Rodrigo Gonçalves
Economist and Specialist in Political Affairs
On September 13, the President of the European Commission inaugurated the new political year with her annual “State of the Union” speech at the European Parliament in Strasbourg.
In this speech, Ursula von der Leyen reflected on what the European Union (EU) has achieved in the past year and what she will emphasize in the coming year, the last of her term of office.
There were several relevant topics in her speech with one of the main themes being, naturally, Russia’s ongoing aggression against Ukraine. Ursula von der Leyen reiterated that the EU will continue to support Ukraine for as long as necessary, adding that “the future of Ukraine lies in our Union”.
This speech, which is an annual exercise marking the start of the legislative year, comes four years after the election of Von der Leyen – who began her first term at the helm of the EU executive in December 2019 – and less than a year before the 2024 European elections, scheduled for June.
Taking stock of her mandate so far, the head contextualized the progress in the European project, after the covid-19 pandemic and the consequences of the Russian invasion of Ukraine, reaffirming that the EU is witnessing today the “birth birth of a geopolitical union, supporting Ukraine, facing Russia’s aggression, responding to an assertive China”.
In a context highly influenced by Russia’s invasion of Ukraine Von der Leyen further pointed out that, today, the EU “reflects the vision of those who dreamed of a better future after World War II”, when they envisioned “a future in which a union of nations, democracies and peoples would work together to share peace and prosperity”.
Of many proposals and ideas presented was particularly relevant The reference to the economic challenges, in particular the implementation by the European Commission of a legislative package on wind energy to, in a collaborative work with industry and Member States, have more and more clean industries, in the framework of the European Ecological Pact.
In her speech to the European Parliament, Ursula von der Leyen stressed that Brussels will focus on competences, access to finance and stable supply chains to operate in several communicating sectors ranging from wind energy to steel, from batteries to electric vehicles, and several other sectors.
The president reinforced the message that the future of the cleantech industry must be made within Europe itself, moving increasingly towards sustainable autonomy.
Another major economic challenge that has been mentioned is the persistence of high inflation that will take some time to resolve. Ursula von der Leyen listed three major economic challenges for industry next year which are labor shortages, skills shortages and inflation.
These challenges must always be addressed with the perspective of facilitating business activity, against a backdrop of reserved economic growth, consequences of the war in Ukraine and a tight monetary policy that makes access to finance difficult.
However, the EU cannot jeopardize its competitiveness, so Von der Leyen has asked Mario Draghi, former president of the ECB, to prepare a report on the future of European competitiveness that can help maintain the fundamental balance on the level of Europe’s competitiveness.
The inflation rate has been falling in recent months after recording record values due to the reopening of the economy following the covid-19 pandemic, the energy crisis and the economic consequences of the war in Ukraine, but still above the ECB’s 2% target for price stability.
To achieve this, the ECB has tightened its monetary policy with successive interest rate hikes, now at a slower pace.
In the midst of this scenario, the good news, according to Ursula von der Leyen, is that Europe has begun to lower energy prices, a component that has been driving inflation to historic levels.
The president of the European Commission stated in this regard that “we do not forget Putin’s deliberate use of gas as a weapon and how that triggered fears of blackouts and an energy crisis like in the 1970s. Many thought we wouldn’t have enough energy to get us through the winter, but we made it because we stuck together, pooling our demand and buying energy together…”
A year ago, the price of gas in Europe was over €300 per megawatt hour, and today it is around €35, revealing the resilience and the capacity to adapt and react of a mature and united Europe.
Also as an economic challenge and taking into account the challenges posed by the business sector, particularly the smaller ones, Ursula von der Leyen announced that an EU representative for small and medium-sized enterprises (SMEs) will be appointed by the end of the year.
Von der Leyen stated that she wants to hear directly from SMEs about their daily challenges and left the note that the first legislative proposals to reduce EU-wide reporting obligations for SMEs by 25% will be presented next month.
A few days earlier, the Community Executive announced an aid package for SMEs in which it admitted the revision of the definition of these companies, considering that the current thresholds do not reflect contexts such as high inflation, admitting additional support measures.
Another issue that Ursula von der Leyen highlighted was the conditions of the European labor market, which have been a headache for the Member States.
The President of the European Commission announced that the EU will organize in 2024 The Summit to reinvent the labor market. Ursula von der Leyen considered that it is necessary to improve access to the labor market in general, but with special attention to young people and women.
This new social partner summit will be organized in conjunction with the Belgian Presidency of the Council of the EU in the first half of 2024. The Belgian Presidency will be the last before the start of the mandate of the new Commission.
The head of the EU executive pointed out that Europe is close to full employment, saying that instead of millions of people looking for jobs, we have millions of jobs looking for people”.
However, labor and skills shortages are reaching unprecedented levels and skills shortages are considered a problem for 74% of small and medium-sized enterprises in the EU.
In this speech one of Von der Leyen’s main concerns was the need to see the EU budget approved quickly and also a trade protocol with Mercosur countries by the end of the year.
As an economic and national security imperative, it is clear from the European Commission President’s speech that European companies need access to key technologies to innovate, develop and produce in order to preserve a European advantage in critical and emerging technologies. However, this need requires a broad understanding to ensure common European funding.
That is why, according to the leader of the EU executive, the European Commission recently proposed a review to strengthen the EU’s long-term budget and the creation of a Strategic Technology Platform for Europe (STEP) to support European leadership in the field of critical technologies.
Speaking about European competitiveness, she defended the commitment to “open and fair trade”, referring to the free trade agreements already concluded with Chile, New Zealand and Kenya and the potential agreements to be concluded with Australia, Mexico and Mercosur by the end of this year.
As for the Southern Common Market (Mercosur), EU and Mercosur negotiators are now finalizing trade discussions to conclude this trade agreement, which was endorsed five years ago, but which has been questioned within the EU bloc for competitive and environmental reasons.
The EU-Mercosur Agreement covers 25% of the world economy and 780 million people, almost 10% of the world’s population.
In a cross-cutting speech on various concerns and issues of interest to Europe, the Commission President leaves in the air the preparation of her re-election for a second term.
Van der Leyen may not please everyone, but she has been guaranteeing the Union of the Member States, in a very complex context, and has led Europe with the necessary firmness that would be required at a time of geopolitical realignments such as we have perhaps never seen before.
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