Eurasia Press & News
Winter is coming. As the European Union (EU) confronts Russia’s war in Ukraine and spiraling energy prices, European Commission President Ursula von der Leyen delivered her State of the European Union Address on Wednesday in Strasbourg, France, with a focus on how the bloc needs to respond to the crisis. Below our experts from the Atlantic Council’s Europe Center and Global Energy Center break down the highlights of the speech and leave their notes in the margins of the text.
Introducing our annotators for this edition of Markup
Olga Khakova: Deputy director for European energy security at the Global Energy Center
Jörn Fleck: Acting director of the Europe Center
Tyson Barker: Nonresident senior fellow at the Europe Center
James Batchik: Assistant director at the Europe Center
Joseph Webster: Senior fellow at the Global Energy Center
Their key takeaways from the speech:
Energy security took top billing. Von der Leyen made news with an announcement on price caps and new rules on the electricity market. The European Green Deal, the search for reliable energy partners, and the climate transition were major focuses in the speech.
EU sanctions aren’t going anywhere. Von der Leyen made clear that sanctions against Russia are here to stay, a message to European member states and the rest of the world as much as to Vladimir Putin.
Europe’s strategic decoupling is accelerating. The days of an assertive EU markets-first, free-trade approach are coming to an end. Von der Leyen doubled down on reducing Europe’s strategic economic dependencies on both Russia and China. Her announcement of the European Critical Raw Materials Act builds on previous efforts to become more self-reliant in microchips and batteries.
Will the EU grow? Von der Leyen endorsed the European Political Community, a nascent if vague proposal from French President Emmanuel Macron to rewrite Europe’s engagement with its neighbors. Ukraine will get access to the internal market, von der Leyen said, but she only mentioned in passing EU enlargement for the Balkans, Moldova, and Georgia.
What was missing: a discussion of defense. With a recognition that war has again come to Europe, von der Leyen spent very little time on the future of Europe’s security and defense. Neither the EU’s Strategic Compass nor common security and defense policies made the cut for this year’s State of the European Union.
Here is the speech, displayed with annotations from our experts.
Madam President,
Honourable Members,
My fellow Europeans,
Never before has this Parliament debated the State of our Union with war raging on European soil.
We all remember that fateful morning in late February.
Europeans from across our Union woke up dismayed by what they saw. Shaken by the resurgent and ruthless face of evil. Haunted by the sounds of sirens and the sheer brutality of war.
But from that very moment, a whole continent has risen in solidarity.
At the border crossings where refugees found shelter. In our streets, filled with Ukrainian flags.
In the classrooms, where Ukrainian children made new friends.
From that very moment, Europeans neither hid nor hesitated.
They found the courage to do the right thing.
And from that very moment, our Union as a whole has risen to the occasion.
Fifteen years ago, during the financial crisis, it took us years to find lasting solutions.
An interesting framing of the EU’s recent history over the last two decades or so—defined by crises and difficulty. But the EU is adjusting and adapting, slowly, to the realities we’re facing. What if crisis is the norm and not the exception moving forward?
—James Batchik, Assistant Director, Europe Center
A decade later, when the global pandemic hit, it took us only weeks.
But this year, as soon as Russian troops crossed the border into Ukraine, our response was united, determined and immediate.
And we should be proud of that.
We have brought Europe’s inner strength back to the surface.
And we will need all of this strength. The months ahead of us will not be easy. Be it for families who are struggling to make ends meet, or businesses, who are facing tough choices about their future.
Among many of these struggles are the immediate and long-term implications of energy poverty on many European consumers and businesses, particularly carbon-intense operations and industries where curtailments or temporary shut-offs carry high costs. The EU is exploring the balance of how much financial support should be provided at the EU level versus national mechanisms.
—Olga Khakova, Deputy Director, Global Energy Center
Let us be very clear: much is at stake here. Not just for Ukraine – but for all of Europe and the world at large.
And we will be tested. Tested by those who want to exploit any kind of divisions between us.
Russia’s energy blackmail has largely failed to crack the EU’s solidarity on sanctions for Russia and humanitarian aid for Ukraine, as well as military support from several European nations. Nevertheless, the Kremlin is doubling down on sowing division through further natural-gas-supply curtailment, particularly the indefinite shut-off of the Nord Stream 1 pipeline.
—Olga Khakova, Deputy Director, Global Energy Center
This is not only a war unleashed by Russia against Ukraine.
This is a war on our energy, a war on our economy, a war on our values and a war on our future.
Calling out Russia’s attack on European energy (security) here sets the scene for a necessary war-level, drastic response to transform European energy markets.
—Olga Khakova, Deputy Director, Global Energy Center
This is about autocracy against democracy.
This is a strong enunciation of the meaning of Russia’s war in Ukraine for Europe. It cuts to the core of the European peace project.
There is also significant overlap with the Biden administration’s talking points; the administration has articulated a worldview defined by democracies versus autocracies.
—James Batchik, Assistant Director, Europe Center
And I stand here with the conviction that with courage and solidarity, Putin will fail and Europe will prevail.
Honourable Members,
Today – courage has a name, and that name is Ukraine.
This is a made-for-TV quote. By my count, von der Leyen mentioned Ukraine thirty-five times (and Russia eighteen) in Wednesday’s speech. Last year that number was zero.
—Jörn Fleck, Acting Director, Europe Center
Courage has a face, the face of Ukrainian men and women who are standing up to Russian aggression.
I remember a moment in the early weeks of the invasion. When the First Lady of Ukraine, Olena Zelenska, gathered the parents of Ukrainian children killed by the invader.
Hundreds of families for whom the war will never end, and for whom life will never go back to what it was before.
We saw the first Lady leading a silent crowd of heartbroken mothers and fathers, and hang small bells in the trees, one for every fallen child.
And now the bells will ring forever in the wind, and forever, the innocent victims of this war will live in our memory.
And she is here with us today!
Dear Olena, it took immense courage to resist Putin’s cruelty.
But you found that courage.
And a nation of heroes has risen.
Today, Ukraine stands strong because an entire country has fought street by street, home by home.
Ukraine stands strong because people like your husband, President Zelenskyy, have stayed in Kyiv to lead the resistance – together with you and your children, dear First Lady.
You have given courage to the whole nation. And we have seen in the last days the bravery of Ukrainians paying off.
You have given voice to your people on the global stage.
And you have given hope to all of us.
So today we want to thank you and all Ukrainians.
Glory to a country of European heroes. Slava Ukraini!
Europe’s solidarity with Ukraine will remain unshakeable.
From day one, Europe has stood at Ukraine’s side. With weapons. With funds. With hospitality for refugees. And with the toughest sanctions the world has ever seen.
Europe has shown remarkable unity in the face of Russia’s war and has indeed acted quickly:
The EU released seven rounds of sanctions packages against Russia, President Vladimir Putin, and Russian oligarchs, including the state-asset freezes, SWIFT bans, and visa limitations. Check out a breakdown of the sanctions here.
The EU activated the European Peace Facility to fund the sending of military equipment to Ukraine, a first for Brussels.
Brussels has allocated over three hundred million euros in humanitarian aid for Ukrainians.
—James Batchik, Assistant Director, Europe Center
Russia’s financial sector is on life-support. We have cut off three quarters of Russia’s banking sector from international markets.
Nearly one thousand international companies have left the country.
The production of cars fell by three-quarters compared to last year. Aeroflot is grounding planes because there are no more spare parts. The Russian military is taking chips from dishwashers and refrigerators to fix their military hardware, because they ran out of semiconductors. Russia’s industry is in tatters.
It is the Kremlin that has put Russia’s economy on the path to oblivion.
This is the price for Putin’s trail of death and destruction.
And I want to make it very clear, the sanctions are here to stay.
A key takeaway here: Europe’s sanctions on Russia are here to stay, and they are having an effect. Von der Leyen is promising here to remain united in exerting pressure on the Kremlin.
—Jörn Fleck, Acting Director, Europe Center
This is the time for us to show resolve, not appeasement.
Some context and tea-leaf reading here: Von der Leyen’s message looks like a promise and a message, especially in the face of growing concern about internal EU divisions with every new sanctions package.
Leadership changes have also sparked worry about the future unity of Europe on sanctions with some of Italy’s presumptive government parties publicly speaking out about sanctions on Russia, for example.
—James Batchik, Assistant Director, Europe Center
The same is true for our financial support to Ukraine.
So far Team Europe have provided more than 19 billion euros in financial assistance.
And this is without counting our military support.
And we are in it for the long haul.
Ukraine’s reconstruction will require massive resources. For instance, Russian strikes have damaged or destroyed more than 70 schools.
Half a million Ukrainian children have started their school year in the European Union. But many others inside Ukraine simply don’t have a classroom to go to.
So today I am announcing that we will work with the First Lady to support the rehabilitation of damaged Ukrainian schools. And that is why we will provide 100 million euros. Because the future of Ukraine begins in its schools.
We will not only support with finance – but also empower Ukraine to make the most of its potential.
Ukraine is already a rising tech hub and home to many innovative young companies.
So I want us to mobilise the full power of our Single Market to help accelerate growth and create opportunities.
In March, we connected successfully Ukraine to our electricity grid.
The unprecedented speed of synchronization is a testament to Ukraine’s resolve and reliability as an energy partner, even in the middle of war. Imagine how Ukraine could contribute to European energy security under peaceful conditions
—Olga Khakova, Deputy Director, Global Energy Center
It was initially planned for 2024. But we did it within two weeks. And today, Ukraine is exporting electricity to us.
It’s important to note the sacrifices the Ukrainian energy sector employees are making as Russia escalates its indiscriminate attacks on critical energy infrastructure, most recently with the assault on Kharkiv’s energy facilities
—Olga Khakova, Deputy Director, Global Energy Center
I want to significantly expand this mutually beneficial trade.
Ukraine holds tremendous renewable energy potential, particularly solar and wind, which could be developed and exported to EU markets. Such trade could significantly contribute to helping the EU meet its climate targets.
—Olga Khakova, Deputy Director, Global Energy Center
We have already suspended import duties on Ukrainian exports to the EU.
We will bring Ukraine into our European free roaming area.
Our solidarity lanes are a big success.
And building on all that, the Commission will work with Ukraine to ensure seamless access to the Single Market. And vice-versa.
Noticeable absence here. Von der Leyen’s comments sound a lot like ad hoc, staged accession, yet she does not mention Ukraine’s EU candidacy status or future EU accession once.
—James Batchik, Assistant Director, Europe Center
Our Single Market is one of Europe’s greatest success stories. Now it’s time to make it a success story for our Ukrainian friends, too.
And this is why I am going to Kyiv today, to discuss this in detail with President Zelenskyy. Honourable Members,
One lesson from this war is we should have listened to those who know Putin.
To Anna Politkovskaya and all the Russian journalists who exposed the crimes, and paid the ultimate price.
The unimaginable war crimes in Chechnya (on which Politovskaya reported in great detail) went unpunished and emboldened Russia to operationalize and standardize cruelty and violence as part of its war tactics. Now, many similar atrocities are documented in Ukraine.
—Olga Khakova, Deputy Director, Global Energy Center
To our friends in Ukraine, Moldova, Georgia, and to the opposition in Belarus.
We should have listened to the voices inside our Union – in Poland, in the Baltics, and all across Central and Eastern Europe.
A powerful acknowledgement and contrition to Poland, the Baltics, and those who have for years been outspoken about Russia, especially from a German European Commission president and ally of Angela Merkel, whose legacy of engagement with Putin is under scrutiny.
—James Batchik, Assistant Director, Europe Center
They have been telling us for years that Putin would not stop.
And they acted accordingly.
Our friends in the Baltics have worked hard to end their dependency on Russia. They have invested in renewable energy, in LNG terminals, and in interconnectors.
Although countries in Western Europe also invested in renewable energy and electricity interconnectors (many of these projects received EU funding), they did not share the same urgency to reduce reliance on Russian energy sources as their Central and Eastern Europe and Baltic neighbors. Economic and energy ties with Russia were meant to draw Russia into the democratic fold of the West and disincetivize conflict.
—Olga Khakova, Deputy Director, Global Energy Center
This costs a lot. But dependency on Russian fossil fuels comes at a much higher price.
We have to get rid of this dependency all over Europe.
Therefore we agreed on joint storage. We are at 84% now: we are overshooting our target. But unfortunately that will not be enough.
Typically, storage supplies 25 to 30 percent of gas consumed in the winter season; this winter, it will play a much more prominent role, particularly in the cold snap scenario and if there is increase in demand across the Asian market.
—Olga Khakova, Deputy Director, Global Energy Center
We have diversified away from Russia to reliable suppliers. US, Norway, Algeria and others.
Last year, Russian gas accounted for 40% of our gas imports. Today it’s down to 9% pipeline gas.
This is an unprecedented transformation for the European market in less than a year.
—Olga Khakova, Deputy Director, Global Energy Center
This is an astounding statistic by all accounts and shows just how rapid this decoupling has been. Last year the conversation was focused on the future of Nord Stream 2, the much-maligned pipeline linking Russia and Germany. Now, not even Nord Stream 1 will be in operation.
—James Batchik, Assistant Director, Europe Center
But Russia keeps on actively manipulating our energy market. They prefer to flare the gas than to deliver it. This market is not functioning anymore.
A nod to Moscow’s disregard for climate priorities. Europe’s decarbonization targets will be achieved faster without Russia’s carbon-intensive energy exports.
—Olga Khakova, Deputy Director, Global Energy Center
In addition the climate crisis is heavily weighing on our bills. Heat waves have boosted electricity demand. Droughts shut down hydro and nuclear plants.
Critical reminder that the energy security crisis must be addressed in tandem with climate objectives.
—Olga Khakova, Deputy Director, Global Energy Center
As a result, gas prices have risen by more than 10 times compared to before the pandemic.
It’s important to note that the supply crunch and rising energy prices started before the war, but Russia’s actions made it exponentially worse.
—Olga Khakova, Deputy Director, Global Energy Center
Making ends meet is becoming a source of anxiety for millions of businesses and households. But Europeans are also coping courageously with this.
Workers in ceramics factories in central Italy, have decided to move their shifts to early morning, to benefit from lower energy prices.
Underinvestments in energy efficiency over the last several decades have resulted in a need to implement emergency demand destruction and peak demand shavings actions, which will include behavioral changes, rather than gradual energy efficiency upgrades which result in less energy waste while improving or maintaining the quality of life.
—Olga Khakova, Deputy Director, Global Energy Center
Just imagine the parents among them, having to leave home early, when the kids are still sleeping, because of a war they haven’t chosen.
This is one example in a million of Europeans adapting to this new reality.
I want our Union to take example from its people. Reducing demand during peak hours will make supply last longer, and it will bring prices down.
This is why we are putting forward measures for Member States to reduce their overall electricity consumption.
But more targeted supported is needed.
For industries, like glass makers who have to turn off their ovens. Or for single parents facing one daunting bill after another.
Millions of Europeans need support.
EU Member States have already invested billions of euros to assist vulnerable households.
The EU is exploring the balance of how much aid should be provided at the EU level versus national mechanisms.
—Olga Khakova, Deputy Director, Global Energy Center
But we know this will not be enough.
This is why we are proposing a cap on the revenues of companies that produce electricity at a low cost.
As the EU forges towards significant renewable deployment to reduce reliance on fossil fuel imports and achieve climate targets, it will be critical to ensure that the cap leaves room for sufficient profits to draw in investors. The renewables industry will also need to be assured that additional caps are not on the horizon as companies reassess their risk of entering or expanding within the European market.
—Olga Khakova, Deputy Director, Global Energy Center
These companies are making revenues they never accounted for, they never even dreamt of.
In our social market economy, profits are good.
But in these times it is wrong to receive extraordinary record profits benefitting from war and on the back of consumers.
In these times, profits must be shared and channelled to those who need it the most.
Our proposal will raise more than 140 billion euros for Member States to cushion the blow directly.
And because we are in a fossil fuel crisis, the fossil fuel industry has a special duty, too.
Major oil, gas and coal companies are also making huge profits. So they have to pay a fair share – they have to give a crisis contribution.
So far we know that the EU is aiming to collect at least 33 percent on 2022 profits which entails an above 20 percent increase on average profits for the past three years. This is a sensitive topic as Europe competes for global liquid natural gas capacities with buyers who may offer more desirable pricing. The devil is in the details about how the EU decides to structure this mechanism. The EU should prioritize addressing the unintended consequences that such restructuring could bring to the European markets.
—Olga Khakova, Deputy Director, Global Energy Center
These are all emergency and temporary measures we are working on, including our discussions on price caps.
At the moment, there is little consensus around price caps for gas or electricity across the EU member states.
—Olga Khakova, Deputy Director, Global Energy Center
We need to keep working to lower gas prices.
We have to ensure our security of supply and, at the same time, ensure our global competitiveness.
So we will develop with the Member States a set of measures that take into account the specific nature of our relationship with suppliers – ranging from unreliable suppliers such as Russia to reliable friends such as Norway.
A much needed acknowledgment that not all dependencies are equal, but there is a lot of gray area too between Russia on the one hand and Norway on the other. Where exactly do countries like Saudi Arabia and Qatar fall on the scale of reliability?
—Jörn Fleck, Acting Director, Europe Center
I have agreed with Prime Minister Store to set up a task force. Teams have started their work.
Another important topic is on the agenda. Today our gas market has changed dramatically: from pipeline mainly to increasing amounts of LNG.
But the benchmark used in the gas market – the TTF – has not adapted.
This is why the Commission will work on establishing a more representative benchmark.
At the same time we also know that energy companies are facing severe problems with liquidity in electricity futures markets, risking the functioning of our energy system.
We will work with market regulators to ease these problems by amending the rules on collateral – and by taking measures to limit intra-day price volatility.
And we will amend the temporary state aid framework in October to allow for the provision of state guarantees, while preserving a level playing field.
These are all first steps. But as we deal with this immediate crisis, we must also look forward.
The current electricity market design – based on merit order – is not doing justice to consumers anymore.
They should reap the benefits of low-cost renewables.
So, we have to decouple the dominant influence of gas on the price of electricity. This is why we will do a deep and comprehensive reform of the electricity market.
Now – here is an important point. Half a century ago, in the 1970s, the world faced another fossil fuel crisis.
This speech is about the twin transitions. But it is not climate and digital; it is climate and energy. The strategic frame of her speech is really centered here.
—Tyson Barker, Nonresident Senior Fellow, Europe Center
Some of us remember the car-free weekends to save energy. Yet we kept driving on the same road.
We did not get rid of our dependency on oil. And worse, fossil fuels were even massively subsidised.
This was wrong, not just for the climate, but also for our public finances, and our independence. And we are still paying for this today.
Only a few visionaries understood that the real problem was fossil fuels themselves, not just their price.
Among them were our Danish friends.
When the oil crisis hit, Denmark started to invest heavily into harnessing the power of the wind.
They laid the foundations for its global leadership in the sector and created tens of thousands of new jobs.
This is the way to go!
Not just a quick fix, but a change of paradigm, a leap into the future.
Honourable Members,
The good news is: this necessary transformation has started.
It is happening in the North Sea and the Baltic Sea, where our Member States agreed to invest massively into off-shore wind generation.
Offshore and onshore wind are critical to Europe’s climate and energy-security ambitions. While this policy speech is admittedly a high-level overview of Europe’s landscape, the continent will need to do more to prioritize wind development.
—Joe Webster, Senior Fellow, Global Energy Center
It is happening in Sicily, where Europe’s largest solar factory will soon manufacture the newest generation of panels.
And it is happening in Northern Germany, where local trains now run on green hydrogen.
And hydrogen can be a game changer for Europe.
Subsequent to von der Leyen’s remarks, the EU scrapped a controversial “additionality” rule which would have required hydrogen projects to use electricity from dedicated renewables sources. By allowing renewable hydrogen gas producers to source electricity from the grid and ensuring electricity is green via power-purchase agreements with renewables projects, the legislation aims to make the EU hydrogen industry more competitive vis-à-vis the United States’ hydrogen complex, which received a major fillip from the Inflation Reduction Act.
—Joe Webster, Senior Fellow, Global Energy Center
We need to move our hydrogen economy from niche to scale.
With REPowerEU, we have doubled our 2030 target to produce ten million tons of renewable hydrogen in the EU, each year.
To achieve this, we must create a market maker for hydrogen, in order to bridge the investment gap and connect future supply and demand.
That is why I can today announce that we will create a new European Hydrogen Bank.
There are few details around the implementation of the European Hydrogen Bank: while the three billion euros in funding would help address the “chicken-and-egg” supply and demand problem endemic in hydrogen markets, at least at the margins, more clarity about the hydrogen bank’s role is needed.
—Joe Webster, Senior Fellow, Global Energy Center
It will help guarantee the purchase of hydrogen, notably by using resources from the Innovation Fund.
It will be able to invest 3 billion euros to help building the future market for hydrogen.
This is how we power the economy of the future.
This is the European Green Deal. And we have all seen in the last months just how important the European Green Deal is.
The summer of 2022 will be remembered as a turning point.
We all saw the dry rivers, the burning forests, the impact of the extreme heat.
And under the surface, the situation is far starker.
So far the glaciers in the Alps helped as an emergency reserve for rivers like the Rhine or Rhone.
But with Europe’s glaciers melting faster than ever, future droughts will be felt far more acutely.
We must work relentlessly to adapt to our climate – making nature our first ally.
This is why our Union will push for an ambitious global deal for nature at the UN Biodiversity conference in Montreal later this year.
And we will do the same at COP27 in Sharm el-Sheikh.
But in the short term, we also need to be better equipped to handle our changing climate.
The destructive power of extreme weather is too big for any country to fight on its own.
This summer, we sent planes from Greece, Sweden and Italy to fight fires in France and Germany.
But as disasters become more frequent and more intense, Europe will need more capacity.
This is why I can today announce that we will double our firefighting capacity over the next year.
The EU will buy another 10 light amphibious aircrafts and three helicopters to add to the fleet.
This is European solidarity in action. Honourable Members,
The last years have shown how much Europe can achieve when it is united.
After an unprecedented pandemic, our economic output overtook pre-crisis levels in record time.
We went from having no vaccine to securing over 4 billion doses for Europeans and for the world.
And in record time, we came up with SURE – so that people could stay in their jobs even if their companies had run out of work.
We were in the deepest recession since World War 2.
We achieved the fastest recovery since the post-war boom.
And that was possible because we all rallied behind a common recovery plan.
NextGenerationEU has been a boost of confidence for our economy.
And its journey has only just begun.
So far, 100 billion euros have been disbursed to Member States. This means: 700 billion euros still haven’t flown into our economy.
NextGenerationEU will guarantee a constant stream of investment to sustain jobs and growth. It means relief for our economy. But most importantly, it means renewal.
It is financing new wind turbines and solar parks, high-speed trains and energy-saving renovations.
We conceived NextGenerationEU almost two years ago, and yet it is exactly what Europe needs today.
So let’s stick to the plan.
Let’s get the money on the ground. Honourable Members,
The future of our children needs both that we invest in sustainability and that we invest sustainably.
We must finance the transition to a digital and net-zero economy.
And yet we also have to acknowledge a new reality of higher public debt.
Welcome to the year 2022, where a German European Commission president is forcing the issue of increased public debt.
Debt has been a bane of European discussions for decades, with more frugal EU members advocating for stricter rules on borrowing and budgets. Others like Spain, Italy, and Greece have for years bemoaned the “Frugal Four” to the north which have forced stricter bailout requirements and austerity measures for European countries in need of financial assistance.
—James Batchik, Assistant Director, Europe Center
We need fiscal rules that allow for strategic investment, while safeguarding fiscal sustainability.
Rules that are fit for the challenges of this decade.
In October, we will come forward with new ideas for our economic governance.
But let me share a few basic principles with you.
Member States should have more flexibility on their debt reduction paths.
Brownie points to be won from Paris but eye rolls from the South. For Paris, greater flexibility on debt means more money for the grand European projects that line the pages of Élysée grand-strategy memos. For the Mediterranean, frustration over forced austerity and years of lectures about the need for controlled spending.
But keep in mind, what will German Finance Minister Christian Lindner in Berlin say?
—Jörn Fleck, Acting Director, Europe Center
But there should be more accountability on the delivery of what we have agreed on.
There should be simpler rules that all can follow.
To open the space for strategic investment and to give financial markets the confidence they need.
Let us chart once again a joint way forward.
With more freedom to invest. And more scrutiny on progress.
More ownership by Member States. And better results for citizens.
Let us rediscover the Maastricht spirit – stability and growth can only go hand in hand. Honourable Members,
As we embark on this transition in our economy, we must rely on the enduring values of our social market economy.
It’s the simple idea that Europe’s greatest strength lies in each and every one of us.
Our social market economy encourages everyone to excel, but it also takes care of our fragility as human beings.
It rewards performance and guarantees protection. It opens opportunities but also set limits.
We need this even more today.
Because the strength of our social market economy will drive the green and digital transition.
We need an enabling business environment, a workforce with the right skills and access to raw materials our industry needs. Our future competitiveness depends on it.
We must remove the obstacles that still hold our small companies back.
They must be at the centre of this transformation – because they are the backbone of Europe’s long history of industrial prowess.
And they have always put their employees first – even and especially in times of crisis.
But inflation and uncertainty are weighing especially hard on them.
This is why we will put forward an SME Relief Package.
It will include a proposal for a single set of tax rules for doing business in Europe – we call it BEFIT.
Wouldn’t be the European Commission if this EU minimum corporate tax initiative—linked to G20/OECD global tax reform talks—wasn’t an odd acronym for something: “Business in Europe: Framework for Income Taxation.”
—Jörn Fleck, Acting Director, Europe Center
This will make it easier to do business in our Union. Less red tape means better access to the dynamism of a continental market.
And we will revise the Late Payment Directive – because it is simply not fair that 1 in 4 bankruptcies are due to invoices not being paid on time.
For millions of family businesses, this will be a lifeline in troubled waters. But European companies are also grappling with a shortage of staff.
Unemployment is at a record low, and this is great.
At the same time, job vacancies are at a record high.
Europe lacks truck drivers, waiters and airport workers,as well as nurses, engineers and IT technicians.
Both low-end and high-end. We need everyone on board.
We need much more focus in our investment on professional education and upskilling.
We need better cooperation with the companies, because they know best what they need.
And we need to match these needs with people’s aspirations.
But we also have to attract the right skills to our continent, skills that help companies and strengthen Europe’s growth.
As a first important step, we need to speed up and facilitate the recognition of qualifications also of third country nationals.
This will make Europe more attractive for skilled workers.
This is why I am proposing to make 2023 the European Year of Skills. Honourable Members,
For those wondering, 2022 was the European Year of Youth.
—James Batchik, Assistant Director, Europe Center
My third point for our SMEs and our industry.
Whether we talk about chips for virtual reality or cells for solar panels, the twin transitions will be fuelled by raw materials.
Lithium and rare earths are already replacing gas and oil at the heart of our economy.
By 2030, our demand for those rare earth metals will increase fivefold.
And this is a good sign, because it shows that our European Green Deal is moving fast.
The not so good news is – one country dominates the market.
This is an explicit reference to China and could build on a trend in Brussels’ shifting expectations for China. In August, von der Leyen warned that one-third of the world’s critical raw materials were sourced from China.
—James Batchik, Assistant Director, Europe Center
So we have to avoid falling into the same dependency as with oil and gas.
This is where our trade policy comes into play.
New partnerships will advance not only our vital interests – but also our values.
Trade that embraces workers’ rights and the highest environmental standards is possible with like-minded partners.
We need to update our links to reliable countries and key growth regions.
And for this reason, I intend to put forward for ratification the agreements with Chile, Mexico and New Zealand.
And advance negotiations with key partners like Australia and India. But securing supplies is only a first step.
The processing of these metals is just as critical.
Today, China controls the global processing industry. Almost 90 % of rare earths and 60 % of lithium are processed in China.
We will identify strategic projects all along the supply chain, from extraction to refining, from processing to recycling. And we will build up strategic reserves where supply is at risk.
This is why today I am announcing a European Critical Raw Materials Act.
Another key takeaway. This legislative initiative is another piece in the overall trend of reducing European dependencies. It is another signal that Europe’s reliance on trade or “Wandel durch Handel” is over.
—Jörn Fleck, Acting Director, Europe Center
We know this approach can work.
Five years ago, Europe launched the Battery Alliance. And soon, two third of the batteries we need will be produced in Europe.
Last year I announced the European Chips Act. And the first chips gigafactory will break ground in the coming months.
We now need to replicate this success.
This is also why we will increase our financial participation to Important Projects of Common European Interest.
And for the future, I will push to create a new European Sovereignty Fund.
The rhetoric here is stratospheric. But there are no details. This could be a centerpiece of future EU industrial policy or a throwaway line forgotten in ten days. (Also vintage von der Leyen…)
—Tyson Barker, Nonresident Senior Fellow, Europe Center
Details are scarce on this announcement, but keep an eye out for further developments along these lines as part of Europe’s growing trend toward securing its trade dependencies.
—James Batchik, Assistant Director, Europe Center
Let’s make sure that the future of industry is made in Europe.
Honourable Members,
As we look around at the state of the world today, it can often feel like there is a fading away of what once seemed so permanent.
And in some way, the passing of Queen Elizabeth II last week reminded us of this.
She is a legend!
She was a constant throughout the turbulent and transforming events in the last 70 years. Stoic and steadfast in her service.
But more than anything, she always found the right words for every moment in time.
From the calls she made to war evacuees in 1940 to her historic address during the pandemic.
She spoke not only to the heart of her nation but to the soul of the world.
And when I think of the situation we are in today, her words at the height of the pandemic still resonate with me.
She said: “We will succeed – and that success will belong to every one of us”.
She always reminded us that our future is built on new ideas and founded in our oldest values.
Since the end of World War 2, we have pursued the promise of democracy and the rule of law. And the nations of the world have built together an international system promoting peace and security, justice and economic progress.
Today this is the very target of Russian missiles.
What we saw in the streets of Bucha, in the scorched fields of grain, and now at the gates of Ukraine’s largest nuclear plant – is not only a violation of international rules.
It’s a deliberate attempt to discard them.
This watershed moment in global politics calls for a rethink of our foreign policy agenda.
We’ve heard these promises about rethinking the EU’s foreign-policy priorities, European sovereignty, military capabilities, and so on for years now. With the shock of Russia’s invasion of Ukraine, there may finally be enough momentum to induce some changes.
However, von der Leyen’s speech is remarkably short on specifics about Europe’s security and defense.
—James Batchik, Assistant Director, Europe Center
By “short,” you mean lacks any mention whatsoever. Odd choice on von der Leyen’s part.
—Tyson Barker, Nonresident Senior Fellow, Europe Center
This is the time to invest in the power of democracies.
This work begins with the core group of our like-minded partners: our friends in every single democratic nation on this globe.
We see the world with the same eyes. And we should mobilise our collective power to shape global goods.
We should strive to expand this core of democracies. The most immediate way to do so is to deepen our ties and strengthen democracies on our continent.
This starts with those countries that are already on the path to our Union.
We must be at their side every step of the way.
Because the path towards strong democracies and the path towards our Union are one and the same.
So I want the people of the Western Balkans, of Ukraine, Moldova and Georgia to know:
This is the only reference to the Balkans, and it doesn’t say anything that hasn’t been said before about the Balkans’ future in the EU.
—James Batchik, Assistant Director, Europe Center
You are part of our family, your future is in our Union, and our Union is not complete without you!
We have also seen that there is a need to reach out to the countries of Europe – beyond the accession process.
This is why I support the call for a European Political Community – and we will set out our ideas to the European Council.
A big endorsement of the European Political Community, but we’ll still need someone eventually to tell us what it actually is.
—Jorn Fleck, Acting Director, Europe Center
For added context: Macron’s idea for the EPC has been big on rhetoric but vague on specifics. The bottom line is that there is recognition that the EU’s relations with its neighbors have to change and cannot be based solely on enlargement policy.
—James Batchik, Assistant Director, Europe Center
But our future also depends on our ability to engage beyond the core of our democratic partners.
Countries near and far, share an interest in working with us on the great challenges of this century, such as climate change and digitalisation.
This is the main idea behind Global Gateway, the investment plan I announced right here one year ago.
It is already delivering on the ground.
Together with our African partners we are building two factories in Rwanda and Senegal to manufacture mRNA vaccines.
They will be made in Africa, for Africa, with world-class technology.
And we are now replicating this approach across Latin America as part of a larger engagement strategy.
This requires investment on a global scale.
So we will team up with our friends in the US and with other G7 partners to make this happen.
First explicit reference to the Biden administration, and still no mention of the transatlantic relationship, including the US-EU Trade and Technology Council.
—James Batchik, Assistant Director, Europe Center
In this spirit, President Biden and I will convene a leaders’ meeting to review and announce implementation projects. Honourable Members,
Key takeaway: Any pilot lines under development for information and communications technology infrastructure in the TTC will now be rolled into a leader-level summit. Watch for announcements on joint financing projects for undersea cables similar to the successful BELLA project.
—Tyson Barker, Nonresident Senior Fellow, Europe Center
This is part of our work of strengthening our democracies.
But we should not lose sight of the way foreign autocrats are targeting our own countries.
Foreign entities are funding institutes that undermine our values.
Their disinformation is spreading from the internet to the halls of our universities.
Earlier this year, a university in Amsterdam shut down an allegedly independent research centre, which was actually funded by Chinese entities. This centre was publishing so-called research on human rights, dismissing the evidence of forced labour camps for Uyghurs as “rumours”.
These lies are toxic for our democracies.
Think about this: We introduced legislation to screen foreign direct investment in our companies for security concerns.
If we do that for our economy, shouldn’t we do the same for our values?
We need to better shield ourselves from malign interference.
This is why we will present a Defence of Democracy package.
It will bring covert foreign influence and shady funding to light.
We will not allow any autocracy’s Trojan horses to attack our democracies from within. For more than 70 years, our continent has marched towards democracy. But the gains of our long journey are not assured.
Many of us have taken democracy for granted for too long. Especially those, like me, who have never experienced what it means to live under the fist of an authoritarian regime.
Today we all see that we must fight for our democracies. Every single day.
We must protect them both from the external threats they face, and from the vices that corrode them from within.
It is my Commission’s duty and most noble role to protect the rule of law.
So let me assure you: we will keep insisting on judicial independence.
Some could read this as a shot across the bow at Poland and other EU countries who have run afoul with Brussels over rule-of-law concerns. Poland and the EU have fought specifically about the state of Poland’s judicial independence. Warsaw scored a victory earlier this year when the EU released cash earmarked for Poland, but von der Leyen may be ready to rehash the issue.
—James Batchik, Assistant Director, Europe Center
And we will also protect our budget through the conditionality mechanism.
Another warning shot to current EU troublemaker Hungary. Immediately after Viktor Orban’s re-election in Hungary this year, Brussels began the process of withholding tens of billions of euros in funds intended for Budapest over significant democratic backsliding under Orban’s watch.
—James Batchik, Assistant Director, Europe Center
And today I would like to focus on corruption, with all its faces. The face of foreign agents trying to influence our political system. The face of shady companies or foundations abusing public money.
If we want to be credible when we ask candidate countries to strengthen their democracies, we must also eradicate corruption at home.
That is why in the coming year the Commission will present measures to update our legislative framework for fighting corruption.
We will raise standards on offences such as illicit enrichment, trafficking in influence and abuse of power, beyond the more classic offences such as bribery.
And we will also propose to include corruption in our human rights sanction regime, our new tool to protect our values abroad.
The takeaway: Watch for a corruption sanctions toolbox with the power to sanction in the future. Greater awareness of the connective tissue between foreign and intra-EU corruption as a national-security threat.
—Tyson Barker, Nonresident Senior Fellow, Europe Center
Corruption erodes trust in our institutions. So we must fight back with the full force of the law. Honourable Members,
Our founders only meant to lay the first stone of this democracy.
They always thought that future generations would complete their work.
“Democracy has not gone out of fashion, but it must update itself in order to keep improving people’s lives.”
These are the words of David Sassoli – a great European, who we all pay tribute to today. David Sassoli thought that Europe should always look for new horizons.
And through the adversities of these times, we have started to see what our new horizon might be.
A braver Union.
Closer to its people in times of need.
Bolder in responding to historic challenges and daily concerns of Europeans. And to walk at their side when they deal with the big trials of life.
This is why the Conference on the Future of Europe was so important.
It was a sneak peek of a different kind of citizens’ engagement, well beyond election day. And after Europe listened to its citizens’ voice, we now need to deliver.
The Citizens’ Panels that were central to the Conference will now become a regular feature of our democratic life.
And in the Letter of Intent that I have sent today to President Metsola and Prime Minister Fiala, I have outlined a number of proposals for the year ahead that stem from the Conference conclusions.
They include for example a new initiative on mental health.
We should take better care of each other. And for many who feel anxious and lost, appropriate, accessible and affordable support can make all the difference. Honourable Members,
Democratic institutions must constantly gain and regain the citizens’ trust.
We must live up to the new challenges that history always puts before us.
Just like Europeans did when millions of Ukrainians came knocking on their door.
This is Europe at its best.
A Union of determination and solidarity.
But this determination and drive for solidarity is still missing in our migration debate.
Our actions towards Ukrainian refugees must not be an exception. They can be our blueprint for going forward.
We need fair and quick procedures, a system that is crisis proof and quick to deploy, and a permanent and legally binding mechanism that ensures solidarity.
And at the same time, we need effective control of our external borders, in line with the respect of fundamental rights.
I want a Europe that manages migration with dignity and respect.
I want a Europe where all Member States take responsibility for challenges we all share. And I want a Europe that shows solidarity to all Member States.
We have progress on the Pact, we now have the Roadmap. And we now need the political will to match. Honourable Members,
Three weeks ago, I had the incredible opportunity of joining 1,500 young people from all over Europe and the world, who gathered in Taizé.
They have different views, they come from different countries, they have different backgrounds, they speak different languages.
And yet, there is something that connects them.
They share a set of values and ideals.
They believe in these values.
They are all passionate about something larger than themselves.
This generation is a generation of dreamers but also of makers.
In my last State of the Union address, I told you that I would like Europe to look more like these young people.
We should put their aspirations at the heart of everything we do.
And the place for this is in our founding Treaties.
Every action that our Union takes should be inspired by a simple principle.
That we should do no harm to our children’s future.
That we should leave the world a better place for the next generation.
And therefore, Honourable Members, I believe that it is time to enshrine solidarity between generations in our Treaties.
Novel and necessary: codifying intergenerational justice in the EU is important for a democratic society whose demography skews older and can thus place greater focus on citizen “incumbent protection” than guaranteeing prosperity pathways for rising generations.
—Tyson Barker, Nonresident Senior Fellow, Europe Center
It is time to renew the European promise.
And we also need to improve the way we do things and the way we decide things.
Some might say this is not the right time. But if we are serious about preparing for the world of tomorrow we must be able to act on the things that matter the most to people.
And as we are serious about a larger union, we also have to be serious about reform.
So as this Parliament has called for, I believe the moment has arrived for a European Convention.
This is maybe purposely vague but possibly significant. A European Convention could include discussion around treaty change, a hotly debated item in Brussels and national capitals. This will be music to the ears of Macron and others who are pushing for treaty change, and maybe more cautiously in Berlin, following German Chancellor Olaf Scholz’s own speech in August about the future of the EU.
—James Batchik, Assistant Director, Europe Center
Honourable Members,
They say that light shines brightest in the dark.
And that was certainly true for the women and the children fleeing Russia’s bombs.
They fled a country at war, filled with sadness for what they had left behind, and fear for what may lie ahead.
But they were received with open arms. By many citizens like Magdalena and Agnieszka. Two selfless young women from Poland.
As soon as they heard about trains full of refugees, they rushed to the Warsaw Central Station. They started to organise.
They set up a tent to assist as many people as possible.
They reached out to supermarket chains for food, and to local authorities to organise buses to hospitality centres.
In a matter of days, they gathered 3000 volunteers, to welcome refugees 24/7. Honourable Members,
Magdalena and Agnieszka are here with us today.
Please join me in applauding them and each and every European who opened their hearts and their homes.
Their story is about everything our Union stands and strives for.
It is a story of heart, character and solidarity.
They showed everyone what Europeans can achieve when we rally around a common mission.
This is Europe’s spirit.
A Union that stands strong together.
A Union that prevails together.
Long live Europe.
