State of the Union – steadying the ship

state of the unionBrexit, economic sluggishness and the refugee crisis has dented the EU’s reputation over recent months both at home and abroad.

These were the challenges confronting Jean-Claude Juncker – the President of the European Commission – as he contemplated his second annual ‘State of the Union’ speech, which he delivered today at the European Parliament in Strasbourg.

The EU’s own take on the US President’s ‘State of the Union’ speech has now become an annual affair, where the head of the EU’s administration sets out his priorities for the coming year, as well, of course, as celebrating the Commission’s achievements.

Losing a member of the EU doesn’t rank as an achievement – and wasn’t an issue that Juncker wanted to dwell on in his speech.

His objective, however, was to steady the ship, outline a clear path to resurrect faith and hope in the EU, and ensure his own institution, the European Commission, stood at the centre of that effort.

Did Juncker steady the ship?

Juncker was honest about the problems that Europe faced. Fragmentation, nationalism and populism were rife. Having just returned from the G20 summit in China, he knew his international partners were looking worryingly at the EU.

He therefore emphasised the practical actions he wanted the EU to focus on, not the usual long term starry-eyed EU ideology. Europe should offer answers, protection and shelter in uncertain times and increasing globalisation.

He said Europe should focus on creating a more successful digital environment in Europe, of boosting investment – in particular from capital markets and expansion of the European Investment Bank guaranteed financing of infrastructure – and of far greater action to tackle the blight of youth unemployment. The urgency of combatting terrorism across the continent and of living up to the EU’s commitment to tackle climate change were also underlined.

But the EU stalwart couldn’t resist throwing some meat to his federalist and EU-integrationist friends in the audience. He flagged again the report calling for deeper Euro-area integration (currently firmly stuck on a shelf), vented the need for the EU to have a proper minister of foreign affairs and reignited the concept of a defence union, aimed at increasing the defence capabilities of the EU (a move until now strongly resisted by the UK).

The reaction?

The message was met by applause, and welcomed by the main liberal, socialist and conservative political blocs in the EP. But his audience were also sat in the capital cities of Europe. It is these Prime Ministers and Presidents whom he will meet at a summit in Bratislava on Friday organised by the EU’s other President, Donald Tusk (the President of the European Council) to attempt to set a new course for the EU post-Brexit. Tusk had outlined his own vision for this in a letter on the eve of Juncker’s speech, which says the little for the EU’s ability to speak with one voice.

Should the speech matter to business?

There was plenty of fanfare. Juncker spoke for some 50 minutes. Tweets were frantically published and YouTube videos recorded.

But does this actually matter to businesses who need to comply with the EU’s regulatory demands and who look for certainty to enable them to make their investment decisions? The answer is not immediately.

Juncker has helpfully highlighted those policy priorities that he wants his Commission to focus on – and indeed published proposals today on issues such as copyright and telecoms. The speech also sends a signal of the political priorities that the Commission will focus its energy on: important for companies looking to engage with it and other EU institutions. But while this might provide some comfort to companies – the big questions as to the long term direction of the EU and particularly what happens post-Brexit remain elusive.

Some key sector specific highlights:

Financial services: increasing the capacity of the European Fund for Strategic Investments, which lies at the heart of the Commission’s Investment Plan for Europe, increasing its investment from a current target of EUR 315 billion to at least half a trillion euro investments by 2020.

Financial services: prioritising the completion of the first set of measures under the so called Capital Markets Union (CMU), including getting final agreement for the Securitisation Package, the Prospectus Review and the revised European Venture Capital Fund and European Social Entrepreneurship Fund Regulations by the end of the year. Juncker also set out his desire to accelerate the second phase of the CMU. Given the departure of Lord Hill whose project this was, this provides reassurance that the CMU remains a priority and might be even more needed in a Europe that is too dependent on bank financing.

Tax: no new measures but post-Apple tax case, reference to his determination to ensure a fair taxation regime.

Digital: he underlined the importance of connectivity for Europe’s competitiveness, and encouraging that investment. He also highlighted the much awaited copyright reforms, to ensure that artists and creators are paid fairly for their work; a proposal that will be scrutinised carefully by the tech industry.

Aled Williams is Senior Director at FTI Consulting in Brussels.

 

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