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The Commission's balance sheet is positive, but the level of ambition is still too low

Future of Europe / EPC ROUND-UP
European Policy Centre

Date: 13/09/2023
In her State of the Union (SOTEU) address, President von der Leyen summarised her first term in office and set expectations for the future, considering the European parliamentary elections next June.

The progress made so far with the Green Deal was highlighted, as were the priorities, such as approving EU legislation on artificial intelligence. She also reiterated the EU’s support for Ukraine in its fight against Russia and vowed to support Kyiv “for as long as it takes”. She also announced to member states to “get ready for an enlarged EU", promising to look closer at each policy and see how they would be affected by a larger Union.

But there is no time for self-congratulation, with Europe’s triple challenge; the permacrises, fundamental transitions, and Russia’s aggression against Ukraine.

So, is Europe ready for the future?

The EPC Round-up assesses pivotal EU policies from different angles. It collects contributions from EPC analysts and experts in the field, bringing together various points of view for a more comprehensive and nuanced picture.

President von der Leyen takes credit for ushering in a green, digital and geopolitical EU, and perhaps rightly so. Even if her ‘geopolitical Commission’ at first was a pun on the ‘political Commission’ that preceded it, the EU executive has responded well both to the political priorities set in 2019 and major unforeseen international crises since then.

Yet this is no time for complacency. The EU is increasingly out of ideas and resources to match the scale and speed of change. Geopolitically, the EU is undecided in how to deal with the ratcheting pressures of China-US strategic rivalry. Meanwhile, the twin economic priorities from 2019 have become three: the triple green, digital and economic security transitions intertwine and collide, and involve deep economic trade-offs our societies remain significantly unprepared for amid a wartime economy.

The Commission’s ‘Digital Decade’ promised a digital catch-up, but we are still to see the evidence of that. The ‘Green Deal’ has been an impressive drive forward towards a more resource-efficient continent, but the hard days are ahead. In a world where economic rivals put competitiveness first, Europe’s climate ambitions will be increasingly contested at home.

Retaining agency in a world of great power competition is no longer only about an adapted regulatory framework. It is increasingly about massive scale resource mobilisation that Europe’s multilevel governance is not capable of. EU Member states are short of fiscal space and money. The one-shot economic solution Europe has is EU-level “eurobonds”-borrowing associated with profound reform of the EU’s Multiannual Financial Framework to gear up its capacity for spending and strategic investments.

This is Europe’s trillion-euro question. The question is for how long we can go on ignoring it.

While the European Green Deal is a major success story of Commission President von der Leyen’s term, relevant legislation still needs to be adopted and implemented across the Union.

The importance of the Green Deal was emphasised in preserving our future prosperity, particularly in response to extreme weather events. To that end, the EU must propose ambitious 2040 targets to ensure it reaches climate neutrality by 2050. It must mobilise investments to support the mitigation and adaptation efforts of its member states and partner countries.

REPowerEU has largely succeeded in severing the EU’s energy ties with Russia. Through the Net-Zero Industry Act, the Critical Raw Materials Act, and the newly announced Wind Power package, the EU must now develop a green industrial policy that provides a credible response to competition from China and the US IRA. Indeed, “the future of our clean tech industry has to be made in Europe”.

The circular economy and zero pollution did not feature in speech, but they are crucial to protecting our planet and health and ensuring access to critical materials. The EU must finalise the new rules on sustainable products and packaging and update the air quality standards.

Rightfully recognised was that agriculture and nature protection can go together, but that does not come for granted. The EU must double its efforts and adopt the Nature Restoration Act and the Sustainable Use of Pesticides Regulation, among others.

As von der Leyen indicated, the dialogue with industry and farmers should be strengthened. Notwithstanding the long-term benefits of the green transition for our economy and society, the EU needs to ensure that short-to-medium-term costs for businesses and people are distributed in a fair way and that trade-offs are minimised and avoided whenever possible.

This State of the Union Address was the first of the post-COVID-19 pandemic era. While references to the success of the vaccine strategy and the building blocks of the European Health Union (EHU) are welcome, Von der Leyen’s speech suggests that we may be following the patterns of previous pandemics whereby health falls off the EU political agenda once the worst is over.  

As we transition beyond the pandemic, it’s imperative to acknowledge the political and economic importance of fostering healthy societies and to maintain momentum around health policy at the EU level. Although the pandemic unequivocally highlighted the pivotal role of health in the functionality of our societies, its significance remains, especially considering the multifaceted challenges currently confronting the EU. The period of permacrisis continually highlights the intersection between health and other policy areas and the need for a more holistic approach. Greater links should be established between the EHU and the Green Deal to benefit human health and the environment. Additionally, the EHU should be further linked to industrial and trade strategies to expand its strategic autonomy, enforce Europe’s health security, and secure its place in the global arena.

As expected, the 2023 State of the European Union (SOTEU) address was a positive appraisal of the work of the von der Leyen Commission since 2019. The Commission’s balance sheet is positive, but the level of ambition of the EU27 is still far too low in view of the ‘Global Zeitenwende’ that we are going through. This is no time for self-congratulation. There is a major discrepancy between how EU citizens evaluate the situation they experience, and the positive picture portrayed by the Commission President. Ursula von der Leyen should have addressed the difficult trade-offs which the EU will have to decide on in view of the next politico-institutional cycle starting in 2024. She missed an opportunity to trigger an honest and frank debate about trade-offs that will inevitably become increasingly more complex and difficult, given the fundamental transitions (green | digital | geopolitical | geo-economic | demographic) we are facing. This debate is necessary in view of the 2024 European elections, if mainstream pro-European political forces want to avoid that populist forces will emerge (even) stronger at the national and European level.

The generational challenges this Commission has faced could not be foreseen, and Ursula von der Leyen and her team should be given credit for the significant steps forward that have been taken to address them, particularly in the context of COVID-19 and the Russian invasion of Ukraine, as well as the progress embodied in the Green Deal. But we need to be forward-looking, given the fundamental challenges and trade-offs we have to face in dealing with the continuing aftermath of the war, the ongoing poly-permacrisis and the fundamental transformations the EU faces (sustainability, technology, economic security and demography) within a context of a much more polarised and fragmented domestic and international political environment. EUrope must not fall for the progress illusion to think what we have done so far is sufficient; on the contrary, we are still trying to solve exponential problems with linear policies and, consequently, we are further and further away from where we need to be.

In today’s SOTEU Commission President von der Leyen spoke about the importance of “a fair outcome for future generations – to live on healthy planet”. She was right to stress the importance of labour and skills shortages, but her speech fell short of concrete initiatives to support young people and provide them with the skills needed to shape their future. At a time when the implementation of the Green Deal is at a crossroads, young people need to feel empowered. The EU should provide them with more opportunities to train, work, and volunteer on climate and green projects. To match her words with actions, von der Leyen should have proposed an Erasmus+ initiative, with paid traineeships in green cities to empower young people with the skills needed for the green transition. An initiative that would allow young people to work on local environmental projects. From the circular economy to the reduction of water and air pollution, from climate and energy resilience to nature restoration and biodiversity promotion. If she has the ambition to continue with a second mandate, she should focus on providing Europe’s youth the skills they need to contribute to a greener future. 

Commission President Ursula von der Leyen missed the opportunity to talk about economic governance despite the urgency of settling for a new fiscal framework.

The Commission had put forward a proposal for a new fiscal framework in April, putting greater emphasis on national ownership, transparency, and investment. But no agreement among member states is in sight, while the suspension of the debt and deficit rules is running out by the end of the year.

The return to the old framework of strict debt and deficit rules would be a huge mistake, preventing more indebted member states from doing urgent investments. With the relaxation of state aid rules in place, this would further unlevel the playing field by increasing the investment gap between richer and poorer member states and further undermining the Single Market.

In the current confrontational geo-economic environment, the Union’s triple green, digital and economic security transition is more urgent than ever, creating the need for unprecedented levels of strategic investments. Therefore, merely relaxing the debt and deficit rules will not be enough. The Commission should push for a new economic governance regime that aligns national investment policy with EU-wide strategic goals in synchrony with a reformed Multiannual Financial Framework and EU level financing tools. A framework based on a common vision for investment in strategic goals might also be a better recipe for the Commission to overcome the resistance of critical member states, which regard the current proposal as a watering down of rules rather than a strategic plan for the future.

The Commission’s achievements have been notable and many, which is no mean feat considering this mandate’s tumultuous events. Nevertheless, with pushback on environmental policy from politicians who should know better, a concerning demographic path ahead, a fractured and uncertain geopolitical and geo-economic landscape and with AI set to dramatically reconfigure society, the EU’s ability to make progress on its agenda remains an open question.

As things stand, the next mandate will likely be as crisis-filled and unpredictable as the current one. Whether it is President von der Leyen at the helm or not, it is clear that the EU will require effective leadership and a holistic approach to policymaking. None of the challenges listed above sit snugly within one DG. Policy discussions often remain disconnected despite the obvious intersections between them and positive member state and Commission initiatives to bolster a holistic approach have so far been largely overlooked. Therefore, the next Commission President should appoint an Executive Vice President for the Well-being Economy to drive this transformative policy agenda forward (both within and outside the Commission) and provide the coordination and strategic political leadership urgently required.

Competitiveness featured prominently in Ursula von der Leyen’s address, in which she pledged to ‘make business easier in Europe’. Echoing the grievances of European businesses, she pointed out that ‘Small companies do not have the capacity to cope with complex administration‘ and firms are being held back by lengthy processes and missing out on growth opportunities.

Indeed, recent efforts to push the green and digital transitions have come with a significant regulatory shake-up. Unprecedented numbers of complex new regulations and regulatory proposals negatively impact businesses’ competitiveness through legislative uncertainty and burdensome reporting requirements, with SMEs and Mid-caps being disproportionally affected. Moreover, EU regulation is often insufficiently harmonised across member states, undermining the integrity of the Single Market.

Addressing these issues, the Commission President pledged to table a legislative proposal to reduce reporting obligations at the EU level by 25% and stressed that member states will have to cooperate to match this figure at the national level. To better hear the voice of small and medium enterprises, von der Leyen also announced the appointment of an EU SME envoy.

These initiatives are neither new nor concrete enough to make a difference. For 30 years, the Commission has launched a host of similar initiatives to create better regulation – so far with little effect. The focus must now lie on creating concrete alleviations for businesses and effectively implementing less burdensome and more effective regulations. Moreover, SMEs should not be the only focus as Mid-caps and scale-ups as important motors of Europe’s transitions should receive similar attention

The von der Leyen Commission has greatly advanced Europe’s digital agenda. However, this agenda was largely missing in her speech. In previous years digital and tech were singled out as important priorities. This year the focus narrowed down to AI, ‘online rights’, and the achievements of the 2022 Digital Services Act and Digital Markets Act. Still, important competition and data privacy concerns remain. Europe’s digital agenda cannot be only reactive and regulatory. Her speech left out advancements in the Digital Single Market, the 30th anniversary of the Single Market, or the need to advance digital skills in the European Year of Skills. The EU also needs to big up its plans for emerging technologies such as quantumcyber, and photonics.

Her announcement of redoubled efforts towards international coordination on trustworthy AI, with an initiative for an Intergovernmental Panel on Climate Change-like body for AI is welcome. While vague at this stage, a truly multilateral effort, bringing together currently disparate efforts at the United Nations, Organisation for Economic Co-operation and Development, and the Council of Europe, makes sense. The question is whether she can bring it to fruition in the year she has left. Von der Leyen pitched her 2023 State of the Union speech somewhat grandly as an “answer to the call of history”. If Europe is to play a leading role in addressing the world’s current crises, risks and opportunities, the digital agenda must have a full place in her vision for the future.

Under President von der Leyen, the EU has concentrated on building its hard power capabilities. But, in the process, it has also neglected its soft power—and is already paying for it.

As the recent streak of coups in the Sahel demonstrates, European aid and diplomacy are no longer unchallenged currencies. China and Russia increasingly contest their influence in Africa. And their appeal has waned for countries like Niger, where years of the EU’s ‘bargain’ (financial support in return for cheap energy and offshored borders) did little to stop a surge in anti-French sentiment; or indeed aggravated it.

This loss of European influence is not unique to Africa but rather symptomatic of a broader, global rollback. From the expansion of BRICS to Modi’s Russia-agnostic G20, the message of the so-called Global South is clear: it will no longer accept de facto Western leadership.

In the Sahel and elsewhere, the Commission must heed these warnings and deliver on this SOTEU’s promises. It must acknowledge the priorities of the many nations that, much like the EU, aspire to “strategic autonomy”. It must enhance their role in the multilateral system and engage them in equitable economic partnerships.

Or it will leave behind a more ‘powerful’ but isolated Europe. 

Three years after launching the New Pact and after many rounds of negotiations, Commission President von der Leyen had no choice but to call for a final push to agree on the files. The work – and responsibility – now lies in the hands of member states and the European Parliament. However, despite the Parliament’s resolve to engage in trilogues earlier this year, and a moment of jubilation following a show of unity by interior ministers in June, it is unclear whether this resolve and trust between member states are strong enough to get the New Pact over the finishing line. Von der Leyen highlighted “practical solutions”, but this disguises the fact that the Pact’s complexity undermines its practicality in many ways. There may be a Pact come the summer of 2024, but without strong, sustained support for implementation, it risks not delivering on member states’ needs.
Trust will also need to be (re-)built. If member states agree on Bulgaria’s and Romania’s accession to the Schengen Area in the coming months, it will bring them one step closer to reducing the internal vulnerability that has long complicated efforts to cement a European migration and asylum system. This Commission has shown considerable innovation in its financial and practical support, something that will hopefully outlast its tenure. Still, these measures will only be able to compensate for a lack of trust for so long.

Repeating that the EU “will be at Ukraine's side every step of the way”, Ursula von der Leyen's passionate support for Ukraine was as visible this year as last. While showcasing the extensive and unprecedented political, economic, military, and humanitarian support that the EU has given to Kyiv since the start of Russia’s full-scale invasion, she stressed the necessity to maintain this and further strengthen it.  Indeed, this is not a choice. It is imperative. Supporting Ukraine may be costly, but freedom is priceless. Ukraine’s victory is tied to the political will of its allies to stand by their “we will stand with Ukraine for as long as it takes” commitment. Ukraine must receive everything it needs to defeat Russia and allow Kyiv to negotiate a final peace treaty from a position of strength, bringing a sustainable and just peace and ending the cycle of Russian aggression.  It must also, as Von der Leyen reiterated, “answer the call of history” and bring Ukraine (Moldova and Georgia) into the EU, ridding Europe of grey zones forever. It's time for the EU to move from rhetoric to action on enlargement and seriously knuckle down on reforms to make the policy fit for purpose.

Ursula von der Leyen attempted to strike a balance between geopolitical ambition and the EU's capacity to act on EU enlargement. She sent a clear signal (perhaps to the particular attention to the European Council President, Charles Michel) that the process will remain merit-based and that successful enlargement cannot occur without assessing the implications and adapting EU’s existing policies, including the Common Agriculture Policy.  

While a note of optimism was injected by imagining "the next European Day of Welcomes and the next economic success stories," she fell short in outlining specific, intermediate steps for how the Western Balkans and the Associated Trio (Moldova, Ukraine, and Georgia) could advance their EU integration. It appears that the accelerated integration of candidate countries into the internal market has not yet been decided upon.  

The Western Balkan countries, along with the Associated Trio, are viewed as potential enlargement candidates. However, von der Leyen’s political leadership seems to struggle with the uncomfortable reality that this group is not homogeneous. The challenge is not just the differences among these countries, but also the lack of ongoing political and institutional dialogue between the Western Balkans and the Associated Trio regarding the path to enlargement. VDL missed an opportunity to recommend streamlining the enlargement process by encouraging dialogue and defining the Commission's role. 

Today, Commission President von der Leyen recognised that we must start thinking about how the EU’s institutions will work in an enlarged Únion and assess enlargement’s impact in different policy areas. Hopefully, this means that the EU - or at least some of its main institutions - is ready to do its part of the homework.

However, von der Leyen fell short of explaining how the EU will encourage and support the implementation of EU-related reforms in the candidate countries. Having closed the door to new members a decade ago, keeping candidates in the waiting room for almost twenty years has come at a high cost for the EU. The failure to deliver on its promises and the lack of a realistic and credible membership perspective for the Western Balkans have undermined the EU’s capacity to trigger positive reforms and ensure stability - as episodes such as the escalation of tensions between Kosovo and Serbia, the intensification of the secessionist threats by Bosnian Serb leaders, or Serbia’s autocratic turn have demonstrated.

To make EU30+ a reality, to the EU must recover the lost leverage and credibility. To achieve so, the EU must come up with a clear political steering to the Western Balkans accession process and remain inflexible to the importance of rule of law and fundamental rights to advance in the EU path.

The EU must “answer the call of history” and work to complete enlargement, as Ursula von der Leyen underscored. The Commission President is right that the EU should not wait for “a European Convention and treaty change if and where it is needed” to advance in its preparations to welcome new members. The announcement of a potential opening of the rule of law mechanism to accession countries is another example of the Commission’s intention to push for sectoral integration before membership. This approach, expected to be rolled out in the upcoming enlargement package, can motivate enlargement countries to deliver challenging work. Yet the rule of law reporting is merely a monitoring tool that stops short of drawing legal conclusions or making recommendations. Thus, it seems unclear how it will support the reform efforts of aspiring countries beyond potentially fostering their sense of inclusion. Also mentioned was the pre-enlargement policy review, and a leaders’ discussion under the Belgian Presidency, which seemed like a clearer contribution towards building the EU’s absorption capacity. However, the EU needs a credible reform roadmap to implement “a vision for successful enlargement”. An inter-institutional conference on enlargement should, therefore, inter alia mandate A Wise Wo/men Group – including political heavyweights and younger people – to help identify the key, “practical questions about how a Union of 30+ members will work”, “think big,” and produce innovative policy solutions for a blueprint on our common, future destiny. This concrete work must start now and before the next EP elections.

Over the past years, President von der Leyen has made bold promises for a ‘New Push for European Democracy’ – and she re-stated many of them in today’s SOTEU. However, despite these repeated promises, only 28% of the initially promised initiatives in this area have been adopted by the Commission so far.  It particularly failed to deliver on the bigger commitments for structural reform made since taking office (e.g. the Spitzenkandidaten system, de-facto right of initiative for the EP, and decision-making procedures).

Once again, von der Leyen has repeatedly supported institutional and structural reforms in today’s SOTEU, particularly to prepare for a Union of 30+, and pledging that “it is time for Europe to once again think big and write our own destiny.”  But again, she did not set out any concrete ideas on how that could be achieved. It is supported in principle, not by leadership.

At the end of her mandate, we need to see the determination that the President has called for herself during the speech – by leading the way to the structural reforms she called for with a concrete democratic reform agenda. For the Commission President, it is time to think – and act – big. And an ambitious reform plan could be the greatest contribution to creating the new push for European democracy she promised four years ago.

Conspicuously absent from the von der Leyen’s address has been any mention of the Conference on the Future of Europe (CoFoE) and its follow up, although the initiative has been a landmark under her Commission’s “new push for European democracy” priority and an unprecedented step in the longstanding EU effort to close the gap between European decision-making and citizens. The omission is all the more notable given the ‘new generation’ of European Citizens’ Panels (ECPs) that Brussels’ executive already implemented this year on the topics of food waste, virtual worlds, and learning mobility as a direct response to the CoFoE’s recommendations. By not referring to her previously espoused plans for the Commission to hold ECPs ahead of key legislative proposals, von der Leyen is missing on the opportunity to pass a valuable legacy to the next college and to consolidate the significant progress achieved under her leadership in strengthening participatory democracy at the EU level. If citizen participation is to become an integral part of the Union’s policymaking toolkit, the Commission should persevere in its commitment to ECPs and von der Leyen should push for the rest of her mandate to persuade the other institutions to join in the effort, as well as in making it difficult for the next college to discard the ECPs to the dustbin of history. The EU’s quest for democratic renewal is far from over and every success – no matter how small, like the ECPs and the CoFoE – should be firmed up and used as steppingstone towards more and further European democratic advances.

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