Midterm

2022 marks the half-way point of the mandate of the current Commission under Ursula von der Leyen and the European Parliament elected in June 2019. The bulk of the legislative proposals that the Commission announced when entering into office in 2019 has been issued, covering the priority policies of economic green transition towards net zero CO₂ emissions, and digital transformation to strengthen the EU’s open strategic sovereignty. These legislative proposals will affect all industries and sectors in varying degrees and are now being debated and amended by the Council and Parliament who have to agree on the texts to become EU law.

Once adopted during the next two years, this set of new laws will arguably constitute the biggest regulatory shift since the creation of the internal market. We will have to seriously adjust our way of producing and consuming goods and services when these rules enter into force. The new laws will apply to the 27 EU member states but also well beyond: EU regulations tend to inspire lawmakers across the globe to undertake similar regulatory initiatives.

Smart economic operators are already anticipating and adapting to this new regulatory environment, whether through voluntary commitments, changes in energy consumption, raw material use, recycling or green investments, to name but a few. Or by carefully considering the use of data, content and digital business partners in line with EU principles for digital markets and services.

More work

The Commission still has a few difficult proposals to make, such as turning OECD tax recommendations into EU law, including the 15% minimum corporate tax or strengthened anti-money laundering measures. Tax proposals require unanimity in Council for adoption, which gives every member state a veto, and therefore command strong convincing power from the Commission to overcome national reticence.

Following on from its successful COVID-19 vaccine buying and distribution scheme and the establishment of the European Health Emergency Preparedness and Response Authority (HERA) to anticipate future pandemics, the Commission is now expected to further develop the European Health Union. Healthcare was until recently the jealously-guarded exclusive domain of member states. But COVID lessons learned have changed many things previously unthinkable, and devising pan-European health policies in selected domains, such as pandemics and other cross-border health threats, will increasingly fall within the Commission’s remit. The pharmaceutical strategy published by the Commission in 2020 entails a thorough rethinking of existing rules and processes. Access to affordable medicines, European competitiveness and innovation in medicine, sustainable and secure supply chains, and Europe’s global role in providing medicinal care to all, are just a few of the major subjects awaiting concrete proposals.

Combatting climate change and moving away from fossil fuels to more renewable energy sources will continue to dominate the energy policy discussions. Governments are concerned about very high and volatile energy prices and about security of supply, with an impact on industrial production and people on lower incomes. In addition gas and oil dependency means dealing with Russia and other countries that link supply of gas to different geopolitical priorities. The future of nuclear energy remains at the heart of the energy debate, with some member states like France favouring further development of nuclear capacity, while Germany – with the Greens in the government coalition – is sticking firmly to its nuclear exit strategy. The challenge will be to reach EU agreement on an encompassing energy policy in line with climate commitments and avoid every member state holding onto its own national energy priorities, regardless of their effect on energy supply or EU climate goals.

Legislators

In light of the very important legislative activity during the coming year, I offer a closer look at the co-legislators –parliament and Council – and the changing dynamics within both institutions.

The Council looks different

The French presidency of the Council during the first half of 2022 promises to be ambitious in terms of finalising key legislative decisions where agreement with Parliament has to be found, such as on the Digital Markets Act and the Digital Services Act.  President Macron has also set out broader goals for the European debate: “if I had to sum up in one sentence the goal of this presidency from 1 January to 30 June 2022, I would say that we need to move from being a Europe of cooperation inside our borders to a powerful Europe in the world, fully sovereign, free to make its choices and master of its destiny”. The practical implementation of this geopolitical strategic sovereignty will fill many Council meeting agendas. It impacts a myriad policy domains, including corporate governance, investment scrutiny, supply chain security, data and cyber security, and, of course, the climate change measures from the Fit for 55 programme, as well as immigration and external border control.

The French Council presidency coincides with the French presidential election campaign and then election in April, and the parliamentary elections in June. French and EU media will scrutinise any success or failure of the French Council presidency with enhanced attention in light of the looming ballots, which will for sure add extra spice to EU discussions.

The Czechs take over the Council presidency in the second half of 2022, essentially focussing on the same priorities.

The dynamics in the Council could well look different than what we have become used to. For one, observers are fascinated by the new German government. After 16 years of Angela Merkel and her CDU-CSU in power in Germany and dominant in the EU, the new coalition of SPD, Greens and FDP will no doubt put a different emphasis on various issues – especially when it comes to climate policy, the defence of democracy and fundamental rights in the EU and abroad. Whether the direct line of communication between fellow Christian-democrats Merkel and von der Leyen, bolstering the central role of Germany on EU policy making, will be replaced by new preferences with social democrat chancellor Olaf Scholz in charge, remains to be seen. No doubt the German Greens will increase their influence on EU policies, with foreign minister Annalena Baerbock in the driving seat. It is noteworthy that while there is no Commissioner from a Green party, the Greens are coalition partners in seven member-state governments. We can therefore expect a more critical attitude from the Council and Germany in particular when assessing Commission proposals.

Parliamentary elections are due in Hungary in April 2022. Whether the recalcitrant prime minister Victor Orban prolongs his tenure and tendency to challenge EU proposals, or a new a wind more favourable to EU policy making blows from Budapest to Brussels, will greatly influence the Council’s capacity to reach agreement on many sensitive files in hand.

Ring of fire

Of greatest concern to the Council, and somewhat underestimated by commentators, is the EU’s relationship with its immediate neighbours outside the single market. Looking at the map, it appears that a ring of fire of difficulties and conflicts encircles the EU.

A tense military situation with Russian provocations and border surveillance in the Nordics and Baltics is testing EU and NATO defence readiness. The situation in Ukraine remains utterly explosive, with continued Russian threats to the Donbass region, and the 2014 Russian annexation of Crimea. The energy provision in the region creates additional tension, with Russia using gas supply as a weapon.

The political abuse of illegal migration by contested Belarus president Lukashenko is challenging the EU and Poland’s border control practices.

Turkey’s economic and monetary slump and the autocratic leadership of president Erdoğan are hampering the long announced updating of the EU-Turkey customs union agreement, let alone any rapprochement between Turkey and the EU.

EU accession talks are continuing with Western Balkan countries, but little progress is being made and there is no clarity on whether the EU will allow or even wants new members to join in the foreseeable future.

In the Middle East Syria and Lebanon remain unstable and sources of refugee displacement. The EU is active on the humanitarian, economic and diplomatic front, but has little visible impact on the political instability and conflict developments.

Similarly North Africa continues to fuel a huge humanitarian disaster with people risking their lives to cross the Mediterranean in the absence of a true common EU policy on migration, illegal or legal. The situation in Libya is extremely volatile, where no agreement between conflicting factions seems viable and human trafficking flourishes.

In September 2021 the General Court of the EU annulled the preferential tariffs and fisheries agreement with Morocco because they cover Western Sahara, so that needs to be re-negotiated, even if the effects of the annulment will not materialise immediately.

One year after Brexit, several trade and customs differences with the UK remain unresolved, especially regarding the Northern Ireland protocol.

The myriad bilateral agreements with Switzerland covering Swiss access to the EU single market need to be updated, but the approach of a general framework agreement was put on hold by the Swiss government. This has the potential to create a chaotic legal environment, with some sector deals expiring and others not yet.

All these conflicts, problems and negotiations will again land on the Council’s table in the coming year.

Building parliamentary majorities

Traditionally the European Parliament reshuffles a number of key positions halfway through the legislature’s mandate. A new president will be elected to replace the untimely deceased S&D MEP David Sassoli. Based on a political agreement reached at the start of this parliamentary term, that position should go to an EPP MEP: it remains to be seen whether that deal will stick.

A number of committee chairs will also rotate, while ensuring that the overall balance between the political groups remains respected.

The parliament will focus on legislative negotiations with member states in Council on a raft of key proposals. This happens during so-called trilogues, in which leading MEPs on a legislative file meet with the Council presidency and, with the help of the Commission hammer out a compromise text that both parliament and Council can accept. Trilogues will take up a lot of time in 2022, and the outcome of negotiations has to be confirmed by the parliament’s 705 MEPs in plenary and by the ministers in the Council. To obtain a majority in parliament a coalition of at least three political groups – including the largest ones – EPP and S&D – must be formed. Since the departure of Hungarian Fidesz MEPs from the EPP group, the gap between the latter and S&D has been reduced, with 177 and 145 members apiece respectively. They still need the support of at least one other group, such as the liberal Renew, the Greens or the conservative ECR. Coalition-building efforts to support compromises with the Council are likely to dominate MEPs’ agenda.

With national parliamentary elections scheduled in France, Hungary, Portugal, Slovenia and Sweden in 2022 and in, Denmark, Estonia, Greece, Italy and Poland in 2023, national political preferences will influence that coalition-building exercise. Which political party wants to be seen supporting which political rival party in Europe, when they are fiercely fighting each other at home to win a national election? We can expect surprises and dissidence in the voting discipline of the political groups based on these considerations.

Once in a lifetime

The coming year promises political fireworks at the EU level, when cornerstone proposals of the von der Leyen Commission await adoption. We can expect parliament wanting to claim victory by pushing through essential amendments. A full plate of problems is laid out on the Council’s table, not to forget the unpredictable evolution of the COVID-19 pandemic.

And then, as always, unforeseen events will disrupt planned procedures.

A lot of the EU regulatory developments about to reach conclusion are once-in-a-lifetime changes that shape the business and civil environment for companies, NGOs, non-EU countries and all citizens. They merit close attention and assessment of their consequences. They also demand input from economic and societal operators, to ensure that the desired objectives can be met in practice. There won’t be a dull moment for public affairs practitioners in 2022.

If you have any questions or remarks, we would love to hear them. Just contact H+K Strategies in Brussels.