4 Key Challenges of EU affairs in 2023: What is at government relations stake?

Since the Eurozone crisis of 2009, the EU has been turbulent by the uncontrolled influx of refugees, Brexit, Covid-19, and a full-scale war of Russia against Ukraine. While major geopolitical rivalries hold their pragmatic interests, more political turmoil, economic recessions, and social inequalities will emerge in 2023 and beyond.

The current state of affairs is being worsened by the deepening global warming that urges tougher responses from the EU member-states.

Implications on the EU Member States and Governments

Whenever the crises adversely affect stability and integrity across the EU, member states fail to cope with the outreaching consequences individually. It is high time when EU governments turn to collective action.

While facing the ongoing and forthcoming challenges, the EU will rely on the crisis management track record it has passed through over the last decade. The lessons learned will help implement best-case scenarios to cope with all the challenges. Union’s solidarity and cohesion are at the core of survival within the realms of the new normal.

While every single challenge underway necessitates early responses, the success of the collective action will much depend on systematic preparations at the EU level to cope with crisis contingencies.

The reliance on crisis response mechanisms (i.e. the EU Civil Protection Mechanism and the Integrated Political Crisis Response mechanism) backed up by the greater use of forecasting capacities, scenario planning approaches and close-knit interaction between the EU institutions and national governments will be decisive given forthcoming challenges.

Timely responses to emergencies will safeguard the collective ability to prevent crises rather than cope with their consequences. As an effective countermeasure, the European Commission has initiated the Single Market Emergency Instrument to preserve the mobility of goods, services, and people across the EU during emergencies.

The War in Ukraine Underway

Russia’s invasion of Ukraine has provoked urgent mobilization of the EU’s external policies to facilitate Ukraine through the application of tougher sanctions against Moscow and the delivery of weapons.

Putin’s aggression imposed harsh implications on the EU governments. The quality of inherent collective action depends on heavy decision-making procedures. Under urgent external pressures, the EU has got far more flexible and mobilized its resources to act more decisively. Delivery of military support to Ukraine has come as an unprecedented challenge for the EU. It has tested the Union for the quality of integration of its member states.

The core question in today’s agenda is whether the war in Ukraine has solidified the EU member states. As a whole, the EU has played a decisive role in the ongoing support for Ukraine. With lesser capacities than those maintained by the United States, the Union as a whole and more and more of its member-states are getting afore of the war stage.

The governments of the EU member states took Russia’s invasion as jeopardizing the Union’s stability. Given the collateral damage of the crisis, most northern and eastern EU members perceived Putin’s invasion as a direct threat to their national security. Consequently, their governments treat the prime defeat of Russia as the only acceptable outcome. Conversely, the southern and western EU members are less anxious about Putin’s military aggression and mostly focus on energy scarcity and forthcoming inflation.

The division in diverse opinions on the war in Ukraine has not strengthened the EU as a geopolitical structure. The EU needs holistic political leadership to cope with these divisions to confront Russian aggression through a joint effort. The most recent proof of collaborative action has been in the approval of a minimum corporate tax of 15% as further EU’s support to Ukraine. Under the threat of further aggression from Putin’s regime, the EU has intensified security measures, including energetic safety and cyber security.

On the energy security front, ECFR initiated a new EU Energy Deals Tracker to lessen the dependence of the EU member states on Russian gas. The extended pool of new suppliers opens the world of opportunity as well as substantial imports of liquefied natural gas (LNG) instead of reliance on pipeline natural gas.

At the end of 2022, the EU joined the first Carbon Border Adjustment Mechanism (CBAM) to prevent carbon leakage. The compromised tariff will cover carbon-intensive products across the most carbon-intensive domains. On this background, the EU will urge its trading partners to de-carbonize.

The EU Cybersecurity Strategy intensifies resilience to cyber threats by prioritizing trustworthy digital technologies. In June 2022, the European Commission initiated a new EU Cybersecurity Strategy to withstand cyber-attacks given sophisticated threats from a vast array of inside and outside sources.

Energy & Sustainability Crisis

Energy scarcity has deteriorated the EU stability and sparked populist anti-EU rhetoric to discredit the Union’s collective efforts. The war-caused energy supply crunch will pose a huge problem ahead. The challenge aligned with inflation has triggered an economic downturn across Europe and led to serious socioeconomic ramifications.

The ongoing energy crisis has intensified the ongoing asymmetries that hinder coherent EU action. In right aftermath of Russia’s full-scale invasion of Ukraine, the European Commission stressed the hazardous effects of Putin’s energy export policies as a rising geopolitical threat.

Unfortunately, the EU is not united in the energy context. The diverse interests of individual member states result in distinguished policies that entail energy mixes. While some states are heavily dependent on energy supplies from Russia, others enjoy the freedom from the bounding imports. The entrenched interests of many states are due to long-term contracts for energy deliveries.

The distinctions among individual member states undermine collective action to impose price limits or import energy collectively. Despite peaking prices for energy resources since August 2022, the EU governments have failed to take common action.

On this sob background, the EU commission has called to tax the windfall profits of energy firms, implement energy-saving measures, and facilitate troubled producers with state subsidies. While more affluent EU member states continue to rely on their national energy reserves, the majority of the EU member states want to establish the EU-wide price cap on gas. Less affluent EU member states have resisted € 200 b. of the German support package that aimed to reopen the North-South void in the EU.

The EU is still likely to initiate a stronger response to the emergent energy crisis owing to (1) collective energy purchasing; (2) price caps, as well as (3) the new financial package within the recovery fund.

Big Tech Legislation & Taxation

The ongoing EU’s battle with Big Tech has so far resulted in billions in fines and tougher taxation. In its effort to slow down the market dominance of the US tech giants prone to avoid taxes, stifle competition, and profit from unpaid news and false propaganda, the EU continues to press on.

While Brussels toughens accountability for disinformation and hates speech dissemination, the European policymakers attempt to free the market from the overlapping presence of the US Big Tech. The battle between Brussels and Silicon Valley is due to unfair rivalry measures against regional tech players.

Under The Digital Markets Act (July 2022), the European Parliament imposed a 10-plus per cent fine on a company’s annual sales for unfair attempts to dominate the EU tech market.

• Google has already paid more than € 8 b. in fines for abusing its domineering market stance.
• The EU accused Apple of blocking rivals from the contactless iPhone payment system.

While the EU is committed to making the US tech giants cease tax evasion, stifle competition, and profit from unpaid news content, so far the undertaken measures have not been successful in terms of tougher taxation of the US tech companies. The latter has been accused of re-directing corporate profits to low-tax economies, including Luxembourg and Ireland.

In close cooperation with the regional corporate business environment, the EU has intensified the cybersecurity domain. Preventive measures envisaged by the EU mark a win-win defence strategy to ensure that the IT system of none of its member states is affected. Once there is a sign of a local cyber threat, member states should accumulate all the available resources to save the Union from systematic hazards to its cyber security.

The EU will further secure digitalization by adopting world-class cybersecurity standards, services, and critical infrastructures to ensure the soonest digital transformation.

In the Aftermath of the Latest Corruption Scandal

The EU value of transparency has been much overshadowed due to the most recent corruption scandal. The European Parliament was shocked by the fact of participation of its MPs (including Eva Kaili, the EU Parliament Vice President) in a criminal venture, corruption affairs, and money laundering.

With more than €1.5 m. at stake, the investigation of the Belgian police sparked an international scandal. The corruption in the EU Parliament has reached an unprecedented scale. Transparency International anticipates more figures involved soon. The case has finally revealed that the political establishment is rotten to the core due to overwhelmingly tolerated impunity.

In the aftermath of the scandal, Transparency International calls the European Parliament for:

• Reforming internal whistleblower rules.
• Establishing a new independent external body instead of the Advisory Committee on the Conduct of Members, and
• Implementing financial control rules to regulate MP allowances, and
• Publishing all lobbying activities from non-EU countries in a special lobby register.

The establishment of an EU-wide ethics body will mark an efficient response to embrace all the lawmaking procedures. As a silver lining to the case, wide-scale reform measures are necessary to tackle corruption among MPs, revamp lobbying, ban ‘friendship groups’ and protect whistleblowers.

To cope with the ongoing and forthcoming crises, the EU should pursue a multi-stakeholder approach with a strategic emphasis on collaboration with business ventures.

The EU political establishment and the governments of the member states should mobilize available resources to develop closer ties with the corporate business environment as a core driver of future changes and innovations.

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The material was prepared by Justin Esiobu, EU GR Forum organizer and Project Manager at CFC Big Ideas.