European Parliamentary Research Service Blog

Written by Anita Orav(1st edition).

Most migrants arrive in Europe legally, to work, study or join family members. Over a million of the first residence permits granted to non-EU third-country nationals in 2019 were for work purposes. The EU shares competence on legal migration with Member States but can set conditions for third-country nationals’ entry into and legal residence in Member States. However, Member States retain the right to determine admission numbers for third-country nationals seeking work. The Single Permit Directive lays down a single application procedure for a combined work and residence permit, and a common set of rights for third-country workers legally residing in an EU country.

In its communication ‘Attracting skills and talent to the EU’, adopted on 27 April 2022, the European Commission announced an overhaul of the EU’s acquis on legal migration. It also proposed a recast of the Single Permit Directive, with the objective of simplifying the application process for living and working in the EU and improving rights for residents and their family members. In the European Parliament, the proposal has been assigned to the Committee on Civil Liberties, Justice and Home Affairs, which debated a draft report prepared by the rapporteur on 1 December 2022.

Versions

• January 2023: Revision of Directive 2011/98/EU on the single permit to reside and work (1st edition)

Proposal for a directive of the European Parliament and of the Council on a single application procedure for a single permit for third-country nationals to reside and work in the territory of a Member State and on a common set of rights for third-country workers legally residing in a Member State (recast) Committee responsible:Civil Liberties, Justice and Home Affairs (LIBE)COM(2022)0655
27.4.2022
Rapporteur:Javier Moreno Sánchez (S&D, Spain)2022/0131(COD)Shadow rapporteurs:Lena Düpont (EPP, Germany)
Jan-Christoph Oetjen (Renew, Germany)
Tineke Strik (Greens/EFA, the Netherlands)
Tom Vandendriessche (ID, Belgium)
Patryk Jaki (ECR, Poland)
Konstantinos Arvanitis (GUE/NGL, Greece)Ordinary legislative procedure (COD)
(Parliament and Council on equal footing
– formerly ‘co-decision’) Next steps expected: Awaiting Committee decision

Written by Clare Ferguson with Sophia Stone.

After a run of difficult years, Members of the European Parliament begin 2023 with a full agenda and some thorny issues to be grasped.

In a key debate on Wednesday morning, Members are scheduled to hear European Council and Commission statements on the conclusions of the European Council meeting of 15 December 2022. Earlier, on Tuesday morning, they are due to hear Council and Commission statements presenting the Swedish Presidency of the Council’s programme of activities for the next six months. Sweden’s priorities are: to protect citizens and freedoms; promote a new growth and investment model; a climate-neutral, green, fair and social Europe; and to promote Europe’s interests and values globally.

In relation to EU freedoms, for 30 years, the single market has benefited us all through free competition under fair rules and the liberty to live, work, shop and retire anywhere we like in Europe. Estimates suggest the single market has added between 8 % and 9 % to EU gross domestic product. That’s not to say that there is no room for improvement – 447 million consumers and 23 million companies mean that the single market is a constantly evolving entity, which needs to adapt to challenges such as the COVID‑19 pandemic. In addition to a ceremony to mark this noteworthy anniversary, Members are expected to debate a motion for resolution on Monday evening, tabled by the Committee on the Internal Market and Consumer Protection (IMCO). Underlining the single market’s vital role in creating a European polity, the IMCO text seeks renewed Member State commitment to implementing and enforcing existing single market legislation correctly and looks forward to renewed action to strengthen and modernise the single market. Members will also hear statements from the European Commission and Council.

While the single market has made it much easier to do business across borders in the European Union, wider globalisation sometimes causes issues when decisions affecting workers for multinational companies are taken far from their workplace. European works councils (EWCs) represent EU employees of large multinational companies, to ensure that their rights are protected. Despite an evident lack of effective consultation, however, the European Commission does not plan to revise the current EWC Directive. On Thursday morning, Members are due to debate a legislative-initiative report from the Committee on Employment and Social Affairs (EMPL), calling on the Commission to take action to ensure European works councils provide meaningful consultation, and an end to exemptions, tougher penalties and access to justice.

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The EU is, above all, a peace project. However, in a dynamic geopolitical situation, the EU can demonstrate its capacity to address external vulnerabilities in a robust manner – such as the unprecedented decision to mobilise funding for Member State weapons delivery to defend Ukraine against Russian aggression. In a debate on Tuesday afternoon, Members are due to discuss annual reports for 2022 on implementation of the common foreign and security policy, implementation of the common security and defence policy, and human rights and democracy in the world.

Russia’s war against Ukraine has added to worsening climate and energy crises, and increasingly assertive authoritarian regimes such as China and Iran are posing new risks to stability. In its 2022 report on the implementation of the common foreign and security policy (CFSP), Parliament’s Committee on Foreign Affairs (AFET) proposes that the EU redouble its efforts to strengthen international security through a military and defence union, by supporting qualified majority voting (QMV) in the Council on security issues, ensuring greater strategic autonomy, and stronger mitigation of climate change vulnerabilities.

The AFET committee takes up the challenges triggered by Russia’s aggression, to focus on EU defence initiatives in its 2022 report on the EU’s common security and defence policy. (CSDP). Noting the dramatic deterioration of the security situation resulting from Russia’s actions, the committee urges that the EU provide all necessary assistance to Ukraine. It welcomes the new initiatives taken in 2022, such as progress on the Strategic Compass, and looks forward to proposals for stronger EU defence financing. Not limited to European soil, the report calls for stronger security partnerships in Africa and in the maritime sphere, particularly the Indo-Pacific. It also welcomes the climate change and defence roadmap, and underlines the need for more investment in ‘green’ defence. Following up on the Conference on the Future of Europe, the report calls for further discussion of using QMV in the Council for CSDP matters.

The consequences, particularly for the most vulnerable, of Russia’s war, are highlighted in a response to the European Commission’s 2021 annual report on human rights and democracy in the world, which details the greatly deteriorating environment. The report from Parliament’s Subcommittee on Human Rights (DROI) for the Committee on Foreign Affairs (AFET) calls for a strong approach to war criminals and human rights violators in the context of the war in Ukraine. It also condemns the increasing threats to freedom of expression in many countries, and welcomes EU action to protect the most vulnerable, wherever they live. In this respect, the Human rights and democracy in the world, 2021 report is particularly in favour of integrating human rights values in trade agreements, and looks forward to greater cooperation between EU institutions on human rights issues.

Peace and security: interactive infographic on Peace and Security.

Food price inflation is another consequence of the war, as well as other factors including extreme weather, affecting all EU citizens. Parliament strongly supports the measures to address the impacts of the Russian invasion on energy and food prices in the EU, particularly those aimed at reducing dependence on imports and increasing domestic production. Parliament has also called for measures to shelter citizens from the worst inflation in commodity prices and has encouraged EU countries to consider taking tax measures to ease access to essential goods. Members are expected to put their questions to representatives of the European Commission on EU action to tackle food price inflation in Europe on Tuesday afternoon.

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Stronger rules on waste shipments are needed to ensure that EU efforts to recycle waste do not lead to environmental degradation outside the EU. A report from Parliament’s Committee on Environment, Public Health and Food Safety (ENVI) considers that European Commission proposals to this end could be strengthened, not least on monitoring what actually happens to waste exported outside the EU. The committee would like to see an assessment of waste management in non-EU countries that takes labour standards into consideration, as well as an end to EU exports of plastic waste. Members are expected to debate the report on Monday evening, with a subsequent vote setting Parliament’s position for negotiations on EU rules on waste shipments with the Council.

Corruption is a major challenge for the EU – all Member States are affected by the problem to some extent – and this exposure to organised crime, undetected fraud and high-level corruption can seriously harm the EU’s budget. Combating fraud and protecting the EU’s financial interests is therefore crucial. Members are due to debate a Committee on Budgetary Control (CONT) own-initiative report on these efforts, detailed in the European Commission’s 2021 annual report on the protection of the EU’s financial interests (known as the PIF report), on Wednesday afternoon. Noting the challenging context in 2021 due to the COVID‑19 pandemic, the CONT committee nevertheless underlines the need for timely parliamentary scrutiny of the spending of the extraordinary EU funds made available for the recovery.

While shell companies, or ‘shells’ (entities with no, or minimal, economic activity) may serve commercial or business functions, they are also used to evade taxes. In response to a European Commission proposal for an instrument to ‘unshell’ companies being used to abuse the tax system, Parliament is set to debate a Committee on Economic and Monetary Affairs (ECON) report on Monday evening. The report proposes lower gateway thresholds to prevent EU shell companies from benefiting from tax advantages, shorter deadlines to address rebuttals, and welcomes plans to review the rules to prevent misuse of shell entities for tax purposes after five years. The proposal requires unanimity in the Council, where negotiations are ongoing, following consultation of Parliament.

Parliament’s 14 vice-presidents replace the president in the discharge of his or her duties, among other duties, and sit as a Member of Parliament’s Bureau, responsible for financial, organisational and administrative decisions on Parliament’s functioning. On Wednesday lunchtime, Parliament will vote to elect a new vice-president, after voting last month to remove the vice-president subject to ongoing investigations by Belgian authorities for alleged wrongdoing.

European Parliament Plenary Session – January I, 2023 – agenda

• Ten issues to watch in 2023: https://www.youtube.com/playlist?list=PLPPfzoqPUImUT7HIcA7l34ieoAtU7GnWU
• Ten issues to watch in 2023
• State of play in the European Council in December 2022
• Priority dossiers under the Swedish European Council Presidency
• Thirtieth anniversary of the EU single market
• Revision of European Works Council Directive
• Report on the implementation of the common foreign and security policy (CFSP) in 2022
• Report on the EU’s common security and defence policy (CSDP) in 2022
• Human rights and democracy in the world, 2021
• Question time: Food price inflation
• Strengthening EU rules on waste shipments
• Protection of the EU’s financial interests and combating fraud: Annual report 2021
• Unshell – Rules to prevent misuse of shell entities for tax purposes
• Vacancy for a Parliament vice-president

Written by Krisztina Binder.

The European education area (EEA) is about promoting cooperation among European Union (EU) Member States to build more resilient and inclusive national education and training systems. The aim is also to improve access to quality education and lifelong learning for all across the EU.

EU leaders first endorsed the vision for a European education area at the Gothenburg Social Summit in 2017. Following the first initiatives, the overall approach to forming the EEA by 2025 was outlined in a 2020 European Commission communication and two 2021 Council of the EU resolutions.

On 18 November 2022, the Commission adopted its progress report on the achievement of the EEA by 2025. The report highlights the first results of the implementation of actions and reforms and points to some positive trends in education, such as the decreasing number of early school leavers and the rising tertiary educational attainment rate. It is estimated that overall EU spending on education and skills will triple between 2021 and 2027 compared to the previous budget period. However, warning signs suggest that more far-reaching, longer-term, efforts are needed to address inequalities in and improve the quality of education and training.

A mid-term review process informed by the Commission’s 2022 progress report will take place in 2023. In this context, an event with the European Parliament has also been scheduled. The Commission is expected to publish a comprehensive report on the achievement of the EEA in 2025.

While in its November 2021 resolution, Parliament expressed its belief that the EEA could and should play a unique role in improving access to and quality of education, it also underlined the need for a more holistic approach and suggested clear priorities and achievable targets for the actions. In its May 2022 resolution, Parliament welcomed the Commission proposals to develop a European approach to micro-credentials, individual learning accounts and learning for environmental sustainability as a step towards the EEA. These initiatives are considered an opportunity to make the possible benefits of the EEA more visible to European citizens.

Read the complete briefing on ‘Taking stock of progress towards the European education area‘ in the Think Tank pages of the European Parliament.

Written by Marcin Grajewski.

As Russia’s war on Ukraine has entered into its 11th month, Moscow’s forces have launched fierce attacks in the east of the country, hoping for gains after a series of retreats in the second half of 2022. In some of the most intense fighting since the invasion, Russia’s onslaught focused on the salt-mining town of Soledar, a stepping-stone in Moscow’s push to capture the entire Donbas region.

In the preceding weeks, Russia has been bombing Ukraine’s critical infrastructure, depriving many areas and people of electricity, heating and water supplies.

Ukraine is preparing to receive Patriot air defence missiles from the United States and Germany. Ukrainian troops were due soon to arrive in the United States to begin training on this advanced defence system.

Meanwhile, the EU has agreed to introduce a price cap for Russian oil at US$60 per barrel.

This note gathers links to the recent publications and commentaries from many international think tanks on Russia’s war on Ukraine. Earlier analyses of the war can be found in a previous edition of the ‘What Think Tanks are Thinking’ series.

Refugees must be central to the reconstruction of Ukraine
Brookings Institution, January 2023

European natural gas imports
Bruegel, January 2023

Germany must move past the crossroads
Carnegie Europe, January 2023

War in Ukraine bolstered EU solidarity: Will it last?
Centre for European Reform, January 2023

Expert insights: Russia and Ukraine
Clingendael, January 2023

The risk of ‘refugee fatigue’: Three ways European leaders can support Ukrainians fleeing the war
European Council on Foreign Relations, January 2023

Announcements of new military equipment for Ukraine: Day 315 of the war
Eastern Studies Centre, January 2023

L’Union européenne face à la guerre en Ukraine: La puissance libérale et ses limites
Fondation Robert Schumann, January 2023

Disinformation as a weapon of war: the case for prebunking
Friends of Europe, January 2023

The threat of war fatigue
German Marshall Fund, January 2023

In focus: Russian exports to the EU before the invasion of Ukraine
Hellenic Foundation for European and Foreign Policy, January 2023

Russian offensive campaign assessment
Institute for the Study of War, January 2023

The land war in Ukraine as winter takes hold
International Institute for Strategic Studies, January 2023

Belarus and Russia move to the next stage of integration
Polish Institute of International Affairs, January 2023

Ukraine and the new two war construct
Rand Corporation, January 2023

The myth of America’s Ukraine fatigue
Rand Corporation, January 2023

Proposals to seize Russian assets to rebuild Ukraine
Brookings Institution, December 2022

Supporting international accountability for Ukraine
Brookings Institution, December 2022

What lessons do past international efforts at rebuilding war-torn countries hold for organizing the reconstruction of Ukraine?
Brookings Institution, December 2022

The Russia-Ukraine war and its ramifications for Russia
Brookings Institution, December 2022

Ukraine is the victim: Negotiations should be Kyiv’s decision
Brookings Institution, December 2022

The impact of the Ukraine crisis on international trade
Bruegel, December 2022

Will the European Union price cap on Russian oil work?
Bruegel, December 2022

The war in Ukraine highlights European rifts
Carnegie Europe, December 2022

The risks of negotiating an end to the war in Ukraine
Carnegie Europe, December 2022

The $300 billion question: How to get Russia to pay for Ukraine’s reconstruction
Centre for European Policy Studies, December 2022

Feel free to talk about Ukraine, but don’t expect miracles
Centre for European Reform, December 2022

Now is not the time for Ukraine to negotiate
Centre for European Reform, December 2022

Are France and Germany wavering on Russia?
Centre for European Reform, December 2022

Open-source intelligence in Ukraine: Asset or liability?
Chatham House, December 2022

Russian imperial mindset must change for real victory
Chatham House, December 2022

Will an EU oil price cap limit Russian aggression?
Chatham House, December 2022

Putin and the Third Rome
Clingendael, December 2022

Three scenarios for the future of Russia-West relations
Clingendael, December 2022

The old is dying and the new cannot be born: A power audit of EU-Russia relations
Council on Foreign Relations, December 2022

Russia-proofing Europe
Council on Foreign Relations, December 2022

Aggression on trial: The tricky path towards prosecuting Russian war leaders
Council on Foreign Relations, December 2022

Russia’s response to Western oil sanctions
Eastern Studies Centre, December 2022

What news from the Ukrainian front: A net assessment
Egmont, December 2022

No security for Ukraine or Europe without a secure Black Sea and Mediterranean
Egmont, December 2022

Helping Ukraine survive the winter is a life-or-death imperative
European Policy Centre, December 2022

Les armes livrées à l’Ukraine depuis janvier 2022. Base de données et fiche d’information
Groupe de Recherche et d’Information sur la Paix et la Sécurité, December 2022

Les Kadyrovtsy en Ukraine: les limites de ‘l’arme psychologique’ de Poutine
Groupe de Recherche et d’Information sur la Paix et la Sécurité, December 2022

Population displacements in the Ukraine War: The challenge of first humanitarian assistance
Hellenic Foundation for European and Foreign Policy, December 2022

10 conflicts to watch in 2023
International Crisis Group, December 2022

Pour l’Ukraine: Les yeux ouverts
Institut français des relations internationales, December 2022

Soviet history shapes African attitudes towards the Ukraine War
Italian Institute for International Political Studies, December 2022

Ukraine: After winter, spring?
Italian Institute for International Political Studies, December 2022

EU foreign policy integration at times of war: From short-term responses to long-term solutions
Istituto Affari Internazionali, December 2022

The Ukrainian conflict and the energy crisis: Sustaining the energy transition
Istituto Affari Internazionali, December 2022

The EU’s latest bargain with Hungary’s Orban unlocks aid to Ukraine
 Peterson Institute for International Economics, December 2022

Russia’s war on Ukraine: A sanctions timeline
Peterson Institute for International Economics, December 2022

Zelensky visits the U.S. to rally support
Polish Institute of International Affairs, December 2022

Russian attacks may prompt increased refugee flows from Ukraine
Polish Institute of International Affairs, December 2022

EU development cooperation policy faces challenges amid the war in Ukraine
Polish Institute of International Affairs, December 2022

Responding to a limited Russian attack on NATO during the Ukraine war
Rand Corporation, December 2022

The trouble with Russian blacklisting
Rand Corporation, December 2022

The attack on Ukraine and the militarisation of Russian foreign and domestic policy
Stiftung Wissenschaft und Politik, December 2022

Read the complete briefing on ‘Latest on Russia’s war on Ukraine‘ in the Think Tank pages of the European Parliament.

Written by Angelos Delivorias.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

For 30 years after the end of the Cold War, the US was the global military and economic hegemon. As the EU widened and deepened, and great powers such as Russia and China, but also emerging middle powers such as Brazil, India, and Turkey, used economic means to increase their global influence and pursue geopolitical aims, scholars argued that the world was becoming multipolar. The past decade, however, marked the limits of multilateralism (and need for reform), leaving room to growing power rivalry. Countries with regional or great power ambitions have used soft power, but also threats and the use of force, to alter the status quo in their favour. This brought supply chains, critical minerals and great power politics to the centre of conversations, and led some analysts and politicians to support the idea that the world has entered a ‘new Age of Empires’. The competition for power deriving from access to materials and influence through investment and economic advantage becomes particularly striking when narrowing the focus to regions of overlapping involvement of major and middle powers with aspirations of expanding influence. To illustrate this, it is interesting to compare the strategies of three different countries towards Africa, a key partner of the EU and a continent undergoing great changes and with great potential for growth, because of its critical raw materials and the opportunities it presents for infrastructure investments, as well as its vulnerability to food and economic crises. 

China has been Africa’s largest trading partner for 12 years and is its fourth-biggest investor. China’s trade with Africa, limited until the millennium, began increasing substantially around 2005 and has kept increasing ever since, reaching US$113 billion in exports and US$78 billion in imports in 2019. In 2019, total Chinese foreign direct investment (FDI) in Africa amounted to US$44 billion (vs US (the top investor) FDI of US$78 billion). One third of Chinese FDI in Africa is channelled to infrastructure and construction, while one fourth goes to mining and extraction of raw materials. Similarly, since the early 2000s, China has emerged as Africa’s largest bilateral lender (62 % of African bilateral debt). Chinese credits to Africa amounted to US$148 billion in 2019, with US$44 billion for investments in infrastructure, US$36 billion to energy, and US$18 billion to mining and extraction. These loans have helped finance large-scale investments but have also resulted in the build-up of debt-service burdens. They also contain clauses that make debt less transparent, making debt estimation, renegotiation and restructuring more difficult. Through its relations with Africa, China aims at accessing the continent’s natural resources, markets to export its manufactured goods, and allies in the diplomatic isolation of Taiwan. Its activities in Africa prioritise economic over political and security interests. Nonetheless, to support its interests, China has also offered military and law-enforcement assistance, and established a naval base in Djibouti. Xi Jinping’s third term should contribute to maintaining the trend. At the same time, the slowing down of the Chinese economy as a result of COVID-19, and the increasing tensions between the US and China may change the Chinese strategy. Similarly, the opaqueness of some Chinese loan deals with African governments and labour issues on the ground may increase African countries’ reticence towards increased ties.

If the 1990s post-Soviet turmoil ended many of Russia’s global ambitions, including in Africa, recent years have seen renewed Russian interest in the continent. Since 2010, Moscow’s strategy and activities have pursued the aim of strengthening its position in the intensifying struggle over access to commodities, transit routes and markets, by developing infrastructure connecting different regions and forging diplomatic and economic links across different continents. Efforts already intensified in the middle of the decade and culminated in 2019 with Russia’s co-hosting (with Egypt) of the inaugural Russia-Africa summit. Russia has modest trade with Africa, (US$20 billion per year), which is heavily imbalanced toward Russian exports of arms and grain (Russia controls 49 % of the overall arms market), and import of minerals, diamonds and oil contracts. Russia has also attempted to negotiate nuclear power deals with several African countries (including Egypt, Nigeria, Ghana and Kenya). Beyond the supply of weapons, Russia is involved militarily in Africa, through its military instructors, its private military companies such as the Wagner group, and through the role played by its navy and air force (deployments, military exercises, basing agreements). While the stated aim is to protect strategic resources and transit routes, there are also allegations (especially for private groups) that they also engage in smuggling and transnational crime. The country also uses credit policy channels (debt write-offs, export credits, credit from its state-owned companies, as well as unpaid USSR claims to African countries it inherited). Going forward, it is difficult to say whether the presence of Russia in Africa will grow or diminish. On the one hand, 25 African states chose not to condemn Russia’s invasion of Ukraine, acknowledging historic ties with the Soviet Union and the Russian presence on the continent. On the other hand, the fallout of food and energy inflation may change the perception of some African countries. Lastly, while scenarios for a post-conflict Russia are still unclear (see issue 9: Russia, quo vadis?), its strategy may change as a result of the significant blow to its economy and the evolution in public opinion, following its invasion of Ukraine.

The primary motivation of Turkey, an emerging middle power, for stronger relations with African countries is economic. Africa has natural resources that Turkey needs for its manufacturing and industrial sectors, including oil and gas. In that context, trade has grown from US$5.4 billion in 2003 to US$25.3 billion in 2021, and Turkey’s president promised in 2021 to double that amount. FDI has similarly increased from US$100 million in 2003 to US$6 500 million in 2021. To further increase trade and to counter the influence on the continent of the Gülen movement, accused of being behind the 2016 failed coup attempt in Turkey, the country also tries to expand Turkish cultural-religious influence on the continent, notably by investing a lot in education projects. Aside from trade and investment, Turkey uses soft power instruments such as humanitarian aid and development assistance programs (e.g. Turkish Red Crescent). Lastly, in 2017, Turkey opened its first military base in Africa, in Somalia. Turkey benefits from the fact that, contrary to some EU countries, it has no colonial past haunting its relations with Africa; in contrast with China, it has not been accused of debt trap diplomacy; and contrary to Russia, it maintains a pro-sovereignty narrative, which resonates in the area. Against possible expansion is the country’s economic crisis. Also, the presidential elections scheduled for June 2023 may result in a change in strategy.

In the aforementioned context, the EU, for which multilateralism is both a foundational principle and part of strategic operational guidance, has positioned itself in Africa through several initiatives, including the European Peace Facility and the Global Gateway strategy, which will mobilise up to €300 billion of investment (half of which has been pledged to Africa) in strategic sectors up to 2027. To maximise results on the continent, it has suggested using the Global Gateway to mobilise finance and tackle the root causes of food insecurity, merging the strategy with the European Green Deal, to mutually reinforce them, or considering debt-for-climate swaps with African countries.

The European Parliament has expressed its concern that, in many areas, Africa has become a new arena of great power competition. It has criticised human rights violations by private military and security companies in Africa, particularly the Wagner group. It called for human rights and the environment to be preserved in fossil fuels projects, stressed the benefits of multilateralism and concerted action at international level, and called for increased investment in Africa to realise the potential for EU-Africa partnership in agriculture and the environment, economic development and sustainable and inclusive growth.

  

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Anna Caprile.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

Russia’s unprovoked invasion of Ukraine has shaken the geopolitical foundations of Europe, opening a colossal security and identity rift in the Eurasian space. Its outcome will shape Europe’s and Russia’s futures, in seemingly drastically divergent directions. In 2023 and beyond, the EU will have consequential choices to make, which will determine when and how these paths converge again, no matter how difficult this might seem today.

The war seen from Moscow: An evolving narrative

The war Russia is fighting now is not the war the Kremlin prepared for. The ‘special operation’ in Ukraine, started on 24 February 2022, was planned as a necessary intervention to ‘fix’, at last, the ‘Ukrainian issue’ – a permanent source of trouble for Moscow practically since the auto-dissolution of the Soviet Union in 1991. As 2023 starts, nothing has gone ‘according to plan’ for the Kremlin, and the Russian army has suffered a series of humiliating defeats, to which Putin has responded by doubling down: mobilisation of 300 000 additional men, illegal annexation of 15 % of Ukrainian territory, and the less-than-subtle threat to resort to nuclear weapons. The Kremlin has changed the war narrative accordingly: it is no longer an intervention against a ‘puppet-Nazi’ government; it has become an existential fight against the ‘imperialist’ West and its attempts to ‘destroy Russia’. ‘The goal of that part of the West is to weaken, divide and ultimately destroy our country’ were Putin’s opening words at the solemn ceremony of the illegal incorporation of the four annexed regions, on 21 September 2022, addressing the whole Russian nomenclature.

The response of the Russian public has also evolved, under brutal suppression of anti-war movements and an increasingly controlled information environment. Levada Centre opinion polls, so far considered reliable, show majority support for the Russian army, but with growing concerns and an overwhelmingly pessimistic view of the future amongst Russians who have not fled the country. Most consequently, above the noise of the Kremlin’s professional pundits, there seems to be a decisive shift amongst influential Russian intellectual elites, including those who initially condemned the invasion, towards the belief that the vital interest of the Russian state are now at stake. As a showcase, the article published in May 2022 by Dmitri Trenin, director of the Carnegie Moscow Centre until early 2022, and now member of the Russian International Affairs Council (RIAC): ‘How Russia must reinvent itself to defeat the West ‘hybrid war’: Russia’s very existence is under threat.‘

Russia next: The way backward?

The retreat of the Russian army from Kherson, the only Ukrainian provincial capital they controlled, and allegedly part of the Russian Federation after the illegal annexation, is a crucial moment in the war. Different military scenarios are in view, with momentous decisions ahead for all parties. Yet, no matter how the conflict evolves, the path Russia has set itself appears dramatically clear already. The Russia that will emerge from this conflict, even if it manages to obtain something that it can depict as a victory at home, will be economically, militarily, and geopolitically weaker. Economically, the cumulative effect of the unprecedented sanctions is starting to mount, decoupling Russia from international finance, foreign investment and high technology components. The exodus of highly educated professionals has moved a vibrant part of the economy away, with GDP declining 3.2 % in 2022 and a similar forecast for 2023. With the progressive decoupling of EU countries from Russian oil and gas, Putin is turning towards other markets, such as China and India, where he has less negotiation space, to preserve his main source of revenue. Militarily, Russia has so far suffered an estimated 100 000 casualties, depriving itself of its best units and revealing its extraordinary weaknesses, and consumed a large arsenal of costly weaponry, difficult to replenish under the sanctions regime. Geopolitically, Russia has achieved the opposite of the declared objectives: NATO will become larger and closer to Russian borders with the incorporation of Sweden and Finland, Ukraine’s national identity has been reinforced and its European aspirations, alongside Moldova’s and Georgia’s, have been firmly consolidated. Meanwhile, Russia is rapidly losing space in what it considered a safe sphere of influence in the Southern Caucasus and Central Asia. Internationally, Russia finds itself increasingly cornered with the status of a pariah state: self-excluded from the Council of Europe, banned from cultural and sports events, condemned and held accountable by the UN General Assembly, designated a state sponsor of terrorism by the European Parliament, following similar resolutions by several EU national parliaments. The G20 meeting in Indonesia was a resounding diplomatic blow for Russia, which will find itself increasingly dwarfed by its alleged regional partner, China. The challenges ahead for the Kremlin are multiple, mounting and feeding each other. The immobility until 2036, which Putin assured for himself with the 2020 constitutional amendments, is less sure than before, and speculation on possible scenarios multiply.

Under a first scenario, already under way now, Putin’s regime evolves into a ‘boosted’ version of itself, towards an increasingly entrenched over-authoritarian, over-centralised, semi-totalitarian regime. Ever-harder political repression and, possibly, the full application of martial law allow federal and regional governments to meet war requirements, including a new mobilisation wave. In parallel, various existing indoctrination programmes, especially addressed to young people, would be accelerated and enlarged. Internal think-tanks have already anticipated a blueprint with different development models for this scenario, under self-explanatory titles: the most promising, according to the authors, appears to be ‘USSR 2.0’; the most controversial, ‘Nation Z’. Stretching further what is already an over-centralised and over-authoritarian regime could lead, however, to paralysis in Kremlin decision-making, with fatal consequences, especially on the battlefield. This leads to a second scenario:the meltdown. An accumulation of military setbacks and crises, and a growing sense of abandonment by disenfranchised groups of population and regions, would erode both regional and economic elites’ support, as well as popular confidence in the current regime, setting it in the direction of collapse. The outcome may be very different, also depending on the situation on the battlefield. The regime could try to avoid its collapse by replacing Putin with a new figure with more political space who could re-conduct Russia out of the impasse – through a timely manoeuvre blessed by the security services, either with Putin’s consent or on grounds of alleged or real Putin health problems. 2024 presidential elections, should they not be postponed under martial law, to avoid a Belarus-type scenario, could be the chosen moment for a change of ‘roof’, keeping safe the very same power elites under an appearance of legality. Putin’s replacement may, however, prove impossible, either because too many different clashing interests would block each other, or because by that time the war would have become untenable. The meltdown could then degenerate into a period of ungovernable chaos, where the para-military actors now boosted by the Kremlin (such as Yevgueniy Prigozhin and his Wagner group, and Ramzan Kadyrov’s Chechen militias), would have a reigning hand. From there onwards, the space for speculation would open up widely: it could, finally, be the moment for a true regime change, perhaps around well-known opposition leaders such as Alexey Navalny. However, a power vacuum could also bring the rise of far-right movements, increasingly empowered under the war rhetoric. And it could also lead, perhaps simultaneously, to the still unlikely, but extremely dangerous, fragmentation of the Russian Federation. Some analyst already see Russia as the next failed state. Whatever scenario unfolds, it will probably emerge, at least, as a failed empire.   

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Maria Diaz Crego.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

The year 2023 is expected to be marked by the adoption of innovative EU legislative proposals in the area of media freedom and pluralism, notably the anti-SLAPPs directive and the European media freedom act. The focus of EU institutions in this area in the run-up for the 2024 European elections has to be linked to the key role media play in contemporary democracies.

Media freedom and pluralism, entrenched as fundamental rights in both the Charter of Fundamental Rights of the EU and the European Convention on Human Rights, are indissociable from democracy as they protect the pluralism, tolerance and broadmindedness without which democratic societies cannot flourish. Media not only provide the information that citizens need to make sound political choices but they also play other important roles, such as: i) acting as ‘watchdogs’ of our democracies and increasing the accountability of our representatives; ii) providing analysis of what is happening and helping citizens to understand an increasingly complex world; iii) boosting inclusiveness and making the voices of minorities heard; and iv) acting as a public forum for dialogue among citizens and groups with diverse points of view.

For media to play an effective role in a democratic society, citizens must have ‘access to a variety of information sources, opinion, voices etc. in order to form their opinion without the undue influence of one dominant opinion-forming power’, as highlighted by the European Commission. Past and current battles for control of media outlets clearly show how powerful media can be when it comes to shaping the views of citizens, and how they can be used to ensure the survival of a specific regime by extolling its achievements and reducing critical comments to a minimum.

Figure 6 – Media freedom and pluralism in the EU

No European Union Member State is free from risks to media freedom and pluralism, although the extent and gravity of those risks varies greatly across Europe, as confirmed by the World Press Freedom index, the Media Pluralism Monitor and the Commission rule of law annual reports (see Figure 6). The 2022 editions of the latter two show a negative shift as regards the journalistic profession, due to an increase in the number of threats to journalists (two journalists were murdered in the EU in 2021, whereas none were in 2020) and in the number of strategic lawsuits filed against media for providing information on issues of public interest (also known as ‘strategic lawsuits against public participation’ or SLAPPs). Both 2022 reports highlight concerns relating to the high concentration of news media on the continent, as well as to the need for further transparency of media ownership in many EU Member States. Editorial autonomy, understood as the protection against undue external interference in the editorial news‑making process, and the risk of political control, especially as regards public media, are also considered indicators of particular concern for the EU area in both 2022 reports.

Action in the media sector, originally aimed at establishing a single market for media services, is not new to the EU and dates back to the 1980s and the adoption of the Television without Borders Directive, repealed by the current Audiovisual Media Services Directive. However, the focus of attention of EU institutions in this particular area seems to be changing and partly moving towards a policy more centred on fundamental rights and the protection of media freedom and pluralism as a prerequisite for the proper democratic functioning of our institutions.

In this vein, as committed in the European democracy action plan (2020), in November 2021 the Commission adopted a legislative proposal on political advertising. The proposal aims to establish safeguards against manipulative techniques in political advertising and ensure the political pluralism that allows democratic institutions to thrive. It would establish common European rules on transparency of political advertising, requiring publishers to clearly label political advertisements as such and include information such as who is the sponsor, who paid, and how much, for it, and the election(s) or referendum(s) to which the advertisement is linked. In addition, the proposal would include a partial ban on the use of targeting and amplification techniques for political purposes, and prohibit those that involve the processing of sensitive personal data. The ban seeks to address therisks of fragmentation of the political debate and manipulation of voters raised by some techniques of political (micro‑)targeting frequently used in political campaigns.  

To address challenges faced by journalists to inform independently and safely on issues of public interest, and respond to growing concerns over the prevalence of SLAPPs within the EU, the Commission presented a proposal on 27 April 2022 for an anti-SLAPPs directive that aims to protect not only journalists, but also anyone exercising freedoms of expression and/or information as regards issues of public interest, from abusive and manifestly unfounded lawsuits. As the proposal would apply to civil SLAPP cases with a cross-border dimension only, it was issued together with a recommendation setting out guidance for Member States to take effective measures to address purely domestic SLAPP cases, including in the area of criminal or administrative law.  

In September 2022, the European Commission adopted a proposal for a European media freedom act that aims to set common European rules ensuring media freedom and pluralism in different areas. It would protect journalistic sources, and media and journalists from the use of surveillance technologies. Moreover, it would focus on media ownership transparency and the editorial independence of media providers providing news and current affairs content, by requiring them to inform about their direct and indirect ownership and imposing on them an obligation to establish internal safeguards geared at guaranteeing the independence of individual editorial decisions, once the editorial line of the media outlet has been defined. As the proposal would leave a wide margin of discretion to media providers as to the internal safeguards to put in place, it is accompanied by a recommendation setting out a catalogue of voluntary best practice to strengthen editorial independence. Finally, the proposal would also establish common rules for transparent and non-discriminatory allocation of state advertising to media and to ensure further independence of public media, among other things by requiring that their funding is adequate and stable and their governing board and head of management is appointed in a transparent and non-discriminatory manner and cannot be dismissed before the end of their term except in specific cases defined by national law. These legislative initiatives are all currently being analysed by the co-legislators. If approved, they would definitively shape the media ecosystem of Europe and the way media exercise their watchdog function for years to come.

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Polona Car.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

As cyber-attacks proliferate, 2023 is expected to see progress on several EU legislative and non-legislative proposals aimed at protecting infrastructure, connected devices, and the whole information and communications technology (ICT) supply chain to counter the wave of cyber-attacks.

A changing cybersecurity threat landscape

Russia’s war against Ukraine has put cyber-resilience in the spotlight. Russia’s aggression includes massive cyber-attacks on Ukraine but also on Ukraine’s partners in the EU. Even before the war, cyber-attacks were a great concern for the European private and public sectors (such as the cyber-attack against the German Bundestag in 2021). A ransomware attack occurred every 11 seconds in 2021, expected to accelerate to every 2 seconds by 2031, costing US$10.5 trillion annually by 2025. Cybercrime is the fastest-growing wealth transfer worldwide, inflicting increasing costs on the world economy with malicious actors becoming increasingly sophisticated. Rapid digital transformation, accelerated by the COVID-19 pandemic and geopolitical tensions, has increased the playing-field for cybercriminals. The 2022 ENISA report on the threat landscape in the EU revealed that 10 terabytes of data are stolen every month. Ransomware, which scores highest on the list of cyber-attacks in the EU, is followed closely by distributed denial of service (DDOS) attacks, with the largest ever DDoS attack in Europe recorded in July 2022. The Cisco annual internet report estimates that DDoS attacks will double from 7.9 million in 2018 to 15.4 million globally by 2023. Health service providers, pipelines, airports, ministries, hotel chains, banks and digital service providers are just a few examples of entities that have suffered from cyber-attacks over the past few years. Russia’s aggression against Ukraine is also provoking the rise of hacktivism and a surge in disinformation. Of particular concern are the growing capabilities of malicious actors, now using attacks against complete supply-chains.

Protecting the critical infrastructure

Especially disturbing are attacks against critical infrastructure such as energy, health and finance, which increasingly rely on IT, becoming extensively vulnerable to cyber-attacks. Russia’s hybrid approach, merging physical and cyber-attacks, has demonstrated that disruption of essential services is a realistic threat to the EU. For example, the attack on the satellite communication provider just one hour before Russia’s attack on Ukraine affected internet services and wind farms across Europe. The Directive on the Resilience of Critical Entities (CER), together with the revised Directive on the Security of Network and Information Systems (NIS2), respond directly to this challenge. However, the fast-evolving threat landscape, and incidents such as the cyber-attack against the Danish railway network in November 2022, demand accelerated implementation of the new legal framework. Hence, the Council adopted a recommendation in December 2022, to step up efforts aimed at protecting critical infrastructure, and foster inter- and intra-EU cooperation. In particular, it would urge Member States to implement measures under the 5G cybersecurity toolbox, considering the high dependency of essential services on 5G and its importance for the development of digital services. The subsequent EU policy on cyberdefence aims to increase the EU’s cyberdefence capabilities and synergies between military and civilian cyber communities. The connectivity of critical infrastructure will be provided by the infrastructure for resilience, interconnectivity and security by satellite (Iris²), a sovereign space-based secure connectivity system, to be functioning in orbit by 2024

Advancing operational capacity

NIS2 formally establishes the EU cyber-crises liaison organisation network (CyCLONe), rapid crisis-management coordination in case of large-scale cross-border cyber-incidents while the Joint Cyber Unit (JCU) ensures a coordinated response between civilian, law enforcement, diplomatic and cyberdefence communities, and should be fully implemented by 30 June 2023. EU cybersecurity capacity-building will be done in the framework of the European cybersecurity competence centre (ECCC), which is to become operational by March 2023. The centre aims to improve technological sovereignty through strategic cybersecurity investments. Together with the network of national coordination centres (NCCs), it will form the cybersecurity shield for the EU, powered by artificial intelligence (AI) and complemented by EU supercomputing infrastructure developed by the European high-performance computing joint undertaking. The first six quantum computers are expected to be available by the second half of 2023.

Protecting connected devices

Connected devices, such as home security applications, toys connected to the internet and smart cameras, expected to amount to three times in number the global population by 2023, have the potential to open the door to malicious actors and impact the whole supply chain, if hacked. To address this threat, the cyber resilience act (CRA) proposal would impose cybersecurity obligations on a very wide range of digital products before they are placed on the market. The proposal would impose high fines for non-compliance and ban products that do not abide by the rules. This could have an impact beyond EU borders, becoming an international reference for the cybersecurity of digital products. Intensive negotiations are expected on this proposal in 2023.

Protecting the supply chain

The October 2022 Council conclusions on ICT supply chain security should be materialised in the creation of the ICT supply chain security toolbox, to complement the coordinated supply chain risk assessment for ICT products under NIS2. The 5G security toolbox criteria could serve as an example when defining high-risk vendors – such as Huawei – for the security of ICT supply chains.

Progress is expected too on domain name systems (DNS) resolver (converting domain names such as www.name.eu into computer friendly IP-addresses, e.g. 192.168.2.1). A public European DNS resolver service (DNS4EU) should develop in 2023 as an alternative to public (non-EU) resolvers prevailing on the market, which would enhance the EU’s cybersecurity abilities and contribute to its digital sovereignty. We can also expect the finalisation of the EU certification schemes for cybersecurity of ICT products (EUCC) and for cloud services (EUCS), where it remains to be seen if disputed sovereignty requirements will be comprised in the scope of the latter.

Bridging the cybersecurity skills gap

The EU response to cyber-threats will depend immensely on having a sufficient and sufficiently trained cybersecurity workforce. The European cybersecurity skills framework (ECSF) will play an important role in defining the cybersecurity profession. The cybersecurity skills academy, which the European Commission has announced for the third quarter of 2023, could address the cybersecurity gap.

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Monika Kiss.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires Increasing fuel prices Figure 5 – Price without taxes – EU weighted average

The war on Ukraine and the subsequent uncertainties and sanctions have caused shortages and disruption in supply of resources, including for petroleum products. Furthermore, the sixth EU sanctions package of 3 June 2022 introduced a partial ban on the import of oil and petroleum products from Russia. Russian oil imports into the EU fell from 2.5 million barrels per day (bpd) in January 2022 to 1.4 million bpd in October 2022. An EU ban on Russian crude oil imports became effective on 5 December 2022, and one on refined petroleum products will do so on 5 February 2023. As a consequence, the increase in prices of diesel, petrol (Euro-super 95), as well as liquefied petroleum gas (LPG) has been exceptionally fast. After the decreasing prices during the pandemic, the contrast was strong.

Transport, a sector already in transformation

Europe’s transport sector is transforming due to the decreasing use of fossil fuels and the increasing use of greener transport modes, encouraged through financial incentives in Member States, and EU initiatives and legislation with binding targets and deadlines. Most transport modes (road, air, sea) are reliant on petroleum products, Only rail has been electrified to a large degree in the EU. In road transport, around 40 % of cars depend on petrol, and about 20 % on diesel, while more than 95 % of trucks still rely on diesel. The share of energy from renewable sources used for transport in the EU increased from under 2 % in 2005 to 10.2 % in 2020. Meanwhile, policymakers are increasingly focussing on greening transportation. As outlined in the European Green Deal and enshrined in the European Climate Law, the EU aims to achieve climate neutrality by 2050, and the transport sector has an important role to play in this. The sustainable and smart mobility strategy, presented in December 2020, outlines how the EU transport system can achieve a green and digital transformation and become more resilient to future crises. It aims to reduce dependence on fossil fuels by 2030 and encourage alternative choices, such as the use of high speed railway and inland waterways. The fit for 55 package is a set of proposals on climate, energy, transport and taxation policies aimed at reducing net greenhouse gas emissions to at least 55 % by 2030, compared to 1990 levels. It also promotes the growth of the market for zero- and low-emission vehicles and aims for zero emissions from new cars by 2035. Furthermore, it proposes to extend carbon pricing to the aviation and maritime sectors.

The multifaceted impact of rising fossil fuel prices on transport

As most transport modes rely on the use of petroleum products, a rise in fossil fuel prices impacts several dimensions of the transport system.

Possible structural impacts are, for instance, changes in usage levels – users limiting or rationalising their usage, for example by abandoning, postponing or combining their trips. Operators might also reduce service frequency. Modal shifts can occur – part of the traffic can shift to a more energy efficient mode that suffers less from increasing petrol fuel prices, for instance road freight transport to rail or inland waterways. Air transport might also be significantly impaired after the increase by 70 % of jet fuel prices during the first 6 months of 2022 and the already low profit margins. This might lead to a shift towards rail or maritime. New network configurations in terms of gateways, hubs, routing, and corridors are also among the consequences. Rising fuel prices will also impact different parts of supply chains – procurement, manufacturing, distribution) and a reconfiguration of the whole chain might become necessary.

The impact also has a temporal dimension: while at first passengers (or companies) could simply absorb the higher costs by reducing usage, trimming their profits or cutting their spending in other areas, in a subsequent phase, there would be changes in commuting patterns (like ridesharing or carpooling), attempts to use public transport, rapid adoption of vehicles with high fuel efficiency, and a search for other transport alternatives. Concerning the transport of persons, increasing fuel prices can lead to higher transport prices, causing an additional burden to households and possibly transport poverty, unless this is compensated at regional or national level. Low-income households that own a car, and rural households spending a higher share of their income on transport fuels, are particularly impacted.

In the domain of freight transport, companies have the choice to work at a loss or to increase their prices to compensate. Price increases will also have an impact on transport services and the prices of the goods transported, which can lead to further inflation. In both passenger and freight transport, there is an increasing number of strikes of transport providers and workers in all transport modes and this tendency will most probably continue, leading to further disruptions.

Increasing fossil fuel prices can also have important side effects., for example shortages in the production of AdBlue, a liquid used in diesel vehicles to neutralise nitric-oxide emissions. Because its production is not profitable due to high gas prices, some manufacturers have already stopped producing it, which could lead to the standstill of a huge number of trucks, and consequently job losses and logistical problems.

Another question is whether the increase in fossil fuel prices will have a favourable impact on the speed of transition towards greener transport modes or the use of more renewable energy, and if it will lead to a reduction in greenhouse gas emissions. As the majority of greenhouse gas emissions from transport are carbon dioxide (CO2) emissions from the combustion of petroleum-based fuels, reduced consumption of fossil fuels as a result of increasing prices could in fact lead to lower emissions of greenhouse gases. This could have the result that emissions targets can be reached more quickly. Emissions can also be reduced through the use of higher shares of advanced biofuels and a more ambitious quota for renewable fuels of non-biological origin such as hydrogen. This is encouraged at EU level in the proposed revision of the Renewable Energy Directive and the REPowerEU plan, aiming for a higher renewable energy target.

The use of fuels produced using renewable sources of energy (such as electricity produced from solar or wind energy), and the use of biofuels is less costly and leads to lower emissions. Nevertheless, this can be a solution only in the long or medium term, as it requires technical adaptation, or even the construction of new types of engines. Recent research also shows that the use of e-fuels – fuels in gas or liquid form that are produced from renewable (solar or wind power, for example) or decarbonised electricity – such as e‑methane, e‑kerosene and e‑methanol, costs 47 % more than battery-electric vehicles. In the long run, however, technological developments will make it possible to reverse this tendency and to advance on the road to greener transport.

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Gregor Erbach.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires Climate tipping points

Climate tipping points have received growing attention, in the wake of an international conference dedicated to the issue, and new research results on the likelihood of tipping points being reached under current trends.

A tipping point is the critical point in a situation, process, or system beyond which a significant and often unstoppable, but not necessarily abrupt, effect or change takes place. Climate tipping points were first identified by the Intergovernmental Panel on Climate Change (IPCC) in 2001 and further analysed in a 2008 research paper. The latest IPCC assessment report identified 15 potential tipping points, among them global monsoon, tropical and boreal forests, permafrost carbon and the Greenland and Antarctic ice sheets. The Greenland ice sheet is an element in the climate system with a tipping point: its stability depends on its height, which reaches up to 3 200 metres and helps maintain eternal snow on top. As soon as it loses height, it may enter an irreversible decline.

Figure 4 – Tipping points and global warming

Late 2022 research estimates the temperature rise needed to trigger these tipping points (see Figure 4), and concludes that seven tipping points are likely at global warming of 1.5 °C, of which five might already be reached at current levels of global warming. The presence of climate tipping points increases the economic costs that result from emitting a tonne of CO2 by around 25 %.

Tipping points are often associated with cascading impacts, where one impact leads to another. An example is the melting of the Arctic ice sheets leading to sea level rise, which in turn triggers population movements and economic disruption. Crossing a tipping point may also lead to reinforcing feedbacks, for example the melting of permafrost leading to the release of methane, a powerful greenhouse gas that reinforces global warming and causes further permafrost melting.

Socio-economic tipping points

Research on socio-economic tipping points finds that even gradual climate change may alter and disrupt socio-economic systems, leading to major economic costs, especially at a more local level. Socio-economic tipping points identified in this EU-funded research include climate induced agriculture and food shocks, migration from coastal areas due to extreme sea level rise or major climate impacts, energy supply shocks, transport disruption, large macroeconomic and financial market impacts, and the potential collapse of insurance markets from extreme weather risks. The World Meteorological Organization warns that higher temperatures and humidity during hot spells could lead to physiological tipping points that make outdoor human labour impossible without technical assistance in some regions.

Policy implications

To avoid the crossing of tipping points, efforts to contain global warming must be reinforced. Every fraction of a degree may be decisive, even if the lower 1.5 °C target of the Paris Agreement is likely to be breached. The 2022 emissions gap report projects a temperature rise of at least 2.4 °C even with full implementation of all national pledges, which would trigger multiple tipping points. The sobering outcome of the COP27 climate change conference has not changed that picture. In light of the limited effectiveness of the Paris Agreement, complementary cooperative approaches, such as climate clubs, are of increasing interest. However, certain social tipping points may make it harder to achieve consensus on climate action, namely the geopolitical crisis accelerated by the war on Ukraine, the erosion of social consensus by social and synthetic media, a shift from climate mitigation to adaptation driven by faster and larger than expected climate impacts, and the demographic crisis that increases state burdens, reduces productivity and creates intergenerational tensions.

Impacts on Europe
Europe would be directly affected by a collapse of the Greenland ice sheet, leading to sea level rise, the loss of Alpine glaciers, the loss of permafrost peatland in Svalbard and Scandinavia, a northward shift of boreal forests, and a collapse of the Atlantic meridional overturning circulation, an ocean current that transports warm water from the tropics to the North Atlantic. The latter would lead to less warming in Europe, but also to prolonged Mediterranean drying. Research indicates that European forests have already reached a tipping point around the year 2000, induced by a temperature increase as low as 0.5 degrees. This has reduced forests’ resilience to fire, windfall and pest outbreaks, potentially affecting 33.4 billion tonnes of forest biomass.

Large-scale removal of carbon from the atmosphere through nature-based and technological approaches will be critical to keeping global warming well below 2 °C, the upper target of the Paris Agreement. This requires innovative financing mechanisms, such as advance market commitments that were used successfully for the development of vaccines. Moreover, it may be prudent to initiate a research programme into controversial solar radiation management techniques, in order to understand their potential and their risks relative to the risks of reaching certain climate tipping points, and to address the associated governance issues.

Although knowledge on tipping points has improved, more research (recommended in Parliament’s 2019 resolution on the environmental action programme), with involvement of the IPCC, is needed to correctly assess the likelihood and possible impacts and create an early warning system, which the Parliament called for in its resolution on COP25. A broader knowledge base would facilitate smart decisions about potentially costly and disruptive adaptation options such as managed retreat from coastal areas. Experts on geopolitics recommend that governments and relevant institutions strengthen their risk assessment and act to prepare for and preferably prevent the worst-case scenarios. The EU supports tipping points research through Horizon Europe, and the Bezos Earth Fund awarded a £1 million (€1.15 million) grant for research into ‘positive tipping points’ in socio-economic systems that would help accelerate the transition to a climate-neutral economy.

Positive tipping points are already happening, for example the switch to electric vehicles enabled by lighter and cheaper batteries, public opinion and policy support. Positive tipping points in the energy system may be triggered by the ever-falling cost of renewable energy together with advances in energy storage. Researchers apply system analysis to identify effective policy interventions by various agents that would enable a cascade of positive changes to rapidly and profoundly transform technology, economy and society, instead of improving incrementally.

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Martin Höflmayr.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

The Russian war of aggression against Ukraine has drastically reversed the dynamics of the unexpectedly strong economic recovery from the COVID-19 pandemic in Europe. Supported by decisive fiscal and monetary policies, the EU economy was already back to its pre-crisis output levels in the third quarter of 2021, though with large differences across Member States. The economic growth dynamic extended to the second quarter of 2022, firmly entrenched in a monetary and fiscal policy mix aligned in their goal to support the recovery. In 2023, the policy objectives of fiscal and monetary policy, like a Janus face with sharply contrasting characteristics, face significant trade-offs between taming inflation and mitigating the impact of high energy prices.

Why did we get two opposing faces? Figure 2 – Gross domestic product (GDP) growth in the EU Figure 3 – Change in annual inflation by item in the ECB inflation product basket

Alongside the humanitarian impact of the war, the EU has been hit by a substantial shock in import prices, in particular energy prices, which has severely dented the economic outlook since early 2022, prompting concerns about more persistent inflation, a cost-of-living crisis and public debt sustainability. As a result, since early 2022, economic forecasts have seen significant downward revisions (Figure 2). Analysis by the IMF serves as a stark illustration of the EU’s severe economic losses from the war. In 2023, Europe’s output will be nearly half a trillion euros lower than pre-war forecasts. According to the latest Commission forecast, the EU is expected to experience a ‘technical recession‘, i.e. two consecutive quarters of shrinking output. This forecast crucially hinges on the assumption that the EU can avoid crippling gas shortages, thus significantly tilted to the downside. Moreover, inflation has increased to record high levels worldwide so that central banks across the globe entered a synchronised monetary policy tightening cycle. In the EU, energy prices have been the main contributor to inflation, especially gas and electricity tariffs. However, price pressures are starting to translate into broader price dynamics as the share of items in the product basket above 2 % – the central banks’ inflation target – has increased significantly (Figure 3). At the same time, the current economic environment is underpinned by the strongest labour market in decades. Unemployment rates are at record low levels, while participation and employment rates are at record highs. Despite the looming recession, unemployment is expected to increase only marginally due to high vacancy rates and labour shortages.

How to synchronise contradictory voices

Against this backdrop of trend reversals, there is an increasing wedge between fiscal and monetary policy objectives. During the pandemic, both fiscal and monetary policies worked in tandem and complemented each other. In an environment of slowing growth, high inflation, elevated post-pandemic debt levels and eroding real incomes, fiscal and monetary objectives are diverging.

On the back of rising energy bills, eroding the purchasing power of households and companies, governments are trying to cushion the impact on real incomes and investment activity. The resulting expansionary fiscal policies, maintaining demand through measures that mitigate the impact of high energy prices, could undermine the disinflationary policy currently being conducted by central banks to bring down inflation through reducing support for demand. Monetary authorities could therefore be forced to increase policy rates even further at the cost of larger output and employment losses. According to the autumn forecast of the European Commission, Member States’ fiscal policy measures to mitigate the social and economic impact of high energy prices will amount to 1.2 % of gross domestic product (GDP) in 2022, and 1 % in 2023. So far, such measures have been implemented in a timely manner, however more than 70 % of them were untargeted. Resilient labour market conditions allow governments to focus on targeted cost-of-living policy interventions, as compensating for higher inflation is supporting wage growth while risks of a wage-price spiral have been contained so far. Furthermore, reducing energy dependence on imported fossil fuels can be expected to exert upward pressure on prices of a broad range of products during the transition period. Therefore, fiscal restraint can help to tackle inflation, and, as argued by the ECB, fiscal measures need to be temporary and tailored to the most vulnerable households and businesses, in order for fiscal policy not to stoke inflation.

The monetary side in the policy mix centres around price stability. To bring inflation back from record high levels to the 2 % target, the ECB has so far followed the synchronised tightening cycle of central banks around the world. On the one hand, it tackled inflation by front-loading four consecutive policy rate increases by a cumulative 2.5 percentage points; and on the other hand, the ECB countered fragmentation concerns by creating a new policy tool, the Transmission Protection Instrument. However, evidence suggests that simultaneous central bank measures change the trade-off between the growth and inflation impact of monetary policy tightening, as the negative impact on GDP is larger but the impact on inflation is smaller, due to the muted foreign exchange rate channel. Forceful monetary policy tightening would also have an effect on financial conditions. Rising borrowing costs could amplify existing financial vulnerabilities in the corporate sector. Increasing risk premia of sovereign debt and debt spreads across EU countries could raise the risk of financial fragmentation that has given rise to concerns about fiscal dominance. The policy dichotomy is further complicated by the fact that it is, as yet, unclear whether the supply shocks have durably depressed potential output. Evidence suggests that destroying demand also affects supply through scarring effects. Therefore, excessive monetary tightening could result in a permanent loss of output as productive capacity adjusts to persistently lower demand. To preserve productive capacity in a contractionary economic environment is the balancing act of targeted energy and fiscal policies on one side and a sufficiently large withdrawal of monetary policy accommodation on the other side. Thus, monetary authorities must tread a narrow path between taming inflation and averting an excessive decline in demand.

The economic outlook is heavily influenced by the evolution of the geopolitical situation and its reverberations in commodity markets. The impacts on growth and inflation are in opposite directions, which significantly complicates policy coordination. The challenges from COVID and the war on Ukraine pose formidable challenges to reconciling fiscal and monetary policy trade-offs.

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Marin Mileusnic.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

The swift execution of the Recovery and Resilience Facility (RRF) will remain vital in 2023, while the constant geopolitical and economic challenges will require new resources. These efforts will be supported by the revision of the EU fiscal framework, which is one of the major policy initiatives scheduled for 2023.

Lessons learned

With over 19 % of its resources disbursed, the implementation of the RRF is well under way, and the Member States are utilising the available funds to make their economies more resilient and future-proof by executing reforms and investments in key areas of European and national interest. The focus on the twin transitions has been particularly important, and the cumulative expenditure planning in all national recovery and resilience plans (NRRPs) exceeds the minimum thresholds for green and digital measures of 37 % and 20 % respectively. With regard to performance, 7 % of all milestones and targets embedded in the plans have been fulfilled thus far. Direct management of the facility by the European Commission in the implementation phase could reduce administrative burden and bureaucracy linked to the disbursement of funds, and thus improve overall effectiveness. Nevertheless, the audit of the only RRF payment in 2021 revealed weaknesses in the Commission’s assessment of milestones and targets linked to it. This was possibly due to the first-time application of the performance-based approach to such vast spending. The ongoing discharge procedure for the 2021 EU budget is examining the initial implementation of the RRF.

By combining the significant financial support with the implementation of measures established in the NRRPs, the RRF has the potential to effectively address key European as well as country-specific challenges and, as some analyses find, reduce the public investment gap. While a number of Member States had already witnessed under-investment trends even before 2008, the financial and economic crisis affected the EU as a whole and further amplified the investment lacuna. The average share of RRF grants in the overall investment by Member States is 14 %, which makes the significant additional growth projections realistic. Investments to address the challenges of the pandemic have been further facilitated through additional RRF loans, as well as the Stability and Growth Pact (SGP), namely the temporary departure from the usual budgetary requirements. Contrary to the low investment outcomes after the financial crisis, Member States managed to sustain public investment, without significant-pressures from breaching EU fiscal rules and having to endure the corrective procedures and market discipline.

Ongoing and new challenges

The RRF continues to be pertinent as there are outstanding structural challenges in the Member States that still need to be addressed, and substantial resources to be disbursed. Swift implementation of the planned measures enshrined in the individual NRRPs in the course of 2023 therefore remains vital. Notwithstanding the well-timed RRF funding to recover from the pandemic, a full economic recovery is already being hindered by new challenges, thus reaching a state of, what some analysts have dubbed as, ‘permacrisis‘. In particular, the energy crisis, caused by Russia’s war on Ukraine, exposed the EU’s considerable dependence on Russian fossil fuels. To differentiate the energy mix of the Member States, deal with high-energy prices and accelerate the green transition, the Commission proposed the REPowerEU plan under which part of the RRF is to be repurposed and its grant allocation increased by €20 billion. However, the energy challenges are expected to remain acute in the medium to long run and therefore surpass both the financing potential and the life span of the Facility, set to expire in 2026. The proposed grant envelope under REPowerEU, in addition to almost 18 % of the existing national allocations devoted to energy measures in all NRRPs, remains a relatively small source of funding compared to the private and public investment needs of the EU energy sector, which are estimated at €390 billion per year. The short horizon for investment and reform is also posing challenges both for the implementation of projects of strategic weight, which may need longer time, and for national authorities to run them properly.

Moreover, with the amassed €600 billion devoted to Green Deal actions, NGEU and the 2021-2027 multiannual financial framework (MFF) are an important source of funding, but still represent only a fraction of what is needed to fulfil all the climate goals for carbon neutrality of the EU by 2050. The RFF may also only partly deliver on the ambitious digital transformation set for 2030, due to the above-noted size and lifetime limitations. Besides this, there has been a relatively slow uptake of the RRF loans (around €165 billion out of €386 billion). One reason is that loan-based investment increases national public debt and can make countries non-compliant with the EU fiscal rules, especially after the deactivation of the general escape clause at the end of 2023. Another reason is reflected in better borrowing conditions for some countries compared to those linked to the RRF loans. Nonetheless, repayable RRF support can still be requested until the end of August 2023, while REPowerEU will put the allocations still available for loans at the disposal of those Member States that wish to pursue additional investment in energy measures.

Keeping investment in the EU alive

In the years to come, the investment needs in the EU will remain huge, predominantly in relation to the twin transitions, but also in the areas of common defence, security and other fields of interest for EU sovereignty and strategic autonomy. To address these long-term challenges, the EU economic governance framework will face revision in 2023. The revamped fiscal rules are to draw from the RRF model, particularly the positive interplay between investments and reforms and financing, to enable the Member States to stay on higher investment and growth paths while remaining fiscally prudent. The review should also support countercyclical fiscal policies for countries to build capital buffers during good times and utilise them during times of recession. In addition to this, a possible revision of the MFF will be discussed in 2023. In a December 2022 resolution, the European Parliament deemed the multiannual budget overstretched in financing various initiatives, and underlined that it should be made bigger and more flexible in order to ensure appropriate investment levels in the EU and to endure future crises. Such a budget should shy away from the juste retour principle. The Parliament is also advocating the introduction of new own resources needed to repay the recovery instrument and to finance common priorities.

Providing strategic sector-specific common public goods will require considerable resources and time for implementation. Some analyses stress that the RRF model, underpinned by common debt, could be continued to achieve these objectives. Still, the future instrument should be made larger and permanent, and continue to strengthen national ownership based on common EU priorities (as is the case with the current RRF). According to the International Monetary Fund, the size of such a fiscal capacity should range between 0.5 % and 1 % of EU gross domestic product (GDP) on a yearly basis. The investment capacity at EU level should be additional to national funding, as it would address challenges of a cross-border nature, thus being more effective and value adding. Any future fiscal instrument should also be fully integrated into the existing budget to provide a high level of public accountability and auditing. Further political debate is expected due to differing views on such an instrument.

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Alina Dobreva.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

Just as Next Generation EU (NGEU, see issue 3) launched, the EU budget has had to respond to the multiple new crises created by Russia’s invasion of Ukraine: security, humanitarian and energy crises, and high inflation. In 2023, attention will focus on how the EU employs various budgetary and off-budget financial instruments to address these crises while dealing with two major challenges: available revenue and flexibility in spending.

Budgeting designed for times of peace and stability

An investment budget, the EU budget is designed to implement long-term policies, to provide continuity and stability rather than flexibility. The long-term policy priorities and their scope of implementation (i.e. financial allocation ceilings on expenditure) are determined by the multiannual financial framework (MFF). This leaves limited possibility for flexibility, responsiveness and dynamism in the face of unforeseen circumstances, despite Parliament’s long-standing position in favour of strengthening flexibility. With the MFF’s seven-year duration, plus the time from the Commission’s initial draft to its final adoption, the expenditure framework at the disposal of policymakers might have been conceived as long as ten years before a crisis hits the Union.

According to Article 311 of the Treaty on the Functioning of the EU (TFEU), the EU shall provide itself with the means necessary to attain its objectives, i.e. to deliver on its policy commitments as well as to address emerging challenges. The reform of own resources in 1988 was the first, and only, major reform to date. However, the competences and therefore policies covered by the EU budget have grown significantly over that period. Even without crises, the sufficiency of EU budget revenue can become an issue of concern. In its 2017 resolution on the reflection paper on the future of EU finances, the European Parliament stressed that additional political priorities should be supported with additional financial means and not be financed to the detriment of existing EU policies.

Budgeting when crises comes

Although the EU budget is not designed to respond to crises and has only limited possibilities to respond to unforeseen events, it does do so, and citizens’ expectations are growing. On the one hand, regardless of the latter, EU policymakers and leaders can act only within the limitations of the EU Treaties and the competences they provide to EU institutions, which can be far below the challenges the crises create. On the other hand, when crises have global impact, responses are more efficient when executed at EU rather than national or regional level. Under the subsidiarity and proportionality principles, the EU budget provides European added value by supporting actions that can be more efficient, effective or synergetic than actions taken at national or lower level.

For slightly more than a decade, the EU budget had to provide financial means for policy responses to several major crises – the European debt crisis, the migration crisis, the COVID-19 pandemic and its economic consequences, as well as to act in the conditions of a worsening humanitarian situation across the world and changes related to Brexit.

Flexibility in spending

The agreed MFF provides tight expenditure ceilings under which annual budgets and their amendments are adopted. A more significant amendment to the MFF could be done in a mid-term review, but the mid-term review/revision of the 2014-2020 MFF did not provide adequate response to the crises back then. The President of the European Commission confirmed in her September 2022 letter of Intent that an MFF review will be done in 2023, as called for by some Members of Parliament. It remains to be seen how and to what extent it will provide a response to current crises.

Over the years, the flexibility instruments of the EU budget have developed after the insistence of the European Parliament, and have been used frequently due to the multiple crises facing the Union. They constitute a minimal share of the EU budget, which Commissioner Johannes Hahn, responsible for the budget, estimates to be around 1 % of the overall EU budget (not linked to pre-allocations), and experience has shown their insufficiency. Flexibility has been much debated but the views of the Commission, the Parliament and the Council vary significantly, with the Parliament repeatedly calling for more flexibility of the EU budget. Future needs might see incorporation of more flexibility instruments in the EU budget rather than, as currently, using a galaxy of off-budget instruments, which are not subject to democratic parliamentary scrutiny. 

Sufficient revenues

In its resolution on the 2021-2027 MFF and own resources, the European Parliament states that the 2014-2020 MFF had proven inadequate to finance the EU’s pressing needs and political priorities. Experts also doubt if the EU budget has been sufficiently expanded and reformed to reflect the deepening Union and its expanding competences. The currently pressing needs related to the Russian invasion of Ukraine and its consequences are expected to be even more significant than those resulting from previous crises. Unlike national budgets, the EU budget cannot run a deficit or fund expenditure through borrowing. It can increase expenditure only through an increase of its revenue, knowns as own resources. Borrowing, however, is a funding mechanism for off-budget instruments such as NGEU (although repayment of the debt it generates will come from the EU budget). The future €18 billion fund to support the reconstruction of Ukraine is again funded by borrowing – loans that will be guaranteed (but not repaid) by the EU budget.

An own-resource reform found interinstitutional agreement (IIA) as part of the package on the 2021‑2027 MFF and NGEU. One aim was securing resources to cover new budgetary expenditure such as on NGEU debt repayment. The first step was the Own Resources Decision (ORD), which entered into force in June 2021, introducing a new own resource based on non-recycled plastics. In December 2021, six months later than initially scheduled in the IIA roadmap, the Commission proposed a new own resources package, comprising part of the revenues deriving from an extended emissions trading scheme (ETS), a carbon border adjustment mechanism (CBAM), and a share of the reallocated profits of very large multinational companies (based on Pillar 1 of the OECD/G20 agreement). The proposal is to introduce the new own resources gradually as of 1 January 2023, but at the time of publishing, the proposal had still not been adopted by the Council. Over the 2026-2030 period, revenue for the EU budget then have the potential to reach up to €17 billion a year (in constant 2018 prices). The Commission committed to making a proposal with a further package of new own resources in 2023 (earlier than the deadline of June 2024 set in the IIA).

The progress of own resources reform will be a key issue to watch during 2023, because any delay to the already lengthy adoption and implementation might put in jeopardy the future stability, reliability and continuity of the EU budget. Even if the IIA is fulfilled as planned, there are still concerns whether the amounts generated will be sufficient due to the increased interest rates on NGEU repayments (the principal is due only at the end of the current MFF) and the additional funds needed to address the consequences of the Russian invasion of Ukraine. Insufficiency of resources might lead to a need to increase the own resource based on gross national income (GNI) and/or limiting the funding of existing programmes and MFF commitments.

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Silvia Kotanidis.

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year.
The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate
and socio-economic tipping points, the impact of increasing fuel prices on transport, cyber-resilience in the EU, protecting media freedom and journalists, the future of Russia, and geoeconomics in an age of empires

The year 2023 will be a crucial one in the run-up to the 2024 European elections, with Parliament facing several major political challenges. Some of these are linked to the nature of European elections and to long-standing efforts to involve the electorate more and to ‘Europeanise’ the elections. Other challenges are linked to recent events that have exposed the need for internal reflection within Parliament and for reforms on transparency and ethics.

As announced promptly by President Roberta Metsola on 12 December 2022 following the wave of investigations into illicit lobbying activities, and reiterated by Members in a resolution the same week, Parliament supports a reform process that touches, inter alia, upon the transparency register, an interinstitutional ethics body and a special inquiry committee. How these and other matters are handled by Parliament and the other EU institutions in 2023 will play an important role in the tone of the electoral campaign, in citizens’ trust in the EU and ultimately in their participation in the 2024 European elections.

In addition, at least three elements – less linked to current events, but more to the nature of European elections and to ongoing institutional work to make them more prominent – are expected to be at the heart of discussions in 2023. The first such element is whether the lead candidate, or Spitzenkandidaten, process will be repeated at the 2024 European elections. This process was intended to build a more democratic link between the only EU institution directly elected by citizens – the European Parliament – and the EU executive – the European Commission. In doing so, the hope was also to increase voter turnout, which had been steadily decreasing over the years (see Figure 1). To achieve this, inspiration was derived from the explicit link that the Lisbon Treaty reform establishes between the European elections and the election of the President of the Commission, whereby ‘Taking into account the elections to the European Parliament’ the European Council, acting by a qualified majority, proposes to the European Parliament a candidate for President of the Commission, who shall be elected by the Parliament by a majority of its component members (Article 17(7) TEU). Under this non-formalised process, European political parties agreed to propose candidates for the position of President of the Commission, with the party that wins the most votes in the European elections, or that is capable of marshalling a parliamentary majority around a candidate, rewarded with the power to nominate their candidate to the Commission presidency.

Under the motto ‘this time is different‘, the lead candidate process was run in the campaign for the 2014 European elections, with a rather successful outcome as Jean-Claude Juncker, the EPP lead candidate, was agreed upon – not without resistance – as the European Council candidate, and then proposed to Parliament which ultimately voted him into office on 15 July 2014. That successful experiment was less successful at the 2019 elections when Ursula von der Leyen, an outsider in terms of the lead candidate process, was elected Commission President on 16 July 2019 by a slim absolute majority (383 votes in favour, 327 against, and 22 abstentions).

The Spitzenkandidaten process is based on the crucial role of European political parties, which each select a person to run as their lead candidate. Each political party runs a selection process for its lead candidate, according to its own internal rules and political strategy. From the Parliament’s perspective, it is a process that enhances Parliament’s role in the choice of the most important EU executive position, an influential role that it would not wish to give up. The year 2023 will therefore be crucial for the European parties in deciding whether, in the absence of any formalisation of the process, to repeat the experiment a third time. With the 2024 elections approaching (the precise dates have yet to be decided) the political will of European parties would have to crystallise by spring/summer 2023, i.e. in good time to select the lead candidates in autumn 2023. It is said that the chances of success of the Spitzenkandidaten process, whose automaticity the European Council has explicitly rejected, would be higher if the outgoing President of the Commission were to run as a lead candidate. European political parties being the protagonists in this process, some positive impact could also derive from the enhancement of their access to EU funds, should the proposal on funding of European political parties and foundations be adopted by the co-legislators in 2023.

The second element is the pending electoral reform contained in the draft legislative act adopted by Parliament on 3 May 2022. That too is very much linked to the lead candidate process. This reform, one of the many attempted over recent decades to ‘Europeanise’ the European elections, would innovate in two respects. First, by addressing the current fragmentation into 27 different electoral systems, it would make electoral rules more uniform within the EU (e.g. uniform minimum common voting age, right to vote in third countries, 9 May as fixed election day). Next, by seeking to emancipate European elections from national-focused debates and to bring citizens closer to European affairs, it would introduce a Union-wide constituency in which 28 Members of Parliament would be elected through transnational lists, with geographical balance ensured between small, medium and large countries through a set alternation of candidates coming from these three groups. The proposal would also provide for the new Union-wide constituency – a major step towards the Europeanisation of European elections – to be accompanied by the formal introduction of a lead candidate process, with a political agreement between the European political entities and with an interinstitutional agreement between Parliament and European Council.

The political will to engage in a path where European transnational lists are combined with a lead candidate process was endorsed by the EPP, S&D and Renew Europe groups in a January 2022 political agreement, Our priorities for Europeans. It is unlikely, however, that the draft legislative act containing the electoral reform described above will be unanimously adopted by the Council, receive the consent of an absolute majority in Parliament and then be ratified by all Member States according to Article 223 TFEU in time for the 2024 European elections. Account should also be taken of the safeguard enunciated by the Venice Commission: that electoral reforms should enter into force at least one year prior to elections. Discussions on the proposal will however likely take place during 2023, giving an indication of the political appetite of Member States to truly make the long-awaited leap to make European elections more European.

A third element is the effect of the Conference on the Future of Europe, and in particular that of the involvement of citizens in what was considered a true exercise of participatory democracy. This engagement might not only have raised the interest of citizens on European affairs, hence possibly also having a positive effect on electoral turnout in the next elections, but has also produced concrete results as far as the role of European elections is concerned. Recommendation 16 of the citizens’ panels suggests harmonising electoral conditions, while proposal 38(4) of the Conference on the Future of Europe calls for citizens to have a greater say on who is elected President of the Commission, either by a direct election or through the lead candidate process. While such forward-looking and innovative suggestions must be considered for implementation by the three institutions in the coming months, they represent a clear indication of the desire to make European elections a truly salient moment in European democratic life.

Figure 1 – Turnout in European elections across all Member States (%) since 1979

Read the complete in-depth analysis on ‘Ten issues to watch in 2023‘ in the Think Tank pages of the European Parliament.

Written by Luisa Antunes.

The European Commission plans to launch its revised EU pharmaceutical package in the first quarter of 2023. Ahead of its release, two recent STOA studies offer insight to inform upcoming Parliamentary discussions. Fragmentation of EU health research and development, lack of transparency and a translation gap between public investment and clinical output are among the weaknesses identified. Possible solutions include the creation of large-scale European biomedical infrastructure, and a series of targeted strategies to improve EU health research coordination and reprioritise areas of unmet therapeutic need.

Background

Health is a fundamental human right, and equitable access to healthcare a cornerstone of EU and Member States’ policies. The COVID-19 pandemic evidenced weaknesses in the organisation of EU health research and development (R&D). Among the issues identified are access to and affordability of medicines, treatment options for rare diseases, antimicrobial resistance and environmental and economic sustainability.

In 2021, the European Parliament adopted a resolution on a pharmaceutical strategy for Europe. It recognises the existence of inequities between Member States in access to healthcare services; antimicrobial resistance as a serious health threat requiring a coordinated response; an unfit-for-purpose system of incentives for R&D on medicines for unmet diagnostics and therapeutic needs; shortages and lack of industry transparency on the pricing and costs of medicines; and an ineffective intellectual property system.

The upcoming EU pharmaceutical strategy package, planned for adoption by the Commission in the first quarter of 2023, aims to tackle this issue. Members of the European Parliament will be asked to vote on the revision of the EU’s general pharmaceuticals legislation and on the revision of the legislation on medicines for rare diseases and children. Topics to be discussed include how to ensure access to affordable vaccines, diagnostics and treatments, how to foster innovation in areas of unmet therapeutic needs, how to improve supply chains, and how to adapt to new scientific developments. The proposals are a stepping stone towards building a stronger European health union

STOA contribution to the debate Figure 1 – Options for biomedicines infrastructure

Ahead of the release of the Commission proposals, the European Parliament’s Panel for the Future of Science and Technology (STOA) has released two reports that analyse the current EU health R&D model. The studies offer policy options to address the overarching issue of unmet therapeutic needs caused by a fragmented EU health research system and the misalignment between public health priorities and industry outputs.

The first study, written by the Department of Economics of the University of Milan and led by Prof. Massimo Florio, proposes the creation of a public European biomedicines infrastructure to tackle market failures and ensure a proper return on investment, while addressing the pricing of medicines and intellectual property rights. This proposal follows from an analysis of over 250 literature reports and consultations with around 50 experts from academia, industry, and governmental and non-governmental organisations in the EU. Such infrastructure would ensure a portfolio of new medicines and related biomedical technologies, from research to the delivery stage, in partnership with third-party research centres at Member State, European and international level. With a proper R&D capacity, 80 to 150 innovative projects could be delivered over the course of 20 years, for an estimated yearly budget of €7 billion. Four possible policy options are presented (see Figure 1), with differing levels of R&D capacity and mission scope. Such an initiative could answer the identified issues of shortages and high costs and prices of pharmaceuticals, lack of transparency, and unmet therapeutic needs, by taking back public ownership rights to innovations that are exclusively in the public interest. It would also centralise public investment in public interest areas of low economic return, such as rare medicines and antimicrobials.

The second study, requested from the Department of Cardiovascular Sciences of KU Leuven and led by Prof. Karin Sipido, analyses the structure and organisation of public funding for EU health research, through literature review and consultations with experts. The study identifies several systemic weaknesses. Funding instruments have increased in diversity and complexity over the last decade, with a shift in priority towards more application and implementation. However, clinical therapeutic studies lack continuity, and there are stark inequalities in infrastructure and workforce investment between Member States. The EU lags behind global leaders, due to a lack of coherent investment, long-term strategy, competitiveness and leadership in biomedical innovation.

The report proposes a set of seven policy options to achieve increased coherence and translational throughput, from basic research to implementation, while considering environmental and economic challenges. These include strengthening cross-border collaboration, increasing programme synergies, and building stronger EU leadership, among other things through the appointment of an EU health adviser. Similarly to Prof. Florio’s study, Prof. Sipido’s study proposes the creation of an EU health institute for research coordination.

Potential impacts and developments

Both STOA studies identify a translational gap between public health needs and production outputs, diagnosing current public funding policies as inadequate in terms of return on investment. Such analyses are in line with the aforementioned Parliament resolution on a pharmaceutical strategy, and feed into the discussion on revising EU pharmaceutical legislation, including that on medicines for rare diseases and children (the ‘orphan and paediatric regulations’) and on market incentives for innovative antimicrobials.

The two studies propose the creation of an EU body as a policy option in order to coordinate EU health research and innovation and address structural weaknesses in the current R&D system. Such a priority was first recognised by a 2020 Parliament resolution on the shortage of medicines, which called on the Commission and Member States to ‘examine the possibility of creating one or more European non-profit pharmaceutical undertakings which operate in the public interest to manufacture medicinal products of health’ and, subsequently, in the December 2021 European Council conclusions, which noted the importance of Parliament’s resolution to ensure the supply of medicinal products affected by market failures.

Another piece of legislation implicated in this process is the proposed regulation on the European Health Data Space (EHDS), as far as it affects access to data and harmonisation between Member States, where a further STOA study on genome editing could be of added value.

Read this ‘at a glance’ note on ‘Towards a new EU pharmaceutical strategy‘ in the Think Tank pages of the European Parliament.

Written by Ralf Drachenberg.

‘This is Europe’ – an initiative proposed by the President of the European Parliament, Roberta Metsola – consists of a series of debates with EU leaders to discuss their visions for the future of the European Union. On 13 December, the Prime Minister of Slovenia, Robert Golob, envisaged a European Union that believes in the power of integration, the power of cooperation and the power of unity. His main message was the importance of the energy transition. In the context of current high energy prices, he stressed the responsibility of the European Council to be more decisive.

Only when we come together on the basis of our strengths and virtues, and when we each contribute what we are best at, then we can form a community that will be the most successful.

Robert Golob

Background

Roberta Metsola launched the ‘This is Europe’ initiative soon after her election as President of the European Parliament in January 2022. Robert Golob is the sixth EU leader to have addressed the Parliament since its Conference of Presidents endorsed the initiative on 28 April 2022. These debates will continue during subsequent sessions. The next confirmed leader to participate is the Luxembourg Prime Minister, Xavier Bettel, during the April 2023 plenary session, although other debates may take place before then.

Figure 1 – Time devoted by Robert Golob to various topics in his speech

A similar initiative by the Parliament between January 2018 and April 2019, ahead of the 2019 European elections, saw a number of EU leaders speak in the Parliament’s plenary sessions about their views on the future of Europe. An EPRS analysis of the Future of Europe debates identified the similarities and differences between the views expressed by EU leaders.

The initiative is particularly relevant in the context of the Conference on the Future of Europe (CoFoE), a bottom-up exercise allowing EU citizens to express their opinions on the Union’s future policies and functioning. On 30 April 2022, the CoFoE plenary adopted 49 proposals (see the recent EPRS analysis), including more than 300 measures by which they might be achieved. As a follow-up to the CoFoE, Parliament adopted a resolution, by a large majority, calling for a convention in accordance with Article 48 of the Treaty on European Union. This call was backed by the President of the European Commission, Ursula von der Leyen, in her State of the Union speech on 14 September 2022.

At the June 2022 European Council meeting, the Heads of State or Government ‘took note’ of the CoFoE proposals. While calling for ‘an effective follow-up’, they did not provide specific guidelines in this respect, but just stated that each EU institution should do this ‘within their own sphere of competences’, rather than jointly among the EU institutions. EPRS research has shown that there is significant convergence between the results of the CoFoE and the priorities of the European Council as expressed in its Strategic Agenda for 2019‑2024 and in its conclusions over the past 3 years.

Main focus of Robert Golob’s speech

While Mr Golob addressed a wide range of topics in his speech to the Parliament (see Figure 1), he devoted most attention to three themes: i) energy transition; ii) geopolitics; and iii) the rule of law.

Energy transition

The main topic of Robert Golob’s address was the energy transition. The Slovenian Prime Minister put strong emphasis on the fact that over-dependence on one source for gas provision, namely Russia, has enabled the weaponisation of that energy source over the past year. He stated that three factors combined were needed to respond to this situation: i) a reduction in energy demand; ii) demonstration of solidarity; and iii) action to address energy prices. Energy transition goes beyond the current situation, as it is the only way to reduce the impact of energy on our climate, helping the planet and future generations.

Geopolitics

Addressing the theme of European geopolitics, Golob supported the enlargement process for both Ukraine and Moldova, as well as for the Western Balkans. He also praised the EU’s response to Russia’s aggression towards Ukraine, showing that when it was necessary the EU knew ‘how to stand united’.

The rule of law

Mentioning that it was the deteriorating rule of law situation in his country that had brought him into politics in the first place, Golob stressed that ‘the rule of law is not something to be negotiated about, but is something to be enforced. And that that is the responsibility of all of us that are in the political system’. He went on to call for new ways to be found to address the issue of ‘paid-for hate speech’.

Specific proposals and positions

The Slovenian prime minister used the opportunity to present his views on how the European Union should advance in specific policy areas. He also made some new proposals, summarised below.

Policy issuePriority action and proposals (quotes)Energy policy‘We will need to be more decisive in order to reduce the volatility in the markets. We will need to be more decisive to eliminate price spikes. And, we will need to be more decisive when it comes to the gas price caps’.Food‘The food system that we are utilising right now is totally unsustainable for our future, totally. Unless we change the food production and food consumption in a very thorough way, we will not be able to meet any of the climate goals’.The rule of law‘All the efforts done – especially by the Iranian women and with their inventive, non-violent ways of protesting against the brutality of the regime and for their human rights, their women’s rights – is something to be really proud of; and we need to give them support as much as possible’.Enlargement‘I welcome the decision of all the institutions to recognise both Ukraine and Moldova as candidates for membership of the European Union, and I welcome all the efforts, including by Parliament, to speed up the accession process’.EU membership‘The effect of joining the European Union is transformative. We have changed. Membership of the European Union changes the country, it changes the outlook first of all of the people, and then the people make sure that the politics also change’.Table – Specific proposals made by Robert Golob, by policy area

Read this ‘at a glance’ note on ‘‘This is Europe’ debate in the European Parliament: Speech by Robert Golob, Prime Minister of Slovenia, on 13 December 202‘ in the Think Tank pages of the European Parliament.

Written by Marcin Grajewski.

The past year has been a genuine annus horribilis, shaking Europe and the world with security, economic and geopolitical shocks. Russia’s brutal and unprovoked attack on Ukraine is the biggest military conflict on the continent since the Second World War. Apart from causing horrific death tolls, suffering and destruction, the war triggered security, political, energy and migration crises and undermined the nascent economic recovery from the COVID pandemic, fuelling record inflation and clouding growth prospects.

The assertiveness of autocratic regimes, notably in China and Russia, the rise of populism, global technology rivalry, and post-pandemic problems with supply chains accelerated global fragmentation, shifted political alliances and posed a further threat to the rules-based order in the world. Climate talks made some headway, but some analysts and politicians warn that the action so far has been insufficient and the world may be close to a point of no return on climate change.

This note gathers links to selected recent publications and commentaries from many international think tanks on the key takeaways from 2022.

Ukraine

Answering four hard questions about Russia’s war in Ukraine
International Crisis Group, December 2022

Time for the West to think about how to engage with defeated Russia
Brookings Institution, November 2022

The war against Ukraine and European defence: When will we square the circle?
Egmont, November 2022

Defend. Resist. Repeat: Ukraine’s lessons for European defence
European Council on Foreign Relations, November 2022

Russia’s war in Ukraine: Misleading doctrine, misguided strategy
Institut français des relations internationales, October 2022

Keeping a cool head: How to improve the EU migration crisis response
European Policy Centre, October 2022

How big is the storm? Assessing the impact of the Russian–Ukrainian war on the eastern neighbourhood
European Union Institute for Security Studies, October 2022

Understanding Russia’s threat to employ nuclear weapons in its war against Ukraine
Heritage Foundation, October 2022

Ukraine’s female soldiers reflect country’s strong feminist tradition
Atlantic Council, June 2022

Fiscal support and monetary vigilance: Economic policy implications of the Russia-Ukraine war for the European Union
Bruegel, May 2022

Global shifts

Deglobalisation and protectionism
Bruegel, November 2022

Democratic innovations from around the world: Lessons for the West
Carnegie Europe, November 2022

China’s growing interference in domestic politics: Globally and in the United States
Council on Foreign Relations, November 2022

The American order is over, and China is ready to dive in
Istituto per gli Studi di Politica Internazionale, October 2022

The emerging world order is post-Western and pre-plural
Institut Montaigne, September 2022

Globalization is in retreat for the first time since the Second World War
Peterson Institute for International Economics, October 2022

Megatrends: 2022
GLOBALSEC, June 2022

China and the transatlantic relationship
Chatham House, June 2022

The new world order
Council of Foreign Relations, March 2022

Putin is creating the multipolar world he (thought he) wanted
Egmont, March 2022

Climate

Can COP keep up with an evolving climate effort?
Brookings Institution, December 2022

COP27 readout: The good and the bad as COP27 concludes
Atlantic Council, November 2022

COP27 didn’t make enough progress to prevent climate catastrophe
Council for Foreign Relations, November 2022

Perspectives on designing a climate club: Alliance-building to strengthen international climate cooperation
EPICO, Konrad Adenauer Stiftung, November 2022

The portfolio of economic policies needed to fight climate change
Peterson Institute for International Economics, November 2022

In defence of borrowing for climate action
Centre for European Reform, October 2022

Climate club: The way forward
Wilfried Martens Centre for European Studies, October 2022

How can the European Union adapt to climate change?
Bruegel, September 2022

How carbon tariffs and climate clubs can slow global warming
Peterson Institute for International Economics, September 2022

Conference on the Future of Europe: What is next for EU climate policies
Ecologic, July 2022

China

China’s wish for 2023? An end to lockdown
Chatham House, December 2022

China and Russia: Are there limits to ‘no limits’ friendship?
Centre for European Reform, October 2022

Lessons for Europe from China’s quest for semiconductor self-reliance
Bruegel, November 2022

The Biden/Xi meeting in Bali: What was at stake?
Peterson Institute for International Relations, November 2022

An allied strategy for China after the 20th Party Congress
Atlantic Council, October 2022

The new U.S National Security Strategy: Battling China for technological leadership
Centre for European Reform, October 2022

How Xi will consolidate power at China’s twentieth party congress
Council on Foreign Relations, October 2022

Why China is not all-In on supporting Russia
Heritage Foundation, October 2022

China is divided on Russia: Let’s keep it that way
Clingendael, September 2022

China’s Belt and Road Initiative: Successful economic strategy or failed soft-power tool?
Finnish Institute of International Affairs, September 2022

Energy

Securing alternative gas supplies and addressing critical infrastructure gaps in Europe
Atlantic Council, December 2022

National energy policy responses to the energy crisis
Bruegel, December 2022

The European Green Deal, three years on: Acceleration, erosion or fragmentation?
Institut français des relations internationales, November 2022

A grand bargain to steer through the European Union’s energy crisis
Bruegel, September 2022

The energy market in time of war
Centre on Regulation in Europe, September 2022

Energy unity or breakup? The EU at a crossroads
Istituto Affari Internazionali, September 2022

It would be a strategic mistake for the EU to ditch the Energy Charter Treaty
Centre for European Policy Studies, August 2022

The impact of the Ukraine war on global energy markets
Centre for European Reform, July 2022

Timing is the key to the Gulf replacing Russian oil
Chatham House, July 2022

The de-globalisation of oil: Risks and implications from the politicisation of energy markets
Istituto Affari Internazionali, July 2022

Inflation

Energy prices and inflation
Centre for European Policy Studies, December 2022

The ECB’s monetary tightening: A belated start under uncertainty
Bruegel, September 2022

A return to austerity in Europe: feasible or fictional?
Real Instituto Elcano, September 2022

Dancing on the edge of stagflation
Luiss School of European Political Economy, September 2022

Uncoordinated monetary policies risk a historic global slowdown
Peterson Institute for International Economics, September 2022

The war in Ukraine and the European Central Bank
International Institute for Strategic Studies, July 2022

Fragmentation risk in the euro area: No easy way out for the European Central Bank
Bruegel, June 2022

The ECB’s normalisation path
Centre for European Policy Studies, June 2022

Our economy needs a good dose of customer-driven deflation
Mises Institute, May 2022

Today’s inflation and the Great Inflation of the 1970s: Similarities and differences
Centre for Economic Policy Research, March 2022

Read the complete briefing on ‘2022: The year that shook the world‘ in the Think Tank pages of the European Parliament.

Written by Jim Maher (European Parliament in ASEAN)

With the world’s two most integrated regional organisations – ASEAN and the EU – this year celebrating 45 years of diplomatic relations, an EPRS online roundtable on 1 December 2022 delved into the real meaning of the ‘strategic partnership’ between the two blocs. Organised jointly with the European Parliament in ASEAN, the exchange also looked towards the next steps in the EU’s engagement with Southeast Asia.

‘Rich and dynamic’ is how European Parliament Vice-President Heidi Hautala (Greens/EFA, Finland) described the current state of EU-ASEAN relations in keynote remarks at the start of the online roundtable, moderated by Elena Lazarou of EPRS. Citing green and digital projects as examples, the Vice-President noted the potential for the EU and ASEAN to ‘mutually benefit from alignment in several important policy areas’.

‘A variation in speed’

On trade, Ms Hautala remarked that the European Union is ASEAN’s third largest trading partner and the second largest source of foreign direct investment. While she noted ‘a variation in speed’ when it comes to trade relations – free trade agreements already in place with Singapore and Vietnam, negotiations with Indonesia underway, and other countries under the Everything But Arms scheme – the region as a whole is ‘moving in the same direction, and the vision for the future is an EU-ASEAN regional FTA’.

Antoine Ripoll of the European Parliament in ASEAN reflected on the substantial progress ASEAN has made in the past four and a half decades, and on the bloc’s role at the core of the Indo-Pacific. Outlining some of the challenges faced by the 10-nation body, he cited security issues (particularly in the South China Sea and the Taiwan Strait), and economic uncertainties due to existing trade tensions. Charmaine Willoughby of De La Salle University in the Philippines added Myanmar as ‘the glaring issue’, along with food security, and ‘grey-zone issues’ such as information manipulation.

On maritime security specifically, Willoughby highlighted the importance of the new Marcos administration leveraging the 2016 Permanent Court of Arbitration award on the South China Sea, which was heavily in favour of the Philippines. She noted that freedom of navigation is at stake and that ‘even if the South China Sea is half a world away from Brussels, it remains a critical issue’.

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Accept YouTube Content ‘A divergence in threat perceptions’

‘We need to fight the battle the way they are fighting it: through economics’ argued Willoughby on the wider issue of countering an increasingly assertive China. Hervé Lemahieu of the Lowy Institute spoke meanwhile of ‘a divergence in threat perceptions’ between many Southeast Asian countries and the West. While for the United States and its Quad partners, it is China’s economic and military power – and willingness to use both in coercive ways – that pose the greatest threat to regional security, in many ASEAN capitals the view is that US-China competition is the main driver of regional instability, he noted.

Mr Lemahieu, Director of Research at the Sydney-based think tank, added that a cohesive ASEAN at the centre of the Indo-Pacific would be ‘a stronger bulwark against Chinese domination than a region divided between those aligned with Washington and Beijing’. ‘A simplistic, binary choice’ between the West and China is, in any case, not one that the countries of Southeast Asia want to make, Shada Islam of the New Horizons Project added.

Another issue hanging over Southeast Asia is that of Myanmar. It has now been over 18 months since ASEAN leaders agreed on a ‘five-point consensus’ to end the chaos in the country following the February 2021 coup d’état. The junta’s commitment to implementing that consensus has been ‘inexistent’, Vice-President Heidi Hautala noted, expressing her hope that the incoming Indonesian ASEAN chairmanship will make real a commitment by ASEAN leaders in November for the bloc ‘to engage all stakeholders’. Ms Hautala stressed that this should include the National Unity Government, which is recognised by the European Parliament as the legitimate representative of the Burmese people’s democratic wishes.

Myanmar junta ‘incredibly impervious to external influence’

Also raising the issue of Myanmar was Hervé Lemahieu, who warned that ‘we need to see this as a generational process rather than something that will be resolved in two years’. The Yangon-raised policy analyst added that those who propose an alternative to the ASEAN approach on the crisis risk overestimating the sway that any external party has on the junta. ‘It seems as if the generals are incredibly impervious to external influence,’ he underlined.

Citing the wide variety of political systems in Southeast Asia, Mr Lemahieu suggested that instead of pushing its ASEAN partners to weigh in on the democratisation of Myanmar, Europe should use the narrative of the coup as a threat to stability that risks becoming ‘a proxy conflict between great powers’. Similarly, on Ukraine, he suggested that, in its dialogue with ASEAN countries, the EU should frame Russia’s aggression as ‘a direct attack on the UN charter’ rather than as something, which pits democracies against authoritarian systems.

Sharing a ‘glass half full’ view on ASEAN, Mr Lemahieu noted that while the bloc brings together ‘an unlikely medley of countries’, its member states are ‘increasingly on the same page when it comes to geopolitical rivalry’. He noted ASEAN’s potential to become ‘a distinctive third pole in the competition between the world’s superpowers’, and added that ‘the EU has come a long way in adjusting its posture and tone’ towards the bloc.

Moving on from ‘regionalism snobbery’

A number of speakers reflected on the importance of a partnership of equals. Vice-President Hautala cautioned against ‘a patronising approach’ from the EU. Shada Islam welcomed the fact that the EU appears to have moved on from ‘regionalism snobbery’, and that there is an acceptance that ASEAN does not need to be a mirror image of the EU. Charmaine Willoughby noted that while the two blocs have different origins and current circumstances, there are underlying similarities, including a shared commitment to multilateralism and adherence to the rules-based international order.

On the wider role of the EU in the region, Hervé Lemahieu cautioned against trying to emulate the United States’ policy: ‘The fact is Europe is not considered as a military heavyweight in the region. […] Where Europe does have the comparative advantage is on economics and trade’. He added that, with its withdrawal from the Trans-Pacific Partnership, the United States has ‘largely abdicated the space’.

On the issue of American involvement, Ulrich Jochheim of EPRS echoed Mr Lemahieu’s assessment of the recently announced Indo-Pacific Economic Framework as ‘very weak’, and suggested that, given domestic political constraints, it is unlikely that the Biden administration would be able to get ‘any serious trade deal’ through Congress.

‘Fight for our values but do it wisely’

Shada Islam noted the importance of ‘accompanying’ countries in making reforms rather than imposing them. Otherwise, ‘we risk losing our value as a trading partner’. Citing the carbon border adjustment mechanism as an example, she noted there is ‘a real danger that we raise our standards so high that countries just can’t meet them’. ‘We need to fight for our values through trade but do it wisely,’ she concluded.

Ms Islam, a Brussels-based commentator, also expressed hope that trade negotiations with Malaysia, the Philippines and Thailand be revived, and a free trade agreement concluded with Indonesia by 2024. She also called for intensified EU collaboration with ASEAN on issues such as connectivity and maritime security, and for sectoral agreements in the digital and green fields.

In terms of recent progress in EU-ASEAN relations, Ulrich Jochheim highlighted the ‘very pragmatic but very useful’ Comprehensive Air Transport Agreement, which replaces more than 140 bilateral agreements. He also noted there will be a breadth of cooperation in light of the new EU-ASEAN plan of action for 2023‑2027.

Antoine Ripoll spoke of the importance of ensuring the EU-ASEAN strategic partnership makes a real difference in the lives of young people, while Charmaine Willoughby mentioned the crucial role of ‘track 1.5 and track 2 discussions’. To ensure ‘a constant to and fro’, Shada Islam proposed that existing contacts between young Europeans and young Southeast Asians – such as the Young Leaders Forum – be institutionalised. Vice-President Heidi Hautala highlighted the European Parliament’s commitment to boosting parliamentary links with ASEAN and its ultimate goal of establishing an inter-parliamentary assembly.

Watch the online roundtable here, and follow the European Parliament in ASEAN on Twitter for more on the Parliament’s engagement with Southeast Asia.

Written by Issam Hallak (1st edition).

In 2020, the Commission launched a review of the Solvency II Directive, the EU’s legal prudential regulatory framework for (re-)insurance companies, which entered into force in 2016. As one output of the review, the Commission made a proposal in September 2021 for a new directive establishing a framework for recovery and resolution of insurance companies – the ‘IRRD proposal’.

The IRRD proposal would establish harmonised recovery and resolution tools and procedures, with enhanced cross-border cooperation between national authorities. The proposal adopts the ‘pre‑emptive’ approach whereby insurance companies must submit plans to the supervisory authorities, which would be given powers to implement resolutions. The proposal also sets out a range of tools for resuolutions.

Versions

• December 2022: Insurance recovery and resolution directive (1st edition)

Regulation amending Regulation (EU) No 575/2013 and Directive 2014/59/EU as regards the prudential treatment of global systemically important institution groups with a multiple point of entry resolution strategy and a methodology for the indirect subscription of instruments eligible for meeting the minimum requirement for own funds and eligible liabilities Committee responsible:Economic and Monetary Policy (ECON)COM(2021)582
22.9.2021Rapporteur:Markus Ferber (EPP, Germany)2021/0296(COD)Shadow rapporteurs:Aurore Lalucq (S&D, France),
Stéphanie Yon-Courtin (Renew, France), Henrike Hahn (Greens/EFA, Germany),
Marco Zanni (ID, Italy),
Johan van Overtveldt (ECR, Belgium),
Chris MacManus (The Left, Ireland)Ordinary legislative procedure (COD)
(Parliament and Council on equal footing
– formerly ‘co-decision’) Next steps expected: Committee vote on draft report

Written by Suzana Anghel and Ralf Drachenberg.

The last regular European Council meeting of 2022 ended with agreements on most open agenda points, notably the €18 billion of assistance to Ukraine and the ninth sanctions package. While the detailed decision on the cap for energy prices was left to the Energy Council to define, EU leaders specified in their conclusions that the proposal was to be finalised on 19 December 2022. In a long strategic discussion on EU-US relations, European Council members concurred that they want an active dialogue with the US on the latter’s Inflation Reduction Act. Regarding the economy, EU leaders invited the European Commission to put forward, by the end of January 2023, short-term measures to mobilise both EU and national investment resources to safeguard the EU’s economic base, as well as an EU strategy to boost competitiveness and productivity in the longer term. On security and defence, EU leaders focused on joint procurement, and insisted on the need to invest in defence capabilities to be able to conduct the full spectrum of EU missions and operations. As regards enlargement, the European Council endorsed the General Affairs Council conclusions on enlargement of 13 December 2022, and granted Bosnia and Herzegovina candidate country status.

1.     General aspects

The European Council, which lasted only one day, took place back-to-back with the EU-ASEAN Commemorative Summit, at which a joint statement, affirming the strategic partnership and the shared interest in peace, security and stability, was adopted. The EU leaders’ meeting began with the customary address by the President of the European Parliament, Roberta Metsola. Her intervention was followed by a particularly long exchange of views involving many EU leaders, the substance of which was largely linked to the criminal proceedings involving the Parliament, among other issues. The EU Heads of State or Government expressed their support for the Parliament’s handling of the matter. President Metsola used the opportunity to announce a wide-ranging reform package to be ready early in 2023, underlining that she would personally lead the work.

This was the first European Council meeting for the new Italian Prime Minister, Giorgia Meloni, and the last for the Irish Taoiseach, Micheál Martin, who subsequently handed over the office to Leo Varadkar.

In the context of attempts by certain Member States to block important decisions until the last moment, EU leaders defended decision-making by consensus, arguing that, ultimately, only the outcome mattered. As for the President of the European Council, Charles Michel, he once again stressed the continuing unity of the European Council.

President Michel announced that due to the rising number of irregular migrants, EU leaders would hold an in-depth debate on migration at a special European Council meeting on 9‑10 February 2023.

2. European Council meeting Russia’s war of aggression against Ukraine

EU leaders reaffirmed their ‘resolute condemnation of Russia’s war of aggression against Ukraine’, reiterated the EU’s ‘full support for Ukraine’s independence, sovereignty and territorial integrity’ and called on Russia to cease its attacks on Ukrainian civilians and infrastructure, and to stop endangering ‘the safety and security of civilian nuclear facilities’ in Ukraine. They once again reiterated the EU’s political, financial, military and humanitarian support for Ukraine. President Michel underlined the Union’s unity on Ukraine, which was demonstrated by the decisions taken at the summit on macro-financial assistance and military aid as well as the ninth package of sanctions.

EU leaders notably agreed on the €18 billion package of assistance for Ukraine in 2023. Whilst Poland had initially threatened to block the decision, along with the minimum tax on multinational enterprises and Hungary’s recovery and resilience plan, the set of measures was adopted by written procedure in the interim. EU leaders also welcomed the G7 agreement to establish a donor coordination platform, which will help coordinate aid for repair, recovery and reconstruction efforts in Ukraine.

The European Council recalled the EU’s commitment to support Ukraine militarily though the European Peace Facility (EPF) and the EU Military Assistance Mission in support of Ukraine (EUMAM Ukraine). It endorsed the political agreement reached in the Council to increase the financial envelope of the EPF by €2 billion (2018 prices) and to allow for additional financial increases at a later stage. EU leaders also reaffirmed the importance of stepping up bilateral military support, including air-defence capacities and demining aid. The Prime Minister of Latvia, Krišjānis Karinš, stressed the importance of continuing to support Ukraine militarily, including with air defence systems, and warned against talks regarding a ‘premature peace or a truce’.

EU leaders also reaffirmed the need for support for internally and externally displaced persons, calling on the Member States ‘to intensify contingency planning, with the support of the Commission’. They also confirmed the Union’s commitment to ‘urgently intensify the provision of humanitarian and civil protection assistance to Ukraine’ as well as to support the rebuilding of damaged critical infrastructure. The President of France, Emmanuel Macron, noted that, earlier in the week, Paris had hosted the international support conference for Ukraine at which €1 billion was pledged for heating stations, power generators and lighting equipment to help the Ukrainians cope with the winter.

EU leaders took stock of the options put forward by the European Commission, at their request, regarding the use of frozen Russian assets in support of Ukraine’s reconstruction, and invited the EU institutions ‘to take work forward’. They discussed war crimes accountability, ‘including ways to secure accountability for the crime of aggression’. They agreed that sanctions and the international oil price cap play a key role in maintaining pressure on Russia to end its war. EU leaders also condemned the Iranian authorities’ support for Russia’s war of aggression, and welcomed the additional sanctions agreed in the Council. The President of Lithuania, Gitanas Nausėda, stressed the importance of ‘keeping the sanctions as strong as possible’ and tweeted that ‘the Ukrainian nation is heroically withstanding Russian aggression’.

Moreover, EU leaders reiterated their commitment to food security, stressing the importance of the solidarity lanes, the UN Black Sea Grain Initiative and the ‘Grain from Ukraine’ programme, and pointed out that access to affordable agricultural products and fertilisers remains key.

The European Council also considered the impact of the war on neighbouring countries, and notably the importance of supporting Moldova in coping with the energy security challenge.

Addressing the European Council once again, the President of Ukraine, Volodymyr Zelenskyy, stressed that Ukraine and all of Europe had become stronger in recent months; he underlined the importance of unity, thanked the EU for the ‘multifaceted assistance’ offered and underlined that Ukraine needs the EU’s support to overcome the destruction of its energy system. 

Main message of the President of the European Parliament: President Metsola stressed that the EU needs to stand with Ukraine and that sanctions need to be implemented. She emphasised that the European Parliament had awarded the Sakharov Prize to the people of Ukraine.

Energy and economy

As stressed by President Michel, ‘our new energy horizon has had spill-over effects on our economy … our future growth perspectives depend on our industries’ ability to remain competitive’. The intertwined energy and economy topics were therefore at the core of discussions.

After reviewing progress made in implementing the October 2022 conclusions, the European Council reaffirmed the importance of phasing out dependency on Russian fossil fuels, whilst promoting innovation, as well as investing in renewables. It notably called for the review of the Renewable Energy, Energy Efficiency and the Energy Performance of Buildings Directives to be finalised. EU leaders also underlined the need to accelerate preparations for the 2023‑2024 winter, calling for the ‘speedy operationalisation’ of the EU energy platform for joint gas and hydrogen purchasing, for consumption reduction and for gas storage facilities to be filled efficiently. As regards the cap on the price of gas, the search for an agreement was delegated to the Energy Council, which it was expected to reach at its meeting on 19 December 2022. Both the European Commission President, Ursula von der Leyen, and the Prime Minister of the Netherlands, Mark Rutte, expressed ‘confidence’ in the Council on this matter.

EU leaders agreed that the ongoing energy crisis endangers the EU’s economic, industrial and technological base, requiring an ‘ambitious European industrial policy to make Europe’s economy fit for the green and digital transitions and reduce strategic dependencies’. They underlined that – if the single market is to be preserved – economic resilience and global competitiveness could only be achieved through coordinated European action. The European Council invited the European Commission to make, by January 2023, short-term proposals allowing mobilisation of European and national level resources to promote investment, and to present a (long-term) EU strategy to boost competitiveness and productivity.

The EU’s economy and its industrial base will be central topics on the agenda of the next European Council meeting, of 9‑10 February 2022. The European Commission President, Ursula von der Leyen, called the European Green Deal the EU’s ‘most existential priority’, recalling the progress made in this area under the current Czech Presidency of the Council of the EU. She stressed that she looked forward to cooperating with the incoming Swedish Presidency on competitiveness.

Main message of the President of the European Parliament: President Metsola stressed that ‘growth will also come from reforming our energy market’, underlined the importance of diversifying sources of energy, and confirmed the Parliament’s readiness to help ‘build our energy resilience together’.

Security and defence

As announced by President Michel, EU leaders took stock of progress made in implementing the security and defence commitments undertaken in Versailles. They confirmed their lasting consensus on defence cooperation and insisted on the need to increase the Union’s capacity to act autonomously. The European Council reaffirmed the importance of the ‘transatlantic bond’, which is reflected in EU and NATO strategic documents. 

As expected, EU leaders focused on joint procurement, calling on the co-legislators ‘to swiftly adopt the European Defence Industry Reinforcement through common Procurement Act (EDIRPA)’, and on the European Commission ‘to rapidly present a proposal for a European Defence Investment Programme’ – much needed to help strengthen the European defence industrial sector. They also underlined that arms stocks, which are currently diminishing as a result of military aid provided to Ukraine, need to be replenished, and invited the European Commission and the European Defence Agency ‘to identify needs and to facilitate and coordinate joint procurement’. Moreover, EU leaders reiterated their commitment to jointly invest in defence capabilities to be able to conduct the full spectrum of EU missions and operations. They also called for investment in strategic enablers, to promote a strong cyber-defence policy, to swiftly implement the EU Hybrid Toolbox, and to adopt a new Civilian CSDP Compact in 2023. Finally, the European Council recalled the global footing of the EPF and welcomed the political agreement reached in the Council on its financing.

External relations Southern Neighbourhood

The European Council discussed the Southern Neighbourhood but, contrary to December 2021, when the subject was last on the agenda, no conclusions were adopted this time. President Macron stressed the importance of joint action in and with the Southern Neighbourhood.

Transatlantic relations

EU leaders ‘held a strategic discussion on transatlantic relations’ without adopting conclusions. President Michel underlined the centrality of the transatlantic relationship, recalling the unfailing cooperation on Ukraine. President von der Leyen stressed that the US decision to invest in clean tech was positive, but underlined that the EU needed to maintain its ‘global leadership in the clean tech sectors’. She presented a plan allowing a response to the US Inflation Reduction Act.

Main message of the President of the European Parliament: President Metsola highlighted the protectionist aspect of the US Inflation Reduction Act, and stressed that climate change should be fought jointly, ‘not at the expense of each other’s industrial base’.

Iran

For the second time in a row, the European Council focused on Iran, calling on the regime to annul the ‘death penalty sentences pronounced and carried out in the context of the ongoing protests in Iran’, expressing opposition to such practices and noting the Council’s recent conclusions on Iran.

Other items Schengen

The European Council welcomed Croatia’s entry into the Schengen area as of 1 January 2023. President Michel reported on the political debate between EU leaders on Romania’s and Bulgaria’s accession to the Schengen area, and expressed optimism that a decision on that matter could be taken in the course of 2023. In that context, President Metsola spoke of a ‘broken promise’ and stressed there was ‘no justifiable reason’ to refuse admission to the Schengen area for Bulgaria and Romania.

Read this briefing on ‘Outcome of the European Council meeting of 15 December 2022‘ in the Think Tank pages of the European Parliament.