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Ursula von der Leyen is keeping her cards for her new Commission hidden until the very end. Which of the nominees will get which portfolio, which man will possibly be replaced by a woman? The European Parliament and the Commission itself are guessing. Even one day before the Commission President wants to present her list to the group leaders. Nevertheless: Czech Minister for European Affairs Martin Dvořák obviously knows which portfolio Jozef Síkela, who was nominated by the Prague government, will receive. He will be given an economic portfolio, with a focus on trade.
Will the next Trade Commissioner come from the Czech Republic? There is also speculation that the Social Democrats will get two important dossiers. But not in the way as expected: Teresa Ribera could be responsible for competition and not climate, which the Spanish climate minister had hoped for. Instead, the Dane Dan Jørgensen could take on the environment and climate portfolio.
The 77 members of the Renew Group, who are retiring to Ostend today and tomorrow for their study days, a kind of group retreat, are likely to be speculating on this. The group wants to adopt a declaration in which it sets out its political priorities for the new mandate. The Liberals’ expectations of the future Commissioners will also be discussed. Everyone will have to be patient for one more day before Ursula von der Leyen puts her cards on the table. Have a pleasant day!
Mario Draghi was clear: to prevent Europe from falling further behind economically, “radical change” is needed – “urgently and concretely.” Otherwise, the EU would face a “slow decline.” Real per capita income in the USA has risen almost twice as fast as in Europe since 2000.
In response to the malaise, the former ECB President proposes a new industrial strategy in his report on competitiveness. The core: to accelerate productivity growth. Labor productivity in the EU has fallen from 95 percent of the US level in 1995 to less than 80 percent. The problem is not so much wage costs as a lack of innovative strength: US companies have left their European rivals behind, particularly in the development and use of digital technologies – and the gap is threatening to grow. Europe is stuck in a “middle technology trap.”
These are the most important building blocks of his counter-strategy:
Draghi warns: In view of the ageing population, the EU is facing decades of stagnation if it does not succeed in increasing productivity growth again. According to the report, the main reason for Europe’s weak position in digital technologies is “a static industrial structure that creates a vicious circle of low investment and low innovation.” In the USA, tech companies have long dominated the rankings of the largest R&D budgets, while in Europe it is still the automotive industry.
The obstacles for innovative companies are well known: too little cutting-edge research, too little commercialization of the results, too little venture capital for start-ups, especially in the growth phase, regulatory hurdles in the internal market, too little and ineffective public research funding and too little focus on groundbreaking innovations.
Draghi is proposing a whole series of measures to address these shortcomings:
The education sector is to be realigned in order to remedy the shortage of skilled workers that is threatening Europe’s economy. University studies, for example, are to be geared more towards the needs of the labor market. To this end, Draghi wants to tackle the curricula. These should focus on STEM skills, which, like digital skills, should also be integrated into other subject areas. The EU is currently lagging behind the USA, particularly when it comes to mathematical and scientific qualifications. Targeted support programs for children from poor households are needed and scholarships for non-EU citizens to attract them to Europe.
The aim is to promote skills for the green transition as well as interdisciplinary skills. The latter includes teamwork, creativity, adaptability, resilience and emotional intelligence. Entrepreneurship should also become an integral part of the curriculum. Draghi would like to adjust university funding to promote innovative, transdisciplinary approaches. Training should also be strengthened across Europe, both qualitatively and quantitatively.
The ESF+, the Union’s central funding program for employment and social inclusion, is to be significantly restructured. Funding should focus on areas where the effect is greatest. According to Draghi, these include clean technologies, digital and advanced technologies and the automotive industry. In addition, the programs should be strictly evaluated in order to assess their benefits and effectiveness and to quickly transfer successful programs to other countries.
Draghi’s proposals on competition supervision had been eagerly awaited. However, the former Italian Prime Minister did not call for a far-reaching reform of the Merger Regulation to allow for more national champions. Instead, he advocates selective relaxation, faster procedures – and even a new instrument for market supervision.
Draghi wants to allow more size in the telecoms sector in particular: here he is in favor of facilitating mergers in order to enable greater investment in broadband infrastructure. To this end, the EU Commission’s Directorate-General for Competition should define the markets at the EU level instead of the member state level and weigh up possible positive effects on innovation and investment against negative consequences for consumers. Until now, the Commission has prohibited mergers if this resulted in fewer than four providers remaining on a market.
Focus on innovation: Draghi is generally in favor of taking greater account of the expected innovation effects when examining company mergers. In sectors such as defense, energy or aerospace, the Commission should also consider the effects of a merger on security and resilience, for example.
Surprisingly, Draghi is taking up a once-buried idea of the EU Commission for a “New Competition Tool,” which is intended to allow faster intervention. The new instrument would allow the Commission to investigate structural barriers to competition in individual markets and then tackle them together with the companies. The use of the NCT is to be limited to certain cases, such as dependence on one or a few raw material suppliers. The responsible State Secretary for Economic Affairs, Sven Giegold, expressly welcomes this.
Draghi wants a Europeanization of industrial policy. He proposes ending the current exceptions to state aid regulations, as they would distort the internal market. “State aid should be used for common goals,” Draghi said at the press conference. Important Projects of Common European Interest (IPCEI) should thus be strengthened. According to Draghi, the approval procedures for IPCEI should be streamlined and extended to another area of innovative technologies.
Draghi sees decarbonization as an opportunity for European industrial policy. It could enable the EU to “take the lead in new, clean technologies and in solutions for the circular economy,” he writes. “But for Europe to seize this opportunity, all policy measures must be synchronized with the EU’s decarbonization goals.”
A different policy mix is needed for each sector, said Draghi, but he distinguishes between four different strategies:
According to Draghi, trade policy should also be at the service of European productivity growth. It must thus be well coordinated with the EU’s industrial and financial policy initiatives. Draghi cites the multi-policy strategies of the USA and China as a model for the silo mentality sometimes prevailing in the EU.
According to the Draghi report, trade policy must primarily respond to unfair trade practices abroad and safeguard essential European supply chains. The former points to a more intensive use of trade defense instruments such as the regulation on third country subsidies. Draghi is also calling for better coordination in FDI screening.
Draghi wants to achieve the goal of securing the supply chain through more targeted trade agreements. They should guarantee European access to critical raw materials and other essential products. This goes in the same direction that the President of the Commission had already formulated in her political guidelines. Preferential trade agreements limited to certain sectors contradict WTO rules. But Draghi sees the multilateral trade order in a “deep crisis” anyway and the EU must adapt to the new reality.
“The EU will need to develop a genuine “foreign trade policy” that coordinates preferential trade agreements and direct investment with resource-rich countries, stockpiling in selected critical areas and creating industrial partnerships to secure the supply chain for key technologies,” writes Draghi. With Alexandra Endres and Alina Leimbach
The first reactions were not long in coming: Mario Draghi had barely finished his press conference at midday when German Finance Minister Christian Lindner already had his say: “Joint borrowing by the EU will not solve the structural problems,” explained the FDP leader. Germany would not agree to this.
Draghi had largely ignored this sensitive topic, devoting only four of the 400 pages of his report to the subject of financing. The former Italian Prime Minister was of course aware of the negative reflexes that calls for joint borrowing trigger in some member states.
But he cannot ignore the issue. According to Mario Draghi, between €750 and €800 billion in additional annual investments are needed to master the green and digital transformation and increase defense capacities at the same time. The figure is made up of the following budget items:
Draghi admits that these additional investments are “massive” – they correspond to 4.4 to 4.7 percent of European GDP. However, he only partially accepts objections that such an investment shock would drive up inflation. Initially, an increase in inflation is to be expected, but the positive effects of innovations on energy prices and productivity should calm prices down again in the medium term.
Draghi also emphasizes that part of the additional investment must come from the public purse. “Even if the capital markets are more closely integrated, it is unlikely that improved market financing will release the desired level of investment,” writes Draghi. According to the Commission study, in order for private investment to be released accordingly, the cost of capital would have to be around 250 basis points lower. Although Draghi is in favor of integrating the capital markets, he says that the resulting reduction in the cost of capital is “substantially smaller” than the 250 basis points required.
More public investment is therefore unavoidable in Draghi’s logic. “Joint financing is needed,” Draghi said at the press conference. And if joint financing is needed, then a joint ‘safe asset’ must be issued. This would also help to drive forward the capital markets union. Draghi emphasized that he sees this EU debt as an instrument rather than an objective of EU policy. However, the political sensitivity of this issue puts a big question mark behind the implementation of Draghi’s investment proposals.
Despite the controversial proposals on financing: overall, Draghi’s report met with a positive response from German industry. “Mario Draghi’s report gets to the heart of the matter,” commented BDI Managing Director Tanja Gönner. What is needed is deeper integration of the internal market in areas such as defense, infrastructure, telecommunications and pharmaceuticals. In the new legislative period, the EU needs just as much of a boost as it did previously in climate policy.
The European Roundtable of Industry (ERT) is also positive. Chairman Jean-François van Boxmeer said that it was now up to the member states to implement the report’s proposals. “We call on them to think big – beyond their national borders – and to consider Europe’s future position in the world,” said the Chairman of the Board of Directors of Vodafone in a press release.
Federal Economics Minister Robert Habeck (Greens) called the report a “wake-up call for Europe.” Draghi was right, he said, the EU needed massive investment, comprehensive reforms and a strengthening of resilience. Habeck warned that it was important not to simply go back to business as usual: the report was a call to action for the new Commission and the EU as a whole. “I am happy to pledge my support,” he explained.
The once again contradictory reactions from Berlin demonstrate how far the road to implementing Draghi’s proposals is. As Ursula von der Leyen noted, there is a “broad consensus” in the EU institutions that competitiveness belongs at the top of the agenda. Draghi’s “plan for decarbonization and competitiveness” largely coincides with her own plan to propose a Clean Industrial Deal. Its proposals on skills or innovation policy would be included in the mission letters of the new Commissioners.
The Commission is likely to play a decisive role in driving forward Draghi’s many far-reaching proposals. This is because the Council is finding it difficult to process such a package. It is true that the Competitiveness Council is an aptly named Council formation. But the COMPET is too weak, argues an EU diplomat, as it usually only consists of state secretaries. The European Council of Heads of State and Government, on the other hand, cannot push ahead with legislative projects itself due to a lack of legislative competence, and the unanimity principle also impairs its ability to act.
Ideally, Germany and France would now take the lead and initiate and continue the debate, says Lucas Guttenberg, Senior Advisor at the Bertelsmann Stiftung. “I don’t see that happening yet either, but it would be worth the effort.”
In his report, Draghi himself criticizes the EU’s inadequate governance structures in this area. The main instrument, the European Semester, does not allow for the coordination of economic policies. He proposes limiting the European Semester to the implementation of fiscal rules and creating a new Competitiveness Coordination Framework. Within this framework, priorities for European competitiveness identified by the heads of state and government should be implemented. A suitable approach should be selected depending on the area of activity and set out in an action plan.
It remains to be seen whether the member states will accept this. Fredrik Persson, President of Business Europe, is confident: “The report will undoubtedly play a decisive role in shaping future EU strategies and policies.”
After the 2024 European elections, the political far-right landscape in the European Parliament (EP) has been reshaped. Parties to the right of the European People’s Party (EPP) made gains in 23 EU member states, particularly in Germany and France. The electoral successes were followed by fragmentation; instead of two, there are now three far-right groups in the EP: the national conservative ECR, which has existed since 2009, and the two newly founded, more far-right groups Patriots for Europe (PfE) and Europe of Sovereign Nations (ESN).
Probably the most important coup was achieved by Viktor Orbán and Marine Le Pen, whose parties merged with partners from the former far-right group Identity and Democracy (ID) to form the Patriots for Europe. Among others, they won over the Czech ANO (formerly part of the liberal Renew), the Spanish Vox (from the ECR) and the majority of the former ID group. Together, they are the third largest group with 84 MEPs.
The ECR gained some smaller partners and, with 78 MEPs, is just about the fourth largest parliamentary group, but is now dominated by Meloni’s Italian brothers. Most recently, the AfD, which had become too radical even for the ID and now PfE, succeeded in founding the ESN, primarily with parties newly elected to the EP, which is now by far the smallest parliamentary group in the EP with 25 MEPs. Further movements or even a merger of PfE and ESN are not ruled out – at least programmatically, there are hardly any differences between the two.
The first resolutions in Parliament show that this fragmentation of the far-right parties will be a key obstacle to their political clout. Even as the third largest parliamentary group, the PfE is excluded from all central offices in the EP (as is the ESN). The more moderate ECR won some important positions but was not needed to win a majority for the election of Ursula von der Leyen as Commission President. At least in this legislative period, the EP’s ability to act is not at risk. However, the pressure to form super-large centrist coalitions has increased.
However, the real increase in power of the far-right parties is taking place outside of Parliament anyway – in the Council and European Council. This is probably where the real calculation behind the founding of the PfE lies. This is because the Italian Meloni government (ECR) and Viktor Orbán’s government (PfE) are already at the table. In the Netherlands, Geert Wilders’ Freedom Party (PfE) also exerts considerable influence on the governing coalition, despite having a non-party Prime Minister. In future, the PfE hopes for further government participation, for example from the FPÖ, Vox or ANO.
For the PfE and its member parties, the Council therefore offers an important platform to possibly push through their agenda in a more coordinated manner than before. They could veto decisions that require unanimity. A blocking minority for majority decisions could also come within reach given the continued electoral success of far-right parties in Europe. Then, at the latest, governments with far-right parties will be able to put their stamp on all key EU decisions.
This is because the long-practiced cordon sanitaire towards far-right parties is visibly eroding, particularly in the Council. While the FPÖ’s participation in the Austrian government in 2000 was still a reason for diplomatic sanctions, Meloni and co. are now pragmatically integrated.
A cordon sélectif has been developing for several years now: While the more radical forces, now in the shape of PfE and ESN, remain largely excluded from key positions in Parliament, the ECR gains access to important committee chairs and vice-presidential positions. Within the European People’s Party (EPP), there is also a growing number of voices calling for cooperation with the ECR when it comes to forming majorities in legislation. This harbors the risk that the previous demarcation will be further softened and the boundaries to the far right will become increasingly blurred.
European social democrats and liberals, on the other hand, also want to exclude the ECR and have first called on Ursula von der Leyen to build her majority in the EP without the ECR and are now demanding that people from all far-right parties are not given weighty portfolios in the new Commission – including the Italian proposal from Meloni’s party.
The EPP and Ursula von der Leyen thus face the dilemma that threatens most center-right parties in Europe: if they sharply distance themselves from the far right, including the ECR, they are forced to compromise far to the left in order to organize majorities and risk bringing together the various far-right forces. If, on the other hand, they approach the (partly) more moderate forces, they normalize cooperation with the far right and legitimize their positions. How these decisions turn out will shape EU policy for years to come, with the appointment of key Commission positions as the next yardstick.
Nicolai von Ondarza heads the EU/Europe research group at the German Institute for International and Security Affairs (SWP).
Max Becker is Research Assistant EU/Europe at the SWP.
Ursula von der Leyen is keeping her cards for her new Commission hidden until the very end. Which of the nominees will get which portfolio, which man will possibly be replaced by a woman? The European Parliament and the Commission itself are guessing. Even one day before the Commission President wants to present her list to the group leaders. Nevertheless: Czech Minister for European Affairs Martin Dvořák obviously knows which portfolio Jozef Síkela, who was nominated by the Prague government, will receive. He will be given an economic portfolio, with a focus on trade.
Will the next Trade Commissioner come from the Czech Republic? There is also speculation that the Social Democrats will get two important dossiers. But not in the way as expected: Teresa Ribera could be responsible for competition and not climate, which the Spanish climate minister had hoped for. Instead, the Dane Dan Jørgensen could take on the environment and climate portfolio.
The 77 members of the Renew Group, who are retiring to Ostend today and tomorrow for their study days, a kind of group retreat, are likely to be speculating on this. The group wants to adopt a declaration in which it sets out its political priorities for the new mandate. The Liberals’ expectations of the future Commissioners will also be discussed. Everyone will have to be patient for one more day before Ursula von der Leyen puts her cards on the table. Have a pleasant day!
Mario Draghi was clear: to prevent Europe from falling further behind economically, “radical change” is needed – “urgently and concretely.” Otherwise, the EU would face a “slow decline.” Real per capita income in the USA has risen almost twice as fast as in Europe since 2000.
In response to the malaise, the former ECB President proposes a new industrial strategy in his report on competitiveness. The core: to accelerate productivity growth. Labor productivity in the EU has fallen from 95 percent of the US level in 1995 to less than 80 percent. The problem is not so much wage costs as a lack of innovative strength: US companies have left their European rivals behind, particularly in the development and use of digital technologies – and the gap is threatening to grow. Europe is stuck in a “middle technology trap.”
These are the most important building blocks of his counter-strategy:
Draghi warns: In view of the ageing population, the EU is facing decades of stagnation if it does not succeed in increasing productivity growth again. According to the report, the main reason for Europe’s weak position in digital technologies is “a static industrial structure that creates a vicious circle of low investment and low innovation.” In the USA, tech companies have long dominated the rankings of the largest R&D budgets, while in Europe it is still the automotive industry.
The obstacles for innovative companies are well known: too little cutting-edge research, too little commercialization of the results, too little venture capital for start-ups, especially in the growth phase, regulatory hurdles in the internal market, too little and ineffective public research funding and too little focus on groundbreaking innovations.
Draghi is proposing a whole series of measures to address these shortcomings:
The education sector is to be realigned in order to remedy the shortage of skilled workers that is threatening Europe’s economy. University studies, for example, are to be geared more towards the needs of the labor market. To this end, Draghi wants to tackle the curricula. These should focus on STEM skills, which, like digital skills, should also be integrated into other subject areas. The EU is currently lagging behind the USA, particularly when it comes to mathematical and scientific qualifications. Targeted support programs for children from poor households are needed and scholarships for non-EU citizens to attract them to Europe.
The aim is to promote skills for the green transition as well as interdisciplinary skills. The latter includes teamwork, creativity, adaptability, resilience and emotional intelligence. Entrepreneurship should also become an integral part of the curriculum. Draghi would like to adjust university funding to promote innovative, transdisciplinary approaches. Training should also be strengthened across Europe, both qualitatively and quantitatively.
The ESF+, the Union’s central funding program for employment and social inclusion, is to be significantly restructured. Funding should focus on areas where the effect is greatest. According to Draghi, these include clean technologies, digital and advanced technologies and the automotive industry. In addition, the programs should be strictly evaluated in order to assess their benefits and effectiveness and to quickly transfer successful programs to other countries.
Draghi’s proposals on competition supervision had been eagerly awaited. However, the former Italian Prime Minister did not call for a far-reaching reform of the Merger Regulation to allow for more national champions. Instead, he advocates selective relaxation, faster procedures – and even a new instrument for market supervision.
Draghi wants to allow more size in the telecoms sector in particular: here he is in favor of facilitating mergers in order to enable greater investment in broadband infrastructure. To this end, the EU Commission’s Directorate-General for Competition should define the markets at the EU level instead of the member state level and weigh up possible positive effects on innovation and investment against negative consequences for consumers. Until now, the Commission has prohibited mergers if this resulted in fewer than four providers remaining on a market.
Focus on innovation: Draghi is generally in favor of taking greater account of the expected innovation effects when examining company mergers. In sectors such as defense, energy or aerospace, the Commission should also consider the effects of a merger on security and resilience, for example.
Surprisingly, Draghi is taking up a once-buried idea of the EU Commission for a “New Competition Tool,” which is intended to allow faster intervention. The new instrument would allow the Commission to investigate structural barriers to competition in individual markets and then tackle them together with the companies. The use of the NCT is to be limited to certain cases, such as dependence on one or a few raw material suppliers. The responsible State Secretary for Economic Affairs, Sven Giegold, expressly welcomes this.
Draghi wants a Europeanization of industrial policy. He proposes ending the current exceptions to state aid regulations, as they would distort the internal market. “State aid should be used for common goals,” Draghi said at the press conference. Important Projects of Common European Interest (IPCEI) should thus be strengthened. According to Draghi, the approval procedures for IPCEI should be streamlined and extended to another area of innovative technologies.
Draghi sees decarbonization as an opportunity for European industrial policy. It could enable the EU to “take the lead in new, clean technologies and in solutions for the circular economy,” he writes. “But for Europe to seize this opportunity, all policy measures must be synchronized with the EU’s decarbonization goals.”
A different policy mix is needed for each sector, said Draghi, but he distinguishes between four different strategies:
According to Draghi, trade policy should also be at the service of European productivity growth. It must thus be well coordinated with the EU’s industrial and financial policy initiatives. Draghi cites the multi-policy strategies of the USA and China as a model for the silo mentality sometimes prevailing in the EU.
According to the Draghi report, trade policy must primarily respond to unfair trade practices abroad and safeguard essential European supply chains. The former points to a more intensive use of trade defense instruments such as the regulation on third country subsidies. Draghi is also calling for better coordination in FDI screening.
Draghi wants to achieve the goal of securing the supply chain through more targeted trade agreements. They should guarantee European access to critical raw materials and other essential products. This goes in the same direction that the President of the Commission had already formulated in her political guidelines. Preferential trade agreements limited to certain sectors contradict WTO rules. But Draghi sees the multilateral trade order in a “deep crisis” anyway and the EU must adapt to the new reality.
“The EU will need to develop a genuine “foreign trade policy” that coordinates preferential trade agreements and direct investment with resource-rich countries, stockpiling in selected critical areas and creating industrial partnerships to secure the supply chain for key technologies,” writes Draghi. With Alexandra Endres and Alina Leimbach
The first reactions were not long in coming: Mario Draghi had barely finished his press conference at midday when German Finance Minister Christian Lindner already had his say: “Joint borrowing by the EU will not solve the structural problems,” explained the FDP leader. Germany would not agree to this.
Draghi had largely ignored this sensitive topic, devoting only four of the 400 pages of his report to the subject of financing. The former Italian Prime Minister was of course aware of the negative reflexes that calls for joint borrowing trigger in some member states.
But he cannot ignore the issue. According to Mario Draghi, between €750 and €800 billion in additional annual investments are needed to master the green and digital transformation and increase defense capacities at the same time. The figure is made up of the following budget items:
Draghi admits that these additional investments are “massive” – they correspond to 4.4 to 4.7 percent of European GDP. However, he only partially accepts objections that such an investment shock would drive up inflation. Initially, an increase in inflation is to be expected, but the positive effects of innovations on energy prices and productivity should calm prices down again in the medium term.
Draghi also emphasizes that part of the additional investment must come from the public purse. “Even if the capital markets are more closely integrated, it is unlikely that improved market financing will release the desired level of investment,” writes Draghi. According to the Commission study, in order for private investment to be released accordingly, the cost of capital would have to be around 250 basis points lower. Although Draghi is in favor of integrating the capital markets, he says that the resulting reduction in the cost of capital is “substantially smaller” than the 250 basis points required.
More public investment is therefore unavoidable in Draghi’s logic. “Joint financing is needed,” Draghi said at the press conference. And if joint financing is needed, then a joint ‘safe asset’ must be issued. This would also help to drive forward the capital markets union. Draghi emphasized that he sees this EU debt as an instrument rather than an objective of EU policy. However, the political sensitivity of this issue puts a big question mark behind the implementation of Draghi’s investment proposals.
Despite the controversial proposals on financing: overall, Draghi’s report met with a positive response from German industry. “Mario Draghi’s report gets to the heart of the matter,” commented BDI Managing Director Tanja Gönner. What is needed is deeper integration of the internal market in areas such as defense, infrastructure, telecommunications and pharmaceuticals. In the new legislative period, the EU needs just as much of a boost as it did previously in climate policy.
The European Roundtable of Industry (ERT) is also positive. Chairman Jean-François van Boxmeer said that it was now up to the member states to implement the report’s proposals. “We call on them to think big – beyond their national borders – and to consider Europe’s future position in the world,” said the Chairman of the Board of Directors of Vodafone in a press release.
Federal Economics Minister Robert Habeck (Greens) called the report a “wake-up call for Europe.” Draghi was right, he said, the EU needed massive investment, comprehensive reforms and a strengthening of resilience. Habeck warned that it was important not to simply go back to business as usual: the report was a call to action for the new Commission and the EU as a whole. “I am happy to pledge my support,” he explained.
The once again contradictory reactions from Berlin demonstrate how far the road to implementing Draghi’s proposals is. As Ursula von der Leyen noted, there is a “broad consensus” in the EU institutions that competitiveness belongs at the top of the agenda. Draghi’s “plan for decarbonization and competitiveness” largely coincides with her own plan to propose a Clean Industrial Deal. Its proposals on skills or innovation policy would be included in the mission letters of the new Commissioners.
The Commission is likely to play a decisive role in driving forward Draghi’s many far-reaching proposals. This is because the Council is finding it difficult to process such a package. It is true that the Competitiveness Council is an aptly named Council formation. But the COMPET is too weak, argues an EU diplomat, as it usually only consists of state secretaries. The European Council of Heads of State and Government, on the other hand, cannot push ahead with legislative projects itself due to a lack of legislative competence, and the unanimity principle also impairs its ability to act.
Ideally, Germany and France would now take the lead and initiate and continue the debate, says Lucas Guttenberg, Senior Advisor at the Bertelsmann Stiftung. “I don’t see that happening yet either, but it would be worth the effort.”
In his report, Draghi himself criticizes the EU’s inadequate governance structures in this area. The main instrument, the European Semester, does not allow for the coordination of economic policies. He proposes limiting the European Semester to the implementation of fiscal rules and creating a new Competitiveness Coordination Framework. Within this framework, priorities for European competitiveness identified by the heads of state and government should be implemented. A suitable approach should be selected depending on the area of activity and set out in an action plan.
It remains to be seen whether the member states will accept this. Fredrik Persson, President of Business Europe, is confident: “The report will undoubtedly play a decisive role in shaping future EU strategies and policies.”
After the 2024 European elections, the political far-right landscape in the European Parliament (EP) has been reshaped. Parties to the right of the European People’s Party (EPP) made gains in 23 EU member states, particularly in Germany and France. The electoral successes were followed by fragmentation; instead of two, there are now three far-right groups in the EP: the national conservative ECR, which has existed since 2009, and the two newly founded, more far-right groups Patriots for Europe (PfE) and Europe of Sovereign Nations (ESN).
Probably the most important coup was achieved by Viktor Orbán and Marine Le Pen, whose parties merged with partners from the former far-right group Identity and Democracy (ID) to form the Patriots for Europe. Among others, they won over the Czech ANO (formerly part of the liberal Renew), the Spanish Vox (from the ECR) and the majority of the former ID group. Together, they are the third largest group with 84 MEPs.
The ECR gained some smaller partners and, with 78 MEPs, is just about the fourth largest parliamentary group, but is now dominated by Meloni’s Italian brothers. Most recently, the AfD, which had become too radical even for the ID and now PfE, succeeded in founding the ESN, primarily with parties newly elected to the EP, which is now by far the smallest parliamentary group in the EP with 25 MEPs. Further movements or even a merger of PfE and ESN are not ruled out – at least programmatically, there are hardly any differences between the two.
The first resolutions in Parliament show that this fragmentation of the far-right parties will be a key obstacle to their political clout. Even as the third largest parliamentary group, the PfE is excluded from all central offices in the EP (as is the ESN). The more moderate ECR won some important positions but was not needed to win a majority for the election of Ursula von der Leyen as Commission President. At least in this legislative period, the EP’s ability to act is not at risk. However, the pressure to form super-large centrist coalitions has increased.
However, the real increase in power of the far-right parties is taking place outside of Parliament anyway – in the Council and European Council. This is probably where the real calculation behind the founding of the PfE lies. This is because the Italian Meloni government (ECR) and Viktor Orbán’s government (PfE) are already at the table. In the Netherlands, Geert Wilders’ Freedom Party (PfE) also exerts considerable influence on the governing coalition, despite having a non-party Prime Minister. In future, the PfE hopes for further government participation, for example from the FPÖ, Vox or ANO.
For the PfE and its member parties, the Council therefore offers an important platform to possibly push through their agenda in a more coordinated manner than before. They could veto decisions that require unanimity. A blocking minority for majority decisions could also come within reach given the continued electoral success of far-right parties in Europe. Then, at the latest, governments with far-right parties will be able to put their stamp on all key EU decisions.
This is because the long-practiced cordon sanitaire towards far-right parties is visibly eroding, particularly in the Council. While the FPÖ’s participation in the Austrian government in 2000 was still a reason for diplomatic sanctions, Meloni and co. are now pragmatically integrated.
A cordon sélectif has been developing for several years now: While the more radical forces, now in the shape of PfE and ESN, remain largely excluded from key positions in Parliament, the ECR gains access to important committee chairs and vice-presidential positions. Within the European People’s Party (EPP), there is also a growing number of voices calling for cooperation with the ECR when it comes to forming majorities in legislation. This harbors the risk that the previous demarcation will be further softened and the boundaries to the far right will become increasingly blurred.
European social democrats and liberals, on the other hand, also want to exclude the ECR and have first called on Ursula von der Leyen to build her majority in the EP without the ECR and are now demanding that people from all far-right parties are not given weighty portfolios in the new Commission – including the Italian proposal from Meloni’s party.
The EPP and Ursula von der Leyen thus face the dilemma that threatens most center-right parties in Europe: if they sharply distance themselves from the far right, including the ECR, they are forced to compromise far to the left in order to organize majorities and risk bringing together the various far-right forces. If, on the other hand, they approach the (partly) more moderate forces, they normalize cooperation with the far right and legitimize their positions. How these decisions turn out will shape EU policy for years to come, with the appointment of key Commission positions as the next yardstick.
Nicolai von Ondarza heads the EU/Europe research group at the German Institute for International and Security Affairs (SWP).
Max Becker is Research Assistant EU/Europe at the SWP.