EU budget officials will have to jump through many hoops, the most difficult of all being the issue of net payers not wanting a bigger EU budget at a time of increased spending pressures
By Jennifer RANKIN
Leaders can spend only limited political capital on euro initiatives while weighed down by domestic problems. It has become a bitter joke in Brussels that the most stable country in the EU is Italy, once notorious for its succession of short-lived governments. France’s Emmanuel Macron and Germany’s Olaf Scholz are humbled by punishing electoral defeats. Spain’s prime minister, Pedro Sánchez, heads a minority government in a country torn apart by a controversial amnesty bill. In Poland, Donald Tusk enjoys a much stronger position, but faces a difficult coalition and an allied opposition president. For EU insiders, a collection of weak governments, or simply those distracted by domestic problems, is no laughing matter.
Faced with the war in Ukraine, the possible re-election of Donald Trump and intense economic competition, critics argue that current European leaders are not up to the task. “We now need a very ‘top’ Europe, which we don’t have at the moment,” said Bas Eickhout, who co-leads the Greens group in the European Parliament, unrepresented at the European Council table. “I don’t see the leadership. I wouldn’t be able to name a head of state that I would credibly say could command that leadership.” With the leaders of France and Germany burdened by domestic problems, the spotlight has returned to Ursula von der Leyen, who is strengthening her grip on power in the European Commission. She is expected to begin a second term as president of the European Commission on December 1, almost six months after the European elections.
Parachuted into the job in a last-minute compromise in 2019, von der Leyen is now a seasoned operator in Brussels. “In his second term von der Leyen knows what he’s doing,” said Heather Grabbe, of the Bruegel think tank. “She knows what power she has, how to make the machines work for her and how to sell things to the capitals … The question is, can she also implement policies, and more critically, implement them ? And that’s where the problem of weak governments is really against it.” Outlining her agenda in the European parliament last July, von der Leyen promised a “clean industrial deal” aimed at boosting jobs and green industries within her first 100 days, higher and more coordinated spending. European defense and renewed efforts to bring Ukraine and Western Balkan countries into the EU. Without action on the economy, the EU risks “a slow and painful decline”, according to Mario Draghi, the former Italian prime minister, who published a 400-page report outlining the “existential challenge” posed by Europe’s economic weakness in the face of major competitors. , such as the US and China. The drug could cost up to €800 billion a year, an investment level equivalent to 5% of the EU’s economic output, he concluded.
This is a conservative estimate, the report says, as it does not account for the costs of improving skills or adapting to climate disruption. So far, von der Leyen has not approved joint borrowing to pay for this agenda. The decision rests with the 27 national leaders. But Germany, the EU’s biggest economy, has poured cold water on a second round of joint debt, modeled after the ground-breaking Covid recovery plan. Luuk van Middelaar, a former senior EU official and co-founder of the Brussels Institute for Geopolitics, said he was concerned about the risk of a disconnect between Draghi’s agenda and what national governments can agree on. “National European leaders … can only spend limited political capital on European initiatives. The stars for this have to align for things to work and currently they are not aligned at all.”
There is “a sense of urgency in Brussels about the state of the world and how Europe is losing and we have to do something” combined with “weak national governments” faced with an agenda that is more important than urgent, Van Middelaar said. “And when it’s not urgent, it’s very difficult to mobilize the political will of 27 or at least a good majority of national governments to act.” Adding to the fragmentation, far-right parties have made inroads across the continent and are in government, or coalitions or supporting governments in seven EU member states: Croatia, Finland, Hungary, Italy, the Netherlands, Slovakia and Sweden. The far right is now the largest party in Austria, although it is unlikely to form a government. Europe’s far-right parties remain divided, except when it comes to opposing further European integration. In the next five-year term, the EU may also face tougher elections, which could further strain shaky coalitions and governments with a far-right presence. “Von der Leyen’s first term was about the twin green and digital transitions, two priorities with strong synergies. Now the second term will be dominated by exchanges,” said Georg Riekeles, a former commission official now at the European Policy Centre.
For example, he sees a trade-off between the EU’s green deal – a step for offshore wind power – and economic security. “For good reasons, we probably don’t want to leave China in the supply chain for critical infrastructure or offer our offshore wind turbines. But without Chinese climate technology, our green deal will be much more expensive.” Grabbe doesn’t see a long-term risk to the green transition, but she said: “Our cleantech needs a much better strategy because the Chinese have bet on cleantech and they were right to do so. And our auto industry being so slow to respond to policy signals has resulted in the current situation where they are in serious trouble.” Throw into the mix the task of agreeing a new EU budget by the end of the five-year period and the picture looks even more complicated. This is always a devilishly difficult political act, but the next one will generate even more difficult political fights.
EU budget officials will have to jump through many hoops, the most difficult of all being the issue of net payers not wanting a bigger EU budget at a time of increased spending pressures . Also, EU debt rose to €459 billion in 2023, doubling from 2021, largely due to the Covid recovery fund. So far, EU governments have been unable to agree how to generate funds to repay the debt, despite a repayment timeline that starts at the end of 2027. It could be a messy, politically charged period. stormy for the EU. But the force of external pressures won’t go away, meaning there’s a good chance many items on von der Leyen’s agenda will become national government priorities five years from now, Grabbe said. “The force of external events and pressures” will create its own momentum, whether through climate impacts such as floods, fires and storms, public expectations for high-quality jobs, or the threat of a revanchist Russia, she said, adding: “We will feel a strong pressure for Europe”.
