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No honeymoon for von der Leyen

Published on: 04 September 2019

No honeymoon for von der Leyen

The new EU Commission is off to a tough start. Compared to 5 years ago, the EU’s challenges have undergone a dramatic shift. The EU’s international role is of much greater significance, as is climate, and values. And translating aspirations in these areas into applicable actions could be just a pipe dream. Finding majorities in the European Parliament will require the support of three political groups, making the adoption of proposals more difficult. And the anti-EU forces in Parliament, and in Europe generally, have also grown.

Five years ago, Europe was struggling to shrug off the sovereign crisis. The priorities of the Juncker Commission were common sense: jobs, growth and investment, the completion of the single market in digital, energy and finance, further opening of trade, and the rule of law. It started off with some big ideas, such as the Juncker Plan, the different ‘Unions’, supported by a different way of working with the ‘teams’ in the Commission, and the cooperation between the vice presidents (from smaller member states) and the commissioners.

Five years on, the Juncker Commission has delivered well on its objectives, as we analysed in our ‘Last Chance Commission’ report, but some of the unions remain very incomplete. Support for the EU has grown, as was clear from the participation rate in the European elections in May, or from the latest Eurobarometer polls. Now EU policymakers need to come up with commonly agreed solutions to a raft of major policy issues. Here is a brief review of just some of the challenges EU legislators will need to tackle:

  • EU economies have resumed growth over the last 5 years. Compared to our main trading partner, the US, we are lagging further behind. EU average GDP growth for the last five years stood at 2.1%, compared to 2.5% in the US, fully accounted for by the lower population growth in the EU, following no growth during the preceding five years, while the US recorded 1%. As a result of these demographic trends and the long euro crisis, US pre-eminence is clearer than at any time before, as exemplified at the G7 in Biarritz.
  • The US lead is also clear at the micro level, in big tech and finance. The term GAFA did not exist five years ago, nor was the dominance of US big tech so pronounced. Today, the combined market capitalisation of just the five big US tech companies (GAFA plus Microsoft) is about $4.2 trillion, and they had a combined $801.5 billion in revenues last year. For comparison, the total market capitalisation of domestic listed companies on all European stock exchanges was about €13 trillion (or $14.2 trillion). The dominance of the US tech sector raises big issues for the competitiveness of European firms, but also for European policymakers in setting EU competition, digital or tax policies.
  • The same applies, ceteris paribus, in finance, where the five largest US-based banks have a combined market cap of about $1.3 trillion, up markedly from five years ago. The total market cap of listed European banks is about half of that, and under pressure, reflecting continuing doubts in the markets about the health of European banks and their business models. Exactly five years ago, the Single Supervisory System (SSM) was created within the ECB, in order to bring about a real banking union. Financial stability has been restored but, apparently, we still have some way to go in creating a profitable environment for banks.
  • Sustainable development is perhaps the most commonly shared European policy objective. But, three years after the Paris Accord, we are not yet making clear progress towards the objective of keeping the global temperature increase below 2%. The EU’s objective to reduce carbon emissions by 40% by 2030 will require a huge coordinated effort, but is not (yet) moving in this direction. In addition, the EU cannot act alone, as the European Council indicated, in a world where the biggest carbon emitters are the large nations in the Asian subcontinent.
  • Even more difficult is the minimum wage, a new objective that has come up during the European elections. Commission President-elect von der Leyen said she would ‘propose a legal instrument to ensure that every worker in our Union has a fair minimum wage’ during the first 100 days of her term. Wage legislation is not an EU competence, and EU countries approaches differ markedly on this. Nor has it been proven that minimum wage rules reduce unemployment, and thus increase welfare. Moreover, the minimum wage cannot clearly be the same in all countries. The challenge will be to find common rules for setting different minimum wages, perhaps relative to the average national productivity. But will Parliament agree with that?
  • European values and the rule of law, or protection of our European way of life, the focus of much of von der Leyen’s speech, was already a difficult target under the current Commission and will undoubtedly remain a challenge in a Union of 27 or 28. Enforcing it internationally – through, for example, qualified majority voting (QMV) in foreign policy, as she suggested in the speech – is certainly not agreed upon amongst smaller member states, let alone the larger ones.
  • A crucial test for the federalist von der Leyen will be how external relations roles will be filled. Will defence get a portfolio, possibly against the wishes of some member states? How will the trade agenda be formulated amid the growing tensions between the US and China?

The incoming Commission looks set to have a highly qualified team, with several reputable members staying on from the previous College alongside strong newcomers. The challenge for von der Leyen, however, is to agree with the College on a European agenda, find some big ideas, and start delivering in the first 100 days on many of the themes she raised. The President-elect will first need to come up with a good distribution of portfolios as a basis on which to further develop a collegial way of working among the Commissioners.

Much has changed in the EU and the world since Juncker took office. The EU Commission is possibly no longer of a ‘last chance’, as a stronger ‘silent majority’ is supporting the EU. But delivering on its objectives, in a much more uncertain world, will be no sinecure.

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Karel Lannoo Karel Lannoo
Karel Lannoo