Politics & Economics

EU: European Summit, International Anxieties Distract from European Scenarios

April 2024
By Giampiero Gramaglia

With its very American and not very European style, Politico placed this ‘special’ European Summit in mid-April, likely the last before the European elections from June 6 to 9, under a provocative banner: “Bullets, not bees,” which almost plays as a pun in English. In recent months, the European Union has shown a populist, hence electoral, tendency to downplay green choices – driven by fundamentally denialist economic interests and corporate pressure from farmers – and to instead emphasize Europe’s Defense, aiming to strengthen the arms industry in a pro-Ukrainian or anti-Russian function, rather than equipping itself with a NATO-integrated autonomous defense capability.

To justify its claim, Politico wrote: “A draft of the Union’s priorities for the next five years insists on defense and barely mentions climate change.” There’s a series of recent EU stances – on migrants, climate, agriculture – that prioritize immediate interests over far-sighted choices. These are often contradictory to already made commitments and sometimes to established political convergences.

But then, as often happens, current events derailed a European Summit that was supposed to outline the EU’s future, from improving competitiveness to completing, never realized, the single market, drawing from the preparatory work entrusted to two former Italian premiers, Mario Draghi and Enrico Letta.

Draghi is vying for one of the top positions in the European institutions in the next 2024-2029 legislature: the presidency of the European Commission, where Ursula von der Leyen’s chances, previously thought unassailable, are plummeting amidst political mistrust and mishaps. Those “drawing knives” against the outgoing president – an image current in Brussels evoking the Ides of March – include socialists, greens, and liberals, who all have their more or less nominal candidates and who are annoyed by UvdL’s insistence on courting conservatives; there’s also dissent within her own party, the European People’s Party.

Thus, the first day of the European Summit was occupied by international crises: Ukraine, where President and Foreign Minister of Kyiv Volodymyr Zelensky and Dmytro Kuleba renew pressing calls for more weapons and ammunition, especially for air defense, as their country is increasingly exposed to Russian attacks on military targets and energy and industrial infrastructures; and, especially, the Middle East, where the potential aftermath of the back-and-forth between Israel and Iran heightens fears of an escalation of the conflict.

The leaders of the 27, in reality, have little margin for action and reaction, just like all the gatherings convened urgently this week to examine and assess the situation: the leaders and then the Foreign Ministers of the G7 under Italian presidency; on Sunday, the UN Security Council; and, on Tuesday, the EU Foreign Ministers. All are unanimous in renewing support for Ukraine – without however unlocking US aid, hostage for six months to US political-electoral squabbles –. And all are unanimous in condemning Iran’s retaliation against Israel – as if the Israeli attack on an Iranian diplomatic site in Syria on April 1st were acceptable under international law –. Little, however, is concrete, if not a new round of anti-Iranian sanctions: it’s been 27 months, since Russia’s invasion of Ukraine, that Western foreign policy has been essentially reduced to sanctions, with little or no effect and some own goals.

The Paris – Berlin axis unlocks the capital markets
Only yesterday, on the second day of the European Summit, was there talk of integration prospects. And it got stuck for at least three hours on the chapter of capital markets: like the old times of the Paris – Berlin axis, which Rome supported, instead of flirting with the frills of the Union, it was a French-German proposal that moved Ireland, Luxembourg, Cyprus, and Malta, i.e., the coalition of small European ‘tax havens’.

In the end, the agreement is a breath of fresh air: the 27 agree on the idea of “improving the convergence and efficiency” of the “supervision” of European capital markets and invite “the Commission to work on the conditions to enable European authorities” to effectively supervise the most significant systemic capitals and main financial market actors. Words, for now, without concrete impact.

Until the last moment, the text of the European Summit conclusions had been left open on two points, precisely on the part of the Capital Market Union. The first on the harmonization of national insolvency systems and on taxation for companies, including the idea of supporting capital investments. The second, more thorny, on improving the supervision of capital markets, to give European supervisory authorities power over transnational systemic capitals and financial market actors.

The breakthrough, on the second point, came by focusing on convergence and entrusting the Commission to study how to achieve it, “taking into consideration the interest of all Member States”.

EU: European Summit, Letta’s report to leaders on completing the single market
The single market is for everyone: we’ve been hearing it for forty years since Jacques Delors launched the goal of completion, which evidently has not yet been realized if, now, in Brussels comes the report by Enrico Letta to the EU leaders on the future of the single market.

The former Italian premier, in a 150-page text, says integration must be “a crucial part of the electoral debate”: a hope in vain a priori, in Italy and not only, because European issues, when touched upon in the election campaign, are always reduced to slogans. And this does not lend itself.

Letta calls for the creation of “a permanent Conference of Citizens”, because the single market must be “understood and accepted by the public opinions”. The former premier suggests to the Council to ask the Commission to “develop a global strategy” on the “actions to break down existing barriers, promote consolidation, and strengthen the competitiveness of the single market”. A theme that links Letta’s study, ‘Much more than a market’, to the reflection on competitiveness entrusted to Draghi.

Letta’s analysis outlines various proposals on how to strengthen the single market: Sabina Rosset, on ANSA, synthesizes them starting from the invitation to increase collaboration between employers and workers: social dialogue is necessary, as is an increase in collective bargaining.

In the energy sector, the study focuses on increasing interconnectivity and on investments in infrastructure to maximize the potential of renewables, ensure energy security, and expand supply options. For the industry, it invites simplification of regulations. A particular focus is reserved for financial integration, with the proposal to create a ‘Union of Savings and Investments’ (not just a Capital Market Union) to mobilize private capital in the EU, reducing dependence on foreign finance. On enlargement, the approach is cautious: ensuring the respect of EU values by gradually extending the benefits of the single market.

The president of the Delors Institute then invites the 27 to aim for integration of telecommunications, energy, and finance, giving scale dimensions to the European economy. As for defense, it is necessary that the industry grows in order to meet domestic demand: “If we are not able to grow, we will continue with this shame of 80% or more precisely 78% of non-European military supplies purchased as Europeans”.

Letta’s report has received much appreciation, but also some criticism. The former premier concludes: “The real enemy of my work is the drawer”. A destination that, especially with the changing of the guard from one Commission to another, cannot be ruled out.