation. If that happens, what are those public goods, global public goods we absolutely need, and how can they be protected? Nuclear proliferation, what about climate change?
Who will step up to lead? Very challenging scenario. Second scenario is a return to a world of blocks, US-led block, China-led block, and perhaps a group of non-aligned countries. In this scenario, the EU's choice matters very much. Third scenario is a reinvented multilateralism.
Essential public could there perhaps produce in a more efficient way, but what are those we need to guarantee? I can't put that to the issue. Where does public cooperation still work to create global public goods? First, one area which is very important is finance. It's critical for growth and employment.
And today, see tremendous challenges in that area. Meeting them will require huge public and private investment, and this is why global public goods matter. Mario Draghi made this point in his report on European competitiveness. Achieving political and policy goals requires creating the right incentives to attract and retain private capital. That capital depends on sound global reporting.
Investors invest when they understand the risks and opportunities associated with investing in a particular company, and this is the fundamental point of corporate reporting. First, on international accounting standards. EU adopted Iowa standards more than 20 years ago. The Chair of Trustees was then Paul Volcker, who came to Brussels to make a great testimony for that, and was able to convince and find cooperation here. This solution of Europe encouraged the rest of the world to follow the suit.
Better corporate reporting improves market liquidity, and many studies prove that it also lowers the cost of capital, which is critical for growth. Because of IFRS regarding standards, financial statements of companies listed in the EU are accepted worldwide, including the U. S. And more than 140 countries. It delivers massive benefits to EU-based companies.
Establishing standards for global finance is a remarkable example of leadership by Europe and others. International accounting standards are a very important public good today. We must keep them in good shape. That takes stable, diversified funding to protect quality and independence. The EU has played a key role, and we'll need that support even more in the future.
On accounting standards, all jurisdictions have cooperated globally, and I believe that cooperation can and it should continue. Andreas Barkov, my left, is the Chair of the International Accounting Standards Board. He will provide an update on developments in this area. The International Sustainability Standards Board was created four years ago at the Glasgow COP26 summit. Decision was demand-driven and shaped through broad international consultation.
The first two standards, IFRS S1 and S2, took effect in 2023. There, we don't yet have a global consensus, but we have seen a strong demand. And currently, 40 jurisdictions representing more than 60% of global GDP have adopted or announced plans to use these standards. These include jurisdictions in Asia, Latin America, and Europe, including many countries in the Global South. They want to satisfy investors' demands for high-quality, globally comparable sustainability disclosures.
The International Sustainability Standards Board has worked closely with the European Commission and IFRS to establish a global baseline of sustainable disclosure standards for financial markets. ISB standards are investor-focused and proportionate in scope and use. Eberle Faber, the Chair of the International Sustainability Standards Board, will speak further on this topic. So I want to conclude by saying that IFRS standards are essential for global public goods. They need to be protected and kept up to date over time.
Investors trust information prepared in accordance with IFRS standards. The trust is central to attracting private capital, which in turn is essential for the EU to achieve its public policy goals. A consistent global approach brings real economic benefits. It improves transparency and accountability. It reduces cost and complexity for companies, and it can also reduce the cost of capital.
It supports better investment decisions and cross-border trade. In Europe, all jurisdictions involved in making this happen have a lot to be proud of. It's a remarkable success story. However, we have now two main challenges. First, we are not immune to a complex geopolitical landscape and to deferring policy and political differences.
We work closely with other international organizations and key stakeholders around the world, such as the European Commission, to protect our global approach, global public good. Second, good standard-setting requires investment. Every change affects thousands of companies in hundreds of jurisdictions. We must consult widely and follow a careful due process, and we must help jurisdictions and companies build capacity for new requirements. And that is, of course, where we need diversified funding from all those jurisdictions which benefit from our products.
Speaker 27
Thank you very much, Iain, Vice-Chair. Good morning, everyone. Since we last met with Econ some 18 months ago, the IASP has made important achievements in financial reporting. These are achievements that make our standards even more relevant and more cost-beneficial to apply. These achievements greatly benefit European stakeholders and policymakers alike.
Regarding remaining relevant, we brought clarity for companies, auditors, and investors on how to account for instruments that are issued to support investments in green finance, a very important topic, not just in Europe. We also amended our literature to allow companies to treat long-term purchases of renewable energy that would otherwise have to be accounted for as financial derivatives as executory contracts or procurements. And we added a list of examples and guidance on how companies should think about reporting on climate-related risks in their financial statements. All three topics were tackled and resolved swiftly. They assist in keeping our body of literature relevant and up-to-date.
But most importantly, they were highly appreciated by stakeholders around the globe, including Europe. Let me turn on to how we ensure our standards remain cost-beneficial. At the IASB, we take cost-benefit considerations very seriously. We only progress with the project if the benefits of our proposals are likely to exceed the costs of implementing them. I want to specifically mention an effort that is currently going through endorsement here in Europe, IFRS 17.
That standard is introducing a reduced disclosure regime for subsidiaries that are reporting to a parent company using IFRS accounting standards. Not only does this standard make it far more efficient and less costly for those subsidiaries to maintain data, it effectively takes out a vast number of disclosures that are deemed irrelevant from a subsidiary's perspective. These are tangible cost savings that bode well in times when everyone is looking for areas of deregulation. And there's more that we can offer you. On your file of the Savings and Investments Union, you're looking into developing a middle regime between the accounting directive and the IFRS accounting standards.
In this regard, I recommend taking a look at our standalone IFRS standard for SMEs. That standard is not currently part of the endorsement process, but it is tried and tested in around 85 jurisdictions around the world, including several EU member states, where it is used as the transposition of the accounting directive. Let me close by saying that we are truly grateful to all our European stakeholders, the European institutions, as well as our colleagues at IFRAC who have all contributed to the aforementioned successes. Thank you.
Speaker 29
Thank you, Vice Chair. It's a pleasure to be back with you here in Brussels. Over the last five years, the European Commission and the IFRS Foundation have cooperated to ensure an optimal level of alignment between both sets of sustainability reporting standards. The first step was reached when and with the publication in summer 23 of the dedicated acts with the CSRD, and at the same time, the IFRS S1 general requirement and our climate standards IFRS S2. At that time, the EU Commission and the IFRS Foundation were able to jointly announce a very high level of alignment on climate for both standards.
Then the endorsement of ISSB standards by Aeroscope opened the pathway towards adoption by multiple jurisdictions, creating a level playing field on climate reporting requirements, in particular, and a basis for high quality climate data acquisition in terms of information serving the preparation of ESRS by undertakings that have international value chains. And with that IUSCO stimulus, there are now more than 40 jurisdictions, as Chair Liekinen said, that have decided to use or adopt outside of the EU, the ISSB standards after two and a half years. Our next cooperation extended in May 2024 with a joint statement by the EU, EFRAG and ISSB that describes the approach of the EU as a full adoption of ISSB standard through interoperability. So simultaneously, Efrag and the ISSB issued a joint interoperability guidance, which allowed the undertakings to navigate between the two sets of standards. This was a major milestone in supporting businesses from Europe and outside Europe in reducing the burden of multiple reporting.
And finally now, FRAG and ISSB recently worked together to further simplify the interoperability mechanism. After thorough discussions with a FRAG, with the European Commission, with the assurance profession, the auditors and the preparers, we believe we found a way to potentially give the European standard a direct full ISSB adopter status. In other words, removing the interoperability mechanism. The only condition needed for this is that those reports as a whole are written in a way to provide all financially relevant information clearly, and not obscured by information that is provided for other users. With that, the European companies could prepare an ISSB report within their CSR report, and this would also significantly facilitate the work for companies that need an ISSB structure for reporting internationally in all of these jurisdictions.
It would of course fully respect the double maturity principle in Europe, but assure that financial users easily find and understand what they need to have. And also and certainly even more importantly, Europe would thus keep its approach and its standards, keep its sovereignty in the field addressing, I think, two main concerns that we've heard from stakeholders. So in conclusion, we look forward to continuing our contribution in the next several weeks towards this potential positive outcome. It would be great news for both the European economy and capital markets. But as Sir Lichenen said, also for close to 70 jurisdictions including EU member states.
Thank you.
Speaker 1
Thank you very much for the introduction to this topic. And now we will have a Q and A session. For each slot, we will have one and a half minutes for the initial question and three minutes for the answer, with the possibility of a quick follow-up question if time allows. And also, if time allows, additional slots can be allocated on the KHDI basis. The first speaker on the list is Mr.
Eero Heinäluoma
Thank you, Mr. Chair, and may I welcome all of our experts here. Glad to see you again. There aren't so many MEPs in the room, but I would take this as a sign of great confidence towards your work. There is perhaps not so much need for scrutiny, but really interesting aspects in what you told us.
My questions this time go to Mr. Likanen. You have been saying that in a fragmented world, there is really a need for global public goods. And of course, one area here is trade and finance, which are important also for our committee. You have also spoken about global standards, which are critical here.
And here my three questions are, first, can we guarantee that global financial standards remain consensual between Europe, U. S. And Asia? And how big is the risk of a fragmented world also here? The second question, European Union has moved in the area of sustainability standards, which you have been mentioning here.
And we know that this has not been an easy road, but an important road. How high is the likelihood that we will have a global baseline for climate and other sustainability issues? And then third and last, we have to mention also the United States in this committee and this morning session. We know that during the Trump administration, the US has been taking this stance from international agreements. However, at the same time, we have noticed that the US is pushing forward global audit standards.
So this, of course, is a positive phenomenon from our point of view. How do you see the European position here? And what's the position of the International Financial Reporting Foundation concerning this? S. Initiative?
Speaker 24
Thank you very much, Erohinolum. They are very important questions to all, and I ask my colleagues to compliment me if they so want. First of all, the global standard situation. I think that perhaps the recent news is that as to the accounting standards, the role of IASB, International Local Standards Board remains intact. And deliver.
But we had just a meeting of the monitoring board where all authorities, also U. S. Participated two weeks ago in London, and I'm rather convinced that this weekend guarantees. We will have challenges, of course, to guarantee that we are properly funded, and all those restrictions will also take part in that. But my basic message is positive.
On the sustainability standards, there are political differences. In the US, you know the discussion about climate. There's no consensus that climate is an issue, but I hope that Emile Farber will reply to that. At the same time, we can say that what has been surprising globally is that Asia, for instance, China, Japan, Korea, Philippines, many others are following international standards. Many leading African countries have decided to adopt them.
Turkey is there too. So this kind of global push is there strong. When we talk about 60% of GDP, it's important. But the fact is, it's not consensual because U. S.
Position is different. As to the audit standards, of course, to make the financial markets work, investors must trust that the financial statements are proper, well done, and they can assess the value of the company. The American view has been that, added to that, you would also need audit standards. So the investors know that these companies have been properly audited. They are assured that we can trust them.
I think they have a point here. We have heard this proposal. We are open. But of course, we need to see what would be the solution to make them global on the one hand. And second, in all these standard issues, you may need to have shared funding so that we have funding that all contributes.
But perhaps today, I can say that I'm slightly more optimistic about this global cooperation than I was a few months ago because we have different initiatives for different sides. If there's a will to find those areas, we agree. Let's go forward there. If we somewhere disagree, we show respect to others and their priorities. Thank you very much.
Speaker 29
Thank you. Okay. And maybe just adding a few more data points to answer your question about The U. S. And this lack of consensus that Charlie Cannon mentioned.
The SEC at this stage is clear that if climate risks are financially material, they need to be disclosed. That was said clearly. Where there is no consensus at this stage is whether you need a specific language, a specific framework that could bring comparability on those topics. The second thing I'd say is California has two rules on climate that are under construction and should start next year that would report on climate risks including greenhouse gas emissions on the basis of a standard TCFD and ISSB when it comes to those topics. So, there are also non-federal initiatives that are there.
The last thing I'd say about The U. S. Is that the U. S. Companies are now facing a situation where 80% of the U.
S. Trade is going to be covered by the jurisdiction that adopts currently the ISSB. Canada, Mexico, the EU, China alone are 50% of U. S. Trade.
So, see a significant traction from the U. S. Chamber of Commerce to support the fact that there would be a unified global baseline, so that it would simplify the life of the most international companies. So, other than this and beyond the US, which remains of course a major driving force in capital markets. Today, those jurisdictions that have decided to adopt the ISSP standards represent roughly 90% of the global market capitalization ex The U.
S. And as was said earlier, a number of global south, of course, but a very significant part of Asia from Japan to Australia basically, and a number of significant partners of the EU, about 50% of the EU trade would be covered by those jurisdictions today.
Speaker 33
Thank you. The next speaker on the list is Mr. Yusi Saramo from the left.
Speaker 20
Thank you, Mr. Chair. And thank you, all the speakers, for your important work and the presentations. I will speak in Finnish because it's a very rare opportunity to address Mr. Lee Karan.
Now I hope that the interpreters have had time to change the language. International standards with regards to are essential. They're an essential part of global finance and the economy. And as you mentioned, these technical standards can be part of cultural wars and geopolitics. And as you have seen, the Trump administration has taken a very negative stance on international sustainability standards.
And as was mentioned elsewhere, the situation looks brighter. Is there a risk that the international finance system will become more fragmented? Is there something that would lead us to believe that there would be a further fragmentation, that The United States will try to get more countries on their side, for example, with regard to their approach on sustainability, that they refuse to collaborate if people don't take their view on sustainability matters? If The United States indeed works in this way, what does that mean for us in the future? Thank you.
Can choose. You can answer if.
Speaker 24
You wonderful language, Finnish. But perhaps I continue in English this time. I and it's a very well-formulated question. And I said when we are in a fragmented world, risks are always everywhere. And the question is, could we find those global public goods that we protect, but that we can't survive without?
And my today, my conclusion is that as to the international accounting standards, which are based for the financial statements, now it seems to be so that all major jurisdictions in the continents know that if don't follow that, the damage in the financial market is huge. Damage for those who want to have private money for their investment will be huge. So I'm on that side, I'm perhaps more positive than I was some time ago. On sustainability, there are really philosophical and political issues there. But what is different compared to the situation five years ago?
Now this movement has begun globally. I was myself in Africa, and I was surprised by the great interest on the issues. And the reply was that we don't want to be only proud of part of the problem. We want to be part of the solution. So it's very important that we follow the Global South here too.
And there are many countries in Africa who have said that we want to be there because if we want foreign capital to invest in our companies, disclosure and reporting must be something they understand. We want to play part of that. So this Africa, Latin America, and Asia are strong. So I think the movement moves on. But we have the issue of the United States, and I don't want to hide it.
It will not be simple. But the way climate issue doesn't disappear. It's not political. It's a scientific issue which is a fact for us. On the third issue, on this audit standards, we are very early in that area.
There have been people work on that in IAASB, which by name, International Audit and Assurance Standards Board at the moment. But of course, logic is that if an investor wants to put money to a company, they want to know that financial statements are proper, and it's also assured by the auditors, then it's safer. Then the money, the price they want to have, though, the money will be smaller. So there is logic in that audit area. So I would say that when I ask them to show respect to our interest in some areas, I would be ready to say to our colleagues that let's show respect to their interest there.
Finally, I just want to conclude by saying that I know the European Parliament has been very active in the to make Europe a better place, to show that we have the highest quality of life here, and I think it's the right purpose. When you go to areas like climate or sustainability, it probably doesn't stop at our border. So all the efforts by which we try to collect global forces for the same purpose are extremely important, and do it in the way that the global standards are clear, transparent. And if Europe wants to add something, it's done in the sort of way that you don't need to report the same issue twice. So there will be no extra cost, mainly for extra benefits.
Would you like to add something?
Speaker 27
Maybe just one pointed remark. I think it's a very good question. And I would say, we evidenced fragmentation in policy, in public policy. But so far, we are not seeing the fragmentation in markets because there is a continued need for global investors to speak that one language. And there are no signs that this actually is being hampered.
So obviously, we shouldn't be complacent about that. We need to monitor that very closely. But so far, it's a new dual reality, I would say, that you do have fragmentation in the public policy side, yet the markets continue to act as if they were global, and they're being fueled by the international standards. Thank you.
Speaker 1
Thank you. And I just wanted to break this Finnish hegemony, so I will also ask some questions. And I will start with your remark at the end, because in politics, to argue that there is a global public good is nothing these days. They will even not understand what you are talking about. So we really need the industry on our side and business interest in order to persuade politicians that that is not the way we can or we should go forward.
So that is the one second thing, is a more Europe related issue. You also mentioned that Europe is working on a kind of middle ground for SMEs. And actually, there is now very shortly a proposal on the so-called 28 regime will be disseminated, which means a very simple and unified approach for probably more innovative companies. So can you imagine that kind of unified design, which is a bit less tedious than the full scale standards can be implemented there? And my third question is related to, of course, the current trends, not only on the green transition, but also on digital transition.
An impact can the AI revolution have on the accounting standards? And how do you cope with these current global megatrends? You.
Speaker 24
I take this AI point first, because then Andreas and Emmanuel will continue. Francis had a session in Montreal, which was and we had the Chicago Booth AI experts there with us. How will AI change the world of accounting and auditing? And my conclusion is that when you have thousands of pages report at the moment, you expect somebody to read them all. It's not very likely.
With AI, you are able to squeeze the essential information into a nutshell, especially if you have the global standards. You know that they are all reports done based on the same standards, which are assured. So AI will make all this information much more usable in the future. It doesn't diminish the need to use your brains, your assessment, but you can use more information, actually, which you don't use today because it was too much. So AI will be a critically important tool to make better benefit of the information available if the standards are the same.
If standards are not the same, transparent, and comparable, it doesn't help. If they are comparable, then 200, 300 pages can be squeezed into five rather fast. But Andreas and Emmanuel.
Speaker 27
Thank you, Aki. So on that point with the AI revolution, it's fascinating, as Aki said. I think there is a high potential for huge efficiency gains to be latched because there is such a vast amount of information. If you just think about the many different languages that exist around this planet and that information is produced in that most people are not able to simply read, but AI can, right, because language doesn't really matter. So I would say it enables us to get better information much quicker and survey that much faster.
However, at this stage, obviously, there are also still some risks. There's hallucination. Sometimes AI is making up some remarks and drawing false conclusions that actually you need somebody to at least do some groundwork and checking. And I would never let AI take the final decision, but it is certainly a good helping hand in that regard. On your question regarding the twenty-eighth regime, I follow that with great interest.
And even though in my remarks, I had spoken about the Savings and Investment Union, I think it equally applies to the twenty-eighth regime. So if you're looking into something that looks international, but is less burdensome than full IFRSs, I would really urge you and would be very happy to elaborate further on looking at the IFRS for SMEs, which we think is really an international standard that is tried and tested, but is perceived to be less burdensome. It's only updated every 5 years. So we don't have the same rigor as we do in the big standards. And I think that could be a great effort, where we could come together.
Thank you.
Speaker 29
I will be brief in complementing the views of colleagues here. Maybe the first thing I'd say is about the digital transition. To say that I'm not speaking about the standards here, but about the real economy. I was in India with the government and businesses a few weeks ago. And there was a report just illustrating that among the critical future developments and economic developments of India, of course, serving AI needs is at the core.
80% of the AI data centers' capacity capabilities that will be built by 2030 are in severe water stress areas. And so, we know that there will be what is called sustainability topics that are in the midst of the way how companies will continue to transition both digitally and technology, but also socially and climate. They are integrated. They are quite often different phases of the same issue, which leads me to the question about the business interest in developing a public good. Essentially, what the ISSB standards and what part of the CSRD is doing as double materiality when it comes to financial materiality is to evidence the risks and the opportunities in the value chains and in the short, mid, and long term for companies to anticipate and manage those risks and for the markets to price those risks appropriately.
And so, you know, we have very concrete conversations with businesses that are not here by itself to create or sustain a good, a public good, but they understand how if they do not take care of that and if they are not able to speak to their investors, their banks, and their insurance companies about those risks in a manner that is competitive and where they can be compared with their competitors, they will not get the money that they need for that. They will get it at a cost of capital that will be higher if they are more risky. And this I think is the fundamental reason why ISSB was created, to allow capital markets to price properly the invisible risks and opportunities in the short, mid, and long term, and in the whole horizon of value chains that goes together with the proper accounting system that is being put in place by the IASB. And for that, I would be confident that more and more companies see the use case for that and therefore in and by itself, not by virtue, but by business reason, as they want to prepare the resilience of their businesses in such a volatile world where geopolitics add to this complexity and to these risks.
Speaker 35
They are actually contributing to building this public good altogether.
Speaker 36
Thank you. Thank you very much. Is there a request for the floor? Yes, Mr. Heine Lund, please.
Eero Heinäluoma
Yeah. Once more, thanks for your presentation. Still one question, perhaps could be mentioned here. And that's the big project of the commission, which is the simplification agenda. Is there something in your area of expertise which could be simplified?
Speaker 37
That's a great question. They are doing the standards. I ask them first, then I can comment later. So Andreas, you take first. You have more standards already there.
Speaker 27
It's a very good question. And I remember that when we came here last time, I received a similar question when I was praising our efforts and actually reducing the disclosure burden. And we always try to actually reduce our efforts. Now we take inspiration from what's already out there. We do not always start from scratch.
So sometimes Europe may have a blueprint that we could grab on, sometimes it is out of the jurisdiction. Jurisdictions. I think in our domain, given that you have adopted the IFRS accounting standards for all companies that have listed securities in a regulated market, I think there is not really a competition where I would suggest Europe takes anything out. But I think we are engaging with our stakeholders very solidly as to seeking areas where we could simplify our literature, where we could take away burden that was deemed unnecessary. That was probably there for a reason at a different time, for instance, in the financial crisis, but no longer, with time having passed, is no longer there.
The one area where I would say, again, where I would make a pitch is the IFRS for SMEs, where I would say rather than developing a middle tier from scratch, why not take something that is tried and tested? So that will be one area where I would recommend further engagement between you and us.
Speaker 29
Thank you, Andreas. I'd like to take the question in two ways. First, can we simplify further what we do at the ISSB? And I'm sure we could. The guideline for us is that we have been created to establish a global baseline.
It's a baseline. It is not supposed to be beyond the baseline. So jurisdictions can build on that. So we.
Speaker 29
Trying constantly to look at the essence of what we do as the baseline, as opposed to be absolutely responding to all the needs of stakeholders. And the core to that is the mission that we have is entirely focused on the same scope of the IASB when it comes to investors' interest. We are looking at answering the common needs of information for investors, not beyond that. And there are many useful things to be done beyond that. But we constantly try to really stay true to that principle.
The other thing I'd say is that we have once expanded significantly the time of our consultations where we felt it was important that we receive significant feedback to create something simple. I mean, making things complex is easier than making them simple, basically. And I'll just show the example of the SASB standards on which we are enhancing this industry-based guidance that we have. We extended the consultation to five months, which is quite a lot of time to ensure that we hear feedback before we decide about what is simple and what is oversimplistic. When it comes to the EU and the EU side, as I just mentioned in my introduction, I think we are at the stage of the finalization of the simplified ESRS, and there is one step further that can be taken that would have a very significant impact in terms of simplification, which is allowing ESRS preparers to also prepare an ISSB report within the CSRD report without changing what they do right now.
And for that we need two small items to be amended in the draft ESRS or in the final delegated text on the ESRS. One is about the presentation requirements to make them more flexible for those companies that would like to have it. And the second is to ensure that the non-obscuring of the financial materiality information that is critical for ISSB is introduced more clearly than what it is today. And so these are, as I said earlier, topics on which we are regularly and thoroughly engaging the commission right now. Thank you.
Speaker 24
Yes, I know the European Commission is working very hard on this impact assessment analysis. And I think great progress has been done there. I still want to remind something what Albert Einstein said when he was asked that, could you make this simpler? He replied, as simple as possible, not simpler. So there are some issues which are, of course, also complex, but you should make them as simple as possible and as cost-efficient as possible.
Thank you.
Speaker 1
Thank you very much. There are no other requests for the floor. So I thank you once again for our three quests. And I really hope that we will not simplify this procedure further to invite only one of them, because all of them contributed very intensively to the debate. So thank you very much for coming, and looking forward to the cooperation in the future.
And that is the end of this morning session of the Ecom Committee. Thank you all for taking the floor. See you in the afternoon.
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