29 November 2019

Von der Leyen promises a ‘transformation’ – but does she really intend to deliver it?



That’s probably what Ursula von der Leyen was thinking on Wednesday when she and her team of 27 Commissioners were confirmed by the European Parliament. The transition phase from the Juncker Commission to one led by von der Leyen has taken months.  The elections took place way back in May and the EU’s head of states agreed to von der Leyen’s appointment as president in July. It doesn’t say much about Brussels’ efficiency that she will finally start work this Sunday, December 1.

The problems along the way – from finding a new President to confirming  individual Commissioners, as several were rejected by MEPs – confirmed what was clear from those May elections: politics at the EU level will be much more difficult from now on. Voters left the European Parliament fractured, as the centre-left Socialists and centre-right People’s Party lost their traditional majorities. In decades gone by the two blocs often could do whatever they wanted as long as the other one agreed – and since they both largely agreed on the need for more integration, arguments about the EU’s overall direction were largely a mere matter of degree. That will not be the case any more.

This makes things tricky for von der Leyen, for whom the endless confirmation process may turn out to be the easiest part of her tenure. Most of the German’s grand plans will be subject to fierce debates and compromises, if they are to have any chance of getting through the Parliament. Nor will national governments meekly acquiesce to what the Commission wants. Certainly the Nordic countries, under the banner of the “Hanseatic League 2.0” have become more decisive in their EU realism since the UK’s decision to leave, but even the very pro-EU countries in the south are standing up to the executive too.

The first test for von der Leyen and her team will be negotiating the next Multiannual Financial Framework, which runs from 2021 to 2027. The Northern member states want to have a smaller budget, the southern ones want to protect agricultural subsidies and the eastern European states want to keep their ‘cohesion funds’, Brussels-speak for redistribution programs from west to east. This bunfight for a share of the budget spoils may well scupper some of von der Leyen’s early plans.

Despite these difficulties, the new president struck an optimistic note in a speech this week setting  out her agenda. “Over the next five years, our Union will embark together on a transformation which will touch every part of our society and of our economy.” For her, global warming and digitalisation will be the “twin transitions” that “will bring changes for all” and those will be the focal points of her Presidency. Some things will stay the same, of course. “Let there be no doubt: Farming will remain a valued part of our culture and our future,” von der Leyen declared, reassuring Big Farmer that their precious subsidies are safe.

Let’s not be too mean-spirited though, for there were some positive elements in her debut address. In contrast to the bellicose approach of some of the preceding EU leadership team, she had warm words for the UK, asserting that “the bond and the friendship between our people are unbreakable.” She was clear too that while Brexit was disappointing, the EU would “respect the decision taken by the British people” – more than can be said by some of the parties in the UK itself.

There was also a welcome emphasis on competitiveness and new technologies, something Europe has been on the losing side for years due to an excessively cautious approach to regulation, combined with instances of outright protectionism. In a particularly pleasing section on small businesses, von der Leyen channelled her inner Edmund Burke (as far as that exists), arguing that SME’s “were built to last, to pass down generations, to provide a fair living to employees. They were built on passion for quality, tradition and innovation”.

That said, how she intends to achieve this optimistic vision showed that her federalist streak is alive and well. The official agenda of her Commission Presidency is replete with top-down programs directed from Berlaymont Most notable is a Green New Deal, which von der Leyen wants to present within the first 100 days of her Presidency. She wants to make Europe carbon-neutral by 2050. It includes a cool €1 trillion of spending on environmental protection, though anything resembling market-based environmentalism is largely absent.

As expected, von der Leyen also wants to double down on the Euro system, completing the Banking Union and implementing a European Deposit Insurance Scheme. She intends to “fully implement the European Pillar of Social Rights” by introducing a “European Unemployment Benefit Reinsurance Scheme”, not to mention proposals for a European-wide minimum wage, which will also be brought forward in her opening 100 days.

Tax harmonisation will take a back seat as the fight for a Common Consolidated Tax Base needs to be continued. And while she did mention new trade agreements with New Zealand and Australia and complained that “too many powers only speak the language of confrontation,” her own record suggests a worrying inclination towards  a protectionist industrial policy.

Even on the innovation and technology front, her claims are too spurious to succeed. She wants to have more innovation. But her solution is not more room for entrepreneurs and free enterprise, but rather to “pool our resources, our money, our research capacity, our knowledge”. That sounds very much like a roundabout way of saying ‘more centralisation’.

Indeed, taken as a whole von der Leyen’s proposals show just as strong a tendency towards EU integration as her predecessor, Jean-Claude Juncker. After all, Juncker had a habit of ignoring even the rule of law as well as the EU’s own laws when it came to decisive issues like the Euro and refugee crises – there was no problem to which the solution was not ‘more Europe’. The same unreflective support for the European project was just as evident in his refusal to countenance David Cameron’s pre-referendum demands for reform – something which was just more grist to the mill of Britain’s Eurosceptics.

Not everything in Juncker’s five-year Presidency was bad: a trade agreement with Japan was important, and, as he noted himself, the amount of EU legislation was reduced by 83% compared to the previous Commission. All in all though, Juncker was a fervent federalist, who put the drive towards ‘ever closer union’ ahead of what might have been best for Europe.

Von der Leyen has the opportunity to change that. But the first signs of what she intends to do seem like it will be more of the same old, same old. In her uber-optimistic speech in front of the Parliament in Strasbourg she proclaimed: “Europe can do it!” But the first lesson for Ursula von der Leyen, the new leader of the European Union, should be that for Europe to succeed, the EU needs to do less.

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Kai Weiss is a Research and Outreach Officer at the Austrian Economics Center and a board member at the Hayek Institute.