A Second European Campaign Has Begun
But also — China, Hungary, Draghi, Ukraine
Hi! Today is 17 June, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
The European elections kicked off a series of intense negotiations that will determine the general direction of European institutions for the coming term. A "second campaign" has begun.
G7 • By the end of the month, European heads of state and government hope to have reached agreement on how to distribute key roles within European institutions. An informal discussion will take place today in Brussels. However, it is likely that Emmanuel Macron, Giorgia Meloni, and Olaf Scholz have already started negotiations during the G7 summit in Italy last week.
The rumor has it that consensus is emerging around the following four candidates: Ursula von der Leyen for a second term as President of the European Commission, former socialist Prime Minister António Costa for the presidency of the European Council, Maltese Roberta Metsola as President of the European Parliament, and Estonian Kaja Kallas as the head of European diplomacy.
Beware: for the moment, nothing is certain — and previous negotiations have shown that last-minute changes are far from impossible.
URSULA • Despite the uncertainty, the chances of Ursula von der Leyen obtaining a second term have never been higher.
For one thing, the results of the European elections were favorable to the European People's Party (EPP, center-right), to which von der Leyen belongs. For another, Emmanuel Macron, who had suggested other names for the Commission presidency, is weakened domestically and in the middle of a campaign for snap parliamentary elections.
The French President may intend to finalize negotiations at the European level before the parliamentary elections in France, in order to secure an outcome that is in his favor. Or he could use these negotiations to show that he is not entirely aligned with Ursula von der Leyen — during the European elections campaign, French opposition parties Les Républicains and Rassemblement National criticized him for being too close with Ursula von der Leyen.
The tense geopolitical situation, marked by the war in Ukraine and the possible return of Donald Trump, also works in favor of von der Leyen, who is seen as the "safe" option here.
YES, BUT... • The European Council is not the sole institution deciding Ursula von der Leyen's fate. When the President of the European Commission is proposed by the European Council, the candidate must then receive the approval of a majority of MEPs.
The centrist coalition of the EPP, Socialists and Democrats (S&D), and Renew (Liberals) — which supported Ursula von der Leyen in 2019 — maintains its majority in parliament but (i) is weakened and (ii) contains several parties (such as The Republicans within the EPP or the German liberal party FDP within Renew) that have expressed significant reservations about Ursula von der Leyen's candidacy. In 2019, the vote was decided by a margin of 9 votes.
Ursula von der Leyen must therefore seek support elsewhere. And in this regard, she faces a dilemma:
The ECR? An alliance with some ECR parties (to the right of the EPP) risks costing von der Leyen the support of certain European leaders (and parties), including Olaf Scholz. Last week, former European Commission President Jean-Claude Juncker publicly advised von der Leyen not to "extend" the majority to "the extreme right".
The Greens? By seeking votes from the Greens, Ursula von der Leyen could alienate part of her own political group, the EPP, which wants to put the brakes on new environmental norms (and wishes, for example, to reconsider the phase-out of internal combustion engine cars by 2035).
The Greens’ results in the European elections were disappointing: they lost 20 seats and now have only 53 MEPs. According to the Greens' leadership, the group would be willing to make significant concessions in order to continue being able to co-govern, shape the Commission's work, and prevent the majority from leaning to the right.
PARLIAMENT • As regards the European Parliament, negotiations within the various political groups have begun. These discussions aim to determine the composition of the political groups, the identity of their leaders, and the distribution of parliamentary positions within (and between) the various groups.
Regarding the composition of parliamentary groups, the Identity and Democracy group (ID, the most right-wing group in the hemicycle) continues to court Giorgia Meloni's ECR, with the aim of creating a "super-group" of the far right.
Easier said than done: for the moment, the alliance is not on the ECR's agenda. Several parties are hesitant and believe they could achieve greater gains elsewhere — this is the case with Meloni's Brothers of Italy, who are also courted by von der Leyen. In exchange for supporting von der Leyen, Giorgia Meloni could request an influential portfolio for the future Italian European Commissioner.
Looking at the presidents of the political groups, the election results could bring about significant changes. In general, it is the party that performs best in the elections within a political group that is the most likely to take the presidency.
Renew: French Valérie Hayer, president of the group, could be replaced following Renaissance's poor performance in the elections.
S&D: Spanish Iratxe Garciá (Spanish socialists) led the social democrats for the past five years. She too could be replaced, as Italian socialists performed better in these elections, winning 21 seats in total.
EPP: The German CDU/CSU remains the largest party in the group coming out of these elections. Manfred Weber should therefore remain President of the EPP.
The Greens: The Greens have a co-presidency (a man and a woman). Terry Reintke (Germany) and Philippe Lamberts (Belgium) have so far led the group. But the strong performance of Dutch Bas Eickhout and the election of Lithuanian Virginijus Sinkevičius, outgoing Environment Commissioner, could change things.
WHAT NEXT • European heads of state and government will gather for a European Council on June 27 and 28, during which they will define the strategic agenda for the period 2024-2029. They also hope to agree on the “top jobs,” although a consensus could already emerge on the evening of June 17.
Regarding the Parliament, the political groups will meet by early July to elect their presidency. The composition of the political groups may still evolve until mid-July, before the constitutive plenary session opens on July 16 and sees the election of the President of the Parliament. Depending on the progress of negotiations, MEPs may also already vote on the orientations for 2024-2029 or the candidate for the Presidency of the European Commission proposed by the European Council.
In Case You Missed It
CHINA • The European Commission has announced a significant increase in tariffs on electric battery vehicles produced in China. These tariffs will take effect on July 4th, unless the Chinese authorities respond to the Commission's “pre-disclosure document”.
The tariffs vary by producer, ranging from 17.4% for BYD to 38.1% for SAIC. Chinese manufacturers that cooperated with the Commission's anti-subsidy investigation, initiated in October 2023, will face a weighted average tariff of 21%, compared to 38.1% for those that did not cooperate.
Currently, electric vehicles in Europe are subject to a 10% tariff. The market share of Chinese brands has increased significantly in recent years. The share reaches around 20%, including joint ventures between BMW and Renault with Chinese partners and Tesla vehicles produced in China, according to Rhodium Group.
The decision was supported by France and Spain. However, Germany, Sweden (with Volvo owned by China's Geely), and Hungary opposed it, citing the risk of a trade war with China. A spokesperson for the German Chancellor expressed hope for an amicable solution with China by 4 July.
The United States recently raised tariffs on imported Chinese electric vehicles to 100%. Some in Europe also highlight the potential costs to the energy transition, as higher vehicle prices could slow adoption.
HUNGARY • On 13 June, the European Court of Justice (ECJ) fined Hungary for failing to comply with a previous ruling regarding the EU's migration policy.
The timing is politically charged: just two weeks before Hungary takes over the presidency of the EU Council, the country has been fined a lump sum of €200 million, with a daily penalty of €1 million for delays.
This follows a December 2020 ECJ ruling urging Hungary to meet its legal obligations on migration policy. The European Commission brought a new case against Hungary, arguing it still hadn’t complied.
The ECJ ruled that Hungary has not taken the necessary steps to implement the ruling, particularly “as regards access to the international protection procedure, the right of applicants for international protection to remain in Hungary pending a final decision on their appeal against the rejection of their application and the removal of illegally staying third-country nationals”.
“That failure, which consists in deliberately avoiding the application of a common EU policy as a whole, constitutes an unprecedented and extremely serious infringement of EU law,” the Court stated in a press release.
The Court added that Hungary’s current migration policy “seriously undermines the principle of solidarity and fair sharing of responsibility between the Member States”. If Hungary refuses to pay the fine, the amount can be deducted from its share of the EU budget.
DRAGHI • On 14 June, at the Charles V Prize ceremony in Yuste Monastery, Mario Draghi delivered a speech advocating for a European industrial strategy.
The former ECB president and Italian Prime Minister has been tasked by the Commission to prepare a report on how the EU can address the growing competitive gap with the US and China. His speech suggests that the upcoming report, to be published in July, will advocate for a more interventionist industrial policy.
Draghi called for the development of a "genuine foreign economic policy" and measures against unfair competition. He proposed the introduction of "Buy European" clauses in public procurement, the use of subsidies and tariffs to offset unfair advantages from foreign industrial policies and real exchange rate devaluations, and the creation of pan-European enterprises.
He also emphasized the need to reduce energy costs, which constitute "a major competitive disadvantage" for European companies.
Draghi finally urged the EU to address issues arising from the lack of a central authority on spending by improving coordination of public procurement policies and clarifying local content requirements for EU-manufactured products.
UKRAINE • Last week, the G7 reached an agreement on using profits from frozen Russian assets. Ukraine is set to receive a €50 billion loan from G7 countries, which will be repaid using profits from these frozen assets. The details of the agreement still need to be finalized.
The agreement emerged after Italy, France, and Germany rejected a controversial US proposal for the EU to repay an American loan with proceeds from frozen Russian assets.
What We’ve Been Reading
Janan Ganesh of the FT writes on ‘Europe’s real tourist trap: the continent gets too much attention from the world to recognise its irrelevance’.
For Bruegel, Marco Buti and Marcello Messori lay out the major economic issues that the new Commission will have to face.
This edition was prepared by the What’s up EU team, including Paul Healy, Luna Ricci, Elisa Zevio and Maxence de La Rochère. See you next week!