Four times per year, EU leaders gather in Brussels. The autumn meeting of this so-called “European Council” is taking place tomorrow.
Typically, the official agenda doesn’t present a proper picture of the actual topics that will be discussed. Also, a lot of it is already being negotiated at the diplomatic level in the days and weeks preceding the Summit.
#EUCO | A busy agenda lies ahead for EU leaders at the European Council meeting this Thursday and Friday:
Click below for more info 👇https://t.co/duyYgYBlC0
— EU Council (@EUCouncil) October 20, 2021
The agenda for tomorrow lists things like “energy prices, migration, COVID19, external relations, Digital Transformation, trade.” Only at the last minute, the sentence that “We will also touch upon recent developments related to the Rule of Law during our working session” was added to the invitation letter.
— Charles Michel (@eucopresident) October 20, 2021
Obviously, the tensions with the Polish government over the ruling by the Polish Constitutional Court – read more about it here – are at the very top of everyone’s mind. Despite EU Council President Charles Michel “desperately trying to keep the Poland rule of law issue out”, he failed in his endeavor.
Tensions with Poland
Yesterday, in a speech for the European Parliament, European Commission President von der Leyen listed three possible options to respond to the Polish court ruling:
“The first option are infringements, where we legally challenge the judgement by the Polish Constitutional Court.
Another option is the conditionality mechanism and other financial tools. The Polish government has to explain to us how it intends to protect European money, given this ruling of their Constitutional Court. Because in the coming years, we will be investing EUR 2.100 billion with the Multiannual Budget and the NextGenerationEU recovery programme.
The third option is the Article 7 procedure. This is the powerful tool in the Treaty. And we must come back to it.”
— Alberto Alemanno (@alemannoEU) October 19, 2021
— Is EU Concerned? (@ISEUConcerned) October 8, 2021
European Justice Commissioner Didier Reynders on his part announced the Commission would start “written procedures” against Poland in the coming weeks, as he also planned to visit Warsaw for talks.
A coalition including the Netherlands, Belgium and Sweden are leading the charge to push for “budget conditionality”, which means going for option 2.
Speaking on behalf of the Benelux, Belgian Foreign Minister Sophie Wilmès said:
“We therefore equally call upon the Commission to make use, when applicable, of the rule-of-law conditionality regulation at the earliest possible time and to seriously consider additional steps to address the inherent risks that the deterioration of the rule of law poses to future disbursements of funds.”
One EU diplomat suggested that the Commission could start right away with its preparatory work on this proceedings – which may end up in Poland losing EU funds – in order to be ready the day after the ECJ verdict on whether the EU’s rule of law mechanism, agreed in 2020, is in line with EU law – whereby Hungary and Poland maintain it is not.
This all follows the compromise of last December’s EU Summit, when Warsaw and Budapest dropped their veto on the EU long-term budget in return for postponing the activation of the new Rule of Law mechanism until the ECJ validates it. Since then, the European Parliament has been putting pressure on the Commission to go ahead no matter what.
To go for this course of action would really be the most radical response, given that article 7 – which could end up in Poland losing voting rights – has already been activated against Poland in the past, but was simply blocked by Hungary – of course, that’s different if current PM Orban manages to hold on to power next year.
Realpolitik may well trump all of this. Still, France and Germany came out remarkably aggressive earlier this week, with French Europe Minister Clement Beaune stating that “budget solidarity cannot continue if there is no respect for fundamental values inscribed in the EU treaty” and his German counterpart Michael Roth warning: “We need to talk, but I do not see any room for compromises.”
This apparently now leads outgoing German chancellor Angela Merkel fearing a push against Poland leaves no room for compromise and could end in disaster. According to a person familiar with her thinking, “she sees a possible worst-case scenario with Poland exiting the EU, as well as authoritarianism bolstered in a country that would become more subject to outside influences”, reports Bloomberg.
Today, French President Macron felt the need to let one of his Elysée officials communicate:
“I formally deny a French or German opposition to raising the issue of rule of law in Poland during the European Council… it is a major problem that throws into question the European project. I formally deny, it is not true”.
On its turn, Politico informs us that “France wanted to avoid confronting Poland, but now, [there is the] feeling that Poland will raise it anyway. [France wants] to limit it to 3/4 interventions”
In other words, “talking” at the EU political level very much involves posturing and spinning.
EU Energy and climate policy:
Exploding European energy prices have refueled the already tense debate on EU energy policy. On Forbes, energy editor Christopher Helman sums up what’s going on:
“It starts with central banks persisting with artificially low interest rates and a flood of cheap money despite record levels of consumer spending and a 30% surge in Chinese exports—all of which is straining against pandemic-constricted supply chains. Add to that Russia not flowing nearly as much gas into Europe as expected (perhaps as a passive-aggressive tactic to force approval of Nord Stream 2).
But the roots go deeper. The ESG and carbon divestment craze has so demonized fossil fuels (and nuclear power) that institutional investors and governments have cut them out of portfolios entirely, and have instead been flowing capital to more socially acceptable low-carbon alternatives.”
One of the topics for this week’s EU Summit is to debate whether nuclear should be recognized as environmentally friendly under the EU’s so-called “taxonomy” regulation, which classifies whether economic activities are environmentally sustainable.
Ten EU member states issue a call for nuclear energy:
— Pieter Cleppe (@pietercleppe) October 13, 2021
The FT notes that “Europe’s pro-nuclear countries, led by France, and pro-gas member states in the south and east, are demanding the taxonomy rules do not penalise technologies they say are vital in securing the transition to net zero emissions” as “France leads the nuclear brigade, and Germany’s SPD wants recognition for gas.”
The EU Commissioner responsible, Mairead McGuinness, is planning to kick the decision over the French Presidential election and has floated possible compromises, which reportedly included “creating an “amber” label for activity that did not win the green label but would still secure a place in the bloc’s transition and not discourage private sector investment.”
Here, France and Poland are on the same side, having issued a joint call with other member states – now also including the Netherlands and maybe Estonia – stating that it is “absolutely necessary” to include nuclear power in the taxonomy framework”.
Separately, Poland is urging the European Commission to look into potential abuse of dominant market position by Gazprom, accusing Russia of linking its insufficient increase in European gas deliveries with demands to finalise the legal framework for the Nord Stream 2 gas pipeline between Russia and Germany, which bypassed Poland. Interestingly, German Greens co-leader Annalena Baerbock is on the same page, having accused Russia of attempting to “blackmail” Europe by causing energy prices to spike, saying: “We can see a poker play by Russia”. Her party is currently trying to form a new, red-green-yellow German coalition government with the German social democrats, who are more conciliatory towards Russia.
Also Europe’s energy-intensive energies have raised the alarm, complaining about “unaffordable” carbon prices, something which results from the EU’s emission trading system.
The EU carbon price has dipped since hitting an all-time high above 65 euros last month, dropping back below 55 euros a tonne today. Big support lines around here retracing the rally from March 2020 lows to the peak.
If they hold it's just a pause in the much longer uptrend… pic.twitter.com/Tj90zbh8LT
— David Sheppard (@OilSheppard) October 19, 2021
“After the Russian action concerning gas, the creators and advocates of this ‘Fit for 55’ have, to put it delicately, made themselves look ridiculous. (…) Energy prices have hit many EU countries with such force that their citizens will simply not agree to further increases in the name of some unproved theory.”
New EU regulations covering big tech:
A deal to agree on the Digital Services Act (DSA) and Digital Markets Act (DMA), new, potentially burdensome EU regulations hitting tech platforms, will be delayed, as the new goal is now to reach a deal “as soon as possible.” Euractiv notes that the timetable to finalise these regulations by the deadline set in Spring “would have served well the French government ahead of the presidential elections there in April next year.” With the French EU Presidency starting from January, Macron would have been able to exploit this round of U.S. tech bashing in the run-up to the French Presidential vote in April. However, an EU diplomatic source revealed a majority of member states opposed this timeline as too strict and not very realistic. Yet more evidence France does not always get its way in the EU.
Michel’s invitation letter mentions the plan is “to follow up on the implementation of the June European Council conclusions on the external dimension of migration, in particular when it comes to financing.”
Covid vaccines for developing countries:
The EU has only donated about 56 million Covid vaccine doses to poor countries, which is less than a quarter of what it promised to supply this year. EU leaders now plan to “call for the rapid removal of obstacles hampering the global rollout of vaccines,” according to draft European Council conclusions. These obstacles reportedly include liability concerns, short shelf life and extensive paperwork.