Your OPP Guide to the State of the Union Speech

It’s almost that time of the year again! 

On Wednesday, the President of the Commission will take the floor in Strasbourg to give her yearly state of the Union speech. During this highly anticipated exercise, Ursula von der Leyen will take stock of recent developments, emphasise the achievements of the Commission and outline her key priorities for the year to come. Let’s go over some of the key issues and policies that are likely to be highlighted in this year’s speech.

A turning point for the von der Leyen Commission. 

Before exploring the different policy areas that could be brought up, it is worth understanding the context of this speech as this year represents the tipping point of the current mandate. Legislative initiatives introduced after the first quarter of 2023 are unlikely to make it through the Parliament before the 2024 elections. This time pressure also applies to procedures currently being discussed by MEPs and the Member States as any delays or major blockades could push procedures into the next legislature. Some of our readers may remember the difficulties encountered by co-legislators on the revision of the Common Agricultural Policy or the adoption of the Mobility Package I last time around.

The priorities set by President von der Leyen in this speech and the upcoming 2023 Work Programme will determine whether this Commission manages to deliver on its initial ambitions. When she came to office, the President had chartered a clear path for the continent, including its green and digital transitions. However, the initial schedule was heavily affected by the last crises which created the need for additional initiatives, mitigated existing plans and diverted legislative efforts toward crisis management and recovery. In this unfavourable context, achieving the high ambitions introduced at the start of the mandate may prove to be challenging. 

A decisive year for the geopolitical Commission?

As she was taking office, President von der Leyen pledged to lead a geopolitical Commission during her mandate. This Commission had to drive the continent through two major international crises — namely the COVID-19 pandemic and the return of war on the European continent. By design or destiny, these crises and rising tensions on the global stage have forced geopolitics to the top of the Commission’s agenda and the President is likely to address the international leadership of the Union next week. 

For instance, it is expected that the President will address the Russian war against Ukraine in her speech. Three different axes could be developed or emphasised: the nature and depth of Europe’s support for Ukraine, the future of relations with Russia and the mitigation of the war’s fallouts for Europeans. Building on the Winter Preparedness Package and recent interventions, the President should be keen to specify the Commission’s intentions regarding European electricity markets and demand. Ensuring Europe’s energy security is one of the key stakes of the Union in the short-term with implications for the long-term management of energy markets.

Striving to build up the resilience of Europe against global uncertainty, the Commission has started to build new partnerships with like-minded and strategic partners. The multilateral fora have become increasingly challenging to navigate for a Commission in search of leadership. Hence, it is increasingly likely to address these issues on a bilateral and ‘minilateral’ basis. The conclusion of a Digital Partnership with Japan is laying down the blueprint for the Union’s renewed agenda for cooperation. The President will likely emphasise the Union’s effort to negotiate new partnerships — as chartered in the Global Gateway and Indo-Pacific strategies. The upcoming proposal for a Critical Raw Materials Act should also be a flagship initiative in this matter and could be clarified by the President during this speech. 

Regarding the Indo-Pacific, the President can be expected to react to growing tensions in the China sea involving the US, China and Taiwan. Considering the prevalence of Taiwan’s microprocessor industry, tensions in the Indo-Pacific represent a key geopolitical issue for Europe. This would also contribute to answering long-standing demands from MEPs to deepen the Union’s ties with Taiwan. The ongoing efforts to build up Europe’s chip capacity were launched during the last state of the Union speech and the President should follow up on these endeavours. 

Delivering the continent’s dual transition

One of the key priorities of this Commission has been to enable the continent’s green and digital transitions. As we reach a turning point in the mandate, the Commission is set to present the last initiatives needed to achieve the Union’s transformations. A number of proposals are still pending and should be issued by the Commission before the end of the year. 

This notably includes the Zero Pollution Package and the second Circular Economy Package that will aim at improving the EU’s approach to designing, consuming and using products. Additionally, the climate package should be introduced before the end of the year. Building on the achievements of the Fit for 55 and Gas Package, it will underpin the creation of carbon removal certifications. The President is also expected to praise the recent publication of the REPowerEU Plan that set out new initiatives expected to be issued in 2023. 

With regards to digitisation, the Commission will presumably issue the liability package in order to make the Union’s conception of liability compatible with the digital age and the progress of artificial intelligence. Cyber security and resilience also remain high on the agenda of the Commission as a new package on these issues is expected to be presented. The Commission has now published most of the initiatives it set out to issue in the field of digitisation, but the President may further clarify her vision for the Digital Decade and tease new ideas to be presented in 2023. 

Another important upcoming workstream for the Commission, as noted in the 2022 Strategic Foresight Report, will be the twinning of the two transitions. By building synergies between the digitisation and greening of Europe, the Commission will aim at enabling decarbonisation thanks to new technologies and at decarbonising digitisation to make it compatible with the Green Deal objectives. Should the Commission be eager to present initiatives in this field, they will likely be introduced in the President’s speech.

Feeding the continent amidst crises

Concerns about food security are on the rise again as the Union is dealing with extreme weather events and the fallouts of the war in Ukraine. This dimension was surprisingly left out of the Czech Presidency’s key priorities. It is possible that the President will reaffirm the seriousness of this topic during her speech.

In the current context, the development of the Farm to Fork Strategy is raising important debates throughout the continent on the delicate balance between the sustainability, security and affordability of food in Europe. The President may want to reaffirm the Commission’s ambitions to transform Europe’s food systems to improve their sustainability and resilience. 

In parallel to rolling out the Farm to Fork, the Commission is hard at work to ensure that European farmers are supported by the revised Common Agricultural Policy. Seven national plans were recently approved by the Commission and its services are hard at work to deliver the remaining ones. The President may want to call on MEPs to support the efforts of her team to complete this process, which will create certainty for farmers' payments and contribute to shaping the future of Europe’s agricultural practices.

Toward a transformation of Europe’s financial sector? 

Numerous efforts were developed by the Juncker Commission to unify Europe’s capital markets union and to improve the fairness of Europe’s tax framework. The current Commission picked up these efforts and is looking at completing the transformation of the European financial sector. Hence, important milestones are still expected to be issued in the next few months, especially the Banking and Insurance Package. 

The Commission will also continue its work to bring last year’s OECD agreements into law by creating new rules on minimum effective taxation and the reallocation of taxing rights. These initiatives should deliver long-lasting European efforts on the corporate tax base. Additionally, the Commission is expected to propose new rules on digital VAT. These initiatives could be highlighted by the President in her speech in an effort to keep the legislative momentum alive as institutions are reaching the mandate’s turning point. She may also be tempted to address the numerous calls to end the Council’s unanimity rules in the field of taxation as an effort to prevent future blockades. 

The mounting inflation is another financial issue that needs to be addressed by European institutions. The ECB is expecting inflation to reach 7.3% in the Eurozone in the third quarter of 2022. Although the institution charts a rapid return to the 2% inflation target, the President may want to address the mounting concerns about European’s purchasing power, especially since energy and food prices seem particularly affected. 

Financing the transformation of Europe and mitigating crises

Another transformative element achieved by the Commission was the set up of the Recovery & Resilience Fund. This massive financing instrument was groundbreaking as it led the Commission to borrow directly from financial markets for the first time in its history. The future of this package gave rise to important debates in Europe from concerns about its financing and its possible perpetuation. 

One of the key elements of the NextGenerationEU that is still undergoing is the issue of new own resources. The scrapping of the proposed digital levy and numerous delays in the presentation of this package raised a number of questions on how the Commission will refinance the debt. Co-legislators are currently working on the proposal issued by the Commission at the end of last year and the President may want to preserve this momentum. 

Finally, before the summer break, several MEPs called on the Commission to revise the 2020-2027 Multiannual Financial Framework. The funds have been heavily affected by the past crises, which, for many, puts into question the Union’s ability to deal with future disruptions. Additionally, the funds are not adjusted to inflation and are therefore being compressed in the current conjecture. The Commission could be expected to reopen the MFF and the President may want to provide more details on this critical issue in her speech. 

A matter of spotlight and momentum

Beyond the core policy issues mentioned above, the state of the Union speech remains a highly political and theatrical exercise. As such, it is unlikely for the President to dive into the details of the files mentioned above. She will rather use this moment to shed light on the Commission’s highest priorities and to create momentum on key issues. This speech is also an opportunity to enrol MEPs’ support for certain ambitions when the Council happens to be more resistant to change. 

Additionally, it is unlikely that the President will be exhaustive in her speech. She may overlook some of the key issues we listed and focus on other important endeavours of her college. Are there any topics that you believe should be addressed by the President?