14 September 2017

Yesterday, Commission President Juncker gave his most eye-catching State of the [European] Union” speech yet. In theory, he’s only a humble servant of the EU member states, delivering and defending the objectives of the EU Treaties. Yesterday, he set out a wide-ranging vision for the future of the EU, much of which is likely to test the limits of what EU citizens or even EU leaders might support. Here’s an overview of his proposals, starting with the positive.

The good

 It’s great to see Juncker pushing to finalise EU trade deals with Canada and Japan and even Mexico and the South-American trade bloc Mercosur by the end of his mandate. He also announced his intention to open trade negotiations with Australia and New Zealand. Perhaps a call to also start trade talks with Britain would have been even better, but it’s welcome to see this level of ambition.

It was also nice to see is his support for the “better regulation agenda” and the creation of a “Subsidiarity and Proportionality Task Force to take a very critical look at all policy areas to make sure we are only acting where the EU adds value”. He was a bit light on specifics but Open Europe has always strongly supported this agenda. Juncker boasted that his Commission had proposed “less than 25 new initiatives a year where previous Commissions proposed over 100”, which is step in the right direction towards quality over quantity.

The Commission President’s calls to “maintain a credible enlargement perspective for the Western Balkans” as well as opening up the Schengen area to Bulgaria, Romania and Croatia were a positive contribution (the existing Schengen countries would need to agree and conditions need to be fulfilled but it’s important to keep the prospect open). The EU deserves credit, alongside NATO, in having helped stabilise Central and Eastern Europe after the Cold War. The EU can also do much good for the historically unstable Balkans.

He also pledged that “the Commission will be open to compromise” in the heated debate on refugee relocation and the posted workers directive, which has pitted East against West. This is a great concern among top EU insiders, and Juncker is wise to seek to defuse the situation. A concession may be on its way to Central and Eastern European states, who feel it’s insensitive to force them to take refugees from other EU states, especially as people can travel freely within the Schengen zone anyway. It remains to be seen what compromise can be brokered in the dispute over the posted workers directive, which allows companies to “post” EU workers in other member states more easily, triggering accusations of “social dumping”, despite the fact that for example in France, most posted workers come from wealthy neighbouring countries. It would be a pity to sacrifice this important tool, which has removed barriers to trade, merely to deflect attention from domestic reasons why Western European labour markets are uncompetitive.

The bad

 Juncker is an unashamed federalist. This means pushing for more concentration of money and power as a solution to the eurozone’s problems.

His speech demanded a “strong Euro area budget line within the EU budget”, but stopped short of a separate budget or even Parliament for the Eurozone, as suggested by French President Emmanuel Macron. Another proposal is to transform the Eurozone’s bailout scheme, the “European Stabilisation Mechanism (ESM)” into a “European Monetary Fund” and create a “European Minister of Economy and Finance”. This would basically entail letting the EU Commissioner for economic and financial affairs preside over the Eurogroup, something that the Dutch PM rejected out-of-hand right after the speech.

Juncker really was on a roll. He also suggested creating an EU “Labour Authority for ensuring fairness in our single market”, never mind that, as the Confederation of German Employers’ Associations pointed out, “we have 28 different labour markets with different [market] structures”. Last but not least, Juncker proposes scrapping the job of EU Council President Donald Tusk, by merging the presidencies of both the European Council and the Commission.

Juncker also tempered his emphasis on striking free trade deals by voicing his support for an EU framework to screen investments made by foreign state-owned companies, something which liberal member states already have deemed “a Trojan horse for protectionism”. Juncker stressed that “we are not naïve free traders” and that “there must be reciprocity” in international trade, echoing US President Trump and many other contemporaries, ignoring the benefits of free trade for the consumer. The victory of “liberal” Macron over “protectionist” Le Pen might yet mean making the EU more protectionist to halt the protectionist hordes.

The ugly

Instead of seeking a solution to the fact that a very high percentage of citizens in countries such as Sweden, Poland and the Czech Republic do not want to join the common currency, Juncker instead thought it best to remind them of their legal obligation to do so, although he played this down afterwards. It seems David Cameron’s efforts – supported by several euro-outs – to establish that the EU could be a genuinely multi-currency union have been thrown out with the bathwater.

Despite Juncker’s encouraging rhetoric that “we should not (…) seek ever growing competences”, he went on to say he was “strongly in favour of moving to qualified majority voting for decisions on the common consolidated corporate tax base, on VAT, on fair taxes for the digital industry and on the financial transaction tax”. Ireland, for one, will strongly resist this. Fostering more harmony in the Union won’t happen by taking more decisions where a minority is being outvoted on deeply sensitive issues.

Finally, Juncker stated that “by 2025 we need a fully-fledged European Defence Union” but did not explain what for. He pre-empted criticism by adding that “NATO wants it.” Indeed, NATO’s Secretary General has endorsed the idea, however on the condition that “as long as we make sure or the European Union makes sure that what the EU does is complementary to NATO”.

European countries, especially the steadfastly Atlanticist and those in the East with an eye on Russia, should really think this through. How likely is it that such a “European Defence Union” will actually deliver real defence capacity and not end up as another empty shell? Why would EU member states give up defence powers when they’re already wary of outsourcing foreign policy? What if the existence of such a “European Defence Union”  one day is used by another Trumpian in the US to remove Europe from the American security umbrella? These questions should be answered before the EU embarks on any new initiative in this area, not at the end.

Conclusion

 This was not a great speech for those hoping the European Commission would see Brexit as the moment to take stock and reconnect with those across Europe who feel that the EU has over-reached. Ever more EU centralisation has already contributed to growing anti-EU sentiment, so why will it be different this time?

This was clear evidence that much of the Brussels establishment thinks that the response to Brexit can and must be ‘more Europe’. Some of the speech was blue sky thinking that is unlikely to see the light of day but enough of the ideas will have been run past Berlin and Paris that they will be tabled in some form. Without the broad consent of voters across Europe, they will provide yet more ammunition for the likes of Le Pen, who, despite recent election results, have not disappeared.