Charles Michel Announces Future Anticipated Resignation
But also — Asylum and Migration Pact, Budgetary Rules Reform, State Aid
Hello! It’s Thursday 11th January, 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
It’s been an eventful return back to work for EU institutions, following the Christmas and New Year’s break. On January 6, Charles Michel announced his candidacy for the June 2024 European elections. If elected — a highly likely outcome — the former Belgian Prime Minister will have to step down early from his position as President of the European Council to begin his term as a MEP.
NEW YEAR, NEW ME • Charles Michel's announcement caught the European bubble off guard.
By running in the European elections, Charles Michel says he intends to "contribute to strengthening the democratic legitimacy of the European project." He will lead the list of the Belgian Reformist Movement, making his election highly probable.
At the moment, it is uncertain if the current President of the European Council is interested in other high-responsibility positions within the EU — for instance, he could try to become the lead candidate of Renew for the presidency of the European Commission or position himself to become the next Belgian Commissioner.
VIKTOR • Charles Michel's announced resignation is unprecedented since the role of President of the European Council was created in 2009 with the Lisbon Treaty entering into force. Under normal circumstances, Charles Michel would have retained his position until the end of November 2024.
What happens in case the EUCO president resigns? According to the internal rules of the European Council, the president is replaced, until the election of their successor, "by the member of the European Council representing the member state holding the six-month presidency of the Council."
If Charles Michel resigns in June, it means that he could be replaced by Hungarian Prime Minister Viktor Orbán, whose government will hold the rotating presidency of the EU Council between July and December 2024 — after Belgium, whose presidency of the EU Council began on January 1, 2024.
CRITICISM • This prospect has sparked numerous criticisms. Some commentators argue that Charles Michel is consciously giving Viktor Orbán the opportunity to excessively influence European institutional activities.
Considering Hungary's controversial position on Ukraine and the rule of law, some view negatively the fact that Orbán could hold both the presidency of the EU Council and the presidency of the EUCO.
More generally, Charles Michel is accused of prioritising his personal ambitions over the responsibilities associated with his mandate.
ANOTHER SCENARIO • The current President of the European Council has dismissed the criticisms by arguing that EU Member States are capable of finding a replacement by June.
"I don't want to anticipate the decision that will be made by the European Council in June, [...] but there are several options, and if the European Council wants to avoid Viktor Orbán, it's very easy," said Charles Michel to several media outlets.
In theory, heads of state could indeed designate a replacement as early as June. The President of the European Council is elected by a qualified majority vote in the Council (unlike the President of the European Commission, approval from the Parliament is not necessary) for a period of two and a half years, which can be renewed once.
NUANCE • Nevertheless, the severity of the current situation should not be overstated. On one hand, the President of the European Council does not have an executive role, and their functions are clearly defined by the Treaty on the European Union (Article 15). On the other hand, it is likely that European heads of state will manage to find a replacement before the start of the Hungarian presidency of the EU Council, even if the timeline for designating a new President of the European Council is shortened.
"Don't exaggerate Charles Michel's early resignation. It merely shifts the race for his succession 6 to 9 months earlier, a nuisance for a few candidates who will still be stuck in national politics" (and therefore unable to run), notes Hosuk Lee-Makiyama, director of the European Centre for International Political Economy (ECIPE).
WHO? • Who could replace Charles Michel? The — short — list of former Presidents of the European Council provides an insight into the profile one might expect. The three Presidents of the European Council — Belgian Herman Van Rompuy, Pole Donald Tusk, and Charles Michel — all previously led their respective states.
"The three holders of the position were all Prime Ministers just before. It's not an obligation, but it's the convention," explained Andrew Gray from Reuters on X.
Stanley Pignal, Brussels bureau chief of The Economist, responded: "I get the sense that the convention around the EUCO presidents is someone who has been a leader in the EU at some point, but not necessarily an incumbent leader (although the first three obviously were)."
One thing is certain: after Charles Michel's announcement, all eyes are now on Ursula von der Leyen, whose candidacy for a second term as President of the European Commission has not yet been confirmed.
In Case You Missed It
MIGRATION • On December 20, the Council and the Parliament reached an agreement on the new asylum and migration pact proposed three years earlier by the European Commission. The President of the European Parliament, Roberta Metsola, described the agreement as "historic." She added that "It is probably the most important legislative agreement of this mandate.”
A reform of European migration policy had already been presented in 2016, but negotiations had failed. The new proposal was organised around three axes: strengthening external borders, a fairer sharing of responsibilities and solidarity, and enhancing cooperation with third countries.
The reform doesn't radically change the spirit of the Dublin system, according to which migrants must apply for asylum in the EU member state through which they entered.
The new pact includes, among other things:
A mandatory border procedure aimed at quickly assessing whether asylum claims are unfounded or inadmissible.
Improved accommodation capacities for asylum seekers — the aim being a total of 30,000 places.
The establishment of so-called "mandatory" solidarity among Member States: Member States facing migratory pressures will be supported by other "contributing" Member States, which can decide how they will assist the states under pressure. Relocations will now be voluntary, and Member States that refuse them will have to provide financial aid to the states facing pressure in return.
Overall, the agreement leans in favour of the Council's position, stricter than that of the Parliament. The agreement must now be adopted by both co-legislators.
SGP • On December 20, EU finance ministers reached an agreement on the reform of European budgetary rules.
These rules — stemming from the Stability and Growth Pact (SGP) — were temporarily suspended due to Covid-19. Because of the war in Ukraine and the current energy crisis, this suspension was extended until the end of 2023, a deadline by which Member States wanted to adopt a revised SGP — which is now a done deal.
As proposed by the Commission, the new rules maintain a maximum debt/GDP ratio of 60% and the limit of 3% for annual deficits.
The rules will now be more tailored to the specificities of the Member States, which will have to agree with the European Commission on four-year fiscal adjustment plans. States may request an extension of these plans for up to seven years if they implement certain reforms and investments that improve growth potential and sustainability. "For the first time in thirty years, the Stability Pact recognizes the importance of investments and structural reforms," tweeted Bruno Le Maire.
However, several experts criticise this option. "The seven-year implementation horizons stipulated in the new rules extend beyond typical political cycles. It is unlikely, for instance, that the Commission will force a government elected with different priorities in the middle of the seven-year cycle to implement policies adopted by its predecessor," argues Luis Garicano, a professor at LSE.
At the request of frugal Member States such as Germany, several safeguards are provided within the rules: for instance, Member States with a debt ratio exceeding 90% of GDP must reduce their excess debt by one percentage point annually. This target is halved for countries whose debt ratio is above 60% but below 90% of GDP.
The excessive deficit procedure is maintained: countries with a deficit exceeding 3% of GDP must reduce their spending by 0.5% of GDP annually. At the last minute, France secured a key amendment on this issue: the Commission will take into account the increase in interest payments until 2027 to calculate the adjustment effort within this procedure.
The Council agreed that the penalty for non-compliance could reach up to 0.05% of GDP and could accumulate every six months until action with effects is taken.
In short, the revised SGP is more flexible and less arbitrary, while maintaining strict obligations to reduce debt and deficits.
STATE AID • On January 8, the European Commission approved €902 million in aid from Germany to Swedish electric battery company Northvolt.
This €902 million aims to support Northvolt in constructing a high-performance advanced electric vehicle battery production plant in the city of Heide in northern Germany.
Northvolt had threatened to withdraw its factory project, citing more attractive subsidies granted in the United States under the Inflation Reduction Act (IRA).
This decision by the European Commission authorises Germany to align with the aid that Northvolt would have received in the United States to ensure that the company remains in Europe.
In March 2023, the Commission replaced its "Temporary Crisis Framework" (TCF), adopted after the start of the war in Ukraine to enable Member States to respond to the energy crisis, with a revised version named "Temporary Crisis and Transition Framework" (TCTF) reinforcing the Member States' capacity to invest in energy transition.
With the TCTF, if a company threatens to relocate a strategic investment to a third country due to more advantageous subsidies, the Member State that would have hosted the investment in question is authorised to match the level of subsidies proposed by the third country, under certain conditions (these conditions aim to prevent the richest States from excessively distributing subsidies and destabilising the internal market).
The aid granted to Northvolt is the first "matching aid" to be authorised since the adoption of the TCTF. One of the conditions allowing the granting of this aid is that it benefits a disadvantaged region in Germany.
The aid was approved in the budget agreement reached by the German government last month, despite the budget setback last November (read our newsletter on the subject here).
What We’re Reading
In the FT, Guy Chazan reports on the German debate over the future of Schuldenbremse, the debt brake provided for by the Constitution. You can also read about it from economist Kamil Kovar.
In Notes from Poland, Aleks Szczerbiak analyses the controversy surrounding the attempted takeover of public media by the new Polish government.
This edition was prepared by Maxence de La Rochère, Augustin Bourleaud and Hana Rajabally. See you next week!