President von der Leyen Delivers State of the EU Speech

Friday, September 18, 2020 - 9:45am

President von der Leyen Delivers State of the EU Speech

What Happened?

On September 15, European Commission President Ursula von der Leyen (VDL) delivered her first State of the European Union address to the European Parliament, against a challenging political and policy backdrop. This was an important opportunity for the president to reset her policy agenda after a first year in office dominated by the COVID-19 pandemic.

Indeed, the pandemic remains top of mind, as VDL delivered the speech in Brussels because a surge in cases in France prevented MEPs from traveling to Strasbourg. Much of her speech focused on Europe’s response to the economic fallout from COVID-19, calling on member states to work more closely together on health issues, and touting the recently agreed NextGenerationEU stimulus package

The Commission is clear that its overall success or failure will be judged on Europe’s ability to recover economically in the wake of the pandemic.

In terms of the macro landscape, von der Leyen spoke only two days after an EU-China Summit where the two sides failed to make progress on a potential bilateral investment treaty. The lack of progress reflected the growing divide between Brussels and Beijing on human rights issues, including Hong Kong democracy protests and treatment of the Uighurs in Xinjiang. Deteriorating ties with Russia also are top of mind, as the recent poisoning of opposition leader Alexei Navalny has led to renewed concerns about the Nord Stream II pipeline. VDL also pointedly refused to recognize the election results in Belarus and called for solidarity with Greece and Cyprus in their dispute with Turkey on energy claims in the eastern Mediterranean. She also took the opportunity to highlight the lack of significant progress—and erosion of trust—in the EU-UK negotiations, underscoring the unity of the EU-27 in the face of British measures that would breach the Withdrawal Agreement.  Notably, VDL made only a passing reference to the transatlantic relationship, underlining the EU’s commitment to work closely with Washington—no matter who wins the election—to develop a positive agenda focused on “trade, tech, and taxation.”

Europe’s Policy Priorities

Beyond the pandemic response and international outlook, most of the speech centered on the Commission’s twin priorities: the Green Deal and digital agenda.

Highlights regarding the Green Deal and Europe’s sustainability efforts

  • An increase in the 2030 target for emissions reduction from 40% to 55%
  • At least 37% of NextGenerationEU stimulus funds have been earmarked for Green Deal objectives
  • 30% of the €750 billion package will be raised through the issuance of “green bonds”
  • Investments will focus on renewable energy projects (including hydrogen), building renovation efforts, and building 1 million electric car charging points across Europe
  • The Commission continues its efforts to design a “WTO-compatible” carbon border adjustment mechanism (CBAM) and will release a formal proposal in 2021
  • The Commission also will propose in 2021 a legislative revision of the EU emissions trading scheme to cover more industries.

Highlights regarding the EU’s digital agenda

  • At least 20% of the NextGenerationEU funds will be spent on digital priorities, including to support development of European cloud infrastructure (Gaia X)
  • Emphasis on harnessing the power of industrial data and data sharing
  • A new proposal on regulating Artificial Intelligence to be issued in 2021
  • Investments in infrastructure, including expanded broadband access and 5G
  • New investments of €8 billion in the next generation of supercomputers
  • An EU-wide digital services tax measure to be released in 2021 if no OECD agreement is finalized.

Conclusion and Next Steps
This was the most forceful and substantive speech of VDL’s presidency to date. She called out the member states for their divergent actions on several fronts—from imposing export restrictions on critical medical supplies at the height of the outbreak to the refusal to support sanctions on Belarus, and their inability to jointly respond to human rights violations in China. She called for the creation of a “Health Union” to centralize some responsibilities in healthcare and encouraged a move towards qualified majority voting in some elements of tax and foreign policy. These messages were primarily aimed at the fractured European Parliament, in an attempt to bolster support for the Commission’s priorities, though differences among member states will continue to plague many of VDL’s policy proposals.

Among the different political groups of MEPs, initial reactions followed somewhat predictable lines. The center-right EPP, while acknowledging the importance of the green transition, prefer the Commission to focus on job creation. The center-left Socialist & Democrats called for tax policy changes, while the liberal Renew Europe group emphasized the need for policies designed to advance Europe’s tech sovereignty. The Greens want to ensure that the EU’s recovery fund is not used to support oil and gas infrastructure.

Attention now turns to the October 19-22 European Parliament plenary, when the Commission is expected to present its 2021 work plan (previewed in the "letter of intent" linked below). The German Presidency of the Council is also hoping to secure the Parliament’s backing for the long-term EU budget and to finalize the terms of the stimulus package at that time.