What C
Ahead of the 2019 institutional reconfiguration of the EU is a fitting
What Comes After
moment to take stock of the European integration process and decide
omes After the Last Chance C
which priorities should define the strategic agenda of the next generation of
the Last Chance Commission?
incumbents.
Policy Priorities for 2019-2024
While acknowledging that the entire EU collective is concerned – member
states and institutions alike – this report is addressed to the one actor that
has a more direct role in fleshing out the policy agenda for Europe: the
European Commission.
This report assesses how the ‘last chance Commission’ of President Juncker
has fared; whether it has followed the ten guidelines it set out at the beginning
of its mandate; how far it was blown off course by critical events; and whether
ommission?
we might see the return of a ‘political’ Commission in the second half of this
year.
Against the backdrop of global trends and deepening divisions between
member states and within the European Parliament, the contributors to
this report distil key policy priorities in areas that will determine the future
European Union, from the single market and the rule of law to migration,
external security and climate change.
Thanks to its wide research coverage of EU policy and strong in-house
expertise, CEPS is uniquely placed to comment on these issues and
recommend action.
CENTRE FOR
EUROPEAN
CEPS
POLICY
STUDIES
Edited by Steven Blockmans
What Comes After
the Last Chance Commission?
Policy Priorities for 2019-2024
Edited by Steven Blockmans
Mehtap Akgüç
Jorge Núñez Ferrer
Cinzia Alcidi
Daniel Gros
Sara Baiocco
Weinian Hu
Miroslav Beblavý
Zachary Kilhoffer
Steven Blockmans
Karel Lannoo
Sergio Carrera
Jacques Pelkmans
Willem Pieter De Groen
Andrea Renda
Christian Egenhofer
Sophia Russack
Milan Elkerbout
Guillaume Van der Loo
Centre for European Policy Studies (CEPS)
Brussels
CEPS is an independent policy research institute in Brussels. Its mission is to
produce sound policy research leading to constructive solutions to the
challenges facing Europe. The views expressed in this book are entirely those of
the authors and should not be attributed to CEPS or any other institution with
which they are associated or to the European Union.
The authors would like to thank corporate and institutional members of CEPS
for their feedback on an earlier draft of this report. Special thanks go to the Board
of CEPS, in particular Joaquín Almunia (Chairman), Danuta Hübner, Fredrik
Reinfeldt and Onno Ruding, for their helpful comments and suggestions.
Cover illustration: Astronomical Clock, Prague, by Vladimir Wrangel (Shutterstock).
ISBN 978-94-6138-717-2
© Copyright 2019, CEPS
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system or transmitted in any form or by any means – electronic, mechanical,
photocopying, recording or otherwise – without the prior permission of the Centre for
European Policy Studies.
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Tel: +32 (0)2 229.39.11
E-mail: xxxx@xxxx.xx
Internet: www.ceps.eu
Contents
LAST CHANCE SALOON? ............................................................................................... 1
INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION ................................ 7
A NEW START FOR EU JHA POLICIES? ....................................................................... 20
NEIGHBOURHOOD, SECURITY AND DEFENCE POLICIES............................................. 33
THE EU’S TRADE AND INVESTMENT POLICY.............................................................. 44
ECONOMIC GOVERNANCE AND ECONOMIC POLICY ................................................. 54
FINANCE FOR SUSTAINABLE GROWTH ....................................................................... 63
THE SINGLE MARKET: WORKHORSE FOR EU PROSPERITY ........................................ 71
DIGITAL ECONOMY, INDUSTRY AND INNOVATION................................................... 82
LABOUR MARKET AND SOCIAL POLICY ...................................................................... 96
REDEFINING THE ENERGY UNION............................................................................. 104
2030 AGENDA: TIME TO WALK THE TALK ................................................................ 114
KEY POLICY PRIORITIES 2019-2024 ........................................................................... 123
ABOUT THE CONTRIBUTORS ...................................................................................... 129
LIST OF BOXES AND FIGURES
Box 1. 10 Commission priorities for 2015-19 ............................................................ 2
Figure 1. Size of the financial sector as share of GDP (end-2017) ....................... 64
Figure 2. EU financial institutional framework ..................................................... 69
LAST CHANCE SALOON?
When the current European Commission began its mandate on 1 November
2014 under President Jean-Claude Juncker, it did so in highly inauspicious
political circumstances. The EU was still suffering one of the most severe
financial and economic c rises since World War II; unemployment had hit
unprecedentedly high levels; intergovernmental emergency measures burdened
the Union’s democratic quality; and the trust in European institutions of a
politics-fatigued electorate had hit an all-time low.
President-elect Juncker published ‘political guidelines’ to mark ‘a new
start for Europ
e’.1 This ‘agenda for jobs, growth, fairness and democratic change’
served to limit legislative action to ten policy fields (see Box 1) and restructure
the internal set-up of the College to enable the so-called ‘last-chance
Commission’ to turn the corner.2 The revised structure was supposed to channel
the Commission’s attention towards ‘big-ticket’ items – easing off on regulation
of eco-friendly light bulbs and water-saving shower heads.
But political circumstances deteriorated and blew the Commission off
course. There was an unexpectedly high influx of people seeking refuge on the
European continent; severe instability in Europe’s direct neighbourhood;
terrorist attacks on home soil; and a rise of populist forces across Europe. The
‘poly-crisis’ revealed deep divisions and incompatible preferences for problem-
solving strategies among member states, which undermined the unity of the EU
and triggered a far-reaching debate on the future direction of the bloc.
1 J.-C. Juncker, “A New Start for Europe: My Agenda for Jobs, Growth, Fairness and
Democratic Change. Political Guidelines for the next European Commission”, Brussels, 15
July 2014, available at https://ec.europa.eu/commission/publications/president-junckers-
political-guidelines_en.
2 J.C. Juncker, “Time for Action”, Statement in the European Parliament plenary session ahead
of the vote on the College, Strasbourg, 22 October 2014. Juncker later adapted this negative
reference. See, “L’heure n’est pas à la division: Discours du Président Jean-Claude Juncker à
l’occasion de l’ouverture solennelle de l’année académique 2016-2017 du Collège d’Europe à
Bruges”, 8 November 2016: “Dans un moment autobiographiquement faible j’ai dit que ma
Commission, si vous me permettez d’employer ce pronom possessif d’une façon un peu
excessive, était la Commission de la dernière chance. En fait, c’est la Commission de la
polycrise, parce que des crises il y en a partout.”
| 1
2 | LAST CHANCE SALOON?
Box 1. 10 Commission priorities for 2015-19
1. Jobs, growth and investment: Stimulating investment and creating jobs
2. Digital single market: Bringing down barriers to unlock online
opportunities
3. Energy union and climate: Making energy more secure, affordable and
sustainable
4. Internal market: A deeper and fairer internal market
5. A deeper and fairer economic and monetary union: Combining stability
with fairness and democratic accountability
6. A balanced and progressive trade policy to harness globalisation: Open
trade – without sacrificing Europe’s standards
7. Justice and fundamental rights: Enhancing cooperation between different
EU justice systems and preserving the rule of law
8. Migration: Towards a European agenda on migration
9. A stronger global actor: Strengthening the global role of Europe
10. Democratic change: Making the EU more transparent and democratically
accountable
Source: European Commission, 15 July 2014.
The big picture
To determine what is strategically important, it helps to take the longer view.
After all, the evolution of the EU and the actions of subsequent Commissions
take place against a rapidly changing global geopolitical and socio-economic
background. The inter-institutional ‘European Strategy and Policy Analysis
System’ project has identified five global trends that would impact on the future
of Europe: a richer and older human race; a more vulnerable process of
globalisation, with an uncertain leadership; a transformative industrial and
technological revolution; a growing nexus of climate change, energy and
competition for resources; and changing power, interdependence and fragile
multilateralism (ESPAS, 2015).
Security concerns led the European Council to invite the High
Representative to draw up ‘A Global Strategy for the EU’s Foreign and Security
Policy’ (EUGS). Starting from the observation that “we live in times of existential
crisis, within and beyond the European Union”, the EUGS defined a defensive
strategy to “promote peace and guarantee the security of its citizens and
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 3
territory” in a more complex, connected and contested world.3 Member states
continue to pay lip service. However, the real question is how this can be
achieved at a time when the economic weight of the EU continues to decline and
its ‘soft power’ is diminished by Brexit and rendered irrelevant by the
dominance of geopolitical issues.
On the socio-economic front, the above-mentioned mega-trends led to the
projection that the world tends towards a more multi-polar system, driven by
rapid economic growth of emerging and developing economies (notably China),
with the centre of gravity shifting away from the established developed
economies of the US and the EU.4 Even if, at present, the global system is under
attack by an erratic US President, the longer term survival of the open and
multilateral global trading system will depend on different views of the relative
roles of the government and markets in what are expected to be the two largest
economies by 2035 (India and China). On this front there has been little
convergence.
As for intra-EU dynamics, our research shows that, over the last two
decades, inequalities have risen in some member states while falling in others,
and that there has been considerable east-west convergence in the EU, but not
north-south within the eurozone.5 However, problems in the future might not
be along these known fault lines, but between countries able to benefit from new
technologies because of strong domestic governance (most importantly high-
quality education) and those where knowledge accumulation and generation is
weak.
Underlying the ‘middling’ growth performance of the European economy
is the fact that the ongoing technological revolution is happening elsewhere.
European industry has been able to use new technologies to enhance
productivity, but the leaders in most technology fields, including artificial
intelligence and cyber security are found elsewhere.
3 “Shared Vision, Common Action: A Stronger Europe. A Global Strategy for the European
Union’s Foreign and Security Policy”, presented to the European Council on 28 June 2016, at 7.
4 These trends have accentuated since. See Gros, 2018: “A further implication of this shrinking
relative weight of the European economy is that for most member states the internal market
might become less important than the global market, thus strengthening centrifugal forces
(‘no Brexit without China’).”
5 Ibid.
4 | LAST CHANCE SALOON?
Reflection period
Following the seismic shock of the June 2016 Brexit referendum to the EU
system, the European Council introduced an emergency plan: the Bratislava
process, giving policy priority to the fields of migration, security and economy.
Shortly after the celebrations to mark 60 years since the signing of the Treaty of
Rome, the European Commission made its own contribution to this debate with
the March 2017 “White Paper on the Future of Europe: Reflections and scenarios
for the EU27 by 2025”, outlining five possible governance modes:6
1. to maintain the status quo;
2. to reduce European cooperation to the single market;
3. to integrate in a differentiated manner;
4. to intensify European action in fewer policy fields; and
5. to integrate more across all policy fields.
Despite criticism that the Commission did not draw any definitive
conclusions but merely outlined the respective consequences, risks and
opportunities of all the scenarios it presented, the White Paper went beyond
short-term policy priority settings and was in fact a strategic move: the
Commission refrained from presenting a blueprint (as it did in the Five
President’s report, for instance), but instead chose to ignite a public debate and
put the onus of decision onto the member states.
The Commission followed through with the production of a series of so-
called reflection papers, addressing five different topics, each under the
leadership of two Vice-Presidents and/or Commissioners: the social dimension
of
Europe
(Dombrovskis/Thyssen);
harnessing
globalisation
(Timmermans/Katainen); deepening of Economic and Monetary Union
(Dombrovskis/Moscovici);
the
future
of
European
defence
(Katainen/Mogherini); and the future of EU finances (Oettinger/Creţu). These
papers each presented the status quo and challenges ahead for the respective
policy fields. In a way, the chosen topics served as an update of the political
priorities that were set three years earlier. After initially pursuing “a reasonable
and balanced free trade agreement with the US”, the Commission had no choice
but to recalibrate its focus on ‘harnessing globalisation’ and to take the internal
as well as the external dimension into account. Whereas EMU continued to be
high on the Commission’s agenda as a political priority, the social pillar and
defence cooperation constituted emerging policy fields. Cooperation in the
social sphere still meets with some resistance, whilst defence integration has
evolved in the last two years in a way that only few expected at the beginning
6 COM(2017)2025 of 1 March 2017.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 5
of the Commission’s mandate (Solana, 2015). Lastly, the focus on the EU’s
finances was a natural one, given the budgetary situation after Brexit and the
pending negotiations over the next Multiannual Financial Framework.
Marking the end of the Commission’s own reflection period, President
Juncker in his 2017 State of the Union speech added a sixth scenario to the list,
one built on the respect and promotion of freedom, equality and the rule of law,
the “three fundamentals, three unshakeable principles” which “must remain the
foundations on which we build a more united, stronger and more democratic
Union”.7
The election of French President Emmanuel Macron and the continuation
of the grand coalition under German Chancellor Merkel gave the EU some
breathing space from the onslaught of nativist parties. But hopes among euro-
enthusiasts of a new momentum to reconstruct the Union waned as the Franco-
German engine sputtered and the right-wing populist wave spread and
translated into the power of government in Austria and Italy. But even if the
latter has deepened divisions between member states that either want to see a
more intergovernmental or those that seek a more supranational EU, it has not
led to the breakup of the Union.
The leaders of the EU27 share a belief in the value added of cooperation
within the Union. They remain united in their handling of the Brexit-file and in
their determination to debate the future of Europe at the informal European
Council summit in Sibiu on 9th May 2019. The outcomes of this debate will then
feed into the European Parliament elections of 23-26 May and culminate in the
June European Council, which is expected to decide on the next European
Commission President and his or her strategic agenda for the next legislature.
This report
Ahead of the 2019 institutional reconfiguration of the EU, it is a suitable moment
for CEPS to take stock of the evolution of the European integration process and
determine which priorities ought to define the policy agenda of the next
generation of EU incumbents. Whilst acknowledging that the entire EU
collective is concerned – member states and institutions alike – this report is
addressed to the one actor that has a more direct role in fleshing out the strategic
agenda for Europe: the European Commission. The report will assess how the
‘political Commission’ has fared and whether we might see the return of it in the
second half of this year. After that, the deliverables of the Juncker Commission
and the challenges and opportunities of the next Commission will be discussed
in what CEPS considers to be the ten most important policy areas for the near
7 http://europa.eu/rapid/press-release_SPEECH-17-3165_en.htm.
6 | LAST CHANCE SALOON?
future. As a sign of the times, security will be dealt with first. In closing, key
policy priorities will be listed for the next European Commission.
References
Blockmans, S. and G. Faleg (2015), “More Union in European Defence”, Report
of the CEPS Task Force on European Security and Defence Chaired by
Javier Solana.
ESPAS (2015), “Global Trends to 2030: Can the EU meet the challenges
ahead?”, 26 March.
Gros, D. (2018), “Global Trends to 2035: Economy and Society”, EPRS Study, PE
627.126, November.
INSTITUTIONAL REBALANCING:
THE ‘POLITICAL’ COMMISSION
What is ‘political’?
By labelling his Commission as ‘political’ President Juncker has created much
confusion, inside and outside the institution. Absent a prevailing definition of
what constitutes a ‘political’ entity, some features can be determined, such as
that it is ruled by political bargaining and value-based reasoning; aims to
influence the substance of policy outcomes (Winzen, 2011, 39); targets
responsiveness or social justice (Gormley, 1986, 619); is based on open political
debate (Radaelli, 1999a, 37); has the tendency to focus on ends rather than
means; and is subject to the public (Bozeman and Pandey, 2003, 5).
One of the most widely used definitions is the ideal-type approach by
Claudio Radaelli, who defined ‘Politics’ in terms of reasoning from values,
whereas ‘technocracy’ describes behaviour based upon expertise (Radaelli,
1999a). ‘Technical’ decision-making is said not to be influenced by personal
interest or political consideration (Schudson, 2006, 492); to lie outside the
scrutiny of voters and influence of pressure groups (Borrás, Koutalakis and
Wendler, 2007, 586); to exclude the consensus of the citizens (Radaelli, 1999a,
42); to rationalise the policy process along predictable lines (Radaelli, 1999a, 47)
and to be concerned with efficiency and productivity, in a rigid process guided
by rules.
The concepts of the ‘political’ and a ‘democracy’ are by no means the same.
However, they are heavily intertwined and mutually dependent on each other.
In fact, there is broad academic agreement that the concept of expertise contrasts
with the concept of democracy (Borrás, Koutalakis and Wendler, 2007; Fischer,
1990; Radaelli, 1999a). The underlying logic of the concept of democracy is
legitimate consensus and participation, whilst technocracy is based on the
notion of expertise as the basis of power and authority (Radaelli, 1999b, 758).
Hence, both concepts have legitimising powers, but follow different logics.
“While democracy is based on legitimate consensus, free elections and
participation, technocracy recognises expertise as the sole basis of authority and
power.” (Radaelli, 1999b, 758). Therefore, technocratic decision-making is “a
| 7
8 | INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION
deep-seated challenge to democracy and its political form of decision-making”
(Fischer, 1990, 23–24) as decision-makers are non-elected actors, who cannot be
held accountable by the public.
The Commission:
Evolution from a technocratic to a political institution?
The Commission constitutes in many regards an administrative and executive
body
sui generis, due to its hybrid nature as a “politicised bureaucracy”
(Christiansen, 1997, 77). The Commission is and always has been a hybrid
creature, as it is functionally divided into political and administrative levels and
was designed as a body with both an administrative and a political mission. Its
mission is contradictory in a sense, seeing that its main activity and core
responsibility, i.e. proposing and drafting EU legislation, is a highly political
task (Christiansen, 1997, 76) and that, at the same time, it represents a “rigid,
rule-bound and hierarchical environment” (Wille, 2012, 386) – as the guardian
of the treaties.
Despite its dual nature, the European Commission was initially created
according to a technocratic ideal. Under its first President, Jean Monnet, the
Commission (then the High Authority of the
European Coal and Steel Community) was
Due to its hybrid nature
designed and ruled by a technocratic elite,
as a “politicised
following the so-called ‘Monnet method’. For a long
bureaucracy”, the
time, European policies were shaped within the
Commission is
circles of (internal and external) experts, highly
functionally divided
skilled and dedicated people operating inside a
into political and
small, non-hierarchical structure (Radaelli, 1999b,
administrative levels.
759). Next to expertise, qualities such as reliability,
efficiency and coherence were aspects on which the
EU’s decision-making was based, as opposed to democratic participation
(Tsakatika, 2005, 198). In Monnet’s conception, a political Commission was seen
as flawed because prone to actors who could undermine the legitimacy of the
organisation by being “short-sighted and self-seeking” (Wille, 2012, 386).
Therefore, the “EU founding fathers sought to insulate the Commission from
politics” (Wille, 2010, 1112). The Commission was designed as an independent
body, composed of people representing all the various political majorities in the
member states. It was intentionally kept outside the daily electoral fray, which
offered the opportunity to formulate long-term ideas in defending the common
good. It was intended to be an institution which was not politicised in the
traditional sense of the term and therefore could be trusted to enforce the respect
of the law.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 9
This tradition prevailed for a long time and was not perceived as a
problem. There was no need for more transparency in those days as the
European Community delivered satisfying policy results, which led to a
disinterested agreement and ‘permissive consensus’ among the general
European public about what was happening at the EU level (Carrubba, 2001,
141). The Union was perceived as quite successful for efficiently carrying out
projects such as the creation and completion of the single market and the
establishment of the single currency, and thereby established output legitimacy
(Scharpf, 2002). This “problem-solving” form of legitimacy (Tsakatika, 2005, 203)
for a long time compensated the inherent lack of input legitimacy (Wille, 2010,
p. 1112).
The Danish ‘no’ to the ratification of the Treaty of Maastricht marked a
watershed moment in European integration history. For the first time, citizens’
scepticism and distrust was directed against an “unaccountable technocratic
elite in the Commission” (Wille, 2012, 387), giving rise to the notion of a
democratic deficit. There were a number of reasons, but two in particular. First,
since Maastricht integration went well beyond single market integration and the
EU was no longer predominantly involved in market regulation, but also in
foreign affairs, justice, immigration and other policy fields, the demand for more
democratic modes of accountability became more strident (Wille, 2010, 1112).
Second, the collapse of the Santer Commission in 1999 damaged the standing of
the institution and forced it into a “self-conscious period of soul-searching about
what its future role in the institutional balance should be” (Cram, 2002, 310).
The post-Maastricht era is characterised by increasingly louder demands
for elected politicians in charge, instead of technocrats and more legitimacy
through input (Wille, 2010, 4). European citizens have become increasingly
opposed to rules shaped by technocrats and demanded democratically
legitimate decision-making processes and an accountable Commission (Wille,
2012, 387).
The EU responded in two ways. Firstly, the legislative competences of the
European Parliament (EP), as a basis for democratic legitimacy, were gradually
strengthened, resulting in significant influence over the policymaking process
as the Parliament developed from a consultative assembly into a genuine co-
legislature with the Council (Neuhold, 2002, 1–2). As such the EU’s institutional
balance was henceforth determined by a triangular relationship.
Secondly, the ties between the Commission and the EP were tightened to
ensure stronger democratic control over the executive and to provide it with
legitimacy: when entering office, the Parliament approves the College of
Commissioners (Article 17(7) TEU); during the term the EP has the capacity to
hold the Commission to account by parliamentary questions (oral, written and
‘question time’) (Article 230 TFEU); furthermore, Commissioners are obliged to
10 | INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION
report regularly to the EP and appear before committees. Ultimately, the
Parliament even has the power to issue a no confidence vote against the
Commission and thereby force it to step down collectively (Article 17 TEU and
Article 234 TFEU).
Consequently, the EP triggered a politicisation trend of the Commission
by becoming its stronger counterpart and a “far more vociferous and demanding
interlocutor” (Wille, 2012, 387). Hence, a process of politicisation was triggered
in the post-Maastricht era, which made the Commission successively more
‘political’ by tying it closer to the EP with a view to giving it greater democratic
legitimacy. The politicisation of the Commission can hence be seen as evolution
triggered long before ‘team Juncker’ took office.
That raises the question, what is new under President Juncker? And what
did he mean when he labelled his Commission as “highly political”?
Juncker’s ‘political’ Commission
Juncker sought to distance himself from his immediate predecessor José Manuel
Barroso, who was generally perceived as a technocrat who did not move far
from business as usual (Peterson, 2017, 1), and as being very deferential to
national leaders and therefore politically weak
Juncker’s proposition
(Dinan, 2016, 103). Despite closer bonds to the
that ‘his’ Commission
European Parliament, the output-focused Monnet
was a “highly political”
conception of legitimacy was still very much
one can be seen as an
present and the Commission stood accused of
attempt to counter
prioritising efficiency over democracy (Tsakatika,
the negative perceptions
2005, 214). As a non-elected institution, it remained
of a distant and
perceived as being largely obscure and non-
unaccountable
transparent, though at the same time playing a
institution.
crucial role in the policymaking of the Union.
Juncker’s proposition that ‘his’ Commission was a “highly political” one
(Juncker, 2014, 16) can be seen as an attempt to counter the negative perceptions
of a distant and unaccountable institution. By opposing the technocratic concept
of policymaking, Juncker aimed to give the Commission more democratic
legitimacy. It can be seen as yet another answer to the post-Maastricht
perception of both the technocratic character of the Commission and
equalisation of the notions of ‘political’ and ‘democratic’. The ‘political’
Commission continues to borrow legitimacy from the European Parliament.
Apart from this legitimacy aspect, there are two crucial organisational
elements that feed into the Commission’s own narrative about it being more
political: first, the prioritisation of policies and second the application of a top-
down approach. These elements are implemented and realised through the
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 11
Commissions’ new way of working that focused on ten priority policy fields in
a restructured College.
Policy prioritisation
A political Commission
does not act in a
The Commission understands ‘political’ as
political vacuum: it is
exercising political responsibility. This means
sensitive to political
refraining
from
blindly
accepting
and
developments and
implementing the instructions of other
coordinates its actions
institutions, but instead embedding all actions in
accordingly. The much-
the bigger political context. A political
quoted slogan of ‘being
Commission does not act in a political vacuum: it
big on big things, small
is sensitive to political developments and
on small things’
coordinates its actions accordingly. The much-
captures this mind-set.
quoted slogan of ‘being big on big things, small
on small things’ captures this mind-set. By deciding on what is ‘big’ and what is
‘small’, the Commission defines ‘political’ as the prioritisation of policy fields in
which action is most needed.
To anchor this mind-set, Juncker set out ten political guidelines, a political
agenda that aims to limit all Commission actions to predefined policy fields. By
concentrating on the most pressing issues, the Commission highlighted its own
agenda-setting role and a new-found resolve to be less hyper-active.
Top-down approach
A second element of the Commission’s own understanding of ‘political’ is a top-
down approach. The rationale behind this is to give decision-making authority
to politicians, not officials. Important decisions, as well as impetus for the
Commission’s legal proposals, shall come from democratically elected office
holders.
Juncker substantially revised the structure
A second element of the
of the College of Commissioners in a more team-
Commission’s own
orientated way, grouping related portfolios and
understanding of
upgrading the hitherto honorary role of the Vice-
‘political’ is a
Presidents, entitling them to coordinate and steer
top-down approach.
the work of Commissioners in so-called project
Juncker substantially
teams. The project teams operate as pre-
revised the structure
coordination
bodies,
where
several
in a more team-
Commissioners come together to discuss dossiers
orientated way.
from different policy angles.
The project team approach and the ‘gatekeeper’ role of the Vice-Presidents
were supposed to streamline all European Commission actions; to foster
12 | INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION
teamwork among Commissioners and their cabinets. In this way, the
Commission attempts to give political impetus to its actions and considers the
political appropriateness of any particular action. The new way of working
facilitates involvement at the political level from the very early stages of the
policymaking process, in contrast to the traditionally strong agenda-setting role
of the Directorates-General (Hartlapp, Metz and Rauh, 2013). The Commission
defines the administrative level as subordinate to the political. Hence, a
‘political’ Commission under Juncker stands for policy prioritisation as well as
for a top-down rather than bottom-up approach, entailing greater political
control over administrative actions (Russack, 2017).
Institutional rebalancing
Not only the Commission’s inner organisation should be in focus in this context;
its relationship with the other institutions is also crucial. Particularly interesting
are its relations with the EP and the European Council.
Relations with the European Parliament
As the principal executive body of the EU, the Commission is politically
dependent on and accountable to the EP. Building on a long evolution of closer
ties to the European Parliament, the lead candidate procedure that was followed
to designate Jean-Claude Juncker as President moved the Commission ever
closer to the EP. The Treaty provides that the EP not only approves the whole
College after extensive hearings of each individual Commissioner; it also elects
the President of the Commission (Article 17(7) TEU). Derived from that treaty
provision, the so-called ‘Spitzenkandidaten’ procedure (whereby the EP’s
political groups nominate lead candidates for the Commission presidency)
introduced an electoral logic similar to what is customary in many European
democracies, in which elections lead to a parliament and the majority in the
parliament determines the nature of the executive. Throughout this process, the
EP lends the Commission President democratic legitimacy, in addition to the
indirect line running through the appointment procedure of the European
Council.
At the beginning of his mandate, Juncker spoke about the “special
partnership” with the EP and expressed his intention to fill this with “new life”
(Juncker, 2014, 12). Also in his annual State of the Union (perceived by MEPs as
being generally more enthusiastic than Barroso’s speeches), Juncker was
“gushing his praise for the Parliament and especially for its President” (Dinan,
2016, 103). The Spitzenkandidaten process is said to make the Commission more
compliant with the European Parliament and more sensitive to its interests
(Dinan, 2016, 111), especially under the previous EP President. It does not lead
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 13
automatically to a political Commission, but it is a crucial element of it and
generated closer institutional bonds.
Relations with the European Council
The ‘political’ notion also has an effect on relations between the Commission and
the European Council. In recent years, one can observe the rise of the European
Council. In formal legal terms, the European Council was ‘institutionalised’ by
the Treaty of Lisbon and endowed with a full-time President who is not allowed
to hold any other office. Despite being located outside the formal legislative
decision-making triangle, the European Council gained political stature in the
past decade as heads of state or government tried to manage the multiple crises
confronting the Union (starting with the sovereign debt crisis; a flare-up of
armed conflicts in the outer periphery; the migration crisis; Brexit and the
perennial future of Europe debate).
As a corollary, the Commission – the EU’s traditional agenda-setter and
initiator – has generally been perceived to have lost power. This has led to a
school of thought: new intergovernmentalism, which finds that the EU has
generally followed a much more intergovernmental than supranational logic
towards deeper integration and advocates that the rise of the European Council
is an answer to the paradox that member states are willing to deepen EU
interaction, so as to expand policy scope, but not to transfer sovereignty to
supranational institutions (Bickerton, Hodson and Puetter, 2015).
Arguably, the Commission is threatened in its key responsibility of
agenda-setting, where the European Council now appears as a competitor. Yet,
one needs to make a make distinction between formal and informal agenda-
setting. Formal agenda-setting, through the ordinary legislative procedure,
prescribes a clear division of labour between the Commission as initiator, and
the EP and Council as co-legislators. The European Council provides the Union
with “impetus”, “general political directions” and “priorities”, but is legally
excluded from performing any legislative functions (Article 15(1) TEU). That
clearly distinguishes its role from that of the Commission, which retains the
formal monopoly over initiating law (Bocquillon and Dobbels, 2014, 20).
Informally, however, the European Council frames the issues that will be
legislated on. This is exemplified in the European Council conclusions, which
contain quite precise mandates and instructions for policy actions for the other
institutions. As such, the European Council delineates – or even curbs – the
Commission’s discretionary powers, reducing its right of initiative into an
executive, i.e. technical power. It has led some scholars to describe the
Commission as some kind of secretariat of the European Council; a neutral agent
with specialised knowledge and expertise (Bocquillon and Dobbels, 2014, 25); an
14 | INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION
‘administrative executive’ as opposed to the European Council as a ‘political
executive’ (Dinan, 2017).
As the European Council emerged as another powerful player on the
crowded institutional scene of the EU, the Commission found itself locked into
some kind of “competitive cooperation” (Bocquillon and Dobbels, 2014). Two
reactions of the current Commission are noticeable. First, Juncker appeared
skilful in influencing the debate
within the European Council, of which he is a
member (Article 15(2) TEU). He seems better equipped than his predecessor, as
Barroso is said to have gauged “what the political traffic will bear” whereas
Juncker aimed to be “more connected to the political process”. In that, Juncker’s
experience “far outstripped that of Barroso” (Peterson, 2016, 16). The fact that
both the European Council’s strategic agenda8 and the Juncker Commission’s
political guidelines (both authored in 2014) focus on very similar policy
priorities, feeds into that argument.
Second, Juncker used the notion of the ‘political’ Commission to be bolder
and more forward leaning. Vis-à-vis the European Council, the
political Commission appears as a stronger (informal) co-agenda setter, compared to a
more technocratic Commission. In Juncker’s own words: “The European
Council proposes the President of the Commission. That does not mean he is its
secretariat. The Commission is not a technical committee made up of civil
servants who implement the instructions of another institution” (Juncker, 2014,
16). Hence, while strategically preparing the ground of his initiatives behind
closed doors within the European Council, Juncker at the same time sought to
give the Commission the image of a strong and independent institutional player.
In many respects, the Juncker Commission has been perceived as being
more ambitious than its predecessor (Peterson, 2017, 15), as shown, for instance,
in the case of the proposed quotas on migrant relocation, the idea of the need to
create a joint EU army or the proposal to introduce
QMV in the area of taxation. Juncker was also
In many respects, the
ambitious in proposing the creation of a common
Juncker Commission
‘European Minister for Economy and Finance’, in
has been perceived as
charge of promoting and supporting structural
being more ambitious
reforms in member states, and coordinating all EU
than its predecessor.
financial instruments that can be deployed if a
member state is in a recession or hit by a crisis.
However, all these proposals were met with hostility from part of the European
Parliament, as well as from many national politicians, in the latter case because
they were concerned by the tendency to replace democratic processes with
8 https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/143477.pdf
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 15
technocratic structures such as the Troika (during the Greek crisis) and fiscal
boards.
Inter-institutional collaboration is crucial. A ‘political’ Commission
should therefore also be measured by how successfully it guides proposals
through the whole decision-making procedure and negotiates with the other
law-making institutions.
Better law-making
According to monitoring work done by the European Parliament,9 by 1
December 2018, the Commission had submitted almost all of its announced
proposals (94%, i.e. 519 of 551 proposals), but only about 50% had been adopted.
The other half is either ‘proceeding normally’ (36%), ‘close to adoption’ (5%); or
‘proceeding slowly or blocked’ (9%). Even if most of those yet to be adopted files
are categorised as ‘proceeding normally’, it seems unlikely that a majority of
those 200 proposals can be adopted by April 2019, when the EP plenary meets
for the last time in its current composition.
Unfortunately, there is no means of direct
By 1 December 2018,
comparison to previous Commissions, as this is
the Commission had
the first time the EP has run such a systematic
submitted almost all of
screening of the Commission’s achievements.
its announced proposals
Nevertheless, it indicates a considerable gap
(94%), but only about
between what the Juncker Commission wanted to
50% had been adopted.
do and what it was able to agree on with the co-
legislators. As the sole holder of the right of initiative, a ‘political’ Commission
cannot be too bold and progressive in its proposals – it must anticipate what will
fly with the other institutions and be able to organise majorities. That raises the
(so far unanswered) question: to what extent does the preparation of
realistic proposals fall under its
political responsibility (a crucial element of a ‘political’
Commission, as the institution itself understands it)?
Comparing 2014 ambitions with results and realities in 2019, one could
say that the Commission outputs were according to its White Paper’s
(COM(2017)2025) relatively unambitious scenario No. 4 (“doing less more
efficiently”), developed by First Vice-President Frans Timmermans under the
‘Better Regulation’ agenda.
The attempt by the European Commission to strengthen evidence-based
policymaking throughout the ordinary legislative procedure, outlined in the
proposed Interinstitutional Agreement on Better Law-making presented in May
2015, was coldly received by the other EU institutions, and the final version of
9 http://www.europarl.europa.eu/legislative-train
16 | INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION
the Interinstitutional Agreement (dated May 2016) did not lead to major
innovations in the coordination of policymaking among the three major
institutions.10
In his 2017 State of the Union address, Juncker announced the creation of
a Subsidiarity and Proportionality Task Force with the mandate of taking a
critical look at all policy areas to make sure that the institutions are only acting
where the EU adds value. However, the Task Force remained bereft of
participation by the European Parliament, which did not appoint any of its
Members to contribute to the process, as was originally foreseen. Published in
the midst of summer of 2018, the final report of the Task Force did not identify
any area in which competences ought to be re-attributed
in toto to the national
level, but it did open the door to possible re-modulations of the mix of
competences between the EU and the national, regional, and local levels, and a
greater involvement of the latter in the overall policy design, implementation
and evaluation phases of EU policy.
Recent events have marked a growing discontent towards attempts to
achieve stronger coordination in migration policy, with the Visegrád group
firmly blocking reform of the Dublin IV Regulation, a group of southern
European countries taking paradoxically similar stances; and even Italy
(illegally and unsuccessfully) threatening to withdraw or reduce its contribution
to the EU budget if other member states did not agree to receive what Rome
considered to be a fair quota of migrants.
This ongoing turf war did not only lead to a stalemate. It also led to new
trends in EU policymaking. Some of these actions bring regulatory and policy
competences ‘up’ the multi-level governance structure of the Union (i.e. towards
EU institutions); others aim at pushing them ‘down’ (i.e. towards member states
and national authorities); and most of them go ‘sideways’ in all kinds of
directions, through the adoption of new forms of collaborative policymaking,
de-ossified processes, and more stringent forms of regulation (Renda, 2019).
Will the next Commission be ‘political’?
The concept of a ‘political’ Commission is not new but a gradual development
since the post-Maastricht era. The Juncker Commission, however, went one step
further in trying to shape a more distinct agenda of its own and in having a
stronger focus on political leadership internally. Certainly, one can argue that
the Commission has always had its own agenda. Indeed, Juncker did not
10 Interinstitutional Agreement between the European Parliament, the Council of the
European Union and the European Commission on Better Law-Making, OJ L 123, 12.5.2016,
p. 1–14.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 17
reinvent the wheel. He did, however, put strong emphasis on the institutional
independence of the Commission and he added substance to the ‘political’
mind-set through the implementation of internal organisational principles.
Throughout President Juncker’s mandate, the concept of the ‘political’
Commission has also received critical feedback. Observers levelled the
accusation that being ‘political’ leads to disorder through a lack of application
of the rules. Also, there are claims that the Commission moved too close to party
politics. Indeed, the strong institutional bonds between the European Parliament
and the European Commission entail a certain ‘politicisation’ of the process,
which means that the appointment of the Commission President does become a
partisan matter (note the conceptual difference from being ‘political’). Making
this position an instrument of party politics might be dangerous, as it might
erode the independence of the role as guardian of the treaties in which the
Commission is supposed to serve the general interest. Favourable treatment of
individual member states has in the past fuelled this argument, for instance
regarding the assessment of national budgets under the Stability and Growth
Pact, which was treated less mechanically and more flexibly by this ‘political’
Commission.
Whether one wishes the next Commission to continue to go down the path
of being ‘political’ depends on one’s understanding of the concept of European
democracy. There are two diametrically opposed visions of EU democracy that
are inevitably linked to the concept of a ‘political’
Commission. First, a federal idea that leads to a
Whether one wishes the
politicised establishment of parliamentary
next Commission
government. Here, the European Parliament has
to continue to go down
a democratic mandate from citizens to decide on
the path of being
a politicised European government. Second, an
‘political’ depends on
intergovernmental vision, where national
one’s understanding
governments retain the power to decide on the
of the concept of
top post for the largely technocratic executive
European democracy.
(Hobolt, 2014, 1533). The inter-institutional
dynamics of the European Union and the power struggle between the
Commission and the European Council fuels the tension between these two
different visions of democracy for the EU. The Spitzenkandidaten system
epitomises this tension.
We find proponents of both visions of EU democracy. Yet, as a matter of
fact, these are times of growing importance of intergovernmental decision-
making and the (European) Council as a central decision-maker. Arguably, this
is not fertile ground for the concept of a ‘political’ Commission and the federal
vision of EU democracy that it carries.
18 | INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION
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A NEW START FOR EU JHA POLICIES?
The Juncker Commission has been the ‘Commission of crisis’. The set of political
guidelines outlined for the European Parliament in July 2014 have been subject
to various (inter)national events framed as ‘crises’ that have sent political waves
over the legitimacy and fundamentals of European integration on Justice and
Home Affairs (JHA) policies. These have included the ‘European Refugee
Humanitarian crisis’ emerging in 2015, the derogation of the internal border-free
Schengen area by a few member states, terrorist acts across several European
cities and the rise of the radical right and ‘Euroscepticism’ in some EU
governments, with some backsliding in their rule of law systems.
This chapter asks whether the Commission has delivered the ‘new start’
promised by Juncker for EU JHA policies. It does so in light of the performance
of the Commission’s intra-institutional setting and the most relevant policy and
legislative developments on JHA or the Area of Freedom, Security and Justice
(AFSJ).11
The Commission’s new structure: one hat too many?
For the first time this Commission included a First Vice-President responsible
for Better Regulation, Inter-Institutional Relations, Rule of Law and the EU
Charter of Fundamental Rights, Frans Timmermans. He was entrusted with two
main roles: first, as a ‘watchdog’ upholding the EU Charter of Fundamental
Rights and the rule of law principles envisaged in the Treaties and monitoring
Better Regulation guidelines, across all the Commission’s activities; and second,
coordinating the work of the three JHA-related Commissioners: the
Commissioner for Justice, Consumers and Gender Equality (Věra Jourová),
Directorate General for Justice and Consumers (DG JUST); the Commissioner
for Migration, Home Affairs and Citizenship Dimitris Avramopoulos,
Directorate General Migration and Home Affairs (DG Home); and the
Commissioner for the Security Union, Julian King, also at DG Home.
11 This chapter is based on the detailed examination provided in S. Carrera (2018),
An Appraisal
of the Commission of Crisis: Has the Juncker Commission Delivered a New Start for JHA Policies?,
Brussels: CEPS.
20 |
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 21
The structuring of this Commission’s work on JHA into two DGs dealing
with separately issues of ‘Justice’ and ‘Home Affairs’ has continued to prove a
welcome division of responsibilities in comparison to its predecessor. However,
the exact division of responsibilities and portfolios among all relevant
Commissioners has not been always clear or remained consistent.
Since the emergence of the ‘European refugee humanitarian crisis’ in 2015,
the highest political instances inside the Commission took over most of the
themes under the responsibility of each of the Commissioners for ‘Home Affairs
and Migration’. This has meant the implementation of a ‘top-down approach’ in
decision-shaping and making. The Commission President’s cabinet, and chiefly,
First Vice-President Timmermans and the Vice-President of the Commission
and High Representative of the Union for Foreign Affairs and Security Policy
(HRVP), Federica Mogherini (European External Action Service, EEAS) have
been in the driving seat in the Commission’s responses to the various ‘crises’.
In practice this has meant that there has been not one, but many ‘Home
Affairs’ Commissioners. The blurring of intra-institutional responsibilities and
Commissioners/Vice-Presidents portfolios has generally played in favour of a
home affairs and security approach prevailing among all relevant
Commissioners and Vice-Presidents in areas such as migration, asylum and
judicial cooperation in criminal matters. This has not always allowed for the
prioritisation and development of other equally crucial policy approaches in
sectors such as foreign affairs, development cooperation, humanitarian aid,
trade, justice, employment and social affairs.
The ‘Commission of crisis’ has put too much focus on border controls and
prevention of entry, returns and readmission in cooperation with third countries
on migration, countering migrant smuggling, building third country capacity
for interception at sea and safeguarding internal security in its overall policy
agenda. This has not always allowed the First Vice-President to fulfil his
watchdog mandate rigorously in the setting and implementation of Commission
policy priorities in view of their compatibility with and impact on the rule of law
and fundamental rights, nor in respect of their added value, proportionality and
necessity in view of EU Better Regulation guidelines.
Legal and policy developments: promises made, promises kept?
There are three main ‘policymaking logics’ at stake that summarise and describe
the overall performance of the European Commission from mid-2014 to the end
of 2018 in relation to the AFSJ: Europeanisation; intergovernmentalism,
nationalism and rule of law backsliding; and informalisation and
exceptionalism.
22 | A NEW START FOR EU JHA POLICIES?
Europeanisation
‘Crises’ have served as catalysts for the adoption of previously controversial and
already existing, as well as some new, EU policy, legislative and institutional
ideas by the Juncker Commission. They have provided the ground for the re-
design or creation of new Community bodies and EU agencies responsible for
coordinating and supporting EU
There are three main ‘policymaking
member states and with increasing
logics’ at stake that summarise and
operational tasks in JHA-related
describe the overall performance of
fields.
the European Commission from mid-
The proposed and adopted
2014 to the end of 2018 in relation to
reform of the Frontex Agency into a
the AFSJ: Europeanisation;
European Border and Coast Guard
intergovernmentalism, nationalism
(EBCG), or the creation – through
and rule of law backsliding; and
enhanced cooperation – of a European
informalisation and exceptionalism.
Public Prosecutor’s Office (EPPO), a
new mandate and a counter-terrorism
centre at Europol, and an expanded role for the eu-LISA agency, constitute some
cases in point. A key outstanding issue for these community bodies and agencies
is that of accountability and judicial control, and effective access to justice and
independent complaint mechanisms when their activities impact on the
fundamental rights of individuals.
The Commission has also actively contributed to the initiation and setting
up of new EU harmonised legal standards. A key and most visible achievement
of this Commission was the formal adoption and entry into force of the new EU
data protection framework including the General Data Protection Regulation
(GDPR), which is now a world-wide benchmark on privacy protection (see the
chapter “Digital Economy, Industry and Innovation”).
In other areas, the Commission has presented some security or law
enforcement-related initiatives in the fight against crime and terrorism whose
EU value added, necessity, proportionality and fundamental rights compliance
– according to the EU Better Regulation Guidelines – have not been sufficiently
proven and independently assessed. These have included policy initiatives such
as the ‘interoperability’ of EU databases, and the related new role attributed to
the European Agency for the Operational Management of large-scale IT Systems
in the Area of Freedom, Security and Justice (eu-LISA), as well as the
presentation of European Production and Preservation Orders (EPO) and a
proposal aimed at preventing the dissemination of terrorist content online.
The area of asylum has been negatively affected by a home affairs and
‘securitarian’ rationale. Some Commission proposals have aimed at reframing
some already existing EU asylum instruments falling under the Common
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 23
European Asylum System (CEAS) as migration and border management
instruments. This has been the case for example with the idea to oblige all
member states to use ‘safe third country’ notions that would require them to
expel legitimate asylum seekers to countries outside the EU where actual safety
is not always guaranteed.
This security rationale has also materialised in an increasing focus on
conditionality in exchange of resettlement, or the increasing penalisation of
asylum seekers who move to a second member state different from the one of
first irregular entry (so-called ‘secondary movements’), irrespective of the
possibility of having legitimate reasons to do so such as degrading or inhuman
reception conditions.
Informalisation
The refugee humanitarian crisis in EU countries such as Greece and Italy showed
the limits and inherent flaws characterising the current distribution model
envisaged in the 1990 EU Dublin system for assessing asylum applications, and
on-the-ground weaknesses in reception conditions and judicial/administrative
asylum structural capacities.
As an ‘immediate policy response’
An emergency temporary
in 2015, based on the European Agenda on
relocation mechanism has been
Migration, the Commission proposed an
the object of legal challenges
emergency
temporary
relocation
and subject to serious
mechanism establishing a distribution key
implementation obstacles.
model for relocating some asylum-seekers
(only those belonging to one of the eligible nationalities, mainly Syrians and
Iraqis) from Italy and Greece to other EU member states, which has been the
object of legal challenges before the Luxembourg Court and subject to serious
implementation obstacles by some member states.
This came alongside a ‘hotspot’ approach to assist authorities in Italy and
Greece with the support of EU agencies like Frontex, the European Asylum
Support Office (EASO), the EU Police Cooperation Agency (Europol) and the
EU Judicial Cooperation Agency (Eurojust) in the registration of asylum seekers,
the identification and fingerprinting of potential beneficiaries for the temporary
relocation scheme and countering migrant smuggling. The ‘hotspot model’ has
been subject to criticism because the hotspots were developed and implemented
entirely outside any EU legal framework, including EASO’s involvement in
admissibility of asylum applications in Greece. They have raised concerns about
their compatibility with fundamental rights challenges, specifically in relation to
the forced fingerprinting of individuals, quasi-detention practices and
degrading reception conditions, expedited admissibility interviews and their
focus on ‘security’ instead of access to international protection.
24 | A NEW START FOR EU JHA POLICIES?
Another example of informalisation was the so-called ‘EU-Turkey
Statement’ adopted in March 2016. Despite being politically portrayed as an
‘EU-product’, the Luxembourg Court confirmed that the Statement’s authorship
belonged to the Heads of Government and State of EU member states, not to any
EU actor whatsoever. When negotiating the deal with Turkish Government, EU
member states made the strategic choice to avoid the EU Treaties and European
law all together in an area of shared and exclusive EU competence. This meant
that they side-lined the EU democratic rule of law guarantees envisaged in the
Treaties, i.e. the role of the European Commission, democratic scrutiny by the
European Parliament and judicial control by the Luxembourg Court, as well as
domestic checks and balances. Here in addition, the fundamental rights impacts
and violations during the implementation of the EU-Turkey Statement have been
amply documented, yet any legal responsibilities for these remain to be determined.
The Commission has also made ‘strategic use’ of EU policy instruments
not constituting formal legal acts or international agreements envisaged in the
EU Treaties, and falling outside the EU budget (‘emergency funding’). This is
the case of ‘readmission arrangements’,
The Commission has also made
which do not correspond with EU
‘strategic use’ of EU policy
Readmission Agreements, and aim at
instruments not constituting
cooperating with African governments
formal legal acts or international
(e.g. Niger, Nigeria, Senegal, Mali and
agreements envisaged in the
Ethiopia) and some in the Middle East
EU Treaties, and falling outside
(Afghanistan) in the readmission of
the EU budget.
irregular third country nationals and
their
own
nationals.
Their
implementation has been tied to the use of extra-budget and emergency-led EU
funding instruments, chiefly the so-called ‘EU Trust Funds’ (EUTF).
The use of EUTF has also been involved in the implementation of EU anti-
human smuggling policies in Libya, including some activities of the
EUNAVFOR-MED Operation (Operation Sophia). Despite its lack of success in
dismantling the ‘business model’ of smugglers in the central Mediterranean,
Operation Sophia’s mandate has been extended on several occasions, to pursue
activities such as those included in the scope of an EUTF project with Italy aimed
at “strengthening the operational capacities of Libyan coast guards”. The risk
here is in indirectly financing trainings and ‘capacity building’ resulting in
asylum seekers being increasingly prevented from leaving Libya and violating
the
non-refoulement principle in a country that remains in conflict.
Intergovernmentalism and nationalism
The politics of crisis have also come with very high costs for the Juncker
Commission. In the name of the refugee crisis and its exceptionality, several
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 25
member state governments and Ministries of Interior have started to act outside,
or in direct contravention to, EU Treaty and existing legal frameworks and their
commitments in the scope of key Union policies. They have also attempted to
regain lost territory and ‘reverse Europeanisation’ in some of these JHA
domains.
This has been the case of the Schengen Area. Since 2016, and giving the
refugee crisis as justification, Austria, Germany, Denmark, Sweden and Norway
introduced internal border controls and
have since then unlawfully prolonged
In the name of the refugee crisis
them beyond the foreseen deadline.
and its exceptionality, several
Nationalism has also prevailed in
member state governments and
relation to EU asylum policy and the
Ministries of Interior have
Commission’s proposed reform of the
started to act outside, or in direct
EU Dublin Regulation, which is
contravention to their
currently stalled inside the Council.
commitments. This has been the
This has meant that other asylum-
case of the Schengen Area.
related proposals such as the
transformation of the European Asylum Support Office (EASO) into an EU
Asylum Agency are equally stalled. However, not enough attention has been
paid to more rigorous enforcement of the implementation of already existing
CEAS standards by all these same member states.
The area of legal immigration has also showed persistent nationalistic
dynamics preventing further Europeanisation. Despite Juncker’s priority to
promote a new European policy on legal migration and revise the EU Blue Card
scheme for attracting highly qualified third country workers, the Commission
proposal to achieve that goal is currently frozen as it has met resistance from
some EU member states inside the Council regarding the abolition of parallel
national schemes for highly skilled foreign workers.
A few member states, such Malta, Cyprus, Bulgaria and Austria, have also
continued to unilaterally implementing investor citizenship and golden visa
programmes which offer facilitated pathways for acquiring their nationality or
legal entry/residency in their country to super rich foreign investors. Investor
citizenship schemes sell actually European citizenship and free movement rights
inside the Schengen area.
Moreover, some golden visa regimes unlawfully sell permanent residency
in the EU. A key challenge inherent to these schemes is that they sell citizenship,
permanent residence and free movement in a manner which does not always
comply with legal certainty (chiefly the effective residency requirement) as well
as transparency and public accountability principles. They also raise profound
risks of clientelism, money-laundering and tax evasion.
26 | A NEW START FOR EU JHA POLICIES?
This Commission has also faced a situation where some EU governments
have actively engaged in the dismantling of domestic rule of law checks and
balances and constitutional (separation of powers) guarantees. For the first time,
the Commission has made use of the EU
For the first time, the
Rule of Law Framework and the Article 7
Commission has made use of
TEU procedure against Poland. However,
the EU Rule of Law Framework
use of both tools has revealed fundamental
and the Article 7 TEU procedure
procedural barriers: they are highly
against Poland.
politicised and dependent on member state
governments, they do not ensure equal
treatment among all EU member states, with little potential for effectively
preventing a risk or a threat to the rule of law from becoming systematic and
thereby undermining the basis for mutual trust in the EU’s AFSJ.
Priorities for the next Commission
The appointment of a new First Vice-President for rule of law, fundamental
rights and better regulation was a welcome intra-institutional innovation in the
Juncker Commission. The office has served to ‘show case’ rule of law challenges
arising in several member states. However, a ‘Commission of crisis’, has
translated into a blurring of roles and portfolios with too much emphasis on
‘migration’ and ‘justice’ through
a security, home affairs or policing approach.
The next Commission intra-institutional structure should therefore give
priority to the following: the role of Vice-President should not be that of ‘First
Vice-President’, as it has exposed this role and made it vulnerable to high-level
politics, making it very difficult to maintain the course of action originally
envisaged in the mandate. Conversely, having three different Commissioners
responsible for ‘Justice’, ‘Home Affairs, Migration and Citizenship’ and
‘Security Union’ under the supervision of a Vice-President on Rule of Law, EU
Charter of Fundamental Rights and Better Regulation has been a welcome
development and should be maintained in the next Commission.
However, the portfolios of each of the three Commissioners could be fine-
tuned and clarified as follows: first, one Commissioner for Justice, Fundamental
Rights and Citizenship, who would be responsible for criminal justice
cooperation, European Citizenship and fundamental rights portfolios (Chapter
4 TFEU, Arts. 82-86; Part II TFEU, Arts. 18-25); second, another Commissioner
on Schengen, Migration and Asylum (Chapter 2 TFEU, Arts. 77-89); and third, a
Commissioner for Security, who would be responsible for the fight against
terrorism and criminality, in particular ‘police cooperation’, i.e. prevention,
detection and investigation of crimes (Chapter 5 TFEU, Arts. 87- 89). This
division of responsibilities would avoid a mixing of Schengen, migration and
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 27
asylum with crime and terrorism policies. Each of these Commissioners would
ideally have their own DG; otherwise, at a minimum, the current division
between DG JUST and DG HOME should be continued.
In terms of specific thematic areas, the next Commission should focus on
the following priorities:
Rule of Law
A first priority should be the setting up of a new EU Periodic Review or
Mechanism on Democracy, Rule of Law and Fundamental Rights (DRF)
covering all EU member states. The EU
Periodic Review would be based on a
A first priority should be the
regular and independent examination of
setting up of a new EU Periodic
all relevant existing international and
Review or Mechanism on
European sources of evidence on
Democracy, Rule of Law and
compliance with EU Treaty values
Fundamental Rights covering
(Carrera and Bard, 2018). This should go
all EU member states.
hand-in-hand with establishing a new
‘EU Rule of Law Commission or Group’ composed of high-level experts and
experienced practitioners that would have the competence to impartially assess
the qualitative findings by thematic area, substantiating the existence of a
systemic risk, threats or ‘generalised deficiency’ of the rule of law, and their
wider implications for EU-specific policies and financial instruments in the
Union legal system (Bárd et al., 2016).
The DRF would be part of a wider ‘EU Rule of Law Toolbox’ bringing the
new mechanism together with all currently existing legal, policy and funding
instruments monitoring and assessing member states’ compliance with Art. 2
TEU principles and the EU Charter of Fundamental Rights. The proposed
Regulation on the protection of the Union’s budget in case of generalised
deficiencies as regards the rule of law in the member states should be adopted,
so as to ensure effective rule of law conditionality in EU funding. Special care
should be paid here to ensure independent quality assessment of generalised
rule of law deficiency – linked to EU Rule of Law Commission or Group, and
direct EU funding to civil society organisations.
The next Commission should additionally implement ‘rule of law
infringement procedures’, presenting both an accelerated/fast track and
freezing component, which would bundle cases against a member state
presenting similar root rule of law causes. The evidence emerging from the DRF
mechanism would be central in substantiating the existence of ‘systematic’ rule
of law causes, which could be also directly brought by the DRF Commission or
Group before the Luxembourg Court, so as not to leave all the discretion in
European Commission’s hands.
28 | A NEW START FOR EU JHA POLICIES?
A Migration and Asylum Union
A second priority should be adopting and implementing a ‘Migration and
Asylum Union’ based on more intra-EU institutional solidarity and supervision
(Carrera and Lannoo, 2018). All EU member states should fully comply with
their current legal obligations under the Schengen regime and immediately
suspend unlawful internal border controls.
The envisaged proposal for a new mandate of EASO and its
transformation into a fully operational EU Asylum Agency should also become
a key priority. The new Agency should be entrusted with coordinating and
applying a new model for distributing responsibility for processing asylum
applications and supervising member states
A second priority should be
in carrying out that responsibility. The
adopting and implementing
allocation model would follow the
a ‘Migration and Asylum
distribution key proposed by the European
Union’ based on more intra-
Parliament, in close cooperation with the
EU institutional solidarity
UNHCR and civil society organisations and
and supervision.
under a clear EU legal framework. This
should go hand-in-hand with a more robust
legal and judicial accountability framework ensuring effective remedies for
asylum applicants having received negative asylum decisions by the new
EASO+ Agency.
The new proposal for revising the Frontex (European Border and Coast
Guard) mandate presents further potential for institutional solidarity and the
development of a ‘professional culture of border and coast guards’ across the
EU. However, it also comes with important gaps and risks. The EBCG should
develop its Search and Rescue (SAR) operational functions and ensure a
Mediterranean-wide SAR operation (Carrera, Blockmans, Cassarino, Gros and
Guild, 2017).
This would mean that each person disembarking from a Frontex EBCG
SAR operation would be taken directly into the scope of application and
mandate of the new EU Asylum Agency and a new distribution key model. The
new Frontex should also go hand-in-hand with establishing an independent
complaints mechanism and an EU border monitor so as to further strengthen
fundamental rights protection in all its activities and responsibilities. The
monitor, which could be part of the European Ombudsman’s office, would be
responsible for evaluating and handling cases of alleged mistreatment and
fundamental rights violation in the context of border control and surveillance
operations.
The EU asylum
acquis already provides a robust transnational legal
framework of Union standards implying clear obligations for all participating
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 29
EU member states. The next Commission should invest renewed efforts – which
should go hand-to-hand with increase EU financial support – in enforcing timely
and correct implementation of these common standards by all EU member states
and relevant national authorities. Asylum should be disentangled from security
predicaments and migration management agendas.
Moreover, the next Commission should make sure to complement the new
mandate of the EU Asylum Agency with a new systematic monitoring or
evaluation mechanism in the area of asylum in light of Article 70 TFEU.
Particular attention should be given to developing common EU legal standards
on mutual recognition of positive asylum decisions taken by another member
state and “establishing a single asylum decision process so as to guarantee equal
treatment of asylum seekers throughout the EU”.
The next Commission should give priority to developing
a fair EU agenda
facilitating legal channels for migration, and implementing the UN Global Compact
on Migration. Such an agenda should be firmly rooted in existing international,
regional and EU human rights and labour standards and the principles laid
down in EU Treaties. The adoption of an EU immigration code – incorporating
all existing sectorial EU directives, and providing a uniform level of rights to
third-country workers – would be a welcome step forward.
The Commission should set up a permanent scrutiny mechanism,
composed of independent experts, of EU member states investor citizenship,
discretionary naturalisation based on national interest and golden visa
programmes. A key focus of such a mechanism would be to ensure legal
certainty, transparency and legal and financial transparency and accountability
of existing and future regimes. Infringement proceedings should be launched
against those unlawfully selling EU citizenship
and long-term residency status. It should
The EU should construct
additionally revise the current EU visa waiver
and progressively develop
regime to include a common EU approach on
a principled and trust-
humanitarian visas that would not be
based policy approach to
dependent on third-country cooperation on
countering terrorism.
readmission. Furthermore, the current EU legal
framework on migrant smuggling should be fully ‘Lisbonised’ and amended so
as to ensure full compliance with international human rights standards and de-
criminalise the provision of humanitarian assistance to asylum seekers and
irregular immigrants by civil society, volunteers and citizens.
A principled and trust-based Security Union
Third, the EU should construct and progressively develop a
principled and trust-
based policy approach to countering terrorism. This policy approach should start
with an evaluation (fitness check) and regular reappraisal of the effectiveness,
30 | A NEW START FOR EU JHA POLICIES?
efficiency and fundamental rights compliance of current and near future EU
policies and their priorities, particularly those related to information exchange.
The fundamental rights impact of the ‘interoperability’ proposals –
including privacy, non-discrimination and effective remedies and the feasibility
in ensuring data quality – should be independently re-examined and thoroughly
addressed (Carrera, Guild and Mitsilegas, 2017). The European Production and
Preservation Order (EPO) proposals should be substantially revised and
improved so as to: first, duly ensure that electronic data will always meet the
standards of ‘evidence’ in criminal justice procedures; and second, ensure
independent judicial scrutiny and effective remedies both in the issuing and
executing EU member states.
The EU should set up an EU-wide requests and complaints mechanism,
independent from the eu-LISA agency, allowing for data subjects to request
access, correct and delete data, as well as lodge complaints against data misuses
in the scope of current and future EU databases. Specific attention should be
given to strengthening the provision of information to data subjects and
guaranteeing effective access to these complaints by affected EU citizens as well
as third-country nationals and asylum seekers.
A European agenda on criminal justice and fundamental rights
Fourth, the next Commission should develop a European Agenda on Justice and
give priority to effective implementation and evaluation of mutual recognition
in criminal matters instruments, under Art. 70
The next Commission should
TFEU, such as the European Arrest Warrant.
develop a European Agenda
It could focus on ensuring the effective
on Justice and give priority to
domestic transposition and use of the
effective implementation and
European Investigation Order (EIO) across all
evaluation of mutual
relevant member states. It is recommended to
recognition in criminal
let this EU mutual recognition tool grow first
matters instruments.
before the EPO is adopted. This priority
should go hand-in-hand with greater financial investment and resources for
ensuring domestic transposition and use of EIOs in light of the needs of national
judges, prosecutors and defence lawyers.
This should also be accompanied by a more robust EU framework on
suspects’ rights in criminal proceedings, starting by filling up current gaps (e.g.
pre-trial detentions or witness protections) and then carrying out a ‘Fitness
Check’ on the entire EU
acquis on suspects’ rights in EU criminal justice
cooperation. Any expansion of EPPO competences should be coupled with
effective and supranational judicial scrutiny by the CJEU. The next Commission
should make every effort to ensure that the EPPO moves from ‘enhanced
cooperation’ to a fully EU body with all relevant EU member states participating
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 31
in its mandate and activities. Special attention should be also given to bring the
EPPO under full judicial control by the Luxembourg Court and developing EU-
wide standards for whistle-blower protection with a direct complaint
mechanism before the EPPO.
The EU’s contribution to cross-border operational cooperation in the area
of cross-border crime fighting hints at some positive transformative effects.
Experiences like those of the Joint Investigation Teams (JITs) of judicial
authorities under the joint coordination of EU agencies Europol and Eurojust,
call for careful examination and scrutiny, as they have the potential to play a key
role in developing mutual trust and cooperation among law enforcement
authorities of EU member states. JITs should facilitate criminal justice
investigations rather than focusing on ‘intelligence’ gathering.
A full implementation of the EU Charter of Fundamental Rights and the
Union’s accession to the European Convention of Human Rights (ECHR) –
following the call envisaged in Art.6.2 TEU – should be at the very top of the
new Commission’s priorities. EU fundamental rights standards should be
preserved, promoted and rigorously monitored in the adoption and
implementation of every legal and policy instrument developing cooperation
with third countries. Frameworks of cooperation on data transfers with non-EU
countries should provide an equivalent level of protection and be fully
compliant with Luxembourg Court benchmarks, otherwise they should be
suspended.
EU AFSJ cooperation: legitimation, credibility and trust
The next European Commission should focus on making rigorous use of the
legal acts and templates of European cooperation envisaged in the Lisbon
Treaty. The increasing recourse to extra-Treaty
and extra-budget instruments during the
The new upcoming
Juncker Commission has not well served its role
period of inter-
as ‘guardian of the Treaties’. It has also posed
institutional renewal
profound challenges to good administration,
should shift out of ‘crisis
democratic accountability and judicial control of
mode’ and return the
the policy developments in areas of huge
‘normal’ course of action
in European integration
importance for the Union’s legitimation. EU
to the basis of the
policy responses need to move from a home
mandate and ordinary
affairs-centric focus towards a ‘multi-sector
procedures provided in
policy approach’ to guarantee a balanced setting
the EU Treaties.
of priorities across all relevant policy sectors.
The new upcoming period of inter-institutional renewal should shift out
of ‘crisis mode’ and return the ‘normal’ course of action in European integration
to the basis of the mandate and ordinary procedures provided in the EU Treaties.
32 | A NEW START FOR EU JHA POLICIES?
The next Commission should dedicate all its efforts to implementing its role as
guardian of the Treaties effectively and designing a
principled and trust-based
justice, freedom and security agenda in its forthcoming policy guidebook. It is by
unequivocally placing EU founding principles first – rule of law, fundamental
rights and democracy – and systematically enforcing and delivering them in
daily practice, that the legitimation, credibility and social trust in European
integration may be guaranteed and maintained in the current and longer-term.
Key priorities for the next Commission
Set up a new EU Periodic Review on Democracy, Rule of Law,
Fundamental Rights covering all member states, complemented by a new
‘EU Rule of Law Commission’
Adopt and implement a ‘Migration Union’ based on more intra-EU
solidarity and supervision, including fully fledged operational EU Asylum
Agency, European Border and Coast Guard
Construct and develop a principled and trust-based policy approach to
counter terrorism
References
Bárd, P. et al. (2016), “An EU Mechanism on Democracy, the Rule of Law and
Fundamental Rights”, CEPS Paper in Liberty and Security in Europe No.
91, April.
Carrera, S. (2019), “An Appraisal of the European Commission of Crisis: Has the
Juncker Commission Delivered a New Start for JHA Policies?”, Brussels:
CEPS Paperback.
Carrera, S. and K. Lannoo (2018), “We’re in this Boat Together: Time for a
Migration Union”, CEPS Policy Insights No. 2018/09, 22 June.
Carrera, S., E. Guild and V. Mitsilegas (2017), “Reflections on the Terrorist
Attacks in Barcelona: Constructing a principled and trust-based EU
approach to countering terrorism”, CEPS Policy Insights No. 2017/32, 29
August.
Carrera, S., S. Blockmans, J.-P. Cassarino, D. Gros and E. Guild (2017), “The
European Border and Coast Guard: Addressing migration and asylum
challenges in the Mediterranean?”, Report of the CEPS Task Force chaired
by Enrico Letta, 1 February.
NEIGHBOURHOOD,
SECURITY AND DEFENCE POLICIES
The blurred lines between internal and external policies
If “all politics is local”,12 then EU foreign policy too should start at home. But
given the hybrid nature of the EU and its small stature in an increasingly
mercurial world, its foreign policy has mainly been defined by external events.
In recent years these include the multifaceted wars in the Middle East and North
Africa (MENA), Russia’s war in Ukraine, the rise of China and the retreat of the
United States from multilateralism, to name but a few.
Unlike the US, the EU is directly exposed to a poor and unstable outer
periphery. Internal and external security are communicating vessels. How the
EU deals with its own neighbourhood defines not just the Union, but also the
perception that Europe’s international partners have of its role on the global
stage.
Yet the Union’s timid response to the dramatic events of the so-called Arab
Spring of 2011, the war in Syria, the implosion of Libya and the influx of refugees
that these crises propelled into Jordan, Lebanon, Turkey, across the
Mediterranean into the Balkans and ultimately the EU have not just illustrated
the limits of the European Neighbourhood Policy (ENP), they have also exposed
the disjointed nature of EU external action writ large. This is particularly the case
in the area of security, but also trade, aid, and representation in international
(financial) institutions, among others.
The general public has shown profound concern over the handling of the
refugee and migrant crisis by EU institutions and member state governments
alike. A spate of terrorist attacks in France, Belgium, Germany, the UK and Spain
between 2015 and 2017 has heightened fears among citizens. Some of these
attacks were carried out by so-called foreign fighters, i.e. nationals of EU
member states who travelled to Syria and Iraq to get battle-hardened at the
service of terror groups like ISIS. Anti-immigrant parties and movements have
12 T. O’Neill & G. Hymel (1994), All Politics Is Local: And Other Rules of the Game. Holbrook,
Ma: Bob Adams Inc.
| 33
34 | NEIGHBOURHOOD, SECURITY AND DEFENCE POLICIES
capitalised on citizens’ fears to make a connection between uncontrolled
immigration and terror attacks in order to advance their nationalist and anti-EU
agenda.
If Eurosceptic and pro-EU parties agree on one thing, it is that the way to
address citizens’ concerns is primarily by developing an agenda that restores a
keener sense of internal and external security:
l’Europe qui protège. This not only
requires a proper management of the EU’s
If Eurosceptic and pro-EU
external borders to allow for the internal
parties agree on one thing,
border-free area to function properly and
it is that the way to address
improved cooperation between services in
citizens’ concerns is primarily
fighting terrorism (see the chapter “A New
by developing an agenda that
Start for EU JHA Policies?”), but also a
restores a keener sense of
genuine defence integration.
internal and external security:
It is against this background that the
“l’Europe qui protège”.
Juncker Commission set as one of its ten
policy priorities the goal that the EU should
become ‘A Stronger Global Actor’. The subsequent work programme stressed,
inter alia, the need to join up all instruments available to the Union and the
Commission’s intention to contribute to the process of strategic reflection that
the European Council had called for.
The inside looking out: policy coherence and strategic revision
Cognisant of the double bind in which EU foreign policymaking usually finds
itself, i.e. between the absence of unity among member states and the lack of
coherence in inter-institutional action, the Commission put emphasis on
strengthening the EU’s early warning mechanisms and crisis response tools.
Arguably, these are areas at the outer edges of its competencies, but Juncker
instructed High Representative Federica Mogherini to use her second hat as
Vice-President of the Commission to the fullest to bridge the divides between
the treaties (TEU for CFSP, TFEU for all other policy areas), instruments, budgets
and across
la rue de la Loi.
Discontinued under President Barroso, Juncker asked Mogherini to
reactivate the Commissioners’ Group on External Action (CGEA). This decision
represented one of the most important institutional initiatives in EU foreign
policymaking since the merger of the position of the High Representative for
CFSP (HR) with that of Vice-President of the Commission (VP) and the creation
of the European External Action Service (EEAS). The CGEA has both injected
much-needed political pragmatism into the way the Commission contributes to
EU external action and has greatly facilitated inter-service cooperation within
the Commission and with the EEAS. In the absence of a clearly stated vision of
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 35
her own role as HRVP, an analysis of Mogherini’s joint statements, joint
initiatives and visits with fellow Commissioners provides evidence that the
contours of her position’s political space have been determined by a pragmatic
approach aimed at strengthening the cohesiveness of this multi-hatted role
(Blockmans & Russack, 2015).
The same approach to more coherence in EU foreign policymaking was
reflected in the Commission’s Work Programme for 2016, which – borrowing
from the High Representative’s assessment of the EU’s strategic environment –
stated:
“In an increasingly connected, contested and complex world marked
by dynamic changes, the coherence of the EU’s external action and our
ability to use all available instruments in a joined up manner to achieve
our objectives and complement our internal policies are ever more
important”.13
The overall tone of the 2016 EU Global Strategy (EUGS) is equally
defensive in nature and puts the Union’s own security and that of its citizens
front and centre. Building on notions developed in the 2015 review of the ENP,
the Global Strategy prioritises ‘principled
pragmatism’ in an ‘integrated approach’ to
The overall tone of the
external action: i.e. a slightly more realist
2016 EU Global Strategy
approach to collective foreign policy than that of
is defensive in nature and
a ‘normative power’; a Union that no longer
puts the Union’s own
wants to overstretch itself by transforming the
security and that of its
neighbourhood according to its own image but
citizens front and centre.
insists on the ‘resilience’ of governments and
societies of neighbouring states, i.e. their ability to absorb endogenous or
exogenous shocks and bounce back to the status quo ante. In this sense, not only
acute problems arising from conflicts, terrorism and radicalisation are labelled
as the root causes of insecurity and threats, but also poverty, corruption and
poor governance, which demand a long-term approach.
Yet, as far as the Juncker Commission’s approach to the EU’s neighbours
in the Western Balkans is concerned, the President shot himself in the foot by
downgrading the enlargement portfolio to a region that has often been said to
have produced more history than it can consume.
13 Commission Work Programme 2016, “No time for business as usual”, COM(2015) 610 final,
27 October 2015.
36 | NEIGHBOURHOOD, SECURITY AND DEFENCE POLICIES
EU enlargement: the failure of strategic ambiguity
Among his ten priorities Juncker declared that “the EU needs to take a break
from enlargement so that we can consolidate what has been achieved among the
28 (…); no further enlargement will take place over the next five years”.
Playing to the gallery at home, the Commission President stated an
obvious fact that is also recognised by the leaders in the region: none of countries
would be ready to join the EU before 2019. But this did little to assuage the
negative signal that Juncker’s highly political statement sent to the region. And
this at a time when the reform process was already veering off track in a number
of the countries concerned; including in what Juncker, in a surprise reversal of
his earlier stance, in his 2017 State of the Union called the ‘frontrunners’ in the
process: Montenegro and Serbia, which had started accession negotiations in
June 2012 and January 2014 respectively.
The downgrading of the enlargement portfolio was reflected in other
ways too: the new Commissioner appointed for this area was given the
responsibilities for European Neighbourhood Policy and Enlargement
Negotiations (NEAR), as had been the case with his predecessor, but which was
contrary to the practice in place from the previous enlargement exercises, where
the Commissioner’s portfolio was purely on enlargement policy. A portfolio
covering so many countries meant less Commission leadership and reduced EU
visibility in the Western Balkans just when it was most needed (Fouéré, 2019).
Conversely, the merger of files was welcomed in ENP countries, which received
more attention from a designated Commissioner than from an over-stretched
High Representative and even boosted hopes of Eastern Partnership states about
their potential membership perspective.
Whilst the European Council did pay attention to the Western Balkans, it
did so purely in the context of security, counter terrorism and the need to stem
the migration flows coming from Turkey across the Aegean Sea, and via Greece
(see the chapter “A New Start for EU JHA Policies?”). Instead of maintaining
focus on the fundamental reforms placed at the heart of the EU accession process
back in 2011, the attention changed to one of securing EU borders and stability
at all costs in the Western Balkan region. Having “strong and stable
governments” was foremost in the minds of the EU leaders at that time, with
elected government officials from some EU member states openly supporting
the ruling parties even when ministers and officials from those same parties
were already under investigation for abuse of power and corruption, as was the
case in Macedonia (Fouéré, 2017). Violations of the rule of law and deterioration
in democratic standards were either ignored or brushed under the carpet. The
exception to the rule was Albania, where the EU worked hand-in-glove with the
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 37
US Embassy to push for the most sweeping of judicial reform processes in wider
Europe.
Caught off guard by the President’s volte-face in September 2017, DG
NEAR tried to regain momentum of the process with a new Enlargement
Strategy in February 2018, when it was clear for all to see how Russia, Turkey
and some of the Gulf States had filled a vacuum left in a region where the EU
held all the trump cards. Even if accession hopefuls like Bosnia-Herzegovina
and Kosovo were allowed to progress on the formal pre-accession track, the
former having been endowed with candidate country status, the latter with a
Stabilisation and Association Agreement, the key to unlocking these countries’
status issues lies not with the Commission or the EEAS but with Russia, the US
and a handful of member states. These factors hamper the HRVP’s mediation
process to normalise relations between Pristina and Belgrade, and will
complicate any future attempt at revising the Dayton Agreement and the
Constitution of BiH embedded therein.
Moving beyond the de facto regression resulting from a ‘you pretend to
reform while we pretend to offer membership’ stance, the next Commission will
have to reinvigorate its efforts to make good on the promise of Thessalonki in
2003, repeated at 2018 EU-Western Balkan
Summit in Sofia, i.e. to integrate the countries
The next Commission will
of southeast Europe into the EU. The
have to reinvigorate its
Commission would be helped if the European
efforts to make good on
Council of June 2019 bites the bullet and
the promise to integrate
decides to open accession talks with Albania
the countries of southeast
and Macedonia – provided that conditions set
Europe into the EU.
out a year earlier will have been fulfilled. For
Macedonia, this required a resolution to the decades-old name dispute with
Greece, which was irreversibly achieved on 25 January when the Greek
Parliament ratified the Prespa Agreement renaming the country ‘North
Macedonia’. Skopje and Tirana would do well to present other tangible results,
including a track-record of implementation of rule of law reforms, to convince
member states like France and the Netherlands that they are worthy of starting
accession negotiations. For their part, member states should not miss the
opportunity to reward the historic display of EU-inspired compromise in a
European region prone to strategic competition.
One southeastern European country with which the EU needs to come
clean is Turkey. By constitutionalising an executive presidential system that
erases the separation of powers and frees President Erdoğan’s hands to deepen
repression, Turkey will be in breach of the ‘political’ criteria for EU membership
for years, if not decades, to come. Rather than merely suspending accession
negotiations in an attempt to keep up appearances – bureaucratic language that
38 | NEIGHBOURHOOD, SECURITY AND DEFENCE POLICIES
will be lost on Erdoğan as much as it will be on liberal Turks and European
citizens – the EU should stand behind its core values and reset its relationship
with Turkey on a more credible and strategic footing, while pressing the regime
on respect for human rights and working with civil society to keep the flame of
what the Juncker Commission used to call
The EU should stand behind
‘deep democracy’ alive (Blockmans and
its core values and reset its
Yilmaz, 2017).
relationship with Turkey
Not only will the next Commission
on a more credible and
President have to provide firmer strategic
strategic footing.
direction to what was hitherto called “the
most successful of EU foreign policies”, his or
her administration will also have to ensure a strict and fair application of the
pre-accession criteria. Be that as it may, the EU will most likely contract before
it will expand. The next Commission will therefore have to deal with (Br)exit
and entry issues. Yet, creating one DG for ‘Membership’ issues, as word on the
Brussels grapevine has it, would give the wrong impression that more exits are
expected, and that the EU is less interested in the strategically important Eastern
neighbourhood (a signal that would be welcomed in Moscow) and the MENA
region.
Towards a new neighbourhood concept
Drawing a clear line in the sand that membership is not on offer for countries
belonging to the Eastern Partnership (EaP), the Juncker Commission
nevertheless recognised the need “to step up close cooperation, association and
partnership to further strengthen our economic and political ties”. Georgia,
Moldova and Ukraine, in particular, have much in common with the pre-
accession states of the Western Balkans: geographic proximity to the EU,
domestic political priority to become members of the EU, and similar struggles
to improve their political and economic governance in line with EU standards
and values (Emerson et al. 2018). The EU’s main differentiation between the two
groups is over the ‘membership perspective’, which has been offered to the
Balkans but not to the East European neighbours. Beyond this formal political
stance, however, the EU has de facto been extending virtually the same
comprehensive array of economic and political instruments to both groups by
signing (Stabilisation and) Association Agreements ((S)AAs), including Deep
and Comprehensive FTAs with the three EaP states. Yet, when comparing the
material substance of the SAAs and AAs (Blockmans, 2017) and the record of
both groups in terms of the quality of their political and economic governance
(Emerson and Noutcheva, 2018), one finds that the two groups are comparable
at both levels. Most striking is that on most of the indicators the EaP frontrunner,
Georgia, even ranks slightly ahead of the Balkan frontrunners. The actual
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 39
policies of the EU towards the Balkans and DCFTA states have been evolving
more than the outmoded rhetorical doctrines and now converge in content, but
so far ‘under the radar’ of high politics. This convergence leads into a case for
reconsidering the EU’s present political doctrines over its neighbourhood
policies.
The next Commission has the opportunity to give more strategic content
and profile to neighbourhood relations. One idea would be to de-territorialise
the obsolete ENP and consolidate the many existing instruments into an
extended, more standardised system with some access to the EU institutions
(Blockmans, 2017; Emerson, 2019). A new neighbourhood concept could connect
with the current renewal of interest in the longstanding debate about
differentiated European integration. This debate could focus either on
developing a more restricted top-tier group, or
on a wider outer-level group, or both. Today
The next Commission
the focus is mostly on the top-tier questions,
has the opportunity to
which are proving to be extremely difficult to
give more strategic
implement, including in the sectors already
content and profile to
subject to selective membership (in particular
neighbourhood relations.
the euro and Schengen). The question of an
outer tier is growing in pertinence, not only for EaP countries, but also for
Turkey, Brexit Britain, the EEA states and Switzerland. There will be predictable
resistance to a common institutionalisation, as various neighbouring states give
priority to their bilateral relationships with the EU and try to cut their own
special deals. When it comes down to practical instruments of cooperation,
however, these naturally become highly standardised. And the EU institutions
are wary about making special deals with one state that will be used as a
precedent in negotiations with others. So, for reasons of both administrative and
legal simplicity, and also of political negotiation, there is a case for
rationalisation and some kind of soft institutionalisation, with degrees of
flexibility. The clinching argument is the current strategic context, with the EU
and wider space of European values being under serious threat from within and
outside. The EU thus needs to get its act together more decisively in its
neighbourhood (Emerson, 2019).
This finding not only applies to states on the European continent, but also
ENP countries in the MENA region (Moran, 2018; Van der Loo, 2016). Parts of
the region are going through an extended period of war and upheaval marked
by state failure, sectarian strife, transnational terrorism, great power
interventions, the proliferation and use of weapons of mass destruction
(including chemical), massive loss of life and large-scale physical destruction.
These developments are not just a threat to the entire region, but also to the rest
of the world and to Europe in particular. The EU is strategically absent from
40 | NEIGHBOURHOOD, SECURITY AND DEFENCE POLICIES
much of the MENA region. It is further proof of the obsolescence of the ENP.
The EU’s naval force ‘Operation Sophia’ off the coast of Libya and actions vis-à-
vis Egypt (i.e. co-opting authoritarian regimes in preventing people from
making the perilous journey across the Mediterranean in search of a better life)
exemplify the ‘pragmatic’ rather than ‘principled’ approach in protecting the
Union’s own interests in relations with the neighbours, and their neighbours.
Shedding almost every pretence at conducting
Moralpolitik, the EU effectively
tries to engage in
Realpolitik, with the ENP being nothing more than CFSP in
disguise.
Pushed by the prospect of Brexit and stress-tested by a US President intent
on putting America first and retreating from multilateral arrangements, this
raises the question whether the hybrid Union of member states and EU
institutions has what it takes to defend its
If Europe wants a voice in
‘strategic
autonomy’
in
a
volatile
addressing instability and the
neighbourhood. Above and beyond the
political problems that blight
member states, the EU has so far really only
its neighbourhood, it urgently
mobilised one offensive asset: money, which
needs to grant itself the means
it can use as leverage to create the conditions
to be a strategic player.
for post-war reconstruction, or squeeze off
with targeted sanctions. In the diplomatic
arena it was able to take some credit for mediating the Iran nuclear deal (JCPOA)
but the US has since robbed the EU of that success.
History has shown that rogue leaders only understand a lang
uage of
diplomacy backed by force.14 If Europe wants a voice in addressing instability
and the political problems that blight its neighbourhood, it urgently needs to
grant itself the means to be a strategic player.
Defence integration
Lack of political will and mutual trust among EU member states has long been
an obstacle to cooperation in security and defence. In the years of austerity that
followed the financial crisis, defence budgets all over Europe were slashed in an
uncoordinated manner, hollowing out most member states’ armies. Facing a
fraught security climate in the Middle East and North Africa, the heads of state
or government meeting at the December 2013 European Council decided to buck
the trend. For the first time since the entry into force of the Lisbon Treaty in 2009,
they held a thematic debate on defence in which they declared that “defence
matters”. Tapping into the political momentum generated by Russia’s assault on
Ukraine, the rise of hybrid warfare and cyber-attacks, terror attacks on European
14 See R. Holbrooke (1998),
To End a War, New York: Random House, at 146.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 41
soil, security concerns over the refugee and migrant crisis, the prospect of Brexit,
and the unpredictability of US foreign policy under President Donald Trump,
the EU has made greater strides in defence integration in the last two years than
in the 60 years before that.
A permanent EU military headquarters has been created and located
within the European External Action Service in Brussels. The 22 member states
that are also NATO allies pledged to increase defence spending to 2% of their
GDP and to earmark 20% of that sum for
investment in defence capabilities. 76
The EU has made greater
concrete action points were agreed to
strides in defence integration
improve the coordination and cooperation
in the last two years than in
between the EU and NATO, both at the level
the 60 years before that.
of headquarters and in the field. A semester-
like Coordinated Annual Review on Defence (CARD) mechanism will monitor
the implementation of commitments on defence spending and capability
development of all EU member states. The ‘big bazooka’, proverbially speaking,
is the creation of a European Defence Fund (EDF), with a proposed EUR 13bn
for the next budget of the EU (2020-27) to stimulate the development of military
capabilities and the deployment thereof.
Crowning this flurry of administrative activity, the European Council in
December 2017 formally launched an “ambitious and inclusive” Permanent
Structured Cooperation (PESCO) for the development and deployment of
defence capabilities.15 Those with (vested) interests ratcheted up the language in
an attempt to claim ownership of the “historic” landmark in the European
integration process (dixit HRVP Mogherini). President Juncker marked the
occasion by saying: “In June I said it was time to wake up the Sleeping Beauty
of the Lisbon Treaty: permanent structured cooperation. Six months later, it is
happening”.16
15 Denmark (which has an opt-out from CSDP), Malta (which invoked a constitutional
commitment to neutrality and non-alignment but kept the door open for future participation
depending on the course of implementation) and the UK (which is leaving the EU) chose to
stand aside. In an effort to maintain cooperation across the Channel and between those states
sharing a strategic culture and a willingness to put skin in the game, France and the defence
ministers of eight other member states signed a letter of intent to establish a European
Intervention Initiative (EI2).
16 European Commission, Press Release IP/17/5205, 11 Dec. 2017, which keenly points out
that “President Juncker has been calling for a stronger Europe on security and defence since
his election campaign . . in April 2014” and that “this same ambition was set out in his three-
point plan for foreign policy, which was incorporated in the Political Guidelines – the Juncker
Commission’s political contract with the European Parliament and the European Council”.
42 | NEIGHBOURHOOD, SECURITY AND DEFENCE POLICIES
Leaving lofty rhetoric aside (see also Macron and Merkel’s confusing calls
for the creation of a European army), the new political momentum and the
definition of higher criteria should be welcomed for what they are: functional
collaborative steps towards a ‘European Defence Union’, akin to the energy and
digital unions. In light of the generally ad hoc
nature of EU foreign policy, the
Union’s efficiency as an international actor in security and defence matters is
gradually being increased in function of the objective to contribute to the
maintenance of international peace and security (Blockmans, 2018).
In 2019 –
année de transition institutionnelle – EU defence integration is
expected to reach an inflection point: the above-mentioned instruments and 34
concrete PESCO projects will need to be implemented, monitored and complied
with. It is here that the challenge lies for the next Commission and the European
Defence Agency. Can they keep the momentum going by applying the
functional mode of integration,
à la méthode Monnet? With the necessary funds,
there is arguably plenty of gas in the tank to develop defence industrial policy,
tackle procurement issues and harmonise technical and operational standards.
Key priorities for the next Commission
Develop a new neighbourhood concept
Prioritise pre-accession preparation of the Western Balkan countries and
re-set relations with Turkey on a strategic footing
Implement functional collaborative steps towards a ‘European Defence
Union’
References
Blockmans, S. (2017),
The Obsolescence of the European Neighbourhood Policy,
Brussels/London: CEPS /Rowman & Littlefield International.
Blockmans, S. (2018), “The EU’s Modular Approach to Defence Integration: An
Inclusive, Ambitious and Legally Binding PESCO?”,
Common Market Law
Review, Vol. 54, No. 6, via CEPS at https://bit.ly/2Admi9O.
Blockmans, S. and S. Russack (2015), “The Commissioners’ Group on External
Action - Key political facilitator”, CEPS Special Report No. 125, CEPS,
Brussels, 17 December.
Blockmans, S. and S. Yilmaz (2017), “Why the EU Should Terminate Accession
Negotiations with Turkey”, CEPS Commentary, CEPS, Brussels, 19 April.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 43
Debuysere, L. and S. Blockmans (2019), “A Jumbo Financial Instrument for an
Integrated Approach to External Conflict and Crisis?”, CEPS
Commentary, CEPS, Brussels, February.
Emerson, M. (2019), “Scenarios for a Wider Europe”, CEPS Policy Insights,
CEPS, Brussels, February.
Emerson, M., D. Cenusa, T. Kovziridze and V. Movchan, eds. (2018),
The Struggle
for Good Governance in Eastern Europe, Brussels/London: CEPS/Rowman
& Littlefield International.
Emerson, M. and G. Noutcheva (2018), “Political and Economic Governance in
the Balkans and Eastern Europe Compared”, CEPS Working Document,
CEPS, Brussels, 6 July.
Fouéré, E. (2017), “The Macedonian Crisis – A Failure of EU Conflict
Management?”, CEPS Commentary, CEPS, Brussels, 5 May.
Fouéré, E. (2019), “The EU’s Engagement with the Western Balkans: A New
Chapter Long Overdue”, CEPS Policy Brief, CEPS, Brussels, 10 January.
Moran, J. (2018), “The Case for a Euro-Arab Summit”, CEPS Commentary, CEPS,
Brussels, 19 September.
Van der Loo, G. (2016), “Mapping Out the Scope and Contents of the DCFTAs
with
Tunisia
and
Morocco”,
IEMed
Papers
No.
28
(https://www.ceps.eu/system/files/euromesco28b.pdf).
THE EU’S TRADE AND INVESTMENT POLICY
Under the Juncker Commission, the EU’s trade and investment policy was
mainly guided by the ‘Trade for All’ strategy, adopted by the European
Commission in October 2015. Based on three key principles: effectiveness,
transparency and values – this strategy aims to ensure that the EU’s trade policy
benefits as many people as possible. However, the EU’s trade and investment
policy was also influenced by external threats to the global trading system and
internal disagreements about numerous trade and investment instruments and
policies during this period. The most important developments in the EU’s trade
and investment policy over the last five years mainly relate to the EU’s FTA
agenda, investment protection, EU-US trade relations, WTO reform and the
modernisation of the EU’s trade defence instruments.
The EU’s FTA agenda
A key objective of the Trade for All strategy was to continue with the conclusion
of a new generation of ‘deep and comprehensive’ FTAs with major trade
partners, a policy that was already set in motion by the Commission’s 2006
Global Europe Strategy. The EU has
A key objective was to
concluded several FTAs with key trade
continue with the conclusion
partners since 2013, among them notably
of a generation of ‘deep and
Canada (2016) and Japan (2018). The EU-
comprehensive’ FTAs with
Canada Comprehensive Trade Agreement
major trade partners.
(CETA) sets standards for the new
generation of EU trade agreements with
third countries regarding tariff reduction and breaking down non-tariff barriers
for optimal market access. The EU-Japan Economic Partnership Agreement
(JEPA) established the biggest trade zone ever negotiated in a period of
increasing protectionism and contestation of the multilateral trading order.
Since 2013 the EU also signed important FTAs with Eastern Partnership
countries (Emerson et al., 2018) and Singapore (2018). Moreover, negotiations
were finalised with Mexico and Vietnam and trade talks with Australia, New
Zealand, Chile and Tunisia are making good progress.
44 |
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 45
Not all EU FTA negotiations launched in this period were concluded
successfully, however. Negotiations with the US on the Transatlantic Trade and
Investment Partnership (TTIP) were suspended as soon as the Trump
administration was inaugurated in January 2017 (Hamilton & Pelkmans, eds.,
2015).17 Also, negotiations with several Asian countries are progressing (very)
slowly, including with Indonesia, the Philippines and Myanmar, for economic
and/or political reasons. The EU also put its negotiations with Thailand on hold
in 2014 after the military takeover. FTA negotiations with India (launched in
2007) were brought to a
de facto standstill in the summer of 2013 due to a
mismatch in levels of ambition, but at the 2017 EU-India Summit both parties
declared their intention to re-engage actively towards a timely relaunch of
negotiations for a comprehensive and mutually beneficial India-EU Broad Based
Trade and Investment Agreement (BTIA).
The FTA negotiations with MERCOSUR saw considerable progress on a
wide range of issues in 2017, but the parties failed to conclude a political
agreement at the end of 2017. And during the subsequent negotiation rounds in
2018, still no agreement was reached on the remaining sensitive issues.
Due to the political situation in Turkey, the Council still needs to agree to
launch negotiations on the modernisation of the EU-Turkey Customs Union
(Gros et al., 2018) and negotiations on the EU-Morocco DCFTA are being
complicated by several rulings of the Court of Justice of the European Union
(CJEU) on the application of the existing EU-Morocco agreement to the Western
Sahara (Van der Loo 2018).
The main stumbling blocks to the Comprehensive Agreement on
Investment with China, one of EU’s top priorities according to its strategy Trade
for All, are fair and equitable treatment and national treatment and its related
provisions and exceptions (Pelkmans et al., 2018). This aspect has weighed heavily
on EU-China trade relations in recent years. Businesses are pleading for a level
playing field and reciprocal treatment between the two global trade powers.
Contestation of the EU’s FTAs and the new architecture of EU trade
and investment agreements
Negotiations on the new generation of EU FTAs, in particular those on CETA
and TTIP, triggered a heated debate in 2013/2014 about the benefits and
consequences of these far-reaching trade agreements. Several (national
parliaments of) member states, Members of the European Parliament and civil
society groups contested the new generation of EU FTAs, fearing, inter alia
, that
these agreements would degrade environmental and consumer protection,
17 The EU-US trade relations are further discussed below.
46 | THE EU’S TRADE AND INVESTMENT POLICY
public services and labour standards and lessen the government’s right to
regulate.
Moreover, several concerns were raised with regard to transparency
and the proposed Investor and State Dispute
Several (national
Settlement (ISDS) mechanism in TTIP and
parliaments of) member
CETA. The European Commission tried to
states, Members of the
accommodate these concerns in the Trade for All
European Parliament and
Strategy by making trade negotiations more
civil society groups
transparent (e.g. by inviting the Council to
contested the new
disclose all FTA negotiating directives and by
generation of EU FTAs.
publishing the textual proposals of FTA chapters
during the negotiations), and by reforming the
ISDS into a new ‘Investment Court System’ (see below).
After the Walloon region temporarily blocked the EU’s signature of CETA
in 2016, a broader discussion was launched on whether, in addition to the EU,
all member states need be involved in the conclusion and ratification of trade
agreements (as so-called ‘mixed agreements’) or whether these FTAs should
only be concluded by the EU (as so-called ‘EU-only agreements’), thus avoiding
the risk that one member state can block the conclusion of an EU FTA for the
entire EU (Van der Loo, 2016). This discussion took place in parallel with the
landmark Opinion 2/15 of the CJEU in which Court broadly interpreted the
EU’s post-Lisbon trade competences and concluded that the entire EU-
Singapore FTA falls within the exclusive competences of the EU, with the
notable exceptions of portfolio investment and ISDS (Van der Loo, 2017). In
order to avoid the burdensome and unpredictable ratification procedure by 28
member states (and their national parliaments), and in the light of Opinion 2/15,
in September 2017 the Commission proposed to ‘split’ future trade and
investment agreements in ‘EU-only’ FTAs covering exclusive EU competence
(which only need to be ratified by the EU) on the one hand, and separate mixed
investment agreements (which also require ratification by all 28 member states)
on the other.
The Council largely agreed with this proposal in May 2018 but stressed
that it would decide on a case-by-case basis on the splitting of FTAs (Council,
2018). In the meantime, the Union signed its first ‘split’ FTA and investment
protection agreement with Singapore and agreed to a similar approach for the
signature of the EU-Vietnam FTA.
The EU’s new investment (protection) policy
As a consequence of the contestation of the ISDS mechanism initially envisaged
in TTIP, in 2014 the Commission launched a public consultation on the EU's
approach to investment protection and investment dispute settlement. This
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 47
consultation led to a proposal for a new and transparent system in 2015 to
resolve disputes between investors and states – the Investment Court System
(ICS), now included in CETA and in the EU’s FTAs with Vietnam, Singapore
and Mexico (but not Japan). These bilateral ICSs, composed of a Tribunal of first
instance and an Appeal Tribunal, aim to address the main concerns about the
traditional ISDS mechanism by, inter alia, limiting the grounds on which an
investor can challenge a state through more precise investment protection
standards; ensuring governments’ right to regulate and to pursue legitimate
public policy objectives; and by including specific rules on transparency and the
qualification of the judges.
Parallel to the establishment of the ICS in its bilateral FTAs, in 2017 the
Commission proposed to establish a Multilateral Investment Court (MIC). This
MIC would be a permanent independent international court empowered to hear
disputes over investment between investors and states that would have
accepted its jurisdiction over their bilateral investment treaties. Moreover, the
MIC should also replace the bilateral ICS in the EU’s recent FTAs. In March 2018,
the Council adopted negotiating directives authorising the Commission to open
negotiations for a Convention establishing such an MIC. Initial talks on the
possible creation of an MIC started in late 2017 under the auspices of the United
Nations Commission on International Trade Law (UNCITRAL).
In order to persuade the Walloon government to sign CETA in November
2016, the Belgium Federal Government requested an Opinion of the CJEU on the
compatibility of the EU’s ICS in CETA with EU law (for example in relation to
the impact of the autonomy of the EU legal order). Opinion 1/17 (
pending),
which is expected to be delivered in 2019, will determine the future of both the
bilateral ICS and the proposed MIC.
Also in the area of investment, in September 2017 the Commission
proposed a framework for screening foreign direct investments by member
states on grounds of national security or public order. The INTA Committee
endorsed the political agreement reached
between the Commission, the Council and the
The Commission proposed
European Parliament on 20 November 2018
a framework for screening
and a plenary session of the European
foreign direct investments
Parliament and the Council will vote on the
by member states on
agreement in early 2019. The FDI screening
grounds of national
framework emphasises cooperation between
security or public order.
the Commission and the member states,
enables the Commission to issue non-binding opinions on investment
concerning several member states or when an investment could affect a “Union
interest” (e.g. H2020 or Galileo). Member states will retain the competence to
review and potentially block foreign direct investment on security and public
48 | THE EU’S TRADE AND INVESTMENT POLICY
order grounds (Blockmans and Hu, 2019). In the same way, they will not be
required to adopt or maintain a screening mechanism. However, existing and
new mechanisms will have to meet certain EU-wide characteristics, such as the
respect of the non-discrimination principle, the protection of confidential
information, the right to judicial redress against national authorities' decisions
or clearly defined applicable procedural rules.
EU-US trade relations
EU-US trade relations deteriorated following the unilateral protective trade
measures imposed by the Trump administration. On top of suspending the TTIP
negotiations, on 1 June 2018 the US imposed additional duties of 25% and 10%
respectively on imports of steel and aluminium from the EU, officially for
‘national security’ reasons. That same day, the EU retaliated by adopting
rebalancing measures that target a list of US products worth €2.8 billion,
including steel and aluminium products, agricultural goods and various other
products. Moreover, the EU launched legal proceedings against the US in the
WTO and a safeguard action to protect the EU market from disruptions caused
by the diversion of steel from the US market.
Following President Juncker’s visit to Washington in July 2018 the Trump
administration held back on imposing 20% extra tariffs on EU automobiles and
auto parts imports (Lannoo, 2018). The EU and the US informally agreed “to
work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on
non-auto industrial goods” and created an Executive Working Group to try to
find common ground. Talks in the Executive Working Group led the
Commission to adopt two proposals in January 2019 for negotiating directives
for trade talks with the US: on conformity assessment, and one on the
elimination of tariffs for industrial goods. The objective of the latter is to
eliminate all duties for industrial goods, on a reciprocal basis, with the objective
of achieving a substantial elimination of tariffs upon entry into force and a
phasing out of such tariffs in a short timeframe. It is clear that these negotiations
will not be a walk in the park. The Commission’s proposal excludes agricultural
products, although this is a key demand from the US. Moreover, the proposal
also specifies that the Commission suspend the negotiations if the US does not
respect the commitments made during the meeting in Washington in July 2018
or if it adopts new trade restriction against the EU. The latter is a reference to the
upcoming report of the US Commerce Department (February 2019) on whether
imported vehicles and auto-parts pose a national security threat, potentially
leading to the adoption of tariffs on EU cars.
However, there is a clear and deep discrepancy between EU and US
negotiating positions for new trade talks. Apart from including agricultural
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 49
goods in its negotiation scope, the USTR has asked to negotiate a full array of
sectoral issues with the EU, including services, IPR, SOEs, subsidies,
government procurement and dispute settlement. Moreover, the USTR
envisages that the possible future EU-US trade agreement to include provisions
that “provide a mechanism to ensure transparency and take appropriate action
if the EU negotiates an FTA with a non-market country”. It goes without saying
that the “non-market country” referred to here is China. Apparently, amidst the
US-China trade war, the US expects the EU to be its ally in containing China and
preventing it from circumventing the punitive measures adopted by the Trump
administration.
WTO reform
Against a background of increasing trade conflicts between major WTO
members such as the US, the EU and China, and US unilateralism and protective
trade policies under Trump, the WTO is facing its worst-ever crisis on two
fronts. Whereas the current crisis is triggered by the US blocking Appellate Body
appointments and the prospective breakdown of the dispute settlement
mechanism at the end of 2019, a more comprehensive reform and modernisation
of the WTO is called for as certain disciplines enshrined in the multilateral
trading system, such as those related to subsidies and state-owned enterprises,
have not been able to adapt sufficiently to the rapidly changing global economy.
In September 2018 the European Commission proposed ideas to modernise the
WTO to prevent paralysis of this crucial international body and pushed its
reform agenda in the autumn of 2018 with key trade partners in different fora,
such as the EU-China Working group on WTO reform, the trilateral ministerial
Working group with Japan and the US and the G20. While several countries have
already aligned with the Union in this reform process, for example in November
2018 when the Union submitted a concrete proposal for the reform of the WTO
Appellate Body together with a group of important WTO members such as
Korea, India, Canada and Switzerland, other countries such as the US are less
convinced by the EU’s reform proposals.
Modernisation of the EU’s trade defence and public procurement
instruments
To combat trade-distortive measures when necessary for EU industry and in the
Union’s interest, in December 2017 the European Parliament and Council agreed
on the Commission’s proposal to modernise the EU's trade defence instruments.
Among the most significant changes to the EU’s anti-dumping and anti-subsidy
legislation are: faster and more efficient investigations; the possibility to impose
higher duties based on economic reality; improved injury calculation; the
50 | THE EU’S TRADE AND INVESTMENT POLICY
inclusion of social and environmental considerations; and increased
transparency and predictability.
In the same vein, and to insist on reciprocity, the Commission adopted its
revised proposal for an International Procurement Instrument (IPI) in 2016. The
IPI allows the Commission to initiate public investigations in cases of alleged
discrimination of EU companies in procurement markets. Should such an
investigation find discriminatory restrictions vis-à-vis EU goods, services
and/or suppliers, the Commission can invite the country concerned to consult
on the opening of its procurement market. As a last resort, the Commission
could, after consultation with EU member states, introduce price adjustment
measures (i.e. a ‘price penalty’), giving EU and non-targeted countries' bids a
competitive advantage on EU public procurement. However, member states
remain deeply divided over this proposal. The INTA Committee of the
European Parliament also needs to vote on a draft report.
Priorities for the next Commission
The main challenge for the next European Commission will be to preserve and
improve the multilateral trading system. At the same time, the European
Commission will need to stand firm and pursue its trade agenda through
bilateral and regional FTAs.
With regard to the multilateral trading system, to European Commission
needs to align more actively and strategically with like-minded countries such
as Canada, Japan and Korea when pursuing its
A precondition for the
WTO reform agenda. However, a precondition
preservation and
for the preservation and modernisation of the
modernisation of the
multilateral global trading system will first be the
multilateral global
normalisation of the triangular trade relationship
trading system will
between the EU, the US and China. As for the EU-
be the normalisation of
US relationship, the conclusion of limited
the triangular trade
agreements such as those envisaged on
relationship between the
conformity assessment and the elimination of
EU, the US and China.
tariffs for industrial goods can be used to
normalise the transatlantic trade relationship, but
such an approach should not be pursued to the detriment of the EU’s value-
driven trade policy. Moreover, the Commission will need to engage actively
with the European Parliament, which is somewhat critical of these agreements.
Moreover, as foreseen in the Commission’s proposal, the EU should suspend
these negotiations if the US imposes new trade restrictions.
The EU must first try to conclude the Comprehensive Investment
Agreement and the Agreement on Cooperation on and Protection of
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 51
Geographical Indications with China as soon as possible (Hu, 2018) to maximise
the EU’s trade potential. Overall, it is imperative for the EU to recognise China
as a partner, albeit a fierce competitor at the same time. The EU must engage
China not only in bilateral relations to solve their trade frictions but also in
multilateral fora (Hu and Pelkmans, 2017). After all, efforts to reform the
multilateral trading system may become redundant if global major trade powers
such as China are not involved.
With regard to the EU’s bilateral trade agenda, the Commission needs to
continue with its approach to ‘split’ exclusive (EU-only) FTAs from ‘mixed’
Investment Protection Agreements. This approach provides a fair balance
between the effectiveness and legitimacy of the EU’s FTA policy, provided that
the European Parliament and national parliaments are fully engaged at their
respective levels of oversight, together with civil society. Moreover, the
Commission needs to maintain its transparency agenda, as foreseen in the Trade
For All Strategy.
Whereas several FTA negotiations are expected to conclude smoothly
during the next Commission mandate, such as with Australia and New Zealand,
several other FTA negotiations will remain challenging, including with several
ASEAN countries and MERCOSUR.
The most important trade negotiations for the next Commission will be
those with the UK on the new economic partnership (Gros and Hu, 2018). The
Political Declaration setting out the framework for the future EU-UK
relationship gives an indication of what the
economic partnership between the EU and the
The most important trade
UK should – or could – look like. This includes
negotiations for the next
an ambitious free trade area that ensures no
Commission will be those
tariffs, fees, charges or quantitative restrictions
with the UK on the new
and an ambitious, comprehensive and balanced
economic partnership.
arrangement on services and investment that
go beyond the WTO standards and build on recent FTAs concluded by the EU.
Crucially, just how ‘frictionless trade’ can be guaranteed while leaving the single
market remains unclear.
52 | THE EU’S TRADE AND INVESTMENT POLICY
Key priorities for the next Commission
Normalise the triangular trade relationship with the US and China by, inter
alia, concluding envisaged bilateral agreements
Work for the preservation and modernisation of the global trading system
(incl. the WTO and the creation of a Multilateral Investment Court under
UNCITRAL)
Continue to ‘split’ exclusive (EU-only) FTAs from ‘mixed’ Investment
Protection Agreements
References
Blockmans, S. and W. Hu (2019), EU Law Obstacles to Chinese Investment Flows
Along the Belt and Road, CEPS Policy Insight, CEPS, Brussels, February.
Council of the European Union (2018), “Conclusion on the negotiations of trade
agreements”, 8 May.
Emerson, M. et. Al (2018), Trilogy of Handbooks on the DCFTAs with Ukraine,
Moldova, Georgian - Second Editions, Brussels/London: CEPS/Rowman
& Littlefield International.
European Commission (2006), Global Europe: competing in the world,
COM(2006) 567 final.
European Commission (2015), Trade for all. Towards a more responsible trade
and investment policy, COM(2015) 497 final.
European Commission (2015), Concept Paper: Investment in TTIP and Beyond
– The path for reform.
European Commission (2017), Proposal for a Regulation establishing a
framework for screening of foreign direct investments into the European
Union, COM(2017) 487 final, 13 September.
European Commission (2018), Concept Paper on WTO Reform, 18 September
Gros, D. et al. (2018), “Strengthening EU-Turkey Economic Relations. Can
Services Revitalize the Customs Union?”, Istanbul Policy Center - CEPS
Report, 3 April.
Hamilton, D. and J. Pelkmans, eds. (2015),
Rule-Makers or Rule-Takers? Exploring
the Transatlantic Trade and Investment Partnership, CEPS Paperback, CEPS,
Brussels.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 53
Hu, W. (2018), “Reciprocity and Mutual Benefits: EU-China cooperation on and
protection of geographical indications”, CEPS Research Report, CEPS,
Brussels, 22 June.
Hu, W. and J. Pelkmans (2017), “China-EU Leadership in Globalisation:
Ambition and Capacity”, CEPS Policy Insights, CEPS, Brussels, 30 May.
Lannoo, (2018), “The Trump-Juncker meeting in DC raises urgent questions for
the next Commission”, CEPS Commentary, CEPS, Brussels, 16 August.
Van der Loo, (2016), “Mapping out the Scope and Contents of the DCFTAs with
Tunisia and Morocco”, CEPS Commentary, CEPS, Brussels, 3 May.
Van der Loo, (2016), “CETA’s signature: 38 statements, a joint interpretative
instrument and an uncertain future”, CEPS Commentary, CEPS, Brussels,
31 October.
Van der Loo, (2017), “The Court’s Opinion on the EU-Singapore FTA: Throwing
off the shackles of mixity?”, CEPS Policy Insight No. 17, CEPS, Brussels,
26 May.
Van der Loo, (2018), “The Dilemma of the EU’s Future Trade Relations with
Western Sahara: Caught between strategic interests and international
law?”, CEPS Commentary, CEPS, Brussels, 20 April.
Pelkmans, J. (2018), “China and the EU: The contradictions of exercising joint
trade leadership”, CEPS Commentary, CEPS, Brussels, 20 September.
Pelkmans, J. et al. (2018),
Tomorrow’s Silk Road: Assessing an EU-China Free Trade
Agreement – 2nd edition, Brussels/London: CEPS/Rowman & Littlefield
International.
ECONOMIC GOVERNANCE
AND ECONOMIC POLICY
During Juncker’s tenure, the role of the European Commission in the field of
economic governance has been overshadowed by political initiatives coming
mostly from the member states and the European Council. The latter, in turn,
acted under the influence of the lingering effects of the euro area crisis, which
had peaked in 2012 – under the previous Commission.
The so-called ‘Juncker plan’ constitutes the main example of an initiative
of the Commission. The European Fund for Strategic Investment (EFSI) is widely
regarded as a success, in the sense that hundreds of billions of investment were
financed under its various mechanisms. However, evidence of additionality, i.e.
that the total amount of this investment would not have taken place anyway, is
more difficult to prove.
Most of the other legislative proposals presented by the Juncker
Commission in the field of economic governance were drawn from the Four
Presidents’ and Five Presidents’ reports of 2012 and 2015, respectively. The
European Council recently reached an agreement on what is considered the
‘final’ pack on EMU governance. The hard content of this pack is modest, but it
is in line with a package of proposals the
There is limited evidence
Commission had published earlier. The most
that changes led to a
relevant novelties are that the European
material improvement in
Stabilisation Mechanism (ESM) will be
economic governance of
empowered to provide a backstop to the Single
the EU. It is also difficult
Resolution Fund (SRF) and that a ‘Euro Area’
to discern a substantial
budget line inside the EU budget may be created.
impact of the Commission
Overall it appears that the Commission has
on economic policy.
played more of a supporting than initiating role
in the changes to the economic governance structure achieved during the tenure
of Juncker.
The Commission could still be seen to have delivered on most of the
promises contained in the reports. But there is limited evidence that changes,
like the creation of a European Fiscal Board or reforming the European Semester,
led to a material improvement in economic governance of the EU.
54 |
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 55
It is also difficult to discern a substantial impact of the Commission on
economic policy overall. Member states have often succeeded in ignoring fiscal
rules and Commission recommendations on economic policy. They managed to
pursue their own priorities, driven either by the domestic political conditions or
the political interest and credo of the running party. The most patent examples
have been the ‘black zero’ in the case of Germany and the expansionary fiscal
policy in France and Italy. Policymakers at the national level have little incentive
(and no political mandate) to take the impact of their policy actions on the rest
of the EU into account. The recommendations of the European Fiscal Board,
which was supposed to establish guidelines for a common fiscal stance, have
also been mostly ignored.
The Commission has been rather flexible in applying the rules of the
Stability and Growth Pact and the Fiscal Compact. In this field the Commission
has considerable influence due to the reverse majority mechanism introduced
with the 2012 reforms. Moreover, only the
Commission (not the Council) has the necessary
The Commission has been
technical staff to be able to judge fiscal plans
rather flexible in applying
the rules of the Stability
rapidly and consistently. However, there is
and Growth Pact and the
little sign that the Commission has used these
Fiscal Compact.
powers. It bent the Stability and Growth Pact
repeatedly in the case of Italy and, in the case of Spain and Portugal in 2016, it
effectively condoned a clear breach of the rules, bowing in this instance to
German pressure. This episode constitutes an illustration the ‘political
Commission’ at work.
However, the Italian budget for 2019 has given the Commission another
chance to assert its role in economic policymaking. In this case, the Commission
has been careful not to appear political, emphasising instead its role as guardian
of the Treaty (and of financial stability). The tough stance of the Commission,
combined with strong market pressure, forced the government in power in Italy
to change course, at least for time being. This episode might in the end constitute
the most important legacy of the Juncker Commission in the field of economic
governance.
Continuing the process of reform of economic governance
After the reform process started under the second Barroso Commission in
response to the sovereign debt crisis, both the Four Presidents’ and Five
Presidents’ reports set out roadmaps for achieving progress towards economic,
fiscal and financial unions and improving democratic accountability up to 2025.
An implicit assumption of both roadmaps was that calmer times would be more
suitable for the needed institutional changes. However, this assumption clashed
56 | ECONOMIC GOVERNANCE AND ECONOMIC POLICY
with the migration crisis, starting in 2015, which triggered new priorities and
changes in politics in several member states.
During the years of the economic and financial crisis, the
intergovernmental approach became dominant in decision-making in the area
of economic policy. This was driven by the urgency of the moment and a better
capacity of such methods to deliver rapid
The Commission’s dual role
solutions and involving the commitment of
as initiator of legislative
large financial resources. When crisis
proposals and guardian of the
pressures abated, however, the community
treaties has been diminished
method was unable to regain its role. While
in the area of economic
the reform process started in 2011 appeared to
governance, either by choice,
make the Commission the big winner of the
or by a de facto more pro-
change, in practice this has not been the case.
active Council, voicing
The Commission’s dual role as initiator of
stronger national views.
legislative proposals and guardian of the
treaties has been diminished in the area of
economic governance, either by choice, or by a
de facto more pro-active Council,
voicing stronger national views. It is difficult to imagine how the future could
be different from the recent past.
The Juncker Commission’s priorities in the area of economic governance
and EMU deepening were identified shortly after the Five Presidents’ report.
This resulted in a strong continuity with the previous cycle. As stated by the
Commission with regards to its aim of completing EMU, the main goal was to
make sure that “
EU countries' economic policies are coordinated to ensure EU
countries can withstand future crises through economic and social reforms and
responsible fiscal policies, encourage investment and enhance competitiveness, deliver
more job opportunities and better living standards”.18 Within this broad goal, a
number of objectives were identified for the different unions. These were
complemented by the launch of the Juncker plan to relaunch investment in
infrastructure in the EU, by promoting private and public participation.
There is no doubt that a number of objectives have been met for each of
the unions.
The Economic Union: The European Semester was streamlined to
improve ownership of the process and policies, but also to include a social pillar
(additional indicators) (see the chapter “Labour Market and Social Policy”). The
Five Presidents’ report also contained a reference to the creation of a stabilisation
function for the euro area. At first, this idea did not go much beyond academic
18 See V. Dombrovskis, P. Moscovici and M. Thyssen, “A deeper and fairer economic and
monetary union: Combining stability with fairness and democratic accountability”, 19
October 2015.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 57
debate and random statements made by President Macron. But in the most
recent debate, the proposal of a budget line for the euro area within the EU
budget gained some steam. The macroeconomic impact of this proposal is likely
to be very limited, because the size of the overall EU budget is very small, close
to 1% of GDP, and it will be kept as such. Yet, treating this euro area (sub-
)budget could be regarded as an important political signal that a door has been
opened to a more substantial euro area fiscal capacity. If this were to come to
pass, the role of the Commission would be enhanced. The Commission would
presumably play a leading role in managing these funds. However, as long as
the spending pattern for the EU is fixed under the Multiannual Financial
Framework (MFF), i.e. planned in advance for seven years, it is difficult to see
what flexibility such a euro area budget could have. In addition, there remains
considerable ambiguity about the purpose and the use of these euro area
resources. Stabilisation and convergence are both on the table. Similarly, no
clarity exists on whether part of the capacity could take the form of a common
unemployment insurance or investment fund.
The Fiscal Union: In the reform of the SGP, the main objective was to
ensure that fiscal rules are enforced. Member states have become familiar with
the process of budgetary planning and surveillance (in a ‘learning by doing’
process), but enforcement of the rules did not improve. The defiant attitude of
the Italian government in the autumn of 2018 did not help the credibility of the
new framework. Similarly, measures agreed by the French government to
respond to internal pressure are likely to put the country in breach of SGP rules.
In practice, regarding the fiscal union the main achievement was the creation of
an independent European Fiscal Board to advise the Commission on an
appropriate fiscal stance for the euro area and on how well EU countries are
implementing EU fiscal rules.
The Financial Union: To ensure strong and stable banks and capital
markets able to finance the real economy, the two main pillars of the financial
union are the Banking Union and the Capital Markets Union (CMU). In the
Banking Union, most progress was achieved before 2015. The backstop for the
Single Resolution Fund (SRF) now appears to be agreed, while the European
Deposit Insurance Scheme (EDIS) proposal is trapped in a very polarised debate
about risk reduction versus risk sharing. CMU has been one of flagship
initiatives of the Juncker Commission. Unlike Banking Union, CMU does not
require the set-up of new institutions but rather harmonisation of regulatory
frameworks and removal of barriers in capital markets, which should incentivise
market behaviour. In Europe, financial markets remain very much bank-centric
and progress towards a truly European capital market has been very limited
The ‘Juncker Plan’: The European Fund for Strategic Investment (EFSI),
was presented as the EU’s response to the economic and financial crisis, going
58 | ECONOMIC GOVERNANCE AND ECONOMIC POLICY
beyond, and, to some extent, against the rules of the Stability and Growth Pact,
too often identified by many with austerity policies. Consistent with this
perspective, the EFSI was designed as a stimulus package. Based on providing
equity and debt supported mainly by the EU budget and partially by the
European Investment Bank Group, its primary goal was to tackle the lack of
confidence of investors by financing investment projects that had stalled during
the crisis. Such a goal was to be achieved by generating an investment value of
€315 billion by 2018. The EFSI was recently extended with the objective of
reaching €500bn in 2020. A further commitment has been made to double the
fund by 2022. Overall, the EFSI has managed to attract investment and to
leverage amounts above the target. To this it should be added that, since the
crisis, the EU and the member states have both considerably increased the
operations of their own national promotional banks to offset the fall in private
investment. Operations have most likely spurred investment or accelerated it
without a significant risk of crowding out. However, returning to an economic
environment of ‘business as usual’ may imply that this no longer holds. The
expansion of the EFSI and the increase in operations raise important questions
about the purpose and actions of public banks (both EU and national) in terms
of countercyclical interventions (like a stimulus package) or measures to
enhance investment in more difficult and riskier areas of the EU (like a long-
term growth instrument).
Taxation: Somewhat surprisingly, and completely outside the initial list
of priorities, EU tax policy may become part of the legacy of the Juncker
Commission and potentially a battleground for the next Commission. Taxation
policy is one of the few areas where the EU
Somewhat surprisingly, and
has always had little influence, and a
completely outside the initial
competence that has remained entirely at the
list of priorities, EU tax
level of member states. Since the start of the
policy may become part of
single market, even tax harmonisation has
the legacy of the Juncker
only advanced very slowly. Initial plans for
Commission and potentially
more tax harmonisation in the context of the
a battleground for the next
1992 programme only resulted in two
Commission.
directives to abolish double taxation for
corporations. Over time, the area has been
characterised by soft attempts rather than hard actions to improve
harmonisation. The 2016 anti-tax avoidance directive (ATAD) pursued the line
of promoting cooperation, rather than outright harmonisation. But the issue of
taxation recently gained considerable public attention in the context of the tax
avoidance scandals that affected multinational corporations operating within
the EU, as well as individuals. The Commission has no power in this realm and
in practice it can only use its state aid instruments in the most blatant tax
avoidance cases. To counter this incapacity for reaction, the Commission has
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 59
prepared a proposal (European Commission, 2019) on EU taxation policy with
a number of general priorities, which can be presented as reflecting public
opinion concerns: tackle tax fraud, evasion and avoidance; favour tax measures
that support policy goals, such as environmental taxation; improve cooperation
in taxation areas that are already harmonised, such as VAT, to allow for more
effective policies. In practice, the proposal has become the catalyst for a broader
debate on changing the method of decision-making from unanimity to qualified
majority voting to ensure faster progress on controversial issues, like this one. It
is very unlikely that member states will agree unanimously to move to QMV. A
majority of member states said right away they do not support the plans and
some criticised the Commission for its poor timing in launching the proposal, as
it risks feeding straight into the Eurosceptic narrative of nativist parties
preparing for the EP elections.
More centralisation or decentralisation?
The process of reform of economic governance has been characterised by two
contradictory forces: one moving towards a more centralised system, another
one towards a more decentralised system. To a certain extent this has mostly
been the result of the urgency of dealing with the flows of the original EMU
system without a coherent and politically viable plan. The idea of different
unions is probably the only way to guarantee progress across the different areas,
but the different approaches very much reflect this tension between more
centralisation or decentralisation.
The push for moving towards a more centralised model was often
inspired by the example of the US federal system and driven by the idea that the
US succeeded in managing the global financial crisis better than the EU did with
its own crisis. The banking union and a common budget, among others, are
typical elements of federations.
By contrast, the push for a more decentralised system and proposals that
would return powers to member states resulted from two different but mutually
reinforcing drivers. On the one hand, in member states’ politics, nationalistic
elements have gained increased support and tend to be translated into a rejection
of more EU integration and more power at the central level. On the other hand,
the recognition of the limited legitimacy of the EU when it comes to constraining
national policy decisions leads to the conclusion that full ownership of the
decision-making process is necessary for member states to follow through on
their commitments. And ownership requires certain functions to be at the level
of the member states. As example of this is the creation of independent fiscal
institutions. Each of these bodies is meant to monitor the implementation of
fiscal rules in its own country, a task rather similar to the one of the Commission
60 | ECONOMIC GOVERNANCE AND ECONOMIC POLICY
but performed at national level. It is likely that both forces will remain in place,
but contradictions may emerge soon.
Challenges ahead: domestic politics and divisions among member
states
Regardless of the political coalition that will prevail after the European elections,
further progress in economic governance will be very limited. Proposals that
require either the set-up of new institutions
Regardless of the political
(like a European Deposit Insurance Scheme)
coalition that will prevail
or Treaty change (like incorporating the ESM
after the European
under the EU law) will be very unlikely or
elections, further progress
even impossible. The European Parliament
in economic governance will
recently blocked the incorporation of the fiscal
be very limited.
compact under EU law. Similarly, the
incorporation of the ESM Treaty into EU law
is likely to face great opposition by member states.
In member states, political priorities seem to have moved away from
economic and governance issues and there seems to be limited political capital
to push for controversial options.
In addition to this, Italy’s economic and political situation will represent a
major obstacle to any advances, both because of Italy’s direct opposition to
certain measures, and other member states’ opposition to potentially costly
developments backed by Italy. Further, recent changes in French domestic
politics may dramatically reduce the French push towards a reformist approach.
There are a few areas where the debate will continue and some of the
current proposals will see the light. A fiscal capacity for the euro area, possibly
in the form of a European unemployment re-
Italy’s economic and
insurance against large shocks, could be agreed
political situation will
upon (see the chapter “Labour Market and
represent a major obstacle
Social Policy”). As proposed by the
to any advances.
Commission, resources may come from the EU
budget and be re-allocated to this function(s).
The likelihood of this would depend on whether the support from Germany
continues and if trade unions, which have been against it, change their stance.
As argued earlier, a very small scheme with potentially different objectives
implies that, in practice, the relevance of the outcome will also be very small.
Capital Markets Union will continue to be one of the flagship initiatives
(see the chapter “Finance for Sustainable Growth”). However, in this domain the
real advances depend largely on market participants and member states’
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 61
commitments, beyond words, to open their domestic markets. The Commission
will continue to promote it, but will not control the process.
Depending on how the Italian – and potentially the French – case will play
out, the Pandora’s box of reforming fiscal rules may be reopened. If France and
Italy become the proof that rules do not work when a national government does
not want to comply with them and, that in such cases, the EU has no power to
change the outcome, we may be forced to recognise that the current rules are of
little use.
Lastly, the newly proposed InvestEU, successor to the Juncker plan,
streamlines the policy and aims to improve coherence and to avoid duplication
with other centrally managed EU financial instruments. However, the next period
will most likely see the emergence of tensions due to a number of contradictions
in the targets of InvestEU. Moreover, the continued expansion of InvestEU, with
the backdrop (hopefully) of a growing economy, is likely to operate against the
additionality principle. This will emerge as result of crowding out of private
investment but also in relation to the normal operations of the EIB Group overall,
which should decrease given the loss of capital of the UK after Brexit. Ultimately,
the question is about the point of equilibrium between private risk taking and
the desirability of intervention by promotional banks.
All in all, the roadmap for EMU governance reform outlined in the Five
Presidents’ report is likely to remain the main reference for the future.
However, looking ahead, the main challenge for the Commission in the area
of economic policy may not be related to implementing the recommendations of
the Five Presidents’ report. The key issue for the Commission will be operating
in a context of rising divisions among member states. Divisions are likely to be
political and economic in nature, and reinforce each other.
Differences in economic performance between member states have
increased since the crisis. Most countries with high levels of debt have
experienced further increases in debt, and hence in their vulnerability. By
contrast, countries with sounder fiscal positions managed to face the crisis better
and also to grow more strongly than the others. The split between these two sets
of countries tends to coincide with a north-south geographical division.
However, the picture of the division may be more nuanced. The struggle to
prevent high debt from rising further is often linked to poor governance as well
as with a low growth performance.
In relation to the latter, in the last two decades, the process of economic
integration has been associated more with the agglomeration of productive
activity and geographical concentration of income than with a generalised
process of convergence between EU regions. Contrary to the promise of the EU
project, a number of areas/regions across the EU, often lagging behind and
62 | ECONOMIC GOVERNANCE AND ECONOMIC POLICY
expected to catch up faster, have been unable to keep pace with the rest of the
union. In several countries, internal transfers compensate for such differences,
but where this is not the case, the risk of ‘peripheralisation’ is very high. While
such differences are most often the result of market dynamics and the specific
features of countries and regions, they are likely to reinforce nationalistic
discourse and challenge the effectiveness and legitimacy of measures aimed at
further deepening. This will have an impact on the functioning of the European
Union and the Commission should not be caught unprepared.
Key priorities for the next Commission
Return to a ‘non-political’ Commission in the area of economic policy: the
exercise of discretion in the application of the Treaty on fiscal rules has
been detrimental to the credibility of the Commission and weakened its
position vis-à-vis the Council
Refocus effort: not enough attention is being devoted to identifying the
roots of emerging divides between member states
Deliver the missing elements of economic governance reform: completion
of the banking union and creation of a euro area budget
References
Alcidi, C. (2019), “Economic Integration and Income Convergence in the EU”,
Intereconomics, Vol. 54, No. 1, January/February.
European Commission (2019), “Towards a more efficient and democratic
decision making in EU tax policy”, COM(2019) 8 final, 15 January.
Four Presidents’ report (2012), “Towards a Genuine Economic and Monetary
Union”, 5 December (https://www.consilium.europa.eu/media/23818/
134069.pdf).
Five Presidents’ report (2015), “Deepening Europe’s Economic and Monetary
Union”, 22 June (https://ec.europa.eu/commission/sites/beta-political/
files/5-presidents-report_en.pdf).
Meseberg Declaration (2018), “Renewing Europe’s Promises of Security and
Prosperity”, 19 June (https://archiv.bundesregierung.de/archiv-de/
meta/startseite/meseberg-declaration-1140806).
FINANCE FOR SUSTAINABLE GROWTH
The financial system, acting as intermediary between savers and borrowers,
investors and entrepreneurs, sellers and consumers, plays a pivotal role in the
functioning of the EU economy. The development of financial markets and
institutions can therefore be a significant factor in inclusive and sustainable
economic growth. However, this not only requires a partial shift in policies, but
also in the way these rules are determined to take into consideration the
increasing complexity and ever more rapid changes in financial sectors and
society.
In general, policies to develop the EU financial system further should
focus more on access and efficiency than on deepening (increasing its size).
According to the latest research, increasing the size of developed financial
systems adds little to economic growth, but can
make the system more fragile as was
Policies to develop the
demonstrated by the 2007-09 global financial
EU financial system
and 2010-12 Eurozone economic crises. Looking
further should focus more
at the size of the financial systems in the EU, the
on access and efficiency
member states in the west and north have
than on deepening.
significantly larger financial systems than those
in the east and some in the south. The latter would therefore be better served by
a deepening of their financial system than the former, which are better served
by measures focusing on efficiency and access. Ongoing digital transformation
and climate change actions might work as a catalyst in this respect, while Brexit
constitutes a serious obstacle to financial development.
In the aftermath of the financial and economic crises, many measures were
introduced to make the EU financial system safer and more resilient. During the
Juncker Commission the focus on the one hand was on completing these
measures such as the Banking Union, and on the other to contribute to economic
growth and job creation for instance by the launch of the Capital Markets Union
(CMU). In this way, the finance agenda contributed to three out of the ten
priorities of the Juncker Commission: a new boost for jobs, growth and
investment (Priority 1); a deeper and fairer internal market with a strengthened
industrial base (Priority 4); and a deeper and fairer economic and monetary
union (Priority 5).
| 63
64 | FINANCE FOR SUSTAINABLE GROWTH
Figure 1. Size of the financial sector as share of GDP (end-2017)
P 1000
D
Equity markets
f G
o
Debt securities
% 800
Bank assets
600
400
200
0
LU
UK
NL
DK
SE
FR
MT
ES
CY
BE
IE
AT
FI
PT
DE
IT
CZ
HR
GR
HU
PL
SI
BG
SK
LV
EE
LT
RO
Note: No comparable information on debt securities issued was available for Romania.
Source: AMECO (2018), BIS (2018), ECB (2018) and ECMI Statistical Package (2018).
The following sections will discuss both the main initiatives that the
European Commission has taken in the area of finance during the Juncker
Commission as well as recommendations for the new Commission.
Completing the Banking Union
The Banking Union was initiated in 2012 in response to the economic crisis in
order to break the sovereign bank nexus. During the financial and economic
crises governments and central banks injected roughly €2,500 billion into
Eurozone banks to avoid destabilisation of the financial system (De Groen,
2018). Part of the funds were to cover the losses on government exposures. In
turn, the funds required for the banking system in Cyprus, Greece, Ireland,
Spain and Portugal, and their economic and fiscal situation, pushed Eurozone
countries to lend almost €300 billion to these countries.
The Banking Union is supposed to avoid Eurozone banks requiring
government funds. To achieve this, the supervision and resolution of
systemically important banks has been moved to the Eurozone level – with the
ECB responsible for supervision and the SRB for resolution of these banks. The
Commission intends to complete this with a deposit insurance. In recent years;
the Commission has come up with several proposals to establish a Eurozone
Deposit Insurance Scheme (EDIS), but despite efforts to reduce the risks in the
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 65
banking sector, there seems insufficient political support from member states for
the proposed forms of EDIS. The potential mutualisation of losses appears to be
the main reason why member states oppose EDIS. Given the importance for the
functioning of the Eurozone financial crisis management framework,
alternatives such as a re-insurance scheme should be considered going forward
(Gros, 2015).
In addition, bank failures since the establishment of the resolution
mechanism and several analytical reports have exposed some shortcomings of
the resolution mechanism. In particular, the resolution mechanism was
circumvented several times. Instead of the resolution mechanism, precautionary
recapitalisation and insolvency regimes were used, which allowed governments
to inject funds in failing banks (De Groen, 2017). Moreover, although discussions
in the Council have made progress, there is still no final agreement on a backstop
for the resolution fund or on liquidity for resolution, which limits the Single
Resolution Board’s capacity for orderly resolving banks.
Finally, a completed Banking Union should indeed avoid governments
being required to bail-out their banks. However, the reverse relation –
governments causing losses for banks – has not been addressed effectively. The
exemption from the large exposure requirement for banks holding government
bonds and zero risk weight for government bonds should be reconsidered to
reduce the home bias in bond holdings as well as the potential destabilisation of
banks due to failing governments (De Groen, 2015).
Creating a true Capital Markets Union
The development of deep and liquid capital markets should provide SMEs in
particular and other businesses an alternative to the currently dominant bank
financing as well as facilitate private risk-sharing (Valiante, 2016). The need for
the development of EU capital markets increased during the Juncker
Commission with the announcement of the UK’s departure, as it currently hosts
the largest EU capital market. The UK has a particularly important role in the
derivatives market, which led the Commission to launch a proposal covering
derivatives clearing in third countries.
In total the CMU action plan included 13 legislative proposals, excluding
the three legislative proposals related to sustainable finance. Although all the
proposals initially foreseen have been published by the Commission, only the
three proposals related to venture capital, securitisation and the prospectus
directive have been adopted. The other proposals covering new products and
services (pensions, covered bonds, crowdfunding, and collective investment
funds), prudential rules (OTC derivatives traders, investment firms, SME
accessing growth markets, second chance measures, cross-border claims and
66 | FINANCE FOR SUSTAINABLE GROWTH
taxation) as well as market supervision and resolution (European supervisory
authorities, central counterparties) are still being discussed by the Parliament
and Council.
Overall, CMU did not have a meaningful impact on the growth of market
financing in Europe. Bank financing remains by far the preferred source of
external finance, even at a higher cost. More
The European capital
therefore needs be done to tackle the bias towards
markets programme
debt financing, in regulation, perceptions, tax
should be fundamentally
systems and the policy debate. Debt financing is
revised after an extensive
not suited to start-ups and high-growth
assessment of the options.
companies – only equity financing can provide
what is needed. The European capital markets
programme should therefore be fundamentally revised after an extensive
assessment of the options.
Promoting sustainable finance
Europe aims to be at the forefront of international efforts to deliver on the UN
2030 Agenda and Sustainable Development Goals and the Paris Climate
Agreement (see the chapter “2030 Agenda: Time to Walk the Talk”). In the
context of the CMU, the Commission has committed to unlocking the full
potential of public and private investment to support the transition towards a
low-carbon, circular and resource-efficient economy. The three packages
launched so far include: i) a taxonomy for environmental sustainability of
investment instruments; ii) rules on disclosure of sustainability risks; and, iii)
minimum standards for low-carbon benchmarks.
But more will need to be done to mainstream sustainable investments. It
is often argued that current market prices do not accurately reflect
environmental and social externalities because of the failure to put in place
adequate market mechanisms, regulations, taxation or other policies. The
integration of Environmental, Social and Governance (ESG) factors would
improve the inclusion of these externalities. For this, a workable, flexible and
dynamic taxonomy should be developed for integration in investment and
advisory processes.
The use of financial legislation to provide incentives or disincentives for
investments deemed sustainable or not should be exercised with caution. For
example, lowering the risk weights for the calibration of bank capital
requirements or the capital charges for insurance companies’ solvency position
based on a newly developed EU taxonomy on sustainable activities must have a
sound prudential basis. This is essential in order to avoid misallocation of
resources.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 67
Large companies tend to report more comprehensive ESG metrics and
therefore dominate the portfolio of sustainable investment portfolios. However,
when it comes to access to sustainable assets/products, a priority should be to
ensure that other important economic actors such as SMEs and innovative,
growth companies are also well represented in the portfolios. Moreover, the
investment products should be available to both high net worth individuals,
institutional investors and retail investors (Amariei, 2018).
Ongoing digital transformation
Fundamental change is ongoing on the tech side, which provides both
opportunities and threats to the financial system. The precise implications of
technical developments are difficult to predict, but they are affecting all aspects
of the market, from retail to wholesale, the entire value chain, products and
processes. In essence, digitalisation will give financial service providers the
opportunity to reduce costs and improve intermediation, thereby promoting
more accessible and efficient financial markets (CEPS, UCC and LIST, 2016).
In turn, technical developments are also creating some challenges.
Financial services are heavily regulated, which limits the possibility for
newcomers to enter the market. This raises the fundamental question whether
the level playing field should be based on the activities or the level of risks
involved. A more proportional approach (‘same risks-same rules’ level playing
field) could spur innovation and new entrants. However, to avoid malpractice
and potential destabilisation the new or changing providers, products and
services should be closely monitored.
Moreover, digital transformation brings specific challenges. Providers
can, for example, be based in faraway jurisdictions, subject to different rules, but
without the user realising and the supervisor controlling. The dependence on IT
also raises fundamental issues for the cybersecurity of networks (Lannoo, 2018).
Integrational considerations
A large share of EU financial legislation has its origin in international bodies.
The EU and several individual member states participating in the Financial
Stability Board have committed to implementing the main international
standards and codes as well as participating in peer reviews. In the aftermath of
the global financial crisis, many international initiatives focused on making
systemic banks in general and globally systemically important banks in
particular more resilient. Almost all of the standards and codes agreed in the
aftermath of the financial crisis have been adopted and are currently or have
been implemented in the EU.
68 | FINANCE FOR SUSTAINABLE GROWTH
The finalised Basel III reforms agreed at the end of 2018 remain the main
standards that still need to be transposed in the EU. Basel standards are mainly
designed for internationally active banks, but are traditionally applied to all
banks in the EU. Taking into consideration the different role that these banks
play in the financial system and the distinction that has already between made
between the supervision of significant and less significant banks in the
Eurozone, it should be assessed whether a simplified regime for less significant
banks would not be more appropriate, allowing these mostly retail banks to
focus on lending to the real economy.
The reforms in the aftermath of the financial crisis have contributed to the
harmonisation of financial services legislation and coordination between
supervisors across the EU. The supervision of credit rating agencies and trade
repositories has even been concentrated within the European Securities Markets
Authority (ESMA). Within the Eurozone the supervision of significant banks
and the resolution of significant and cross-border banks are also now
concentrated within the Single Supervisory Mechanism and Single Resolution
Mechanism respectively. However, cross-border activities remain limited. This
is partially explained by the large differences between member states in
consumer protection rules, anti-money laundering implementation, non-
financial legislation (accounting, insolvency, taxation, etc.) and different market
practices.
Institutional considerations
The change in policymaking procedure due to the new Commission structure
with cross-cutting Vice-Presidents has had limited impact on financial services
legislation. Jonathan Hill was Commissioner responsible for financial stability,
financial services and CMU from November 2014 until he stepped down in June
2016, after the UK decided to leave the EU. Hill’s responsibilities were taken over
by Vice-President Valdis Dombrovskis, which has not led to any notable
adjustments to the financial services agenda.
The institutional framework for financial services has, however, changed
drastically in the aftermath of the financial crisis. At EU level, the European
Supervisory Authorities were established. They are primarily responsible for
promoting supervisory convergence and coordination as well as the preparation
of technical standards and guidelines. In addition, the European Systemic Risk
Board is responsible for the coordination of macro-prudential policies.
Although the ESAs have independent chairpersons most of the decision-
making power is with the board of supervisors, in which national supervisors
have nearly all the votes. This significant role for national supervisors in
decision-making increases red tape. Empowering the chairperson could
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 69
contribute to making the authorities more effective as well as potentially giving
them a more prominent role in the legislative process (Lamandini, 2018).
Figure 2. EU financial institutional framework
Source: Authors’ elaborations.
Financial legislation is becoming increasingly complex and prescriptive.
Policymakers and Members of the European Parliament are regularly indicating
that they are no longer able to assess the appropriateness of the legislation.
70 | FINANCE FOR SUSTAINABLE GROWTH
Moreover, the legislative cycle easily takes a couple of years, whereas the sector
is changing at an ever faster pace. This requires a legislative procedure that
allows for swifter changes and more coordination between policy areas.
Legislation at a higher level (more principle-based and coherent across policy
areas) complemented by technical standards that can be changed more easily
should allow for faster policy responses and leverage the technical expertise that
is available within the ESAs in preparing the standards.
Key priorities for the next Commission
Complete the Banking Union
Create a true Capital Markets Union
Empower European supervisory authorities
References
Amariei, C. (2018), “Enabling Sustainable Savings and Investment Channels in
Europe: Opportunities and Challenges”, 3rd Interim Report of the CEPS-
ECMI Task Force on Asset Allocation in Europe, Brussels: ECMI.
CEPS, UCC, LIST (2016), Study on the role of digitalisation and innovation in
creating a true single market for retail financial services and insurance,
European Commission Directorate-General for Financial Stability,
Financial Services and Capital Markets Union.
De Groen, W.P. (2015), “The ECB’s QE: Time to break the doom loop between
banks and their governments”, CEPS Policy Brief, CEPS, Brussels, 13
March.
De Groen, W.P. (2017), “The provision of critical functions at global, national or
regional level, In-Depth Analysis”, European Parliament, Brussels.
De Groen, W.P. (2018), “Financing bank resolution: An alternative solution for
arranging the liquidity required, In-Depth Analysis”, European
Parliament, Brussels.
Gros, D. (2015), “Completing the Banking Union: Deposit Insurance”, CEPS
Policy Brief No. 335, CEPS, Brussels, December.
Lamandini, M. (2018), “A supervisory architecture fit for CMU: Aiming at a
moving target?”, ECMI Commentary, ECMI, Brussels, 9 August.
Lannoo, K. (2018), “Cyber finance challenges demand a unified response, CEPS
Policy Insights”, CEPS, Brussels, 25 October.
Valiante, D. (2016),
Europe's Untapped Capital Market: Rethinking integration after
the great financial crisis,
Brussels/London: CEPS/Rowman & Littlefield
International.
THE SINGLE MARKET:
WORKHORSE FOR EU PROSPERITY
The Juncker Commission structured its agenda into ten priorities with simple,
presumably attractive titles. Whether this approach has been good for
developing and modernising the single market is less than clear. What it boiled
down to was a fragmented presentation of the single market into a few ‘unions’
and other ‘packages’ in an attempt to obtain an easier ‘sell’ to the press and
citizens. This way, it was hoped, the crucial aspects of the single market that
require a higher profile and top-level political attention would be able to forge
ahead. The all too convenient assumption behind this strategy was that the more
‘classical’ single market was largely
completed and, in any event, less
The economic case to go for an
urgently in need of the attention of high-
ambitious single market
level EU decision-makers. Yet, the
strategy is strong – with
economic case to go for an ambitious
estimated gains of up to 10% of
single market strategy is strong – with
EU GDP or more – and also
estimated gains of up to 10% of EU GDP
crucial dynamically, in light of
or more – and also crucial dynamically,
opportunities with new
in light of opportunities with new
technologies and digitalisation.
technologies and digitalisation.
A commendable innovation of the then new Commission is that teams of
Commissioners are active on specific strategies. No silos anymore. For the single
market, permeating policy work in many DGs, this is a most welcome
development.
The multi-labels single market
The present European Commission attempted to reframe and politically
‘unbundle’ the single market. The motive behind this attempt is entirely
understandable. ‘The’ single market is so incredibly comprehensive and multi-
faceted, with so many highly specialised horizontal and sectoral refinements,
that it is plainly impossible to handle ‘it’ in a practical way. It takes a series of
Commission DGs and a range of EP committees in order to comprehend what is
| 71
72 | THE SINGLE MARKET: WORKHORSE FOR EU PROSPERITY
going on. The best demonstration of the enormity of addressing ‘the’ single
market was the 2010 Monti report that brought together a very broad spectrum
of issues, often with a degree of technicality, but which had, unfortunately, not
anywhere near the impact it fully deserved. And which the EU deserved. ‘The’
single market either risks being dealt with by slogans and ‘
obligatoire’ promises
by the European Council, both of little help, or, one ends up with an impossible
Monti-plus type agenda unlikely to generate appeal and progress. The Juncker
approach is one response to this perverse reality: the hard core of European
integration is a hard sell, and yet everybody is in some general sense in favour.
It seemed easier to invent appealing labels for areas where specific needs
could be identified, all with some degree of urgency. First, the term ‘union’ was
utilised for three such areas: the banking union, the capital markets union and
the energy union. The banking union is nothing more or less than the single
market for banking services. The crucial difference with most other areas
consists in the nature and extent of ‘positive integration’ needed for the single
market for banking services to function properly: common agencies and other
bodies with supranational powers and large funds for bank resolution and
financial stability. The urgency arose from the profound financial crisis in the
EU. A number of hastily tightened directives or additional ones had already
been drafted or even enacted before the term ‘banking union’ appeared. The
single market for financial services had witnessed three regimes over time,19 but
had never addressed two taboos: on the one hand, effective bank supervision at
EU level (with the ‘fiscal capacity’ at EU level to decide on and execute bank
resolution promptly) and, on the other hand, the links between the
(macro)prudential banking regime and financial stability in the euro area.
Labelling the set of challenges to the single market for financial services as the
‘banking union’ enabled the more EMU-related aspects of the banking regime
(for short, financial stability) to be linked directly with the more traditional
internal-market-related aspects (for short, risk regulation underpinning the trust
in banks). The banking union is now functioning, a remarkable achievement
given the old taboos, although it awaits further deepening for the sake of its
resilience (see the chapters “Economic Governance and Economic Policy” and
“Finance for Sustainable Growth”).
The capital markets union is in a different class. In conventional single
market terms, capital markets in the EU do not present a lot of lingering barriers
to free capital movement. Rather, the capital markets union has another distinct
motive, namely, to increase significantly the reliance of private firms (and
especially SMEs) on equity capital and away from an overdependence on bank-
19 In the early 1980s, in the EC-1992 period (with the 1989 second banking directive as the
pivot) and in the period 1999-2005.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 73
financed capital. This motive is macro-economic and relates to the proper
functioning of EMU. When comparing US and EU reliance on private versus
public risk-sharing (Nikolov, 2017), the US private sector relies far more on
private capital than the eurozone, and thereby improves its resilience during
crises, including a swifter return to the trend growth path. It also helps healthy
SMEs to have access to finance when banks are struggling to survive. In single
market terms, the capital markets union constitutes a structural reform of
European capital markets and the underlying regulatory framework at member
state and EU levels. But the limited readiness of member states to reform
domestic laws – without a treaty obligation – has proven to be a serious
hindrance so far (see the chapter “Finance for Sustainable Growth”).
The energy union is both a relabelling of the single market for energy and
a coupling of energy markets with a more ambitious EU climate strategy.
Therefore, it does address classical single market barriers and less conventional
ones like the huge investment requirements in e.g. interconnectors, allowing
more effective coupling of national energy markets, but its complications derive
in particular from the combination with climate strategies. One prominent sign
is the composition of a monthly gas and electricity bill for households or
industry. Precisely when, slowly but steadily, the European wholesale energy
markets are beginning to look like a single market with converging prices (e.g.
in hubs), a range of national taxes (network charges, VAT, Renewables [RES]
charges) cause large disparities in the effective market prices for users and
consumers. Another very problematic distortion consisted in the derogation of
national RES subsidies from the regular EU state aid regime, with the
consequence that enormous amounts of RES subsidies (some €65 billion in 2016)
generated costly direct distortions,20 as well as indirect distortions such as
sponsoring the build-up of a competitive wind industry in a few EU countries.
Given the ever more ambitious EU climate strategy, the energy union will also
have to govern the transformation to a new EU energy system (see the chapter
“Redefining the Energy Union”).
Second, the single market perspective of the Juncker Commission
favoured the pursuit of
sectoral ‘packages’. The most impressive of these is the
‘digital single market’ (DSM), a much better label than the 2010 Digital Agenda,
with a much more structured approach and (rightly) a greater sense of urgency.
The DSM has classical single market barriers to be removed or overcome and
considerable progress has been made. One particularly difficult barrier is the
flaw in EU law (ever since the Rome treaty) affirming copyright to be national,
not EU-wide, not even in a parallel regime. The reference to the Berne
20 With huge losses on e.g. state-of-the-art gas turbines or their mothballing despite being
brand new.
74 | THE SINGLE MARKET: WORKHORSE FOR EU PROSPERITY
Convention, based on national copyright, is of course at best a weak excuse. The
Union has EU trademarks and a near-EU-wide Uniform Patent; there is no good
reason to hold on solely to national copyright. Business models in e.g.
audiovisual services, streaming, etc. are virtually all based on exploiting the
national borders inside the EU21 and hence fiercely resisting the single digital
market. The DSM would greatly benefit (and e.g. start-ups within it) if this flaw
could be repaired; during the Juncker Commission, the much discussed geo-
blocking directive shows how artificial and piecemeal the DSM risks being if it
is not (see the chapter “Digital Economy, Industry and Innovation”).
Another important package is found in ‘mobility’ – in fact the various
modes of transport. For road and related issues, three successive mobility
packages were introduced, updating EU regulatory provisions but also funding
options (especially for infrastructure) and the preparation of automated mobility
(e.g. standards, etc.) as well as storage (in the light of electric driving on a large
scale). In addition, there was a long-term ‘track’ for rail with successive
initiatives already more than one decade ago22 and the nine promising European
freight rail corridors, both north-south and east-west, which have been
operating for a few years. The 4th railway package23 was enacted in two steps in
2016, a significant success in the initially so inward-looking and rigid rail sector.
The Connected Europe Facility has enabled a significant increase in
infrastructure funding for rail, the ‘last mile’ links with industrial centres and
with ports. In maritime transport, progress (if not a breakthrough) was
accomplished in the EU ports policy, in terms of social dialogue, users’ influence
and – especially – the 2017 regulation.24
Yet another ‘package’ proposed was concerned with the ‘circular
economy’, inevitably linked with the single market too and discussed elsewhere
in this volume (see the chapters “Redefining the Energy Union” and “2030
Agenda: Time to Walk the Talk”).
21 Companies maximising profits by means of 3rd degree (i.e. geographical) price
discrimination, going against all that a single market stands for.
22 Culminating in the 4th rail package, enacted finally in 2016.
23 With a technical pillar and a market pillar.
24 Regulation 2017/352 establishing a framework for the provision of port services and
common rules on the financial transparency of ports. Readers might remember that a decade
ago a draft directive on port services induced fierce protests from a small but militant group
of port workers from certain harbours. When the European Parliament debated the directive
in Strasbourg, violent protests led to widespread destruction of street lights, road signs and
numerous windows as well as aggression against MEPs and the police. The EP then
suspended the debate on the draft directive.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 75
The classical single market as Cinderella?
The classical single market seemed to have been lost during the first years of the
Juncker Commission. The ‘classical’ single market can be defined as the
combination of the free movements, the right of establishment (negative
integration) and the appropriate and proportionate regulation and/or common
policies and common institutions (positive integration) yielding the proper
functioning of the single market. The proper functioning generates static and
dynamic economic benefits supporting (additional) EU economic prosperity.
This generic definition applies to all single market activity, also the policy
domains with new, attractive labels. Nevertheless, outside these domains with
specific needs and urgency, the classical single market was at first only
mentioned in passing when the ten priorities were announced. As a result, it
proved cumbersome to acquire genuine political attention for what were and to
some extent still are crucial aspects of the single market, in particular by member
states in Council and at home. The most prominent attempt to repair this error
consisted in the 2015 Single Market Strategy,25 which looked a lot like typical
single market ‘strategies’ of previous Commissions (with e.g. Barnier and
Bolkestein, respectively, in the lead). By addressing the problems of the
‘collaborative economy’, a mini-package on SMEs and start-ups, a renewed
attempt to re-invigorate the single services market, trying to tackle the barriers
in retail, fixing geo-blocking, modernising the
standards system (a few years after the last
It has been hard to avoid
modernisation), further improvements in
or pre-empt the drawbacks
public procurement, some further work on IPR
of the Commission’s
(whilst still waiting for the Unitary Patent and
splintered approach.
its Court to finally come into force), pursuing a
‘culture of compliance and smart enforcement’ and reforming the mutual
recognition directive, it has been hard to avoid or pre-empt the drawbacks of the
splintered approach.
The need for effective and intrusive implementation and enforcement
strategies in several areas is beyond any doubt, however such ‘strategies’
unfortunately have little political appeal although lip-service is paid to them.
The worst case was the emphasis on the single market for services, shared in
words by the Council and the EP on many occasions. Upon closer scrutiny of the
services strategy, with implementation of the huge services directive as critical,
one can summarise the development as follows: enormous efforts by the
25 See COM (2015)550 of 28 October 2015, Upgrading the single market: more opportunities
for people and business; and a host of related documents.
76 | THE SINGLE MARKET: WORKHORSE FOR EU PROSPERITY
Commission in several ways,26 some selective encouragement by the EP (which
has of course only an indirect and distant role to play in implementation) and a
hesitant if not recalcitrant Council or a majority of it.
Besides services, the EU improved the system of market surveillance in
goods, completed the formidable task of implementing REACH (even with
respect to SMEs) after 11 years and adopted the General Data Protection
Regulation.
A competitive single market for consumers and all of business
It should never be forgotten that the quality of the single market is largely
determined by how competitive it is. The overriding motive to enjoy a ‘common
market’ is that it can generate economic gains beyond those of trading in a WTO-
type group of countries. But these economic gains presume a competitive
market. And 60 years of EU competition policy has yielded overwhelming
evidence of the serious and permanent need for a powerful mechanism ensuring
competitive markets in the EU for consumers and
Despite discussions about
for all businesses, big or small. Despite
what has priority, it is
discussions about what has priority, it is striking
striking time and again
time and again that much of EU competition
that much of EU
policy remains the same and for good reasons.
competition policy
This has been true of cases over the last five years:
remains the same and for
cartels of truck companies and in the derivatives
good reasons.
trade; pre-emptive action (removing rail track) to
disable a competitor in freight rail in Latvia;
highly selective tax advantages for just a few firms or only one (in secret rulings)
in Ireland, Luxembourg and the Netherlands; excessive pricing (a judgment
often seen by competition lawyers as hard to ‘prove’) in post-patent medicines;
26 After the 2011 report on the mutual evaluation of the Services directive, the Commission
followed up on the ‘unfinished business’ of implementation (e.g. on legal form, cross-border
insurance, etc.), persuaded member states to engage in a Mutual Evaluation of 2 years (!) on
the professional qualifications regulation, which yielded rather little, and insisted on the
proper application of proportionality (a legal requirement in the Professional Qualifications
directive) for all national regulated professions (for all EU countries, some 5,500 applications),
the disappointment about which was underpinned by a most revealing Commission
publication setting out the problematic tests by the member states, culminating eventually in
the 2018 Proportionality directive – yet, even this careful bottom-up approach and the
balanced directive continued to be resisted by a minority of member states. The Court of
Auditors insisted in a 2016 report on the implementation of the Services directive that the
Commission be more determined in enforcement via infringement procedures. However, this
firmness is not a priori sensible: it would probably have caused a lot of friction rather than
more single market.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 77
rebates given by a dominant firm that are so advantageous that even Intel cannot
break into the market; a search engine of a highly dominant internet platform
player that systematically manoeuvres the comparison shopping products of
competitors to (say) page 4 and thereby advantages its own.
Plus ça change…
Here we have a policy where innovation and change should not be overrated –
much of what is in place needs to be executed well and that is meritorious for a
competitive single market.
Nevertheless, EU competition policy is facing profound challenges. Some
internet firms have undergone such phenomenal change in only a few years that
‘winner takes all’ properties are suspected. With such dominance in place, one
can expect to see anti-competitive behaviour emerge that ought to be corrected
or even nipped in the bud. The theory is that such innovative firms will stay on
their toes because of potential competition, perhaps via disruptive innovation
by new entrants. It is a possibility, but not universally the case; moreover, if that
is the remedy, new entrants and young firms scaling up must be protected
actively against takeovers, notably by the dominant company, in order to protect
what competition is all about: the competition process itself. And consumers
who should, rightly, count on EU and national competition policy to ensure that
markets work for them. And possibly smaller firms if and only if that is essential
for the competitive process to work well, for instance by means of sustained
innovation or the development of other business models. The ‘big’ competition
cases of the last few years, such as Google, Intel and Qualcomm, together with
some new EU regulation (e.g. on geo-blocking, data protection, etc.) might not
be sufficient to ensure that digital platforms and internet companies do not drift
ever further towards dominance. The consumer benefits of effective platforms
are clear and well-recognised, yet so are the drawbacks. The question is whether
the EU has the right, yet proportionate answer to such developments.
Another issue arose during the Juncker Commission: that of ‘fairness’. It
is likely that Juncker has pushed fairness and equal treatment at the level of
citizens and consumers in a reaction to the observations of many citizens (and
some populist political parties) to the perceived privileges of rescued banks,
with the subsequent budget cuts and lower public investments hitting the
ordinary citizen, and the tax avoidance of some multinationals. As the following
section emphasises, even the single market is now presented as (more) ‘fair’. The
term ‘fair’ has also popped up in much of what this Commission has pursued,
whether in labour and social policies, consumer protection policies but also in
EU competition policy. Commissioner Vestager has used the term repeatedly,
claiming that ‘fairness’ was always in the DNA of competition policy. She rightly
claims that competition policy should ultimately be good for consumers. But
should it pursue that aim directly – implying greater interventionism via
regulation, for instance – or by means of protecting the competitive process,
78 | THE SINGLE MARKET: WORKHORSE FOR EU PROSPERITY
counting on properly functioning markets to take care of the consumer? And in
protecting the consumer via competition policy, how much priority is still given
to ‘efficiency’, whether static or dynamic? Such an approach to competition
policy also quickly slips into ‘fairness’ between businesses, say with unequal
bargaining power, such as is the case with unfair business practices or the 2018
platform-to-business proposal, instances where competition policy cannot easily
be invoked. There is also the risk of economic dependence for (say) SMEs in need
of large counterparties for effective entry to be feasible. It is suggested that the
new Commission undertake a major investigation of whether the imbalance of
bargaining power is becoming a structural issue in the single (digitalised)
market. The new market dynamics might well call for a refinement of relevant
market definitions, the identification of dominance, the finding of abuse and a
set of reasonable remedies. This ought to be accompanied by an extension of the
enforcement powers of DG COMP towards such practices.
A ‘fair’ single market
A properly functioning single market may well accentuate adjustment
pressures, that is, adjustment of workers, firms and regions. Ideally, a ‘fair’
single market should convincingly address the temporary costs of adjustment at
both levels of government whilst providing new perspectives for temporary
losers. One should neither underplay nor overplay the recognition of ‘losers’.
Not underplay it, because adjustment might coincide with a downturn of the
economy, making it very difficult to find alternative employment without
relocation (which is often unattractive because of social and cultural ties). Job
losses from a deeper single market sharpening competition and from a single
market more open to the world can be concentrated in specific ‘low potential’
regions (World Bank 2018), rendering adjustment more difficult still as
promising sectors might be lacking in that region and workers might be trapped
as houses can only be sold with a capital loss. Not overplay it either, because
adjustment occurs in any market economy for a host of reasons, and the single
market is only one of them. Moreover, adjustment is intrinsically harder in EU
countries that are lagging behind in the upskilling and upgrading of their labour
force. This is because the comparative advantages of the EU in a globalised
world economy tend to reward skilled workers more, as they are structurally in
demand, than their low-skilled counterparts. Countries like Italy, Portugal and
some others still have relatively large shares of low-skilled workers and the best
policy is to focus on this weakness with gusto. Besides these fundamentals, a
fairer single market is also about abuse of mobile workers, be they migrants
inside the EU or posted workers due to sloppy enforcement and weaknesses in
some directives. Such abuse has undermined or at least weakened the legitimacy
of the single market for many workers.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 79
The Juncker Commission has attempted to give greater priority to social
aspects, hence to a fairer single market. In so doing, it has combined symbolic
approaches (the reforms of the Social Fund and the Global Adjustment Fund, as
well as the European Pillar of Social Rights, largely a matter for member states)
and enforceable improvements of EU regulation for mobile workers27 (see the
chapter “Labour Market and Social Policy”).
Challenges for the new European Commission
The single market enjoys high approval rates amongst European citizens and
this might well remain a stable rating now that some social defects in labour and
services regulation and supervision have been addressed. Brexit has
demonstrated more effectively than in any other imaginable way how crucial
the single market is for European integration. Nonetheless, deep suspicions
linger and mellow only slowly. As Stefano Micossi noted a few years ago,
“Globalisation, technological change and the financial crises have impoverished
the working classes and seemingly drained all appetite for further market
opening” (Micossi, 2016, 34). However, it is precisely the single market that can
be a source or at least an important condition of sustained economic growth in
Europe. An interesting estimate by the EP Costs-of-Non-Europe project is that
the economic potential of ‘deepening’ the single market – i.e. overcoming market
integration ‘deficits’ – amounts to roughly 9% of EU GDP.28 The EU’s more
ambitious investment agenda, complementary to the single market, should be
of some help as well.
The best option for the new Commission is to give justified and
unwavering priority to the single market in all its dimensions. That is, to a
deeper and ‘fair’ single market, with no automatic primacy for the economic
dimension above the social dimension. In both dimensions, the single market is
far more of a matter for member states than they have admitted so far. The old
dictum that the Commission proposes and the EU legislator (including the
Council) disposes does not at all properly reflect the requirements for effective
27 In particular, the enforcement directive for posted workers (2014) and a revision of the
posted workers directive (2018) based on the ‘same wages for the same work in the same site’,
a breakthrough helped by renewed economic convergence between East and West in the
Union, two CJEU cases and several national court cases on post-box companies prohibiting
the very low wages for workers from Central Europe in Germany, Belgium and the
Netherlands, and ordering compensation for the workers).
28 Mapping the Costs-of-Non-Europe, 4th edition, December 2017. Taking only the single
market aspects, one finds €1,280bn, which amounts to 9% of EU GDP for 2016. See
www.europarl.europa.eu/RegData/etudes/STUD/2017/603239/EPRS_STU(2017)603239_E
N.pdf
80 | THE SINGLE MARKET: WORKHORSE FOR EU PROSPERITY
progress on the single market. The inconvenient truth is that – for single market
purposes – member states have first to significantly improve domestic
‘governance’,29 and promote and credibly enforce the single market at home
(Pelkmans, 2016). Member states need to accept
The inconvenient truth is
fully that the indispensable deepening of the
that – for single market
single services market cannot possibly be
purposes – member states
achieved by purely EU-level measures, without
have first to significantly
significant regulatory and other reforms at
improve domestic
home. The social aspects of a ‘fair’ single market
‘governance’ and promote
can, more-often-than-not, be best addressed at
and credibly enforce the
national level because that is where social and
single market at home.
labour powers are found.
The reform of the single services market is
a priority. The European economy is a service economy and the EU’s future
economic growth cannot be raised by focusing solely on goods, even if there are
lingering issues in that area. Indeed, goods exported by EU countries easily
incorporate some 30% of in-house services and procured services, in particular
in European value-chains. This shows that today’s competitiveness of European
enterprises hinges on a competitive single services market as well as on least-
restrictive30 services regulation at home, minimising the negative cost spill-overs
in forward linkages. The new Commission might seek a genuine ‘single-market
compact’ with member states in order to engage in a credible pursuit of a deeper
EU services market.
Another critical priority is the DSM, in combination with policies on new
and emerging technologies. The rationale consists of the urgent need to remove
lingering barriers to upscaling and belated consolidation of eComms and
audiovisual businesses, and the opportunity to exploit a range of new
technologies that require a truly single market of continental size. This should
be considered in light of the potency of the Uniform Patent (following the
German constitutional court ruling, in the hope that this ultimate of endless
obstacles to the common patent will be eliminated) with all its advantages,31 as
a major incentive to innovate in the large EU market. This combination is not a
return to old-fashioned industrial policy but precisely an effective way to exploit
the continental size of the market in a dynamic fashion. Ideally, member states
also ought to try to tackle the regulatory heterogeneity at business regulation
29 In Micossi, op. cit., p. 31, who depicts the ‘quality of institutions’ with four indicators:
government effectiveness, control of corruption, rule of law and regulatory quality.
30 Least-restrictive, justified by market failures but proportionate (no more restrictive than
necessary).
31 Such as the slashed costs of the patent, the (almost) EU-wide automaticity of the patent and
the EU-wide enforcement, all three important benefits.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 81
level because this is another friction for SMEs and start-ups that considerably
hinders their development and causes some to relocate to the US (Spotify is a
salient example).
The test for member states will be whether they are capable of and
effective in assuming visible responsibility for the single market, indeed,
‘ownership’ for delivery. In such a setting, an activist Commission can rightly
be ambitious.
Key priorities for the next Commission
Develop a deeper and ‘fair’ single market in an even-handed and
comprehensive manner
Support member states in improving domestic governance, promotion and
enforcement of the single market
Reform the single services market
References
Kalff, D. and A. Renda (2019),
Hidden Treasures. Mapping Europe’s Sources of
Competitive Advantage in Doing Business, CEPS Paperback, CEPS, Brussels,
Micossi, S. (2016), “30 Years of the European Single Market”, College of Europe
Bruges, BEEP Briefings 41/2016.
Nikolov, P. (2017), “Cross-border Risk Sharing after Asymmetric Shocks:
Evidence from the eurozone and the US”,
Quarterly Report on the Euro Area,
Vol. 15/2, 7-18.
Pelkmans, J. (2016), “What Strategy for a Genuine Single Market?”, CEPS Special
Report No. 126, CEPS, Brussels.
World Bank (2018), “Growing United, Upgrading Europe’s Convergence
Machine”, Washington DC.
DIGITAL ECONOMY,
INDUSTRY AND INNOVATION
The future of Europe is deeply connected to the future of European industrial
innovation and the latter is fundamentally dependent on digitisation. The
Digital Single Market (DSM) and the need for growth, jobs and investment
featured prominently among the ten priorities set by President Juncker at the
beginning of his mandate. Today, synergies and interrelations between these
areas have led to an emerging need for a common strategy on industrial
transformation and digitisation, in which the DSM becomes a key cornerstone
of future EU industrial policy, thanks to initiatives such as Industry 4.0; and a
precondition for better innovation performance, also due to growing awareness
that it is not innovation but rather its diffusion that hampers Europe’s economic
performance. Ensuring sustainable industrial leadership in the EU also means,
and requires, progressing on various Sustainable Development Goals, most
notably SDG 8 (decent work and economic
There is a need to
growth), SDG 9 (industry, innovation and
significantly strengthen
infrastructure) and indirectly all others. What
policy coherence and
emerges is the need to significantly strengthen
orchestrate multi-level
policy coherence and orchestrate multi-level
efforts, against a trend of
efforts, against a trend of ‘pre-emptive
‘pre-emptive legislation’.
legislation’, in which the Commission typically
takes action mainly to avoid national
governments adopting widely diverging policies (e.g. in digital taxation;
artificial intelligence; platform regulation, industrial internet, etc.).
The state of things: industrial policy and innovation
A strong industrial base is perceived as fundamental for Europe’s economic
recovery and competitiveness, and also for sustainable development. Industry
in Europe, whose value added makes up 17.3% of European GDP (2015), attracts
80% of private research and innovation, employs 23.6% of workers and, for each
additional job in manufacturing, creates 0.5-2 jobs in other sectors. Industry also
accounts for over 80% of Europe’s exports, generating a €365 billion surplus in
the trade of manufactured products. Moreover, the EU is a major producer of
82 |
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 83
new knowledge in Key Enabling Technologies (KETs): products based on
industrial biotechnology or advanced materials have higher technology content
than competing North American or East Asian products. This policy area will
be heavily affected in the years to come by emerging trends in global economic
governance, including the emerging new wave of protectionism in the US and
China. The future of European industry lies
inter alia in the relaunch and
coordination of industrial policy at the EU and national levels; in the timely and
effective digitisation of European industry sectors; the transition towards clean
energy; a more effective mix of policies and financial instruments under the
post-2020 Multi-Annual Financial Framework; the ability to promote disruptive
technologies and business models without being captured by the interests of
incumbents. In a nutshell, several policies are relevant for the future of European
Industry, and here we will only select a subset, which appear to be at once very
relevant, and not covered by other chapters in this report.
Europe’s innovation and entrepreneurship ecosystem is dominated by
SMEs, which represent the overwhelming majority (99%) of companies, and the
real engine of innovation. At the same time, Europe’s vibrant start-ups too often
find difficulties both at the launch stage, when the so-called ‘valley of death’
affects their potential for effectively deploying their business model; and later,
in the ‘scale-up’ phase, when they encounter difficulties in accessing the capital
and market opportunities they need in order to thrive in the EU single market
and at the global level. Many small companies in the EU struggle to
internationalise their business even with an open and fair trade framework in
place. Only 25% of EU-based SMEs export at all, and an even smaller portion
export beyond the EU. And in key sectors, there is at once a shortage of skills
and non-bank capital, which deprives European firms of some of the most
dynamic and emerging forms of access to capital, including crowdfunding and
more traditional forms of equity financing, such as venture capital. Finally, in
some cases the regulatory framework is insufficiently innovation friendly,
especially for SMEs. As a result, in many European countries productivity
growth is stagnating. A growing divide is observed in many sectors between
leading frontier firms, who are able to internationalise and catch up with
emerging technologies, and laggard (or ‘zombie’) firms, which survive in the
market but are unable to trigger desired productivity increases. This growing
divide also hides a growing inability of Europe to enable a ‘Darwinian’ selection
of the most efficient firms in the market, which ultimately harms economic
performance.
In the coming years, several policies may invert this trend if properly
implemented. First, the creation of the European Innovation Council (see below)
has the potential to help top companies scale up in the single market and
beyond, thanks for an innovative, excellence-based system for the selection of
84 | DIGITAL ECONOMY, INDUSTRY AND INNOVATION
most promising business plans. Second, the blending of financial instruments
and the launch of a more mission-oriented innovation policy promises to create
a better environment for smaller companies to contribute to emerging streams
of industrial policy at the EU level. Third, the Capital Markets Union promises
to complement Europe’s strong tradition of bank financing, helping to: unlock
more investment from the EU and the rest of the world; connect financing more
effectively to investment projects across the EU; make the financial system more
stable; deepen financial integration and increase competition through enhanced
cross-border risk-sharing, deeper and more liquid markets and diversified
sources of funding. But when it comes to the Capital Market Union,
implementation is the keyword: adequate market monitoring and enhanced
policy coordination will be required in order to ensure that the promised
objectives are ultimately met (see the chapter “Finance for Sustainable Growth”).
Moreover, SMEs will increasingly suffer from the emerging skills gap at
the EU level, especially in key sectors such as cloud computing, artificial
intelligence and machine learning. The grand coalition for jobs and skills will
need to be reinforced in order to promote the overhaul of existing curricula in
member states, giving more space to communication, leadership, team-working
and empathy skills, together with the often-mentioned Science, Technology,
Engineering and Mathematics (STEM) and coding skills. The unavailability of
sufficient talent is increasingly becoming an obstacle to EU competitiveness and
also sustainable development.
A number of additional policy initiatives can further contribute to
improving the environment for doing business in Europe: a more effective
blending of financial instruments and better implementation of the SME
window in the EFSI (2.0) can open new market opportunities for high quality
small enterprises in Europe; and the reduction of administrative burdens
(including in access to EU structural and cohesion funds) can improve SME
participation. In the better regulation field, the improvement of tools such as the
‘think small first’ SME test, innovation deals and the innovation principle will
be key to improving the business prospects of many European SMEs.
Finally, sector-specific industrial policy will be essential in a time of rising
protectionism and global economic and political turbulence. Reducing the cost
of energy for European companies is imperative to safeguard competitiveness.32
The need to stimulate innovation, especially in services, is at the centre of
smart specialisation policies and, more generally, of the multi-level efforts to
promote innovation in the EU. Key issues in this respect are the evolving EU
approach to standardisation; the transition towards a mission-oriented
32 CEPS has been leading a series of topical projects for the European Commission on Energy
Prices and Costs, for a number of industrial sectors (e.g. glass, ceramics, steel, aluminium).
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 85
approach to innovation, which may lead to shifting Research and Innovation
funding closer to the commercialisation phase (Mazzucato, 2018); and the smart
use of regulation as a market creator and shaper (European Commission, 2015).
All these are important trends, which echo existing data on the US and even
more on China, which is increasingly investing in late-stage development phases
of innovation, bringing it gradually closer to market in several sectors.
Most importantly, the Commission has presented its proposal for the
Horizon Europe programme, which will replace the current Horizon 2020
programme in the 2021-2027 financial framework. Horizon Europe will
introduce the following main new features: (i) a European Innovation Council,
which establishes a one-stop shop to bring the most promising high-potential
and breakthrough technologies from lab to market application, and help the
most innovative start-ups and companies scale up their ideas; (ii) new EU-wide
research and innovation missions focusing on societal challenges and industrial
competitiveness; and (iii) enhanced
support for member states lagging behind
in their efforts to make the most of their national research and innovation
potential, also through blending of innovation funds with structural and
cohesion funds.
Industrial policy is, of course, also linked to specific sectoral initiatives.
One example is space policy, which is increasingly perceived as strategic due to
the possible spill-overs into many other sectors such as defence and
manufacturing. The European space economy, including manufacturing and
services, employs over 230,000 professionals. Its value was estimated at around
€50 billion in 2014. This represented one fifth of the value of the global space
sector. The EU can now rely fully on the EU’s three flagship space programmes:
Copernicus – the most advanced Earth observation system in the world; Galileo
– Europe’s own global navigation satellite system, providing highly accurate
global positioning data; and EGNOS – making ‘safety of life’ navigation services
available to aviation, maritime and land-based users over most of Europe. With
world-class space systems already in place and producing results, the EU will
be focusing over the next years on how best to use the space data gathered. Space
data can guide rescue teams in locations hit by natural disasters, improve land
use in agriculture, and make transport and energy infrastructure safer. On 1
December 2017, the Competitiveness Council discussed the way forward for the
EU’s space programmes: ministers expressed the need for a stronger link
between space and the digital economy. The EU is investing over €12 billion in
space activities for the period 2014-2020, with a high estimated return on
investment (€3-4 for every euro allocated). Post-2020 the EU will be looking at
the next generation of space programmes: this will have to be done in constant
public-private cooperation to ensure the maximum leverage effect for the public
funds available.
86 | DIGITAL ECONOMY, INDUSTRY AND INNOVATION
The Digital Single Market as a cornerstone of future European
industrial policy
The completion of a vibrant Digital Single Market was one of the ten priorities
laid out by the Juncker Commission when taking office in 2014. The digital
economy, more generally, is inevitably key to Europe’s economic performance,
future social and environmental sustainability, and overall global
competitiveness. However, at the same time digital policies have become
increasingly complex, due to the ongoing crisis of trust in the current internet
model, in which large platforms play a prominent role; and also in view of
emerging, disruptive technologies such as artificial intelligence and blockchain.
An overview of emerging challenges is best provided by a ‘layered’ approach,
which follows the architecture of the internet (so-called OSI layered
architecture):
• The
infrastructure layer features key emerging challenges such as the need to
secure a good balance between investment in very high speed broadband
infrastructure and the entry of new players thanks to network sharing
obligations. At the same time, a key challenge in infrastructure is promoting
co-investment and risk-sharing to bring high speed broadband to under-
served, unprofitable areas; and to use wireless and satellite technologies
where appropriate. This layer also prominently features the need for a
smarter and more coordinated spectrum policy, both for 4G
communications and also for the upcoming 5G, which requires both low
frequency and millimetric spectrum. Current spectrum policy still appears
too fragmented, and the proposals made by the Commission within the new
e-Communications Code appear insufficiently ambitious (Renda, 2017).
Similarly, current targets for 2025 (Very High Capacity networks) appear to
be obsolete already, in light of the breath-taking evolution of broadband
technologies around the world.
• The
logical layer is
very important for the digital economy, in particular for
what concerns network neutrality. There, the implementation of net
neutrality rules – a notable achievement of this Commission – is currently
ongoing, after the Telecoms Single Market Regulation entered into force on
29 November 2015 and application on 30 April 2016.33 The Regulation
created an individual right for end users to access or distribute internet
content and services of their choice. The Regulation also established, for the
33 Regulation (EU) 2015/2120 of the European Parliament and of the Council of 25 November
2015 laying down measures concerning open internet access and amending Directive
2002/22/EC on universal service and users’ rights relating to electronic communications
networks and services and Regulation (EU) No 531/2012 on roaming on public mobile
communications networks within the Union (Text with EEA relevance).
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 87
first time in the EU, the principle of non-discriminatory traffic management,
which means that internet traffic has to be treated equally. The (first) reports
covering the period from 30 April 2016 – 30 April 2017 have been published,
showing limited enforcement activity, focused on specific issues such as zero
rating. The effectiveness of the regulation in tackling network neutrality will
have to be monitored carefully in the coming months.
• Above the logical layer are
online platforms. These have been increasingly
subject to regulatory attention and obligations during the Juncker
Commission, following a trend that also encompasses DG COMP’s
enhanced activism in competition investigations related to the digital
economy. The Commission’s Communication on Online Platforms,
published on 25 May 2016 identified a number of areas where further
attention was considered to be needed. It aims to achieve a level playing
field for comparable digital services;34 to ensure that online platforms
behave responsibly to protect core values; to foster trust, transparency and
ensuring fairness; and to keep markets open and non-discriminatory to
foster a data-driven economy. In the mid-term review of the DSM Strategy,
the Commission made a commitment to two main actions:35 (i) to prepare
actions to address the issues of unfair contractual clauses and trading
practices identified in
platform-to-business (P2B) relationships, including by
exploring dispute resolution, fair practices criteria and transparency, then
adopted in 2018 and accompanied by the creation of a dedicated
observatory;36 and (ii) to ensure better coordination of platform dialogues
within the Digital Single Market focusing on the mechanisms and technical
solutions for
removal of illegal content, with a view to enhancing their
effectiveness in full respect of fundamental rights. On 1 March 2018, the
Commission then issued a Recommendation on measures to effectively
tackle illegal content online,37 which builds on an earlier Communication on
“tackling illegal content online, towards enhanced responsibility of online
platforms”, adopted on 28 September 2017, and translates the political
commitment of the Communication into a (non-binding) legal form.38
34 COM(2016) 288 final.
35 The Commission’s “Europe’s Digital Progress report 2017” and the accompanying
Communication
are
available
at
https://ec.europa.eu/digital-single-
market/en/content/mid-term-review-digital-single-market-dsm-good-moment-take-stock.
36 For more information, see https://ec.europa.eu/digital-single-market/en/expert-group-
eu-observatory-online-platform-economy.
37 Commission Recommendation of 1.3.2018 on measures to effectively tackle illegal content
online (C(2018) 1177 final).
38 COM(2017) 555 final.
88 | DIGITAL ECONOMY, INDUSTRY AND INNOVATION
Ongoing discussions are related to the issue of
disinformation (or commonly
referred to as ‘fake news’), another area in which the responsibility of
platforms is emerging. An
ad hoc communication was adopted by the
European Commission on 26 April 2018.39 The recent
Cambridge Analytica scandal has further increased the urgency of online platform regulation, an
area in which the EU is well positioned compared to other parts of the world:
but so far, a rather cautious soft law approach has emerged.
• At the
application layer, several policy initiatives
have been adopted, ranging
from the need to policies in the artificial intelligence domain, but also for the
Internet of Things, blockchain architectures and applications; policies for the
collaborative economy; and many more. Following an influential report by
the European Parliament,40 a Commission Communication on “Artificial
intelligence for Europe”41 paved the way for a constructive debate on the
ethical, legal and policy challenges of AI, ranging from algorithmic
transparency and accountability to auditing, liability and non-
discrimination obligations. The Commission also adopted a coordinated
plan on AI that announced an increase in investment in this emerging,
general purpose technology for up to €20 billion per year, adding EU and
national efforts together. Regarding a seemingly disruptive and high-
potential development, i.e. Distributed Ledger Technologies, a new Hub and
Observatory have been launched by the European Commission, alongside
several initiatives in DG GROW, DG CONNECT and DG FISMA. The
European Parliament (STOA) has also been active in this field. The key
challenges here are understanding the scalability, latency and security
problems of existing blockchain and distributed ledger technologies; their
risks in terms of abuse of power and violation of privacy; and their evolving
governance, which seems to move towards permissioned ledgers, rather
than purely ‘trustless’, ‘permissionless’ architectures.
• For what concerns the
content layer,
key initiatives have been launched on
copyright reform and the
information society directive, the audiovisual
media services directive, and the future of culture and media policies. The
battle over copyright cannot be considered as settled, and the need for more
consistency in fields such as user-generated content and text and data
mining appear to be urgent, if Europe is to reap the benefits of the data-
driven economy. More generally, in many sectors that are being permeated
39 COM(2018) 236 final.
40 European Parliament, Report with recommendations to the Commission on Civil Law Rules
on Robotics.
(2015/2103(INL)), 278 January 2017.
41 COM(2018) 237 final, 25 April 2018.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 89
by the digital economy there will be a need to carefully discuss data policy,
in particular when incumbent players (e.g. energy companies, or banks) are
asked to share their data portfolios with new entrants, which may end up
being large tech platforms.
• On top of these layers, a number of
‘horizontal’, cross-cutting policies were
launched by the Commission, but many of them have remained pending.
These include:
o The
General Data Protection Regulation, which entered into force in May
2018, promises to revolutionise the internet environment by imposing
new obligations for the processing and treatment of personally
identifiable information. The GDPR, aims to protect EU citizens from
privacy and data breaches through an increased Territorial Scope
(extraterritorial applicability), rather harsh penalties (up to 4% of
annual
global
turnover
or
€20 million); requirements for
The General Data Protection
explicit consent by data subjects to
Regulation, which entered
the treatment of personally
into force in May 2018,
identifiable information; breach
promises to revolutionise
notification obligations; a right to
the internet environment.
access and port one’s own data; the
right to be forgotten; ‘privacy by design’ provisions; and the obligation
for a subset of data controllers and processors to appoint a Data
Protection Officer.
o The Commission has been active also in proposing a revision of the
ePrivacy Directive (often referred to as the ‘cookie law’), which would
turn it into a regulation. The proposal, presented in January 2017,
aimed to align the text with the scope of the GDPR, and improve it in
light of technological developments (i.e. the advent of the Internet of
Things). But the proposal proved to be extremely controversial, and
was significantly delayed in the political debate, to the extent that it
may be left to the next European Parliament.
o An emerging policy on the
free flow of data, on which the Juncker
Commission first published a communication on “Building a European
Data Economy” in January 2017, later followed by a proposed
Regulation on the free flow of non-personal data. The latter aims at
removing obstacles to the free movement of non-personal data.
Together with the GDPR, this Regulation is expected to ensure a
comprehensive and coherent approach to the free movement of all data
in the EU: however, the boundaries between the two are blurred, and
implementation will probably come with the need for clarification.
Also, the ‘free flow’ regulation, on which political agreement was
90 | DIGITAL ECONOMY, INDUSTRY AND INNOVATION
reached in June 2018, features a difficult reconciliation with the
Cybersecurity package, and maintains that national security will
remain a basis for exemption from the free flow.
o Provisions on
network and information security and resilience, which
include the Cybersecurity Act and the Network and Information
Security Directive. Both provisions are important, but most likely
insufficient steps forward in the creation of a more secure cyberspace
in Europe. The NIS Directive contains legal measures to boost the
overall level of cybersecurity in the EU by ensuring the presence of a
Computer Security Incident Response Team (CSIRT) and a competent
national NIS authority in each member state, and a framework to
support and facilitate strategic cooperation and the exchange of
information among member states, which includes a new CSIRT
network. The Cybersecurity Act, on which political agreement was
reached on December 11, 2018 reinforces the mandate of the EU
Agency for Cybersecurity (ENISA) and establishes an EU framework
for voluntary cybersecurity certification.
o
Provisions on Digital Taxation, which include VAT for e-commerce and
the new proposed 3% digital tax on the global turnover of specific large
tech platforms adopting advertising-based online business models or
online marketplace models.
o
Other horizontal provisions (e.g. state aids for broadband, competition
policy provisions). In particular, the application of competition policy
to online markets remains very sensitive in the academic literature and
in the daily practice of competition enforcers. Issues such as market
definition, the interpretation of the notion of dominance and the
related abuse, and even more importantly the selection of appropriate
remedies appear to be in need to a redefinition, if EU institutions wish
to preserve the effectiveness of antitrust laws.
Moreover, the Commission has been active in shaping new policy for the
EU
digital transformation. New initiatives are being launched on ‘Industry 4.0’, or
the fourth industrial revolution that is being
The Commission has been
triggered by the development of the Internet of
active in shaping new policy
Things and by advanced connectivity powered
for the EU digital
by sensors, nanotechnologies and mobile
transformation, or the
broadband (4G, and in the future 5G). The
fourth industrial revolution.
underlying idea is that if Europe is able to
strengthen its leadership in key sectors of the
industrial economy such as embedded systems, mobile communications and
others, it will be able to play a key role in the future of advanced manufacturing.
And it will generate important savings and efficiencies by creating new, more
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 91
flexible supply chains based on smart equipment, smart and responsive objects,
and highly reconfigurable product lines. The energy savings, productivity
increases and profit opportunities of a transition towards Industry 4.0 are very
significant, or at least are presented as remarkable by the German government,
which launched an
Industrie 4.0 initiative back in 2011 and is currently
implementing it actively. At the same time, the transition to Industry 4.0 is
presented as likely to create new jobs: not only is the internet, often described as
creating 2.6 jobs for every job it destroys; but in the case of Industry 4.0, the
prospects for ‘mass customisation’ should in principle lead to a proliferation of
new jobs in the value-added services sector, rather than in manufacturing.
Finally, major steps were taken during the Estonian presidency on the
digitalisation and interoperability of public administrations in Europe (Tallinn
Declaration, 2017). This, coupled with the Commission’s initiatives on eID and
interoperability (ISA2), is one of the most promising avenues for strengthening
multi-level governance and increasing the cost-effectiveness of administrations
at all levels of government in Europe.
Progress achieved, and ways forward
The Juncker Commission has been very active in industrial policy, innovation
policy and digital policy. However, progress towards the achievement of the
DSM has been patchy, and many proposals are still pending, and likely to end
up in trilogue settlements. The same applies to
industrial policy and research and innovation
The Juncker Commission
policy initiatives, which await the opinion of the
has been very active in
Parliament and the Council. While the change of
industrial policy,
guard between Commissioner Oettinger and
innovation policy and
Gabriel during the mandate may have affected
digital policy. However,
the timeline of the Commission’s work, there are
progress towards the
probably other reasons for the partial failure of
achievement of the DSM
the DSM project. To be sure, the Juncker
has been patchy.
Commission has shown a determined turn
towards more aggressive internet policy, which led to growing tensions with US
tech giants and a not-so-hidden desire to make space for European champions
in the near future (e.g. the platform-to-business proposed regulation; the
antitrust investigations on Google and Amazon; the ePrivacy proposed
regulation). In this complex landscape, the GDPR appears as the poster child of
this generation of EU policy: strict, rather burdensome, extraterritorial and bold.
Whether the GDPR will represent a landmark example for future EU regulation,
remains to be seen. The GDPR entered into force only recently, on 25 May 2018,
and accordingly it is still very difficult to judge whether its relatively strict
92 | DIGITAL ECONOMY, INDUSTRY AND INNOVATION
provisions will become a global standard, or even whether they will be fully and
homogeneously complied with at the EU level.
The next Commission: a wish list for more agile, integrated, and
sustainable digital industrial policy
The next five years will see the emergence of a new technology stack, composed
of enhanced connectivity (including 5G wireless connectivity), high-
performance computing (including edge, fog, quantum computing), pervasive
artificial intelligence, blockchain technologies and the Internet of Things.
Governing this transition is essential for research, innovation, education, and
industrial policy. Most likely, Europe will not get a chance to compete with other
giants such as the US and China on all aspects of
Europe could position
the new digital economy; however, Europe could
itself as a leader in
position itself as a leader in Responsible AI, as
Responsible AI, as well as
well as in specific industrial settings, such as B2B
in specific industrial
industry platforms, and new spaces in
settings, such as
automotive (e.g. automated vehicles), as well as
B2B industry platforms,
in healthcare, energy, and public services sectors.
and new spaces in
Governing the transition is also essential for
automotive.
sustainable development, if all these emerging
trends are approached with a view to enabling a more sustainable European
society by 2030.
The complexity of the challenge calls for a bold reform in the way the EU
institutions approach this policy. Key initiatives that should be considered by
the next Commission include the following:
At the infrastructure layer, the EU should focus mostly on setting updated
targets for member states, and centralising spectrum policy in view of a swift
adoption of 5G wireless broadband. So far, the e-communications code
seems to have provided old answers to old questions: without a more
coordinated policy for mobile ecosystems in various industry sectors, the
enormous power of the IoT-enabled economy will vanish, leaving Europe as
a laggard in what used to be one of its leading industries.
A homogeneous, consistent, efficient policy for data-driven innovation in
Europe requires several clarifications and interpretations at the crossroads
between GDPR, free flow of data, copyright/TDM, ePrivacy and
cybersecurity. The lack of data has emerged as a key issue for many
entrepreneurs, large and small companies, willing to use innovative
techniques such as machine learning. To be sure, data is more accessible
today than it was in the past, but not all players in the market can have access
to the same amount of data, and this may stifle the competitive dynamics in
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 93
specific markets, or create collective action problems in others. It is of utmost
importance that governments adopt open data policies, by making large
datasets available to the public, possibly in formats that are interoperable
with existing machine learning software. So far, data held by government
and data from publicly-funded research are still largely unavailable for
researchers, entrepreneurs and companies willing to engage in data-driven
innovation. The free flow of data in the single market should be promoted,
in line with the European Commission’s recent communication on the
matter. At the same time, possible exceptions to the free flow, for example
based on national security stances, should be interpreted narrowly to avoid
disproportionate disruptions of data flows.
Almost inevitably, there is a need for skills and competences in data science
and IT, areas in which Europe seems to be unable to produce the needed
talent, as well as unwilling to attract it from non-EU countries (see the
chapter “Labour Market and Social Policy”).
The next Commission should work on the launch of an ambitious ‘AI for
good’ strategy linked to SDGs and coupled with strong, innovation-friendly
ethical guidelines. The AI strategy could include the investment in the
creation of a ‘CERN for AI’, or a similar distributed excellence centre for
research, education and technology transfer in a field that is increasingly
strategic for Europe.
Horizon Europe, to be launched in 2021, should see the launch of new
Missions, one of which should ideally be a ‘Mission on digital
transformation’. This will be a unique chance for the EU to merge education,
research, innovation and industrial policy into a consistent, multi-level
endeavour towards governing the digital transition. Milestones could take a
very concrete form (e.g. “reskilling 50% of the EU workforce by 2024”), thus
creating an immediate impact on European citizens in terms of visibility of
the EU and its relevance, and added value. Mission IT could incorporate
existing initiatives such as CLAIRE, ELLIS, HumanE AI Flagship, and
AI4EU.
Future policies for the digitised industry should include a remarkable
emphasis on experimentation. This may follow two tracks:
o
Experimenting with new technologies/business models/delivery modes,
and blending funding instruments and schemes to run experiments.
A notable example in this respect would be the upcoming pan-
European blockchain platform;
o
Experimenting with policy solutions, by engaging in techniques such as
randomised controlled trials, rapid prototyping, scenario testing,
94 | DIGITAL ECONOMY, INDUSTRY AND INNOVATION
and virtual and actual sandboxes, which are creating a new role for
policymakers in the digital era.
Europe should launch a major initiative to transform public administrations
by fully implementing the 2017 Tallinn Declaration on e-Government,
stepping up ISA2 by making interoperability mandatory for all
administrations, and creating a public blockchain governed by public
administrations at all levels of government in the EU (Bouyon, Nucciarelli
and Renda, 2019).
Finally, and most importantly, the EU should strive to strengthen its cyber
defence capabilities if it wants to have a chance to compete at the global level,
and improve the life of its citizens by
Europe should launch a
harnessing the potential of the digital
major initiative to
transformation. This will most likely require
transform public
the creation of a European Cyber Defence
administrations and most
Agency with executive responsibility, built
importantly, the EU
around ‘core activities’ that could be carried
should strive to
out with greater efficacy and/or efficiency
strengthen its cyber
through centralisation (Griffith et al., 2018).
defence capabilities.
The new Agency would need to develop the
core operational capabilities needed for
preventing or withstanding a cyber incident occurring within the EU,
including detection, technical attribution, and crisis response capabilities.
This is absolutely necessary since, in the long term, stronger EU defence
capabilities cannot be achieved through a largely segmented, multi-level
governance model (the 2017 Cyber Security Package) or merely through the
creation of a coordination mechanism (a cyber defence coordinator akin to
the EU Counter-Terrorism Coordinator). The creation of an EU Cyber
Defence Agency effectively addresses both the limitations of the current EU
approach and ecosystem (fragmentation, a solely advisory role, and limited
resources) as well strategic and operational considerations for developing a
cyber defence posture more broadly.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 95
Key priorities for the next Commission
Create a Digital Single Market and position the EU as a leader in
responsible AI and specific industrial settings (e.g. B2B platforms,
automated vehicles, healthcare, energy, public services sectors)
Develop a consistent, efficient policy for data-driven innovation in Europe
(GDPR, free flow of data, copyright/TDM, ePrivacy and cybersecurity)
Launch a major initiative to transform public administrations into e-
governments and strengthen EU cyber defence capabilities by upgrading
ENISA to an operational cyber defence agency
References
Bouyon, S., A. Nucciarelli and A. Renda (forthcoming), “Towards a European
Internet of Value? Leveraging blockchain to boost the EU Digital Single
Market”, CEPS Task Force Report (https://www.ceps.eu/content/
towards-european-internet-value-leveraging-blockchain-boost-eu-
digital-single-market).
European Commission (2016), “Better Regulations for Innovation-driven
Investment at EU Level”, Commission Staff Working Document,
https://ec.europa.eu/research/innovation-
union/pdf/innovrefit_staff_working_document.pdf.
Mazzucato, M. (2018), “Mission-oriented research & innovation in the European
Union”, Strategic Report for Commissioner Carlos Moedas
(https://publications.europa.eu/en/publication-detail/-
/publication/5b2811d1-16be-11e8-9253-01aa75ed71a1/language-en).
Renda, A. (2017), “Reforming e-Communications Services: a Critical
Assessment”, Report for the European Parliament IMCO Committee
(https://www.ceps.eu/system/files/IPOL_IDA%282017%29595348_EN
.pdf).
Tallinn Declaration on e-Government (2017), at the ministerial meeting during
Estonian Presidency of the Council of the EU on 6 October 2017.
LABOUR MARKET AND SOCIAL POLICY
The mega-trends of digitalisation and automation have already changed the
landscape of labour markets and value chains around the world, with their
inevitable economic and social consequences. And the pace of change is
accelerating; job markets and skills requirements are evolving faster than
traditional labour market practices and institutions. But what exactly are these
changes, and how will governments, industry leaders, social partners and
workers react to them?
The current Commission has initiated substantial research and analysis
into the topic, and the next incumbents should decide how to take this research
forward. In order to make informed decisions, policymakers should bear in
mind a number of issues.
To begin, the jobs of today require constant ‘up-skilling’ to stay abreast of
new technologies and business strategies. No longer can one leave education
and perform the same job for ever. Employers,
The jobs of today require
social partners and governments are engaged in
constant ‘up-skilling’
dialogue to find suitable policies to ensure
to stay abreast of
workers retain an up-to-date skillset. A key
new technologies and
question remains: who is responsible for funding
business strategies.
such initiatives – employers, governments, social
partners, or some combination of actors?
Moreover, the types of jobs now in demand require new skillsets. This is
forcing educators to re-evaluate mandatory courses, with an emphasis on
developing digital proficiencies at an early age. In fact, CEPS research has found
that job ads, even for traditional, lower-skilled professions demand at least basic
digital skills (Beblavý et al., 2016).42 Mastering such skills is thus important
regardless of industry, experience or age.
Despite efforts to improve education and training, many tech firms in
Europe still face significant challenges to find enough qualified workers. Filling
the demand for skilled labour is likely to remain a key policy challenge for the
42 See Demand for Digital Skills in the US Labour Market: The IT Skills Pyramid,
https://www.ceps.eu/node/12055.
96 |
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 97
foreseeable future. Yet failing to do so would mean that Europe will miss out on
an excellent opportunity for economic growth and technological innovation.
Furthermore, digitalisation and automation mean that mainstays of the
job market are less secure than before. While there is little consensus on the
magnitude of these effects, it is clear that labour markets are adjusting and old
jobs are disappearing, as new types of jobs
emerge. More sophisticated IT systems are
The European Pillar of Social
allowing more complex processes to be
Rights (EPSR) was a flagship
automated. Outsourcing is easier than it has
initiative of the Juncker
ever been, and is even possible for
Commission to give the EU a
individuals at a micro level. For processes
stronger social face, intended
that cannot be automated or outsourced,
to balance the Economic and
many firms favour contracting work out
Monetary Union with a
rather than hiring new employees. This has
social dimension, promoting
resulted in a significant increase in self-
inclusion and fairness along
employment in many of Europe’s largest
with economic growth.
labour markets, notably Germany.
While these transformations affect the European labour market, the EU
faces a profound crisis on several fronts, which has eventually led it to
reconsider its role in promoting EU citizens’ social rights and living standards.
In this regard, the European Pillar of Social Rights (EPSR) was a flagship
initiative of the Juncker Commission to give the EU a stronger social face,
intended to balance the Economic and Monetary Union with a social dimension,
promoting inclusion and fairness along with economic growth (Lorcher and
Schömann, 2016; Muñoz, 2019).
Adopted in November 2017, the EPSR is rather weak in terms of the
outcomes generated. The time left until the end of the Juncker Commission
mandate was indeed too short to deliver concrete actions in a field where the EU
is progressively but still timidly assuming a role that goes beyond its traditional
proclamations and values. The Social Fairness Package of March 2018, including
a proposal for a European Labour Authority, a
Council recommendation on access to social
The Social Fairness
protection for all workers and the self-
Package of March 2018
employed, and a communication on
was the first step towards
monitoring the implementation of the EPSR,
concrete legislative and
was the first step towards concrete legislative
coordination action.
and coordination action after the EPSR
proclamation. These proposals are currently under discussion, together with the
possibility to establish a European Social Security Number, as was announced
as a follow up to the implementation of the EPSR.
98 | LABOUR MARKET AND SOCIAL POLICY
To keep the aims of a ‘social Europe’ on track, the key challenge for the
next Commission and Parliament will be to transform the 20 principles of the
EPSR into implementable actions. If it fails to do so, this important document
will gather dust and not impact EU citizens’ lives.
The first step would be to come up with the solid justification, supported
by the empirical evidence wherever possible, of the necessity and opportunity
of the EU social dimension, because this is still controversial. Member states are
still reluctant to allow the Union to encroach upon this traditionally national
competence.
In addition, to move from declaration to delivery, it is necessary to
undertake a careful assessment of the instruments that the EU could put in place
to pursue the EPSR principles. While EU legislation43 already promotes some of
these, further EU funds and budget allocation could be the key to creating the
conditions for these principles to translate into practice. For principles that are
already assigned EU co-funding in order to complement member state policy,
however, further EU coordination by means of hard and soft EU law could serve
to strengthen and harmonise the implementation of such principles at national
level. Fine-tuning the EU instruments to implement the EPSR, and their optimal
combinations, is an important challenge, which requires significant ad hoc
research, continuous feedback mechanisms from civil society and social
partners, and a constructive political debate. Yet, it remains the key to successful
implementation, avoiding disappointment and a waste of resources.
However, part of the challenge of implementing the EPSR and building
common EU ground for social policy relies on overcoming heterogeneity
between the member states in this field. A key strategic decision could be to
determine whether the way forward is to aim for harmonisation (or at least
continuous upward convergence) or rather to acknowledge and preserve this
heterogeneity and put in place concrete actions to limit negative phenomena
such as social dumping and so-called benefit tourism that discredit the Social
Europe project.
Finally, the challenge is about taking into consideration the ongoing
changes in the labour market while putting in place implementation measures,
to ensure that these measures are well designed for any eventuality. Promoting
a horizontal approach to social protection and addressing people’s social rights
before, during and after working life, the EPSR seems consistent with the
changing nature of work and, specifically, with the need to ensure social
protection in self-employment and non-standard forms of employment, which
43 An overall picture of the EU legislation to promote social rights is reported in the EC Staff
Working Document on The EU social acquis, https://eur-lex.europa.eu/legal-
content/EN/TXT/HTML/?uri=CELEX:52016SC0050&from=EN.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 99
are growing apace in the European labour force. Yet this makes its
implementation even more ambitious and would require a profound change in
national social protection systems that may encounter additional obstacles.
In pursuing empowerment, fairness and social inclusion, the EPSR pays
specific attention to gender equality and equal opportunities, which, in spite of
considerable action undertaken at EU level, still seem to require extra efforts to
achieve an equal European society for men and women.
Indeed, in recent decades, the EU has already put in place several
instruments to promote gender equality44 and has constantly monitored the
gender issue in the labour market (European Union, 2015). However,
considering the still-high gender pay and employment gaps in all EU member
states (European Union, 2018), it is clear that such efforts have not delivered
satisfactory results.
To trigger deeper change in the labour market and in society at large,
growing attention has been paid to moving beyond equal treatment and non-
discrimination and towards promoting inclusion and diversity. This requires
understanding and accepting differences, as well as adjusting to different needs
and attitudes at work, to support and facilitate women’s employment.
The next EC and EP will need to incorporate this new concept in their
labour and gender policies, to strengthen and boost its actions in this field. This
will require transversal and coordinated efforts that go beyond purely labour
market interventions and will involve every aspect of society if they are to
address embedded social norms and rules. Policies in this direction require a
long timeframe to assess impacts, which make them hard to plan carefully,
evaluate and thus defend. Yet such actions are needed to eradicate the roots of
gender inequality that are ultimately behind sexual harassment and violence in
European society.
European Unemployment Insurance
While Europe is slowly recovering from one of its most severe crises, there have
been widespread calls for reform. These calls have focused on the Economic and
Monetary Union (EMU), whose fundamental weaknesses were exposed in the
global financial crisis of 2008 and subsequent eurozone crisis. With the inception
of the EMU, countries lost control over their monetary policy, which is now
managed centrally. National fiscal policy has remained in place and has widely
44See for example the Directive 2006/54/EC on the implementation of the principle of equal
opportunities and equal treatment of men and women in matters of employment and
occupation,
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:
32006L0054&from=EN.
100 | LABOUR MARKET AND SOCIAL POLICY
been believed to gain in importance as a mechanism to prevent economic shocks
and mitigate their impact on employment and incomes. Yet during the crisis,
this combination of monetary and fiscal policy fell short. Other instruments,
including labour mobility or wage flexibility, were not so powerful either.
Market failures, current account imbalances and spillover effects raise
additional concerns.
While there is a broad expert agreement that the EU (or at least the
eurozone) would benefit from a macroeconomic stabilisation function and the
Five Presidents’ Report gave this argument political support, there has been no
decisive action by the Juncker Commission on either the European
Unemployment Benefit System (EUBS) or any other form of stabilisation
instrument. The new Commission should move this issue forward and either
take action or put it to rest.
In the report by Beblavý and Lenaerts (2017), the authors concluded that
a EUBS would complement rather than substitute the other instruments and
market mechanisms. A EUBS could be designed in many ways to achieve
specific policy objectives. A fundamental distinction is that between the
equivalent and genuine EUBS variants. Both the genuine and equivalent EUBS
variants have their merits, and the choice of one of them would be based on
political grounds.
A genuine EUBS pays out benefits directly to any eligible unemployed
individual, collects contributions from employers and employees (who
contribute an equal share) and functions continuously. These variants would
Europeanise the existing national schemes and thus require considerable
harmonisation among them. Harmonisation and minimum standards would be
essential for the stabilisation capacity of the EUBS and would help to mitigate
moral hazard.
Equivalent EUBS variants function very
A EUBS could contribute
differently: all financial transfers would occur
to macroeconomic
between the supranational fund and the
stabilisation and efforts
member states (which would only receive a
to address unemployment,
pay-out when the EUBS is triggered). The
encourage labour mobility,
equivalent EUBS would thus ‘reinsure’ the
stimulate upward
existing national unemployment benefit
convergence and support
schemes (NUBS). Equivalent EUBS could leave
the further development of
a lot of flexibility to member states, but
a ‘Social Europe’.
crucially this would depend on the extent to
which
conditions
are
imposed
on
governments’ scope to spend the funds received from the supranational fund
and whether there are minimum standards for the NUBS.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 101
A EUBS could contribute to macroeconomic stabilisation and efforts to
address unemployment, encourage labour mobility, stimulate upward
convergence and support the further development of a ‘Social Europe’ along
several dimensions. In general, the stabilisation impact of EUBS is found to be
fairly limited due to the small scale of the scheme (which would typically be less
than 1% of EU GDP) (Beblavý and Lenaerts, 2017). Equivalent EUBS variants
generally perform better in stabilisation terms than genuine EUBS variants. This
finding can be explained by the focus of the equivalent EUBS on the crisis years,
while genuine EUBS would operate continuously.
Other findings that result from the simulations are that experience rating
and clawback are effective mechanisms to prevent permanent transfers.
Labour mobility and migration
The last decade saw a doubling of intra-EU labour mobility. The free movement
of persons is one of the key pillars of the Union, but growing mobility also brings
challenges – e.g. attempts by some member states to limit social benefits to
foreign workers – and also potential solutions – namely a proposal by the
Commission to establish European Labour Authority.
The European Labour Authority is an ambitious idea with fundamental
objectives such as the facilitation of information access for individuals and
employers, supporting cooperation between member states in the enforcement
of cross-border Union law, and mediating solutions in cases of cross-border
disputes. As the European Labour
Authority is not yet fully operational, it will
As the European Labour
be during the mandate of the next
Authority is not yet fully
Commission that the organisation takes full
operational, it will be during
shape. It is thus important to maintain
the mandate of the next
momentum if the new organisation is to
Commission that the
meet its expectations in the coming years.
organisation takes full shape.
As regards the migration of third
country nationals, most of the debate in Europe revolves around refugees and
the disagreements about burden-sharing across member states. The recent
experience of a rescue boat (Aquarius) carrying more than 600 refugees denied
entry by Italy and Malta again showed the diverse attitudes of current
governments towards third country nationals, even when they migrate for
humanitarian reasons. Therefore, it is very important that migration and asylum
policies are agreed at the European level, where each member state takes its fair
share of the burden (see the chapter “A New Start for EU JHA Policies?”).
While the number of arrivals of asylum-seekers has decreased over the
last year compared to the peak of 2015, the challenges of successful integration
102 | LABOUR MARKET AND SOCIAL POLICY
of refugees into the labour markets and social life of host countries are ever
present. Migrant women especially lag behind in participating in the labour
market and social life in general. Language barriers persist despite efforts to
counter them. To this end, targeting integration at the local level (e.g. at the city
or municipality) could be a way forward. Moreover, despite the varying reasons
for migration (family, economic or study), the foreign-born populations in
Europe also face integration challenges as differing experiences of employment
(e.g. in terms of wages and employment rates) compared to native-born workers
persist, albeit to differing degrees across member states. Overall, failing
integration risks putting pressure on member states and drives extreme political
discourse.
Whatever the outcome of Brexit, the status of EU citizens working in the
UK and of UK citizens working in the European Union will be an economically
important and politically sensitive issue for years to come. A number of EU
governments have unilaterally declared that UK citizens currently residing in
their countries have nothing to fear, but how future migration flows between
the UK and the European Union countries will be organised remains an open
question. In principle, this is not an issue for the Union, but rather for national
governments. However, the future Commission should at least consider
coordinating an exchange of information and the policy response of national
governments.
Key priorities for the next Commission
Agree on the need, instruments and method to implement a European
Pillar of Social Rights and a Social Fairness Package
Advance the debate on European Unemployment Benefit System (or any
other form of stabilisation instrument) and take action
Support the establishment and operation of a fully fledged European
Labour Authority
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 103
References
Beblavý, M. and K. Lenaerts (2017), “Feasibility and Added Value of a European
Unemployment Benefits Scheme”
, Luxembourg: Publications Office of the
European Union
Beblavý, M., B. Fabo and K. Lenaerts (2016), “Demand for Digital Skills in the
US Labour Market: the IT Skills Pyramid”, CEPS Special Report, No. 154,
CEPS, Brussels.
European Union (2015), “Strategic Engagement for Gender Equality 2016-2019”,
Luxembourg: Publications Office of the European Union
European Union (2018), 2018 Report on equality between women and men in
the EU
, Luxembourg: Publications Office of the European Union.
Lörcher, K. and I. Schömann (2016), “The European Pillar of Social Rights:
Critical Legal Analysis and Proposals”, ETUI Research Paper - Report 139.
Muñoz, S. (2019), “Striking a balance between competitiveness and social
fairness: what can we expect from the European Pillar of Social Rights?”,
in Chiocchetti P. and F. Allemand, eds.,
Competitiveness and Solidarity in the
European Union: Interdisciplinary Perspectives, Abingdon: Routledge.
REDEFINING THE ENERGY UNION
Originally proposed by then Polish Prime Minister Donald Tusk in 2014 as a call
for Europe to unite to “end Russia’s energy stranglehold”,45 ‘Energy Union and
climate – making energy more secure, affordable and sustainable’ – has been
identified as one of the Juncker Commission’s ten political priorities. The
European Commission has acknowledged that energy matters for many areas
such as the economy, security, the environment, social cohesion, local
development and is therefore also an area for European solidarity.
While the original Tusk proposal has been framed in the context of
external security, the Juncker Commission elevated Energy Union alongside
other ‘unions’ to become a mission statement. With strong support from the
European Parliament and (mainly but not only) Central and Eastern European
member states, the Commission adopted a
The Juncker Commission
political and strategic perspective on energy for
adopted a political and
the first time. This was in contrast to the
strategic perspective on
previously largely market-led policies. By this
energy for the first time.
change in approach, the Juncker Commission has
managed to forge a new consensus on climate
change after the previous compromise had broken down following the failure
to reach a global climate change agreement in 2009 in Copenhagen. This new
consensus was achieved by linking the agendas of the internal energy market
and climate change to security of supply, solidarity, infrastructure and
innovation. The choice of issues is partly a reflection of competences under
Article 194(2) TFEU on energy, but also attempts to mirror member state political
priorities. Energy security is, for example, high on the agenda of Central and
Eastern European as well as to a somewhat lesser degree, peripheral member
states. The construction of interconnectors and gas and electricity, which
45 Donald Tusk, “A united Europe can end Russia’s energy stranglehold”, FT 21.04.2014.
Although Donald Tusk referred mainly to natural gas, many Central and Eastern European
countries also depend on Russian oil and therefore are vulnerable to pipeline conflicts such
as between Russia and Belarus. In addition, the three Baltic republics’ electricity grids
continue to be fully integrated into (‘synchronised’ with) the Russian power grid.
104 |
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 105
increases energy security yet also fosters market integration, had also long been
demanded by many peripheral member states.
To address inevitable trade-offs, the Juncker Commission has pursued a
number of strategic political actions, often to directly accommodate member
state interests. Worth mentioning in this context are the Baltic synchronisation
of the electricity system of the EU, the France-Spain electricity interconnector,
the proposal to harmonise EU rules on gas import pipelines in the context of
Nord Stream 2, the screening of foreign investment, the European Battery
Alliance or the Central and South East European Connectivity Initiative
(CESEC).
Initially in the Political Guidelines, the aim of ‘Energy Union’ remained
vague and appeared as a left-over handed down by Tusk. The perhaps
unexpected acceleration of the Energy Union strategy can also be interpreted as
a means to regain the initiative following the October 2014 European Council.
The conclusions were unprecedentedly prescriptive and detailed so that,
originally, it left very limited room for manoeuvre for the Commission. By
enlarging the scope of energy and climate to ‘Energy Union’, the Juncker
Commission took back some room for manoeuvre.
Finally, the Juncker Commission had to contend with the constitutional
limitation of the EU’s energy competences under Article 194(2) TFEU: that
important energy policy decisions need to be taken by unanimity in the Council.
An example of the Commission’s prudent
approach has been to not pursue the idea of joint
An example of the
gas purchasing, which, though part of the original
Commission’s prudent
Tusk proposal, would have been very divisive and
approach has been to
possibly impossible to reach agreement on.
not pursue the idea of
Attempts to reduce barriers in the EU’s
joint gas purchasing.
electricity market further with the “Clean Energy
for All” package had some success, but fell short of constituting a breakthrough.
The new Commission may well have to tackle this again.
Working methods
Energy Union does not only mean catering to different member state priorities.
It also means effective integration of the various policy strands, e.g. energy
security, decarbonisation, market integration, innovation etc., or, as it was put
at the time, “breaking down the silos”. There have been some successes.
106 | REDEFINING THE ENERGY UNION
A first pointer can be found in the Energy Union strategy communication
of February 2015 where the five priority areas46 were labelled as ‘dimensions’
instead of ‘pillars’, the previous terminology used. Language however matters
only if followed up by action. There has been a strong coordinating role of the
Vice-President for Energy Union and the creation of teams among cabinet
members. Nevertheless, it took the strengthened role of the Secretariat General
in cooperation with the President’s cabinet and the European Political Strategy
Centre (EPSC) – at the expense of the Commission’s services – to ensure the high-
level orientation of the 2015 strategy on Energy Union. In general, it can be said
that the EPSC has played a major role in identifying and communicating the
high-level priorities of the Juncker Commission in the field of energy and climate
change.
A second indicator for a more strategic approach than in the past has been
the process of writing the 2015 Energy Union strategy communication. Early
drafts were still in the mould of the traditional approach, whereby each unit of
the various DGs is allowed to put their priorities in the final documents, often
supported by interest groups and the European Parliament. For example, a
version from January had more than 40 ‘Actions’, many remarkably detailed and
often of a technical nature. The final document consolidated the numerous
actions into 15 high-level action points. The more detailed initiatives were later
published as Annexes in the State of the Energy Union communications.
An interesting innovation was the Vice-President’s Energy Union Tour
where he visited all member states twice to discuss national stakeholders’
energy policy priorities, cross-border questions and to increase, in the
Commission’s own words, “ownership by all parts of society”. While the
political impact of the Energy Union Tours is difficult to judge, it has contributed
to raising the profile of energy and climate issues such as integration of
renewables, interconnectors, security of supply or long-term implications of the
transition to the low-carbon economy.
A successful EU ETS reform?
While the October 2014 European Council adopted the climate and energy
framework for the period until 2030, i.e. when the current 2020 package expires,
the groundwork had already been laid by the Barroso Commission in a green
paper from March 2013.47 A major element of the 2030 framework would be the
46 Energy security, solidarity and trust; a fully integrated European energy market; energy
efficiency contributing to moderation of demand; decarbonising the economy; and research,
innovation and competitiveness.
47 COM/2013/0169 final.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 107
future of the EU’s carbon market, i.e. the EU Emissions Trading System (ETS).
The EU carbon market is the biggest such market in the world and it has
repeatedly been dubbed the EU’s flagship policy. At the same time, impact was
limited given the very low prices, stemming from the structural oversupply
legacy of the economic crisis. Still, at the same time, Europe’s energy-intensive
industry was complaining of costs undermining its competitiveness, for
example vis-à-vis non-EU competitors.
The revision process of the EU ETS was launched with the July 2015
Commission proposal. Initially, it was intended to focus on the competitiveness
of industry, in particular by revising the carbon leakage risk mitigation
measures; i.e. who obtains the limited number of free allowances. This fitted
with the Juncker Commission’s approach of emphasising the industrial policy
dimension of climate policies. While the Commission’s idea was to treat price
and oversupply issues separately from cost and competitiveness issues, this
artificial split did not work. When final agreement between the Council and EP
was reached in November 2017, it was the additional reform of a supply
mechanism, the so-called Market Stability Reserve48 that attracted most
attention. The issues of supply and competitiveness were thus tackled jointly,
deviating from the original Juncker idea (Elkerbout, 2017).
It was notably pressure from a number of member states (mostly in north-
west Europe, including France and the UK) that led to a stronger Council
position and the idea of strengthening the supply mechanism in the ETS
revision. The Commission and Parliament followed the member states’ lead, not
the other way around – a somewhat uncommon feature. A more strategic
approach by the Commission might have seen the necessity of a simultaneous
treatment of the supply mechanism and competitiveness issues at an earlier
stage. It could also be that the Juncker Commission underestimated the interest
of European finance ministers in higher ETS prices, as revenues largely accrue
to their budgets.49
What the EU ETS revision did not address in a structural manner is how
to safeguard the competitiveness of industry in the long run, with a perspective
beyond 2030. With fewer allowances available as time goes on, free allocation –
48 A central element of reform has become to bring ‘demand’ into balance with ‘supply’, via a
supply mechanism. The reasoning is that demand is flexible, for example depending on
economic activity, weather, technology costs but also policy, while supply is largely inflexible.
For many years, the Commission has been opposed to supply mechanisms for fear of a
politicisation of the carbon market.
49 Following the reform, allowance (EUA) prices have quintupled compared to the lows of
2017 and have since stabilised around €20/tonne, up from €4-5. At current prices and with an
annual auction volume of around 800 million, this results in about €16 billion in revenues for
the 28 member states.
108 | REDEFINING THE ENERGY UNION
of allowances as a compensation for additional costs – is not a sustainable long-
term solution. Free allocation, moreover, also reduces incentives to reduce
emissions. With the deep emission cuts required, large-scale investments in low-
carbon technology are required in industries that face strong international
competition. If European companies are to make transformative low-carbon
investments, the question is who will buy their products if the option remains
to import functionally equivalent, but more carbon-intensive alternatives from
outside the EU. Halfway through the ETS revision process, there was some
tentative movement towards addressing this issue with the proposal to include
cement imports into the EU ETS. While the environment committee of the
European Parliament was supportive of the idea, it was later dropped. Likewise,
the idea of border taxes based on carbon contents occasionally resurfaced
without really making it onto the political agenda.
Back into the trenches?
In order to deliver on its political priorities, the Commission resumed its ‘daily
routine’ in the form of the legislative process. The proposal on the ETS revision
was followed by the so-called ‘Winter Package’, later renamed as the ‘Clean
Energy For All Europeans’ package establishing the climate and energy
framework for the period until 2030 and, to round it up, the Clean Mobility
Package in several steps.50 All these packages in themselves consisted of several
legislative proposals. The ‘Clean Energy Package’ alone was in excess of 4,000
pages of documentation. It included 8 legislative proposals on areas as diverse
as market design, renewable energy, energy efficiency, a specific governance
structure, the reorganisation of the European energy regulator, ACER or the
security of the electricity grid. Naturally, this necessitated a return to the silos,
given the endless complexity of the proposed legislation.
Communication and spin
As under the previous Barroso Commission, communication occupied centre
stage, with the concomitant risk of excessive hype. For example, the ‘Clean
Energy Package for All Europeans’ package – this name was adopted relatively
late in the process – was presented by the Commission as a sign of European
global leadership. In reality, the Clean Energy Package was intended to make
the European electricity market fit for the ever increasing uptake of renewables
in the period up to 2030. While this is an important and worthy task, it still falls
short of the self-declared objective of “creating the conditions for sustainable
jobs, growth and investment”.
There are questions on whether the Package will
50 COM(2017) 675 Final – Delivering on low emission mobility.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 109
indeed unlock investment. That the measures from the Clean Energy Package
would “equip all European citizens and businesses with the means to make the
most of the clean energy transition”51 seemed optimistic in the first place, even
if it had been adopted as the Commission had proposed. The communication
offensive on the Clean Energy Package also seems responsible for making the
proposal record-breaking in terms of size; this may have overwhelmed Europe’s
legislators.
Brexit
The Juncker Commission responded quickly to the challenges created by Brexit
in a two-fold manner. On the island of Ireland, Brexit poses risks for the
operation of the integrated all-Ireland electricity market, which has been fully
operational since the autumn of 2018. This was recognised by both parties as
requiring cooperation to ensure its continued operation irrespective of the
outcome of the Brexit talks.
On the EU ETS, the Commission
The Commission managed
undertook steps to mark UK-issued
to obtain a mandate
allowances and shift the compliance dates for
from the European Council
2019 to avoid a situation where UK operators
to propose a “strategic
would no longer have a compliance obligation
long-term vision” for a
to surrender allowances, but still be in the
climate-neutral economy,
possession of allowances which, if sold
with a view to 2050.
simultaneously, could disrupt the functioning
This can be seen as
of the ETS market. Climate and energy issues
a Juncker Commission
were also included in the Withdrawal
‘legacy paper’.
Agreement, with the end of the transition
phase (at the end of 2020) coinciding with the end of the ETS 3rd trading phase
as well as the 2020 target horizons, thereby limiting disruption (Elkerbout, 2016).
Looking ahead
In the beginning of 2018, after much hesitation by member states, the
Commission managed to obtain a mandate from the European Council to
propose a “strategic long-term vision”52 for a climate-neutral economy, with a
view to 2050. This can be seen as a Juncker Commission ‘legacy paper’ towards
the end of its term and which the incoming Commission will inherit
. The long-
term greenhouse gas emission strategy is partly an update of the original 2011
51 European Commission Press Release IP/16/4009 of 30 November 2016.
52 COM(2018) 773 final, “A Clean Planet For All”.
110 | REDEFINING THE ENERGY UNION
‘roadmap’ towards a low-carbon economy. At the same time, it is meant to kick-
off an EU discussion on possible pathways to reach the EU’s mid-century climate
objectives. In 2011, the aim was to reduce greenhouse gas emissions by 80-95%
by 2050. In the updated strategy, some scenarios aim to achieve net-zero
emissions by 2050 (Elkerbout and Bryhn, 2019).53 Such an update has become
necessary in light of the 2015 Paris Agreement but also because of dramatically
falling technology costs for, e.g., renewables and batteries.
The current EU legislation – for 2020 and 2030 – conforms to a pathway
leading to 80% emissions reductions by 2050, was established well before the
adoption of the Paris Agreement, which is generally considered ambitious due
to its aspirational 1.5°C and “well below 2°C” temperature targets. The Special
Report on the 1.5°C temperature target of the Intergovernmental Panel on
Climate Change (IPCC) provides further impetus
The first objective for the
to account for the latest climate science in the EU’s
next generation of EU
climate strategy.
incumbents is to provide
Against this background, the first objective
direction to future
for the next generation of EU incumbents is to
secondary climate and
provide direction to future secondary climate and
energy legislation, taking
energy legislation, taking into account the
into account the changes
changes in technology and the international
in technology and the
climate policy landscape. On the technology side,
international climate
the new long-term strategy will provide insights
policy landscape.
into the different technology clusters and
associated infrastructure that the Commission
sees as necessary (and viable) for reaching long-term climate objectives. It is
hoped that with a clear and credible mid-century strategy, public and private
investment in the low-carbon transition should both be more attractive.
A second priority should be on low-carbon technologies in the EU, i.e. a
discussion on the strategic perspective initiated by the Juncker Commission of
approaching climate, energy, and industrial policy in an integrated manner. The
energy transition, driven by carbon constraints, would then become the vehicle
to modernise the European industrial economy, with the competitiveness of
industry underpinned by low-carbon energy and technology. This integrated
approach, with a clear industrial dimension, also naturally fits with the more
strategic political approach taken with the Energy Union.
Thirdly, the updated strategy deals with the EU’s long-term target by
updating the options for the 2050 climate objective. The European Council will
53 With a net-zero greenhouse gas emissions target, any remaining emissions should be
balanced by ‘carbon removal’, e.g. carbon sinks such as forests which absorb carbon dioxide
from the atmosphere.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 111
need to choose a pathway that is either still somewhere between 80-95%
emission reductions, or the more ambitious net-zero target. The Commission
highlighted the importance of the net-zero goal, by linking it to the Paris
Agreement’s 1.5°C temperature target. The EP already endorsed the net-zero
goal earlier in the year. With a net-zero objective, any emissions that are left by
2050 would need to be compensated by negative emissions, i.e. the sequestering
of CO2 in the atmosphere, or offset by reductions outside the EU.
Finally, this also reopens the question of what proportion of the emissions
reductions should be undertaken domestically. In the European Council
conclusions of October 2014, the heads of government agreed that the EU’s
target of “at least 40%” reductions by 2030 was to be achieved strictly within the
EU. Unlike in previous years, when the Kyoto Protocol was still the leading
international framework, no international
credits (or offsets) would be allowed. But in
A second priority should be
the future the use of offsets may be seen as
on low-carbon technologies
more attractive, when stringent targets of
in the EU, i.e. a discussion on
the strategic perspective
beyond 80% might need to be achieved.
initiated by the Juncker
The choice of whether to fulfil climate
Commission of approaching
targets domestically or not is a strategic
climate, energy, and
choice that can only reasonably be made at
industrial policy in an
the highest political level. What is notable,
integrated manner.
however, is that the European Council
agreed on a number of far more detailed provisions on how climate and energy
policies should be shaped. This includes statements on the annual reduction in
the cap of the ETS, the design of free allocation provisions, and the exact limits
of flexibility mechanisms available to member states to reach emissions goals
under the effort sharing framework.
In its legislative proposals, the Commission closely followed these
European Council conclusions. But whereas the consensus decision making of
the European Council shows strong political backing for a course of action, the
high degree of detail also blurs the line between ‘political guidance’ and the role
of the co-legislators. Even if in some cases the Council and Parliament ultimately
moved away from some of the specifics of the October 2014 conclusions, they
nevertheless held a strong gravitational pull during the legislative process.
Addressing this trade-climate nexus remains a crucial challenge for the
future. Without the reasonable prospect of a profitable market, large-scale
private investments in low-carbon technology will remain elusive. The
Commission did address industrial investment on the side of project funding by
proposing a larger Innovation Fund. Nevertheless, the more structural barrier to
investment is not so much the availability of funding as it is the necessity for
clear business cases to justify these large low-carbon investments, knowing that
112 | REDEFINING THE ENERGY UNION
non-EU competitors may not face equally stringent climate policy signals for
some time to come.
“This time is different”?
The Juncker Commission started with the slogan “this time is different”. There
was a difference in that political priorities were followed up by concrete and
focused initiatives. Not all were successful. But this gave the impression that the
Juncker Commission did not shy away from opposing any member state if
required. Nord Stream 2 is a case in point. Although the German and Austrian
governments insisted that Nord Stream 2 is a purely commercial project, the
Commission kept highlighting the political nature of the project. In the end, the
German government started to acknowledge the political implications and
engaged in a high-level political process, initiated and chaired by the European
Commission.
By focusing on strategic issues, the Juncker Commission has managed –
over time – to integrate energy, climate, economic and industry policy, although
with some hiccups such as in the EU ETS. Cooperation between the various
Directorates-General has improved with the effect of better integration. While
for many years, climate policy in the EU was driven by the international climate
change negotiations, the predominant focus of energy policy has been the
completion of the internal market for electricity and gas, including infrastructure
and the security of the electricity and gas systems. Industrial policy, on the other
hand, was concerned with the competitiveness of various sectors and their
growth and jobs. One of the successes of the Juncker Commission has been to
link the three policy areas together. At the same time, it is fair to say that some
seeds for better integration had been sown by the Barroso Commission, for
example through the May 2014 European Energy Security Strategy, the Green
Paper on the 2030 climate and energy framework, or several energy prices and
costs studies to improve evidence for the energy sector. This should, however,
not be to decry the improvements that the Juncker Commission has achieved by
focusing on strategic issues. On the climate side, however, the conservative
approach of the Commission’s proposals and its sequencing had a more short-
term horizon.
The publication of the EU long-term strategy for climate and energy at the
end of November 2018 should turn attention back to longer-term strategic issues.
The main objective of the strategy is to give concrete meaning and identify
practical steps in moving towards a modern, competitive and clean – meaning
both low-carbon and low-emission – economy embedded in a European
industrial strategy. By initiating and leading the long-term strategy, the
Commission will also avoid the October 2014 situation, where the European
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 113
Council tried to put the Commission in a straitjacket with unprecedentedly
prescriptive and detailed conclusions.
Key priorities for the next Commission
Approach climate, energy and industrial policy on low-carbon
technologies in an integrated manner
Implement the 2018 strategy for a climate-neutral economy (2050)
Support the European Council in choosing a pathway that is either
between 80-95% emission reductions or the more ambitious net-zero target
References
Egenhofer, C., et al. (2018), “Composition and Drivers of Energy Prices and
Costs in Energy Intensive Industries”, Report for DG GROW, Publications
Office of the EU.
Elkerbout, M. (2016), “Brexit and Climate Policy: Political choices will determine
the future of EU-UK cooperation”, CEPS Commentary, CEPS, Brussels, 15
July.
Elkerbout, M. (2017), “A Strong Revision of the EU ETS, but the Future May
Bring Impetus for Further Reform”, CEPS Commentary, CEPS, Brussels,
14 November.
Elkerbout, M. and J. Bryhn (2019), “Sinking to Zero: the role of carbon capture
and negative emissions in EU climate policy”, CEPS Policy Insight, CEPS,
Brussels, 22 January.
European Commission (2013), A 2030 Framework for Climate and Energy
Policies, COM(2013) 169 final.
European Commission (2017), Delivering on Low Emission Mobility,
COM(2017) 675 final.
European Commission (2018), A Clean Planet For All, COM(2018) 773 final.
2030 AGENDA: TIME TO WALK THE TALK
Looking at current trends such as the resurgence of nationalism in politics,
deteriorating rule of law in some European countries, new protectionist stances
and tariff wars in trade, short-termism in social policy and reiterated denial on
climate change, the agreement reached in September 2015 by 193 countries on
the Sustainable Development Goals (SDGs) seems to belong to a very distant era
in human history. Indeed, much has changed since then, with the United States
reaching a record low in its commitment to SDGs, Brazil entering a new era of
populism and China struggling to show
The pursuit of the SDG
leadership on environmental, and, even more,
agenda, orphan of any
social, achievements. Moreover, additional
strong political will, now
risks have emerged: compared to 2015, digital
looks more to technological
technologies and platforms, such as
breakthroughs and global
increasingly pervasive artificial intelligence
private initiatives than to
and powerful social media and collaborative
the alignment of political
platforms threaten the achievement of social
agendas in leading blocs.
goals such as decent, let alone full,
The next Commission will
employment; as well as the proper evolution of
have to shift gear to achieve
the democratic process. The pursuit of the SDG
the intended progress.
agenda, orphan of any strong political will,
now
looks
more
to
technological
breakthroughs and global private initiatives than to the alignment of political
agendas in leading blocs.
Recent reports have confirmed that, with the exception of Scandinavian
countries, all high-income countries are far from a trajectory that would lead
them to achieve the 17 SDGs, and struggle in particular with four objectives
related to sustainable consumption and production patterns, climate action,
aquatic life and life on land. On the environmental side, almost 200 nations at
the 24th Conference of the Parties in Katowice avoided a ‘no deal scenario’ and
finalised rules for tracking efforts to meet emission reduction targets. However,
only one tenth of these nations seems to be seriously oriented towards stepping
up investment in clean-energy research and development by 2021; and both the
IPCC and the International Energy Agency have recently announced that data
for the first nine months of 2018 point to a record increase in carbon emissions.
114 |
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 115
The EU, as a bloc, has not been sufficiently able to step up its efforts to date: the
next Commission will have to shift gear to achieve the intended progress.
The Juncker Commission and the SDGs: five years of roller-coaster
politics
Although sustainable development is considered a fundamental and
overarching objective of the EU, enshrined in Article 3 TEU, and despite the
existence of an EU strategy since 2001 and a set of Sustainable Development
Indicators since 2005, the salience of this strategy at the highest political level
had never been particularly strong before the launch of the 2030 Agenda: indeed,
the EU was heavily criticised for lacking ownership and governance (Gregersen
et al., 2016). The self-evident pragmatism shown by the President in
de facto
replacing the Europe 2020 agenda with the “ten priorities” (Renda, 2015)
appeared antithetical to the adoption of a more ambitious, far-reaching
sustainability agenda. New legislation had to fall in one of the ten baskets, with
no exceptions, and the relatively poor state of the economy in the first years of
Juncker’s mandate jeopardised the adoption of courageous plans for the initially
invoked “Triple A” in social policy. Internally, the Commission appeared
divided in its Vice-Presidential structure, with the First Vice-President showing
determination to pursue a sustainable development agenda, and others more
oriented towards growth, or resilience. Similarly, emphasis on social and
environmental goals has been weak in the semester, as well as in important
policy dossiers. Such internal division was nurtured by the publication of the
White Paper on the Future of Europe, which outlined both a Scenario 4 (“doing
less, more efficiently”); and a scenario 5 (“doing much more together”), which
in and of itself looked more consistent with the adoption of a sustainable
development agenda. Paradoxically, the more prominent advocate of a
deepened European Union, First Vice-President Timmermans, was asked to
chair a Task Force on Scenario 4, which ended with a partial boycott (by the EP)
and a very inconclusive report silently published in mid-2018. The existing
misalignment between EU and national policies on matters related to SDGs has
continued, and became even wider in some cases (Ashford and Renda, 2017).
In this overall context, the European Commission has shown, at least in
theory, strong commitment towards the SDGs.54 In November 2016, a series of
communications outlined the future agenda for 2030, centred on SDGs. The
Commission presented the new agenda as a joint initiative with member states
54 But EEB: “Three years after the international community agreed on the 2030 Agenda and
the SDGs, President Juncker still refuses to bring himself to even mention sustainability or the
Global Goals”. At https://eeb.org/launch-of-the-manifesto-for-a-sustainable-europe-for-its-
citizens/.
116 | 2030 AGENDA: TIME TO WALK THE TALK
and many different actors, aimed at fostering a stronger, more sustainable,
inclusive and prosperous Europe. Most importantly, in the Communication
“Next steps for a sustainable European future”, the Commission made clear its
intention to mainstream sustainable development in European policies: this
includes, most notably, the European Semester, the EU Budget, and the better
regulation agenda. Such mainstreaming, however, has remained on paper: the
2030 Agenda plateaued and gradually disappeared from the radar during the
following two years. This does not mean that the EU has remained inactive in
pursuing sustainable development in Europe: only, the way in which progress
has been pursued remained patchy and lacking an overall, consistent,
coordinated, multi-level strategy as the ‘mainstreaming’ idea would have
implied.
Examples of demonstrable commitment towards the SDGs are numerous,
and include the creation of a multi-stakeholder platform on SDGs, which
finalised its contribution to an upcoming Commission reflection paper in
September 2018, highlighting the need for a more
In November 2016 the
comprehensive and coordinated EU strategy. In
Commission proposed a
specific policy domains, achievements have been
new Consensus on
notable. For example, the Commission pursued
Development, aimed at
sustainable development in recent trade
updating the aid response
agreements such as those with Canada, the
to current global
Andean Community and Central America, in
challenges and promoting
which
ad hoc advisory groups were set up to
the implementation of
monitor the implementation of sustainable
the 2030 Agenda in
development provisions.55 Also, in November
partnership with
2016 the Commission proposed a new Consensus
developing countries.
on Development, aimed at updating the aid
response to current global challenges and
promoting the implementation of the 2030 Agenda in partnership with
developing countries; in addition, among other initiatives, the Commission
strengthened its “Everything but Arms” arrangement in 2014 and endorsed the
Arms Trade Treaty, which is believed to have the potential to contribute to SDG
16 (peace, justice and strong institutions). Importantly, on the ‘home front’ the
Commission presented the new Pillar of Social Rights in November 2017, a
broad framework articulated around 20 principles and rights essential for fair
and well-functioning labour markets and welfare systems in 21st century
Europe, and contemplating far-reaching initiatives such as the establishment of
a European Labour Authority, actions on work-life balance for parents and
carers, a Directive on transparent and predictable working conditions, and a
reform of the rules on social security coordination. On the environmental side,
55 http://ec.europa.eu/trade/policy/policy-making/sustainable-development/.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 117
the Commission adopted an ambitious “Plastics Strategy”, and subsequently
tabled a proposal for a new Directive banning a range of single-use plastics and
to ensure that producers will pay the clean-up costs, which was almost
unanimously backed by the European Parliament (91.5% of the votes), but is
proving way more controversial in Council and, consequently, in the trilogue.56
Perhaps most importantly, the Commission also relaunched its ambitions in
emissions reduction by proposing a net-zero emissions 2050 strategy at the end
of November 2018, thus becoming the first major player to respond to the
worrying findings of the most recent IPCC report, and outlining eight different
scenarios to achieve the stated goal by 2050.57 The Commission will now have to
consult with member states before delivering the final EU strategy to the
UNFCCC. And, while several member states already committed to net zero
emissions in 2050, and a few of them (Germany, France, the Netherlands,
Sweden, Finland, Portugal and Luxembourg) call for a faster transition to a clean
economy, countries like Poland are still reportedly planning the construction of
new coal-fired power plants; and also Slovenia, the Czech Republic, Estonia and
Ireland appear to lag behind in terms of overall progress and commitment
towards a cleaner economy.
All in all, there has been no shortage of initiatives that, either explicitly or
implicitly, could be subsumed under the umbrella of the SDGs. However, the
‘mainstreaming effect’ has not been visible in all policy areas. For example in the
area of investment policy, the first Juncker plan (EFSI) has been heavily criticised
for devoting almost 30% of its energy loans (€1.85 billion) to fossil energy, and
for massively funding carbon-intensive transport like motorways and airports.
And the reform of the Common Agricultural Policy, presented by the European
Commission in November 2017, is considered to be insufficient to achieve the
full potential of agriculture to contribute to the SDGs, which ended up being
little more than a must-have preamble in an otherwise excessively timid reform.
Lack of alignment and coherence is also visible in apparently distant policy
areas: for example, the Commission seems likely to miss the opportunity to
promote the development of artificial intelligence in relation to SDGs: the
current agenda and coordinated plan on AI adopted in December 2018 are
focused on EU “competitiveness”. Not surprisingly, this can have important
56 If the Directive will be significantly watered down, the EU will be unlikely to contribute to
several SDGs and reach some of its most resounding environmental commitments such as
reducing most common types of marine litter by 30% by 2020; and ensure the recyclability of
all plastic packaging by 2030. Council amendments regarding Extended Producer
Responsibility (EPR, Article 8) and the separate collection target for plastic bottles (Article 9)
would be adopted.
57 https://ec.europa.eu/clima/sites/clima/files/docs/pages/com_2018_733_analysis_in_
support_en_0.pdf.
118 | 2030 AGENDA: TIME TO WALK THE TALK
effects on the ability of the EU to achieve the SDGs: looking at the development
of AI and robotics from a growth or GDP perspective is very different than
approaching them through the lens of the SDGs. The latter approach would
reveal substantial impact on the environment (SDGs 7 and 13); inclusive growth,
full and productive employment, and decent work for all (SDG 8); quality
education (SDG 4), women’s empowerment (SDG 5), poverty (SDG 1) inequality
(SDG 10) and goals on industry, innovation and infrastructure (SDG 9).
The most important testbed for the EU’s commitments is certainly the
negotiation on the next multiannual financial framework (MFF), which came
with ambitious plans for climate mainstreaming across all programmes. The
underlying idea is that new institutions such as
The most important
the Urban Investment Support service (URBIS)
testbed for the EU’s
and regional investment advisory hubs will help
commitments is certainly
in steering the use of funds towards the clean
the negotiation on the
energy transition. So far, the European
next multiannual
Parliament has shown it fully backs the proposed
financial framework.
mainstreaming of the SDGs in the new EU
budget, and advocated that “the proclamation of
the European Pillar of Social Rights and the commitment from the EU and
member states to ensure a more social Europe should be supported by adequate
financial resources”; and “that, following the Paris Agreement, climate-related
spending should be significantly increased compared to the current MFF and
reach 30% as soon as possible and at the latest by 2027”.58
This patchwork of initiatives, still lacking full coordination, is reflected in
the state of advancement of the EU towards the SDGs. Recently, in a stocktaking
exercise of progress achieved over the past five years, Eurostat found that
progress was strongest for SDG 3 (‘Good health and well-being’), SDG 4
(‘Quality education’) and SDG 7 (‘Affordable and clean energy’); slow or
inexistent on other SDGs, and even negative on SDG 10 (‘Reduced inequalities’),
due to the continued rise of income inequalities within member states.
The next Commission: shifting gear to shape a fully fledged EU
2030 agenda
The European Commission has promised to publish a reflection paper on SDGs
by the beginning of 2019. It is clear that a stocktaking of EU positioning towards
the 2030 Agenda leads to the need for a considerably more comprehensive and
coordinated, multi-level policy towards the 17 goals. Inevitably, the salience of
58 http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-
2018-0075+0+DOC+XML+V0//EN.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 119
the SDG agenda in the next legislature will partly depend on the political
coalition that prevails in the elections: depending on the outcome, the next
Commission may enter a period of denial, or one of renewed commitment.
Below, we assume that the SDG agenda will remain relevant and prominent in
the EU following the elections.
First, the EU will have to construct the
First, the EU will have to
overall foundations for a comprehensive EU
construct the overall
2030 agenda based on sustainable development.
foundations for
This implies:
a comprehensive
Stepping up the prominence of the SDG
EU 2030 agenda based on
agenda in the Commission: in particular,
sustainable development.
the President should be in charge of
advancing the agenda, and report on its progress in the SOTEU speech.
The finalisation of the work ongoing in Eurostat and the JRC to convert
the SDGs into EU, national and regional SDGs, to be adopted as
benchmarks for cohesion policy, the European semester, and better
regulation methodology.
The adoption of a comprehensive EU 2030 agenda based on sustainable
development, which attributes clear commitments to the EU, national
and regional levels, in an attempt to ‘localise SDGs’;
The introduction of clear SDG-related conditionality in the allocation of
cohesion funds, as well as i.a. in the approval of InvestEU projects;
The full re-orientation of the better regulation agenda towards the 2030
Agenda: this implies different mechanisms compared to the current
reliance on cost-benefit analysis. In particular, the impact of new
legislation on all SDGs should be provided, along with rules to solve
trade-offs between SDGs in case such trade-offs emerge (e.g.
employment v. environment); and guidance on which SDGs are non-
negotiable in case of trade-offs (e.g. gender; equality; rule of law).
A reform of the European Semester to ground it in SDGs, introducing
conditionality to this end: national reforms that worsen the conditions of
workers (see, e.g. Hungary’s recent reform of its labour code),
significantly deviate from emissions reductions plans, or deviate from
the rule of law, etc., should trigger negative recommendations and
eventually sanctions and infringement procedures at the EU level. To
this end, the new productivity boards that member states were asked to
appoint by May 2018 (currently still pending in many member states)
should not work only in the direction of productivity-oriented reforms,
but rather SDG-oriented ones.
120 | 2030 AGENDA: TIME TO WALK THE TALK
Make the 2030 Agenda the basis for a new EU narrative, in which the EU
“leaves no one behind” and promotes the SDGs with concrete impacts
for society. This requires strengthening communication on progress and
failures on the way to a more economically, socially and
environmentally sustainable society by 2030; and co-creating SDG-
related strategies at the local, national and EU level with citizens and
civil society.
Second, efforts should be made to align sectoral EU legislation towards
the SDGs. This is also essential because the next five years are likely to see a
transformation of many industry sectors and markets due to the spread of a new
‘technology
stack’
composed
of
high-
Second, efforts should be
performance computing, artificial intelligence,
made to align sectoral EU
the Internet of Things, 5G communications, and
legislation towards the
partly distributed ledger technologies. This new
SDGs.
wave of innovation will not,
per se, bring good
news for the SDGs. As a matter of fact, enabling
technologies must be careful steered by governments in order to ensure
alignment with sustainability goals (Renda, 2019, AI Task Force report). The
following initiatives would be essential:
At sectoral level, it would be important to perform an analysis of the
potential for various policy areas to contribute to SDGs, and then launch
consistent REFIT initiatives based on a new SDG-compatible
methodology, which would entail the evaluation of the alignment of
entire policy areas towards 2030 goals. In this respect, food policy,
energy policy, transportation policy and manufacturing policy appear to
be the most likely to affect the viability of the EU 2030 agenda in the
years to come, together with more horizontal areas such as sustainable
finance.
Launch an initiative to explore ways in which digital technologies can
help Europe achieve its 2030 goals: the potential is enormous, from
agriculture to transport, healthcare and climate: a coordinated plan
would be needed to identify most relevant ways to achieve synergies
between policies, and to maximise the co-benefits of possible policy
actions.
Step up ambition in reforming the CAP, by addressing issues like
precision agriculture, data-driven agriculture, but also existing gaps in
the proposed reform such as combatting obesity and type-2 diabetes
through regulatory measures and behavioural insights; and addressing
inequality (read: unfair and uneven farm payments) and climate change
in a more convincing way.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 121
Adopt sectoral plans in sectors like manufacturing, transportation,
energy to establish data-sharing and joint commitment rules, including
clearer competition policy and intellectual property rules for cases of
SDG-oriented collaboration between competitors.
Launch concrete “Missions” in Horizon Europe, oriented towards
significantly advancing on a number of SDGs. Horizon Europe, still
under consideration in the European Parliament and the Council, is
explicitly rooted in the SDGs and foresees the launch of a limited number
of “moonshots”, i.e. ambitious, exploratory and ground-breaking
projects such as achieving plastic-free oceans; reducing the burden of
dementia; and tacking CO2 emissions in the largest cities. In this respect,
as observed by the ESIR advisory group in its latest memorandum, it
would be essential to adopt missions that advance on as many SDGs as
possible, and incorporate education, research, innovation and industrial
policy components.59 One good example would be an ambitious mission
on the digital transformation of industry, accompanied by key targets
for the re- and up-skilling of the workforce in Europe, and an
experimental space for welfare policies aimed at mitigating the impact
of job automation (e.g. robo-taxes, Universal Basic Income, etc.).
Key priorities for the next Commission
Assume responsibility at the level of Commission President to advance a
comprehensive EU 2030 agenda based on sustainable development
Adopt benchmarks for cohesion policy, European semester and better
regulation methodology and introduce clear SDG-related conditionality in
allocation of cohesion funds, as well as in the approval of InvestEU projects
Align sectoral EU legislation towards the SDGs
59 https://publications.europa.eu/en/publication-detail/-/publication/8ffe2509-fc2f-11e8-
a96d-01aa75ed71a1/language-en.
122 | 2030 AGENDA: TIME TO WALK THE TALK
References
European Commission (2018), “In-depth Analysis in Support of the Commission
Communication COM(2018) 773 – A Clean Planet for all. A European
long-term strategic vision for a prosperous, modern, competitive and
climate neutral economy”, 28 November (https://ec.europa.eu/clima/s
ites/clima/files/docs/pages/com_2018_733_analysis_in_support_en_0.
pdf).
Renda, A. (2017), “How can Sustainable Development Goals be ‘mainstreamed’
in the EU’s Better Regulation Agenda?”, CEPS Policy Insights 2017/12,
CEPS, Brussels, 17 March.
KEY POLICY PRIORITIES 2019-2024
When the Juncker Commission took over in 2014, it appeared that fault lines in
the construction of the Economic and Monetary Union were responsible for the
main problem of the day: the euro crisis. This tendency to see internal reform as
a key was reinforced by the so-called ‘refugee’ crisis (cf. the Dublin system).
Today, both these crises seem ‘dormant’ and external challenges have shown the
value of the Union in an uncertain world. The internal convulsions in the UK
political system have also transformed Brexit from a potentially lethal sign of
dissatisfaction with the EU into an illustration of its importance.
In many respects, the Juncker Commission has been perceived as being
more ambitious than the Barroso Commission, as shown, for instance, in the case
of the proposed quotas on migrant relocation, the idea of the need to create a
common ‘European Minister for Economy and Finance’ and an ‘EU army’, or
the proposal to introduce QMV in the area of taxation.
President Juncker sought to distance himself from his immediate
predecessor, who was generally perceived as a technocrat deferential to national
leaders. Juncker’s proposition that his Commission was “highly political” can be
seen as an attempt to counter widespread negative perceptions of a distant and
unaccountable institution and give the Commission more democratic
legitimacy. At the same time, Juncker used the notion of the ‘political’
Commission to be bolder in its agenda-setting function vis-à-vis the European
Council.
Critics have levelled the accusation that being ‘political’ leads to a less
rigorous application of the rules. Also, there are claims that the Commission
moved too close to party politics. Indeed, strong institutional bonds between the
European Parliament and the European Commission entail a certain
‘politicisation’ of the process, which means that the appointment of the
Commission President becomes a partisan matter. Making this position an
instrument of party politics might be dangerous, as it could erode the
Commission’s role as a guardian of the treaties in which it is supposed to serve
the general interest independently. Favourable treatment of individual member
states has fuelled this argument, for instance regarding the assessment of
national budgets under the Stability and Growth Pact, which was treated more
‘flexibly’ by the current Commission.
| 123
124 | KEY POLICY PRIORITIES 2019-2024
The best way to assess the Commission’s track record might be to gauge
how successful the institution was in guiding proposals through the entire
decision-making machinery of the EU. All of the bold proposals mentioned
above were met with hostility from part of the European Parliament and the
member states. By the end of 2018 the Commission had submitted almost all of
its announced proposals (94%, i.e. 519 of 551 proposals), but in fact only about
50% of those had been adopted.60 The other half is either ‘proceeding normally’
(36%), ‘close to adoption’ (5%); or ‘proceeding slowly or blocked’ (9%). Even if
most of those yet to be adopted files are categorised as ‘proceeding normally’, it
seems unlikely that a majority of those 200 proposals can be adopted by April
2019, when the European Parliament meets for the last time in its current
composition.
Unfortunately, there is no means of direct comparison of these figures to
the scores of previous Commissions, as this is the first time that the EP has run
such a systematic screening of the Commission’s activity. Nevertheless, when
comparing 2014 ambitions with results and realities in 2019, one could say that
outputs were more in line with the Commission’s relatively unambitious
scenario No. 4 (“doing less more efficiently”), as mentioned in the 2017 White
Paper on the Future of Europe and developed by First Vice-President Frans
Timmermans under the so-called ‘Better Regulation’ agenda.61 It goes to show
that, as the sole holder of the right of initiative, a ‘political’ Commission cannot
be too bold in its proposals; it must anticipate what will fly with the other
institutions and be able to organise majorities.
During Juncker’s tenure, the role of the European Commission in many a
crisis-affected area has been overshadowed by political initiatives coming
mostly from the member states and the European Council. In key areas such as
economic governance, migration and rule of law, for instance, the Commission’s
dual role as initiator of legislative proposals and guardian of the treaties has
been diminished, either by choice, or by a de facto more pro-active Council,
voicing stronger national views. It is difficult to imagine how the future could
be different from the recent past.
Whether one wishes the next Commission to continue to go down the path
of being ‘political’ depends on one’s understanding of the concept of European
60 http://www.europarl.europa.eu/legislative-train.
61 The attempt by the European Commission to strengthen evidence-based policymaking
throughout the ordinary legislative procedure, outlined in the proposed Inter-Institutional
Agreement on Better Law-making presented in May 2015, was coldly received by the other
EU institutions, and the final version of the Agreement (dated May 2016) did not lead to major
innovations in the coordination of policymaking among the three major institutions. See
Interinstitutional Agreement between the European Parliament, the Council of the European
Union and the European Commission on Better Law-Making, OJ L 123, 12.5.2016, p. 1–14.
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 125
democracy. Yet these are times of increasing nationalism, informalisation and
exceptionalism, leading to a growing importance of intergovernmental decision-
making and the (European) Council as a central decision-maker. Arguably, this
is not fertile ground for the concept of a political Commission and the federal
vision of EU democracy that it carries.
Regardless of the political coalition that will prevail after the European
elections, further progress in many EU policy fields is likely to be limited.
Divisions within the European Parliament and between the member states are
likely to be wider and deeper, thus limiting political capital for controversial
proposals. This should not discourage the next incumbents at EU level from
being ambitious. Yet they should be more realistic in setting the agenda for the
future of Europe.
It would help if the next European Commission were to distinguish policy
priorities for the period 2019-2024 between those of a ‘housekeeping’ nature to
keep the Union on the course of steady progress, and those geared to more
‘fundamental’ areas, where there is a need to bolster the basic principles on
which the Union’s community of law is built or full cooperation with the Council
is required to change the speed and/or direction of the integration process to
strengthen the EU’s strategic autonomy. At the same time, the next Commission
should take greater care in forging a coherent policy agenda. This applies as
much to the social dimension of EMU and the (digital) single market as it does
to the nexus between climate, energy and industrial policy (as exemplified by
the need for a true Capital Markets Union). Finally, Juncker’s successor would
do well to maintain the current Commission’s more hierarchical and clustered
structure as it stimulates coordination between DGs and consistency in
implementing a multi-level strategy for the next legislature.
126 | KEY POLICY PRIORITIES 2019-2024
Fundamentals First
Set up a new EU Periodic Review on Democracy, Rule of Law,
Fundamental Rights covering all member states, complemented by a new
‘EU Rule of Law Commission’
Adopt and implement a ‘Migration Union’ based on more intra-EU
solidarity and supervision, including a fully fledged operational EU
Asylum Agency, European Border and Coast Guard
Reform the services market, create a digital single market and position the
EU as a leader in responsible AI and specific industrial settings
Strengthen EU cyber defence capabilities by upgrading ENISA to an
operational cyber defence agency
Develop a new concept which gives more strategic content and profile to
neighbourhood relations
Normalise the triangular trade relationship with the US and China by,
inter alia, concluding envisaged bilateral agreements
Support the European Council in choosing a pathway that is either
between 80-95% emission reductions or the more ambitious net-zero target
Housekeeping
Justice, Rights and Security
Move from ‘crisis mode’ to ‘normal’ course of action in line with mandate in
the Treaties
Work towards the establishment of a new European Border and Asylum
Service
Ensure that EPPO moves from ‘enhanced cooperation’ to a fully fledged EU
body with all relevant EU member states participating in its mandate and
activities
Construct and develop a principled and trust-based policy approach to
counter terrorism
WHAT COMES AFTER THE LAST CHANCE COMMISSION? | 127
Europe in the world
Prioritise pre-accession preparation of the Western Balkan countries and
reset relations with Turkey on a strategic footing
Implement functional collaborative steps towards a ‘European Defence Union’
Work for the preservation and modernisation of the global trading system
(incl. the WTO and the creation of a Multilateral Investment Court under
UNCITRAL)
Continue to ‘split’ exclusive (EU-only) FTAs from ‘mixed’ Investment
Protection Agreements
Economy and finance
Return to the ‘non-political’ Commission in the area of economic policy: the
exercise of discretion in the application of the Treaty on fiscal rules has been
detrimental to the credibility of the Commission and weakened its position
vis-à-vis the Council
Refocus effort: not enough attention is being devoted to identifying the roots
of emerging divides between member states
Deliver the missing elements of economic governance reform: completion of
the banking union, creation of a euro area budget and a true Capital Markets
Union, empowering European supervisory authorities
Single market
Develop a deeper and ‘fair’ single market in an even-handed and
comprehensive manner
Support member states in improving domestic governance, promotion and
enforcement of the single market
Develop a consistent, efficient policy for data-driven innovation in Europe
(GDPR, free flow of data, copyright/TDM, ePrivacy and cybersecurity)
Launch a major initiative to transform public administrations into e-
governments by implementing the 2017 Tallinn Declaration
Agree on the need, instruments and method to implement a European Pillar
of Social Rights and a Social Fairness Package
Advance the debate on the European Unemployment Benefit System (or any
other form of stabilisation instrument) and take action
Support the establishment and operation of a fully fledged European Labour
Authority
128 | KEY POLICY PRIORITIES 2019-2024
Energy, climate and sustainable development
Approach climate, energy and industrial policy on low-carbon technologies
in an integrated manner
Implement the 2018 strategy for a climate-neutral economy (2050)
Assume responsibility at the level of Commission President to advance a
comprehensive EU 2030 agenda based on sustainable development
Adopt benchmarks for cohesion policy, European semester and better
regulation methodology and introduce clear SDG-related conditionality in
the allocation of cohesion funds, as well as in the approval of InvestEU
projects
Align sectoral EU legislation towards the SDGs
ABOUT THE CONTRIBUTORS
Mehtap Akgüç, Research Fellow in the Jobs and Skills unit
Cinzia Alcidi, Senior Research Fellow and Head of the Economic Policy unit
Sara Baiocco, Researcher in the Jobs and Skills unit
Miroslav Beblavý, Associate Senior Research Fellow and Head of the Jobs and
Skills unit
Steven Blockmans, Senior Research Fellow and Head of the EU Foreign Policy
and Institutions units
Sergio Carrera, Senior Research Fellow and Head of the Rights and Security
unit
Willem Pieter De Groen, Research Fellow and Head of the Financial Markets
and Institutions unit
Christian Egenhofer, Senior Research Fellow and Head of the Energy and
Climate Change unit
Milan Elkerbout, Research Fellow in the Energy and Climate Change unit
Jorge Núñez Ferrer, Senior Research Fellow in the Economic Policy unit
Daniel Gros, Director
Weinian Hu, Research Fellow in the Global Governance, Regulation,
Innovation and Digital Economy unit
Zachary Kilhoffer, Researcher in the Jobs and Skills unit
Karel Lannoo, Chief Executive Officer
Jacques Pelkmans, Senior Research Fellow in the Global Governance,
Regulation, Innovation and Digital Economy unit
Andrea Renda, Senior Research Fellow and Head of the Global Governance,
Regulation, Innovation and Digital Economy unit
Sophia Russack, Researcher in the Institutions unit
Guillaume Van der Loo, Researcher in the EU Foreign Policy unit
All authors are affiliated to CEPS.
| 129
MAJOR CONTRIBUTIONS
INSTITUTIONAL REBALANCING: THE ‘POLITICAL’ COMMISSION
Sophia Russack
A NEW START FOR EU JHA POLICIES?
Sergio Carrera
NEIGHBOURHOOD, SECURITY AND DEFENCE POLICIES
Steven Blockmans THE EU’S TRADE AND INVESTMENT POLICY
Weinian Hu, Guillaume Van der Loo ECONOMIC GOVERNANCE AND ECONOMIC POLICY
Cinzia Alcidi, Daniel Gros, Karel Lannoo, Jorge Núñez Ferrer
FINANCE FOR SUSTAINABLE GROWTH
Willem Pieter De Groen
THE SINGLE MARKET: WORKHORSE FOR EU PROSPERITY
Jacques Pelkmans
DIGITAL ECONOMY, INDUSTRY AND INNOVATION
Andrea Renda
LABOUR MARKET AND SOCIAL POLICY
Mehtap Akgüç, Sara Baiocco, Miroslav Beblavý, Zachary Kilhoffer REDEFINING THE ENERGY UNION
Christian Egenhofer, Milan Elkerbout
2030 AGENDA: TIME TO WALK THE TALK
Andrea Renda
What C
Ahead of the 2019 institutional reconfiguration of the EU is a fitting
What Comes After
moment to take stock of the European integration process and decide
omes After the Last Chance C
which priorities should define the strategic agenda of the next generation of
the Last Chance Commission?
incumbents.
Policy Priorities for 2019-2024
While acknowledging that the entire EU collective is concerned – member
states and institutions alike – this report is addressed to the one actor that
has a more direct role in fleshing out the policy agenda for Europe: the
European Commission.
This report assesses how the ‘last chance Commission’ of President Juncker
has fared; whether it has followed the ten guidelines it set out at the beginning
of its mandate; how far it was blown off course by critical events; and whether
ommission?
we might see the return of a ‘political’ Commission in the second half of this
year.
Against the backdrop of global trends and deepening divisions between
member states and within the European Parliament, the contributors to
this report distil key policy priorities in areas that will determine the future
European Union, from the single market and the rule of law to migration,
external security and climate change.
Thanks to its wide research coverage of EU policy and strong in-house
expertise, CEPS is uniquely placed to comment on these issues and
recommend action.
CENTRE FOR
EUROPEAN
CEPS
POLICY
STUDIES
Edited by Steven Blockmans
