The Commission President delivered on 14 September to the European Parliament the annual State of the Union speech (SOTEU-22), unveiling the main political priorities for the next working year. In the second article we analyse those aspects of the speech related to member states’ governance, business, industrial development, SMEs skills, etc.
The Commission’s plan for the next working year includes several new ideas and proposals concerning the member states governance and entrepreneurship; the issues that are closely connected both to the present multiple crises and the EU’s programs on circular economy and sustainability. Of course, not all issues pertinent to the member states’ business community have been covered in SOTEU-22, but some of the focal points concerning entrepreneurship are revealed below…
Important guidance for the member states, as well as huge financial support is envisaged in the NextGenerationEU plan, which has been conceived two years ago but entered into force only recently. On common opinion, it provided a vital financial support and a boost of confidence for the EU and the member states’ economy. The initial €100 billion have been already disbursed to the member states; but still other € 700 billion are waiting to be introduced into national sustainable economy.
NextGenerationEU will guarantee a constant stream of investment to sustain jobs and growth while providing necessary renewal, resilience and recovery to growth. It means relief for our economy. But most importantly, it means renewal as the plan also finances new trends and projects in renewables, such as wind turbines and solar parks, high-speed trains and energy-saving renovations, to name a few.
The member states have not only to invest in sustainable growth; the investment process shall be sustainable too. It is good news for businesses: the states are supposed to finance the transition to a digital and net-zero economy, which is a good hint for entrepreneurs!
Besides, the member states’ governance has to acknowledge a new reality: i.e. the trend towards higher public debt; the EU institutions have to suggest optimal fiscal rules (mainly for states in the eurozone) that allow for such strategic investment that help to safeguard fiscal sustainability. These have to be rules fit for the challenges of this decade: hence, during the fall of 2022, the Commission will suggest some new ideas for the states’ economic governance to be approved by the states’ leaders.
Cap on some companies’ revenues
One of the proposals in this regard is the cap on the revenues of companies that produce electricity at a low cost: these companies are making huge profits, but extraordinary recorded profits benefiting from present war in Europe and unprotected consumers shall be shared and channeled in the EU’s social market economy to the most needed. Hence the Commission’s suggests more than €140 billion for the member states to cushion the burden.
Besides, due to the present energy crisis, the fossil fuel industry using oil, gas, coal, etc. and making huge profits also has to pay a special duty; however, these are all emergency and temporary measures including a proposal on price caps…
All citations and references are from the “2022 State of the Union Address by President von der Leyen” in: https://ec.europa.eu/commission/presscorner/detail/en/speech_22_5493/ 14.09.2022.
Debt reduction: basic principles
During the covid-pandemic and due to uncertain modern critical energy period, the states exceeded their sovereign debt and budget deficit. Although the “Maastricht rules” require 3 percent for the former and 60 percent for the latter, several states were forced to violate.
The Commission suggested that the EU member states should have more flexibility on their debt reduction paths; however, there should be more accountability on the delivery of reduction issues. Thus, there should be simpler rules that all can follow, alongside a more transparent vision of all form of strategic investment in order to provide the financial markets the needed confidence they need.
In formulation a “joint way forward” the states’ need more freedom to invest coped with more scrutiny and more ownership by the states leading to better services for citizens. But behind all the actions in these fields have to be the stability clause of the Maastricht Treaty providing both for stability and growth.
As to the FDI’s perspectives in EU, the Union’s institutions have already introduced legislation to screen foreign direct investment in member states companies for security reasons.
As the EU embarks on various transitional measures in development, the states must rely on the enduring values of the European social market economy, which encourages every citizen and business to excel; it is the “market” that rewards performance, guarantees protection and opens opportunities. Besides, it is the strength of European social market economy that will drive the green and digital transition. For this to succeed the states need an enabling business environment, a workforce with the right skills and access to raw materials/resources that industry needs. And more, the future of European integration and global competitiveness depends on it: hence the states must remove the obstacles that still hold SMEs back; instead, they must be at the centre of these transformations as the backbone of European industrial progress.
However, pandemic uncertainties, present high prices and inflation have been negative for the employees, and especially at the present energy crisis. Thus, the Commission suggested to adopt an SME Relief Package with a proposal for a single set of tax rules for corporate entities (the so-called BEFIT) which will make it easier to do business in the EU-27 with less red tape and a dynamic continental market. Besides, there is an intention to revise the Late Payment Directive: it is simply not fair that 1 in 4 bankruptcies are due to invoices not being paid on time.
European Year of Skills-2023
The European companies are also grappling with a shortage of staff, although unemployment in most member states is at a record low level; but at the same time, job vacancies are at a record high. For example, European companies and economy at large are lacking truck drivers, waiters and airport workers, as well as nurses, engineers and IT technicians.
Hence, the states lack a much needed focus and investment on professional education and up-skilling with a better cooperation with the companies; the latter know better what staff they will need; however, the process has to be coordinated with people’s aspirations.
Both the EU and the states have to arrange a system to facilitate and attract the right skills for the continental economic development, i.e. skills that would help companies and strengthen European growth parameters.
As an important step in this direction, the EU and the states are obliged to speed up and facilitate the recognition of qualifications: both among the EU states and also of third country nationals; it will make the EU more attractive for skilled workers.
With all these in mind, the Commission proposed to make 2023 the European Year of Skills.
Perspectives in industrial development
The EU’s “twin transition” (climate and digital) will be it chips for internet and/or virtual reality or cells for solar panels, is fueled by raw materials. Lithium and rare earth materials are already replacing gas and oil in various national economic sectors: by 2030, the demand for these rare earth metals will increase five-fold.
On one side, it is a good sign, because it shows that the European “green deal” is moving fast; on the other hand, it is problematic as only a few states in world dominate in the rare earth resources. Hence, the task for the states is to avoid falling into the same dependency pattern as it happened with oil and gas.
A good remedy is the EU external trade policy with the new partnerships to advance the states’ vital interests and the EU-wide values; the trade that embraces workers’ rights and the highest environmental standards is possible with like-minded foreign partners. For this to happen, the EU will update its links to reliable countries and key growth regions: e.g. the Commission intends to put forward for ratification trade agreements with Chile, Mexico and New Zealand, as well as through the advanced negotiations with other key partners like Australia and India.
The securing supplies are becoming important for the whole EU and the member states’ economic development. Presently, China controls the global processing industry: almost 90 % of rare earth materials and 60 % of lithium are processed there.
The EU has to identify strategic projects along global supply chain: from extraction to refining, from processing to recycling in order to create European own strategic reserves. The Commission adopted to legal instruments: the European Critical Raw Materials Act (in addition to the Battery Alliance act adopted five years ago), and the European Chips Act launched last year with the main idea to produce about two third of the needed batteries; the first chips mega-factory will break ground in the coming months.
Besides, the EU will increase financial support for the states participating in the so-called “important projects of common European interest” and create a new European Sovereignty Fund to support the member states’ progressive industrial future.