The Niinistö report and European defense
But also — Chemicals, Mercosur, Pharma, Germany
Hello! Today is November 5, 2024, 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
On 30 October, former Finnish President Sauli Niinistö presented his report on the EU's civil and military preparedness to Ursula von der Leyen. The report sounds the alarm on defense, but Member States are divided on which direction to take, particularly when it comes to funding.
REPORT • In March, the President of the European Commission, Ursula von der Leyen, asked Sauli Niinistö — who had just completed his last term as President of Finland — to write a report on the EU's civil and military preparedness.
The request was made shortly after Finland put forward a Preparedness Union Strategy at the beginning of 2024.
For historical reasons, Finland has placed security at the heart of its political and social organization. The country shares a border with Russia — to which it lost 11% of its territory during the Second World War. Finland has compulsory military service, and citizens are advised to have enough food to survive self-sufficiently for 72 hours in the event of a crisis — Niinistö is proposing to extend this recommendation to the whole of the EU.
In keeping with the Finnish approach to crisis preparedness, the report stresses the importance of both military and civil preparedness — the recent floods in Spain are a reminder of the security risks associated with non-military issues.
Niinistö calls on the EU to devote 20% of its budget to security and crisis preparedness, in the broadest sense of the term.
DEFENCE • When it comes to defense, the situation is alarming.
While most European countries now exceed the minimum 2% of GDP allocated to defense — as required by NATO — investment by the 27 remains extremely fragmented.
80% of national defense investment is confined to the territory of each Member State. At the same time, the EU is increasingly dependent on third countries: compared with the period 2014-2018, European countries almost doubled their arms imports from abroad between 2019 and 2023 — and more than half of these imports come from the US.
This is nothing new. 15 years ago, EU Member States agreed on a non-binding 35% benchmark for joint defense equipment procurement. This target has not been met: such investment has hardly ever exceeded 20%.
In their respective reports on the internal market and competitiveness, Enrico Letta and Mario Draghi also sounded the alarm.
FUNDING • At the European Council in June, Ursula von der Leyen stated that €500 billion of investment would be needed at EU level over the next 10 years. To put this into perspective: Member States have spent a total of €240 billion on defense by 2022.
When it comes to EU-level funding, two options are on the table: (i) fresh contributions to the EU budget or (ii) new common borrowing, taking inspiration from Next Generation EU. Germany and the Netherlands are opposed to this second option, while France is in favor.
Niinistö makes no mention of a common defense debt — indeed, the report is rather quiet on the financial aspects. He does, however, call Member States not to wait for the EU's next long-term budget (the Multiannual Financial Framework), which will start in 2028. At present, only 1% of the 2021-2027 long-term budget is earmarked for defense.
The report welcomes the action taken by the European Investment Bank (EIB), which has changed its rules on financing dual-use (civil and military) equipment and infrastructure. Until now, the EIB could only finance such equipment and infrastructure on condition that civilian use prevailed over military applications.
NATO • Niinistö calls for a strengthening of the EU's ability to cooperate with NATO — 23 out of 27 Member States are members of NATO (Finland and Sweden joined the alliance in 2023 and 2024 respectively).
The former Finnish president insists that NATO remains the backbone of collective defense. He raises a sensitive point: on the one hand, the US criticizes the EU for its lack of investment in defense; on the other, Washington wants the center of gravity of European defense to remain transatlantic.
These concerns were raised by the former NATO Secretary General, the Norwegian Jens Stoltenberg, who warned of a risk of duplication of NATO efforts on the EU side. “What the EU should not do is start to build alternative defense structures”, he said in September.
EUROPEAN CIA? • One of Niinistö’s proposals concerns intelligence cooperation. An earlier version of the report, obtained by Bloomberg, called for the creation of a genuine European intelligence service. The final version of the report speaks only of cooperation — a more realistic proposal.
WHAT NEXT • Sauli Niinistö's report is less impactful than the reports of his counterparts Enrico Letta and Mario Draghi — the diagnosis it makes on defense issues is already known, and the proposals it puts forward are for the most part already being discussed.
For the first time, the EU will have a Commissioner for Defence and Space: Ursula von der Leyen has appointed Lithuanian Andrius Kubilius to this post — his appointment still has to be validated by the European Parliament, as do those of the other 25 commissioners-designates. Parliamentary hearings have started this week.
The Niinistö report is mentioned in the commissioner-designate's mission statement, in which von der Leyen also asks them to: draft a White Paper on the future of European defense by next spring; implement the first European Defense Industrial Strategy (EDIS) (presented back in March 2024) and, as part of this, adopt the European Defence Industry Programme (EDIP) (which has a proposed budget of €1.5 billion over the period 2025-2027); and create defense projects of common European interest, such as a European Air Shield.
In partnership with the Brussels Sustainability Club.
The Brussels Sustainability Club hosted Kamil Maj, advisor to the President of the European Parliament Roberta Metsola, on Wednesday, October 30. The conversation, moderated by Stefano Miriello from the Carbon Capture and Storage Association, focused on the political priorities of this new assembly, the hearings of the designated commissioners before the Parliament, and what to expect regarding environmental legislation for the upcoming term. What’s up EU was a media partner for the event.
In Case You Missed It
CHEMICALS • On 30 October, the European Chemicals Agency (ECHA) published the results of a pilot enforcement project focused on cosmetic products, which was carried out in thirteen EEA countries between November 2023 and April 2024.
Of the 4,478 analyzed cosmetic products, 285 (6,4%) contained hazardous substances. In its report, ECHA highlights the shortcomings of the REACH Regulation, which is the main EU law to protect humans and the environment from toxic chemicals.
The first Von der Leyen Commission promised to revise its rules in 2020 but postponed the reform four times before finally scrapping it altogether from its Work Programme for 2024. Commissioner-designate Stéphane Séjourné has pledged to relaunch the reform in 2025.
MERCOSUR • After nearly 25 years, the free trade negotiations between the EU and Mercosur (Argentina, Bolivia (since July 2024), Brazil, Paraguay, and Uruguay) finally appear to be drawing to a close.
On 23 October, the outgoing European Commissioner for Trade, Valdis Dombrovskis, held talks with Argentinian and Brazilian ministers at the margins of the G20 Summit in Brasília, paving the way for a potential agreement by the end of 2024. In September, eleven EU Member States had called for renewed efforts to finalize the trade deal.
The EU-Mercosur Trade Agreement would have to be approved by a qualified majority in the Council, after ratification by the European Parliament.
France has always opposed the deal, arguing that it would hurt European farmers. However, the country no longer seems able to sustain a blocking minority in the Council. The need to revive the EU’s sluggish economic growth and to diversify supply chains seems to have persuaded several Member States to change their position.
In response, France’s new trade minister, Sophie Primas, has warned fellow Member States not to ratify the agreement in its current form, stating that it would be a ‘political mistake’. France demands the introduction of mirror clauses on the environment to protect farmers against unfair competition.
Such clauses would be unacceptable to several Mercosur countries, however, including Brazil. A recent decision by the Commission to postpone the implementation of its Regulation on Deforestation-free Products has helped to ease tensions.
The FNSEA, the main French umbrella organization representing agricultural unions, has called for industrial action to resume from 15 November onwards. The FNSEA also stated that it is ready to protest in Brussels.
PHARMA • On 31 October, the Commission imposed a fine of €462,6 million on Teva Pharmaceuticals, the world’s largest producer of generic medicines, for abusing its dominant position. The company’s blockbuster medicine, Copaxone, is used to treat multiple sclerosis (MS). Teva held a patent on its active pharmaceutical ingredient, glatiramer acetate, until 2015
The Commission found that Teva abused its dominant position in two ways. First, the company artificially extended Copaxone’s patent protection by misusing the rules and procedures of the European Patent Office (EPO). Second, Teva implemented a ‘systematic disparagement campaign’ against a competing medicine with glatiramer acetate by ‘spreading misleading information about its safety, efficacy, and therapeutic equivalence with Copaxone’, despite the confirmation of all three of these aspects by the relevant health authorities.
The Commission concluded that Teva’s abuses were complementary and together amounted to a single and continuous infringement within the market concerned. This is not the first time that Teva has fallen afoul of the EU’s competition rules: in 2020 the Commission fined both Teva and another company for agreeing to keep a cheaper version of a narcolepsy medicine out of the market.
GERMANY • The miseries of the German ‘traffic light coalition’ (a combination of the social democratic SPD, the liberal FDP, and the Greens) show no sign of abating. The coalition partners continue to hemorrhage support among voters and are struggling to find common ground on almost any subject. Recent polling indicates that public support has fallen to a nadir of 30%.
Disagreements have crystallized around the federal budget for 2025, which must be passed before the end of the year. The crisis within the coalition reflects the state of Germany’s economy, which is in turmoil. Volkswagen, one of the largest employers in the country, recently announced that it might close three factories and scrap tens of thousands of jobs.
Tensions intensified in October: Chancellor Scholz invited neither Christian Lindner (Finance Minister and leader of the FDP) nor Robert Habeck (Economy Minister and leader of the Greens) to an important industrial policy summit. In response, Lindner and Habeck have organized their own meetings with industry representatives, setting out distinct visions on industrial policy.
It is looking increasingly unlikely that the coalition will serve until the end of its term in autumn 2025. The prospect of early elections should concentrate minds at the FDP, which is currently hovering around the 5% threshold required for a seat in the Bundestag and thus potentially faces political extinction.
At the European level, disunity in Berlin is hampering the emergence of a solid German position on key policy issues. While the Draghi report called for ambitious measures to boost EU competitiveness, EU countries are unlikely to adopt these if German decision-makers cannot agree among themselves. Earlier this year, the FDP temporarily blocked the adoption of the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) even though an interinstitutional agreement had already been reached, sparking fury in Brussels.
What We’ve Been Reading
Two good reads In Politico. Clea Caulcutt and Eddy Wax attempt to gauge if Stéphane Séjourné is up to the challenge of filling Thierry Breton’s shoes in the European Commission. Nicholas Vinocur warns that whoever wins the race to the White House, Europeans must grapple with America’s waning interest in Europe.
This edition was prepared by Augustin Bourleaud, Antoine Langrée, Antoine Ognibene, Léopold Ringuenet, Rogier Prins, Hana Rajabally and Maxence de La Rochère. See you next week!