State of the Union Address
But also — Plenary, ECB, Migration
Hi! This is Monday, 18 September 2023, and here’s the EU news you need this week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and Linkedin.
The Briefing
On September 13, the President of the European Commission delivered her annual State of the Union address, the last one of her current term (2019-2024). Ursula von der Leyen's highly polished and calibrated speech suggests that she is preparing for re-election as President of the Commission.
SOTEU • Also known as "SOTEU", the State of the Union address has been held every year in September since 2010. Inspired by its American equivalent, the aim of the address is to enhance the transparency of the Commission's actions, particularly vis-à-vis the Parliament to which the speech is delivered in plenary session.
The State of the Union speech is an opportunity for the President of the European Commission to take stock of what has been achieved, and to announce the main directions for the year to come.
For Ursula von der Leyen, this was a special speech for at least two reasons. Firstly, it was the last of her mandate, which began in 2019. And secondly, this SOTEU was probably a way for her to position herself ahead of the European elections taking place next year. Following these elections, the Council will have to nominate a new candidate for the Commission President job, whom the Parliament will then have to elect by an absolute majority.
Although Ursula von der Leyen has not officially announced her intention to stand for a second term, the signals she sent out during her speech suggest that she is actively preparing for re-election.
GREEN DEAL • Ursula von der Leyen did not fail to mention the Green Deal, the flagship of her mandate as President of the Commission. On this subject, she adopted a particularly pro-industry stance.
"We will continue to support European industry throughout this transition", she declared, before announcing a package of measures on wind energy and dialogues on ecological transition with European industry stakeholders.
As Ursula von der Leyen is the victim of much criticism from the EPP — her own political group in the Parliament — some of whose members believe that too many environmental rules are detrimental to economic activity, these remarks show a desire to ease tensions and secure the political group's vital support ahead of the 2024 elections.
SUBSIDIES • On the subject of the Green Deal, Ursula von der Leyen also declared that the Commission is preparing to open an anti-subsidy investigation into electric vehicles from China.
"Our industry and our technology companies love competition (...) But competition is only worthwhile if it is fair," she said. Before adding, "world markets are today flooded with cheap Chinese electric cars, whose prices are kept artificially low by massive public subsidies".
This investigation had been requested by France for several months, but fears of a trade war with China had led the Commission not to follow up on French requests, until now. To a certain extent, this announcement is a way for Ursula von der Leyen to send a positive signal to Emmanuel Macron, whose support had been essential to her election as President of the European Commission.
Germany, for its part, would have far more to lose from a trade war with China over electric vehicles than France, since German vehicles have a far greater presence on Chinese markets than French ones.
Nevertheless, the announcement of the investigation has won the support of German MEP Manfred Weber — the leader of the EPP group and a notable critic of Ursula von der Leyen on the Commission's environmental policy. "We need to activate our trade defense instruments to avoid another solar panel attack," he said, referring to China's unfair trading practices in the solar panel market in the early 2010s.
However, the FT warns against adopting such measures for electric vehicles, recalling that the additional customs duties that were adopted on Chinese solar panels in 2013 were lifted 5 years later, as Europe needed Chinese panels to meet its renewable energy targets.
ECONOMY • The European Commission President's remarks on competitiveness continued in the economic section of the speech. In particular, Ursula von der Leyen announced that she had asked Mario Draghi, President of the European Central Bank from 2011 to 2019, to prepare a report on the future of European competitiveness.
Here, Ursula von der Leyen wants to show that she takes the subject seriously. In recent months, many voices have called for a reduction in the regulatory burden on European businesses, particularly SMEs (small and medium-sized enterprises). We invite you to read our briefing from last week on this topic.
It is therefore not a surprise that Ursula von der Leyen announced the appointment of an EU representative for SMEs, as well as a legislative proposal to reduce the administrative burden on businesses by 25%. "For each new legislative text, we carry out a competitiveness check, entrusted to an independent committee", she also declared.
OTHER • The President of the European Commission also made important statements on the following subjects:
On agriculture, the launch of a strategic dialogue on the future of agriculture in the EU was announced. "Today I would like to pay tribute to our farmers and thank them for ensuring, day after day, our food supply", said Ursula von der Leyen, as a nod to the EPP after criticism from part of the group over the Nature Restoration Act. Read our briefing on the subject.
On the tech front, Ursula von der Leyen announced her wish to see the creation of an international body similar to the IPCC (Intergovernmental Panel on Climate Change) on artificial intelligence.
On migration, she called on the Parliament and Council to reach agreement as soon as possible on the new pact on migration and asylum.
Finally, on enlargement, "we cannot — and should not — wait to amend the treaties before moving forward", declared Ursula von der Leyen. "We can adapt our Union to enlargement faster than that," she added.
In Case You Missed It
PLENARY • In addition to the State of the Union address, the last plenary session of the European Parliament was marked by several important decisions. Firstly, the update of the directive on renewable energies (RE) and the acceleration of their deployment were adopted, with a target of 42.5% use of RE by 2030.
The European Parliament also approved, with 483 votes in favour, 52 against and 89 abstentions, the revision of safety and quality standards for substances of human origin (SoHO). The proposed new rules aim to provide donors and patients with a harmonised framework for transplants and donations, while maintaining certain limits on the supply of these therapies.
MEPs also pledged to improve air quality with the adoption of stricter standards for the main pollutants by 2030, also providing for a right to compensation for citizens affected by air pollution.
In response to allegations of bribery of MEPs by states such as Qatar and Morocco, Parliament adopted 14 measures to enhance transparency, including the publication of MEPs' appointments and the declaration of their assets.
Finally, the Parliament gave the go-ahead to start negotiations with the Council on the reform of the EU electricity market, as proposed by the European Commission. MEPs want to strengthen measures against price volatility and ensure that consumers can benefit from fixed-price or dynamic-price contracts. They also want to prohibit suppliers from cutting off supplies to vulnerable customers.
ECB • The European Central Bank raised its three main key rates by 25 basis points (0.25%). After this tenth rate hike, the ECB's deposit facility stands at 4.0%, its highest level since 2001. The decision comes after the ECB revised its growth outlook for the eurozone downwards, to 0.7% in 2023.
The Frankfurt-based institution stated that "the ECB's key interest rates have reached levels which, if maintained for a sufficiently long period, will make a strong contribution to inflation returning to the target level as soon as possible." This was seen as an indication that rates should stabilize in the future. Lower growth forecasts raised fears that further rate hikes would further disrupt the recovery.
But the more orthodox members of the Governing Council are not giving up. In their view, a further rate hike may be necessary in December, depending on inflation and growth forecasts.
MIGRATION • On Wednesday September 13, Germany announced that it was suspending the voluntary reception of asylum seekers from Italy "until further notice", due to "strong migratory pressure" and Rome's refusal to apply the Dublin Regulation.
This European mechanism facilitates the relocation of asylum-seekers arriving mainly via Italy and Greece to other voluntary member states in order to relieve their burden. Under the contested Dublin regulation, the first host country must process the asylum application, which has the effect of concentrating the effort of European migration policy on just a few countries that are the gateways to Europe.
For its part, Italy, through the voice of Giorgia Meloni, asserts that it does not have sufficient reception capacity in a particularly critical migratory context. According to the Italian government, more than 130,000 migrants have reached its territory, including 8,500 in the last week alone, compared with 65,000 in 2022 at the same time.
What we’ve been reading
Europe needs to seize on Artificial Intelligence as an opportunity to find the path to growth, contend Zach Meyers and John Springford of the CER.
The Commission’s anti-subsidy investigation into Chinese electric vehicles should spur Europeans to think about the future of their industrial policy, write André Sapir, Simone Tagliapietra and Jeromin Zettelmeyer for Bruegel.
This week’s newsletter is brought to you by Guillaume Renée, Maxence de La Rochère and Augustin Bourleaud.