Ukraine and Moldova Granted Candidate Status
Also — Eurozone, Fit for 55, Energy Security, China
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In The Spotlight — Ukraine and Moldova Granted Candidate Status
European leaders met on 23-24 June in Brussels. Candidate status was granted to Ukraine and Moldova, but not to Georgia. Enlargement — it would be the biggest in two decades — is a rightfully heralded as a historic moment. It will however be a long and complex process. Ukraine and Moldova will have to overcome numerous potholes on the road to accession caused by the many cracks among EU Member States.
SUMMITRY • On 16 June, French President Emmanuel Macron, Italian Prime Minister Mario Draghi and German Chancellor Olaf Scholz, along with Romanian President Klaus Iohannis supported Ukraine’s candidate status to join the Union on a symbolic visit to Kyiv, the first since the beginning of the war. European Commission President Ursula von der Leyen also put a lot of political capital at risk in pushing Member States to grant candidate status to Ukraine — a country which she visited twice.
LET’S EXPLAIN • Let us not get excited too quickly. Article 49 of the Treaty on European Union (TEU) provides the legal basis for EU accession. Once the application has been lodged by the applicant country, the European Commission issues an Opinion on the application. The European Commission issued its opinions on the applications of Ukraine, Moldova, and Georgia on 17 June — which is very quick as Ukraine handed its application on 28 February, four days only after the war broke out. Moldova and Georgia, who are part of the Associated Trio, followed suit on 3 March.
THE CANDIDATE • It its opinions, the European Commission assessed the suitability of the applicant countries based on their “respect and commitment” to the values enshrined in Article 2 TEU, which includes, inter alia, rule of law, democracy, non-discrimination. The Commission also assessed whether they satisfy the Copenhagen and Madrid criteria — which determine EU membership eligibility — based on the existence of stable institutions, functioning market economy, and the ability to take on and implement the obligations of membership, and the ability to apply and transpose EU law. Based on these criteria, the Commission opined that Ukraine and Moldova should be granted candidate status by the European Council — but not Georgia.
THE APPRENTICE • Candidate status is granted by the Council of the EU, following the opinion of the Commission and the political endorsement of the European Council — that is what occured on 23-24 June. Candidate status is an important step, but it only puts Ukraine and Moldova on the path towards EU accession if they are able to successfully reform and transform themselves to converge towards EU standards.
NO FAST TRACK • There are no deadlines for the negotiations following the granting of candidate status, and both sides will have to dive into the 35 policy areas — chapters — on which progress by Ukraine and Moldova is required before accession can be envisioned. For Ukraine, corruption will be a very challenging problem to tackle in a war-struck country. Some wait very long in the lobby.
Ukraine and Moldova received a very quick answer to their candidacies, but there is no fast-track on EU membership itself. In May, French Europe Minister Clément Beaune said that Ukraine’s accession might take up to 15 or 20 years. Croatia was a candidate for nine years before becoming an EU member.
ENLARGEMENT FATIGUE • EU enlargement is a risky business. ‘Enlargement fatigue’ describes the feeling that the EU’s expansion has already gone too far, by granting membership to countries who failed to really meet the criteria. Denmark and the Netherlands have already made it clear they will not give Ukraine or Moldova a blank cheque.
Welcoming a country as populous as Ukraine would fundamentally reshape the political equilibria within the EU institutions. New countries would get a veto in some of the sensitive topics where unanimity voting is still the rule at the Council. They would also get a big proportion of the seats at the European Parliament.
Joining the EU without joining NATO would make little sense in terms of security guarantees for Ukraine and Moldova — hence the hesitancy at the geopolitical implications. Sweden and Finland intend to join NATO, and Denmark recently voted to end its opt-out of the EU’s common security and defence policy.
Another aspect is rule of law. The acrimonious spat between the European Commission and Hungary and Poland on rule of law criteria means that there is a limit to the EU being soft on rule of law with war-struck countries and hard with Hungary or Poland.
POLITICAL COMMUNITY • One way to keep candidate countries in the waiting room without alienating them — think of the Western Balkans — is to create another community.
French President Emmanuel Macron floated the idea of a European Political Community in his 9 May speech at the European Parliament in Strasbourg. Although the proposal is its infancy, its spirit echoes Romano Prodi’s ‘everything but the institutions’ — which marked in 2004 that “the policy of enlargement is drawing to a close, at least for the time being”.
In Case You Missed It
RUTTE SNAPS AT ITALY • “In the division of labor of the monetary system and bringing down the spread, [Italy] has to make sure the fundamentals are alright”, Dutch Prime Minister told reporters in Brussels, Bloomberg reports. The quintessentially dutch quip comes as a reminder that market discipline, reform, and a sound budgetary trajectory should be the way out of rising spreads, not monetary policy magic.
On 12 March 2020, ECB President Christine Lagarde triggered a mini-panic when she said, at the onset of the COVID-19 crisis, “we are not here to close spreads, there are other tools and other actors to deal with these issues”. Fast forward two years, the spread between the German and Italian bonds is at record highs, amid fears that rate hikes and the end of net asset purchases will hurt debt-ridden and low-growth countries such as Italy.
This time, the ECB is exploring a new tool to avoid widening spreads and to stave off the risk of a market meltdown in peripheral eurozone countries. And it is Mark Rutte, not Christine Lagarde, saying that the ECB is not there to close the spreads. Rutte added however that he has “faith” in Italian Prime Minister Mario Draghi’s ability to set Italy on the right path : “I am really fascinated and positive about the fact that you now see in Italy and other countries reforms taking place, which I was afraid I would never see in my lifetime. We like the idea that you give something, in return for reforms”, he said — as Bloomberg reports.
AGREEMENT ON FF55 • On 22 June, the EP finally adopted its position on three key legislations from the Fit for 55 package. This followed a previous plenary session where MEPs failed to find compromise on crucial measures to reduce greenhouse gas emissions by 55% in 2030.
MEPs notably managed to agree on the Emissions Trading System (ETS) reform — which conditions the adoption of the two other texts. On this matter, the Social Democrats (S&D) and Renew Europe accepted several amendments put forward by the conservatives in exchange for a faster phase-out of free allowances (2032). The ETS will finally cover 63% of emissions in targeted sectors, which is more ambitious than the Commission’s proposal (61%) but lower than what was suggested by the Environment committee (67%).
An agreement was also reached on a more ambitious Carbon Border Adjustment Mechanism (CBAM) than the one suggested by the Commission and the Council. The mechanism is nonetheless still considered to be unfair for poorer countries by many organisations, including Oxfam. Finally, MEPs agreed on a Social Climate Fund aimed at helping those most affected by energy and mobility poverty to cope with the increased costs linked to the energy transition.
While the compromise is overall considered a success, organisations such as WWF have accused the EP of voting for a “diluted” reform of the ETS. The final version of the three texts will be determined by subsequent talks between the EP and the Council.
CHINA • On 26 June, G7 leaders unveiled the Partnership for Global Infrastructure and Investment. The plan is essentially a rebranded version of the Build Back Better World plan announced in 2021 at a G7 Summit in the UK
The EU’s own plan, called Global Gateway — with 300 billion euros of flagged financing until 2027 — is now a part of this bigger umbrella term. The EU’s plan is meant to counter China’s Belt and Road Initiative (BRI). From the Piraeus Port to a 1 billion dollar highway in Montenegro, China’s state-sponsored infrastructure investment are seen as a strategy to sow the seeds of disunity among fragile EU countries and neighbours. The EU will side with the UK and US. In total, the package should amount to roughly 600 billion dollars.
ENERGY SECURITY • On 27 June, the European Commission announced new gas storage rules. The EU Gas Storage Regulation “requires that Europe’s gas reserves are refilled before the winter, and their management protected from outside interference”. Under the Regulation, Member States are required to fill storage capacities to 80% of capacity by November.
Russia is reducing gas supplies to a dozen EU Member States, following the granting of candidate status to Ukraine and Moldova. The EU is trying to avoid a situation where Member States would close off their market in case Russia cuts gas flows further. Six Member States — Germany, Poland, Slovakia, Czechia, and Austria — signed on 27 June a Memorandum of Understanding on risk-preparedness and energy solidarity in case of electricity black-outs next winter.
In a joint statement on 27 June, Ursula von der Leyen and Joe Biden pressed :
Russia's energy coercion has put pressure on energy markets, raised prices for consumers, and threatened global energy security. This was most recently demonstrated by the politically motivated acute disruptions of gas supplies to several European Union Member States. These actions only underscore the importance of the work both the United States and the European Commission are doing to end our reliance on Russian energy. We are also working together to find ways to further reduce Russia's energy-derived revenues in the coming months to further curtail Russia's ability to fund its unprovoked war in Ukraine.
What we’ve been reading this week
Ukraine’s and Moldova’s accession to candidate status to EU membership is a bitter pill to swallow for many in the Western Balkans. Carnegie’s Dimitar Bechev explains why the states of the region have lately failed to make much progress in their own bids to join the Union.
For the ECFR, Teresa Coratella untangles the difficult internal politics faced by Mario Draghi as he asserts his country’s support for Ukraine.
The CEPR has published an ebook on the economics of Brexit.
This week’s newsletter is brought to you by Augustin Bourleaud, Maxence de La Rochère and Thomas Harbor. See you next Tuesday!