EU Commission

Von der Leyen’s State of the Union Address – Many nice headlines and few propositions

In her third State of the Union (SOTEU) address, an annual tradition since 2010 as a direct consequence of the Treaty of Lisbon, Commission President Ursula von der Leyen took stock of the Commission’s working program and recalled the EU’s spirit of unity and solidarity in times of war. As expected, von der Leyen focussed largely on the EU’s handling of Russia’s war with Ukraine, the latter officially represented by its first Lady. She rightly pointed out that the EU as a whole has managed to take decisive action without falling into the trap of endless negotiations, unanimity blockades or technocratic discussions. Compared to the aftermath of the financial crisis or the deadlock in negotiations after the migration crisis in 2015/2016, the EU swiftly put into place several rounds of sanctions and provided unprecedented support (e.g. 348 million of humanitarian aid or taking in more than 5 million Ukrainian refugees).

Compared to her last SOTEU address in 2021, von der Leyen’s speech contained less new and less concrete proposals. Instead, it focused on the following key topics: the war between Russia and Ukraine and its repercussions on European households and the energy market, economic governance and recovery, the green transition and investment in new technologies, strategic autonomy in supply chains and raw materials, as well as  European democracy and enlargement.

Committing Ukraine to the EU While Avoiding Trouble at Home

After having connected the EU’s and Ukraine’s electricity market, the coming months will see further efforts by the EU to integrate Ukraine into the European Single Market. A first concrete step will be the opening of the European Roaming Area and the reduction of customs duties. Further economic cooperation is indeed in both interests, as Ukraine has already been enjoying a well-known and privileged partnership with the EU. In order to mitigate rising costs for households all over Europe, due to the cut-off of Russian energy supply, von der Leyen announced a cap on the revenue for electricity companies. This proposal is expected to generate around 140 billion euros for Member States and was strongly supported by the liberal group Renew Europe in the European Parliament. In order to ensure sufficient energy and raw material supply, the EU should take the leap and move further towards green technologies. Another important announcement in this area is the stark increase in the use of Hydrogen, which will be financed through a proper European hydrogen bank. While investing in future technologies such as hydrogen or chips production is certainly a great idea, these initiatives should not let the EU become too protectionist and self-centred. While radically diminishing independence towards Russia is indispensable for more strategic autonomy of the EU, the answer has to mainly include the diversification of supply chains and conclusion of more free trade agreements, such as the upcoming initiatives with Chile, Mexico or New Zealand.

More Flexible Fiscal Rules but at What Cost?

Another important policy area covered by von der Leyen, previously featured in the French program of its Council presidency in 2022 and since July taken up by the Czech Republic, concerned the future of economic governance in the EU. In the face of the Russian invasion in Ukraine, France had to overhaul its priorities and thus hold the Versailles summit in March 2022 on defence policy instead of sketching out a new economic model for the EU. The myriad of defence initiatives that came out in the last months might also be the reason why defence and foreign affairs policy initiatives were completely left out in the SOTEU. This summer, Germany’s liberal Finance Minister Christian Lindner already made clear that reforming the Stability and Growth pact should entail more flexibility with regard to fiscal rules, by holding Member States more accountable when it comes to their debt reduction. Von der Leyen seems to have taken up this vision, although details will only be revealed in October when the Commission will present its plans. It is noteworthy that she neither called for a fully-fledged reform of already existing instruments (such as the Stability and Growth Pact, the European Semester etc.) nor yet another investment plan, as funds from the Next Generation EU package have not even been fully used yet. It is very likely that the upcoming discussions will cause some discomfort, especially among the Southern Member States who tend to be rather in favour for deficit spending. This includes France, which has been lobbying to exempt all investments in green technologies of the national debt level.

More European Democracy Despite National Reluctance

Von der Leyen held her speech against a backdrop of general low interest in European politics at the national level. As the Head of the liberal political group in the European Parliament Stéphane Séjourné pointed out in an interview with l’Opinion, Europe has been playing a rather insignificant role in the national arena. This absence can especially be seen in the context of the current elections and campaigns in Italy, Sweden, Bulgaria and Lithuania. Rising living costs, failed integration policy and purchasing power are perceived as more urgent matters than further integration of the complex governance machine called EU.

This SOTEU address also needs to be seen in the context of the Conference on the Future of Europe (CofEU), an EU-wide and citizen-led process in which citizens were able to share and discuss their ideas for a common future with the EU institutions. Expectations, propelled by the proposals of the CofEU, are high with regard to more efficiency, capacity to act and actual impact of the multi-level European architecture. After the Commission announced that proposals of the CofEU would figure in the SOTEU, new proposals such as an EU mental health strategy came as no surprise in her speech. However, the Commission President still managed to played out an unexpected ‘coup’: She announced that the CofEU should be perpetuated as a citizen engagement exercise and that the EU should launch a European convention to serve as the prerequisite for treaty changes. Unfortunately, the Commission and the European Parliament cannot call the shots on this matter without taking into account the Council. It remains unclear whether treaty changes will really be part of further discussions as 13 Member States, including the Czech Republic who currently holds the Council Presidency, already expressed their unwillingness to engage in treaty changes. This attitude was corroborated by Finnish Prime Minister Sanna Marin, who held a speech the day before von der Leyen’s SOTEU, as a part of a series of events titled “This is Europe”. She was the sixth head of state debating European affairs in front of the Parliamentarians. The Finnish Prime Minister stressed that the CofEU was not relevant enough to trigger treaty changes, but conceded that institutional reforms should be undertaken within the current institutional framework.

So far, the CofEU proposals can be divided into four categories, including already running initiatives like the fit for 55 package, initiatives that still need some final tweaking like the Pact for Migration and Asylum, amendments for planned initiatives like the Free Media Act and brand new initiatives, mainly those aiming at expanding EU competencies. e.g. the creation of a health union. A follow-up event, to be held this autumn will update CofEU participants on what next steps to expect based on the proposals and measures in the final report.

Liberals on the Forefront of Treaty Change Demands

The lack of ambition at the national level has been challenged by Liberals and the European Parliament, who see treaty changes as a prerequisite for overcoming existing institutional deadlocks. Several of the currently discussed proposals were already part of the ‘Verhofstadt report’ from 2016, addressing the shortcomings of the current legislative and judicial framework of the EU which had to face several consecutive crises. In his report, the former leader of the liberals and main representative for the European Parliament within the CofEU, already gave some pointers for treaty changes: the EU should get rid of intergovernmental mechanisms outside of the treaties (such as the European Stability Mechanism), the unanimity rule that often turns into total obstruction, the practice of Europe à la carte (e.g. Schengen) with in and opt-outs, as well asthe insufficient use of flexible tools such as enhanced cooperation. These suggestions, together with the CofEU proposals, should nourish the future debate on how to reform the EU before enlargement negotiations continue.

Support for Macron’s European Political Community

Like German Chancelor Olaf Scholz in his speech in Prague at the end of August, Commission President Ursula von der Leyen echoed Emmanuel Macron’s suggestion to set up a European Political Community for Europe’s neighbours. Whereas Scholz underlined that this new cooperation mechanism should be complementary to the regular and more formalised enlargement procedure and should thus not bar the way for countries like the Western Balkans to join the EU once and for all, von der Leyen remained silent on the details. As for most of the SOTEU announcements, details will be revealed at a later stage, as the Commission will set out a paper in October together with an inaugural meeting  of the leaders of the EU, Ukraine, the U.K., Norway, Switzerland, Western Balkan countries and probably Turkey in Prague. It remains to be seen, what form such cooperation will take. It is clear, however, that the EU has its role to play towards its neighbours and partners worldwide to fight against disinformation and foreign interference, if it wants to uphold its values of democracy and free speech. Following the European Democracy Action Plan von der Leyen therefore announced a defence of democracy package to counter attacks from authoritarian regimes. Whether the EU takes its democratic model seriously will be put to the test in the upcoming days, as the Commission could freeze funds for Hungary within the newly established conditionality mechanism. Time has come to live up to its own standards first before teaching others how to protect their democracy.

Jeanette Süß is European Affairs Manager in the regional office of the “European Dialogue“ of the Friedrich Naumann Foundation for Freedom in Brussels, where she heads the France section.