EU’s plans for 2024: aspiration or perspiration?

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2023 was a challenging year for the EU. Will 2024 bring the same level of economic instability and political instability, or will new mega-policies and a slew of elections bring about new opportunities?

Ukraine: Next Steps?

With Russia’s war on Ukraine entering its third year, President Vladimir Putin has vowed to continue the fight until Moscow can secure the ‘demilitarization’ and ‘denazification’ of the country. Virtually all Russian armed forces are in an active stage of action, ramping up missile attacks on Ukrainian targets. The stakes for Kyiv remain exceptionally high, and Europe’s ongoing resolve to support the country as it battles against Russia is crucial.

In its November recommendation, the European Commission formally brought forth the idea of green-lighting accession talks, stressing that Kyiv is in desperate need of a strong political message as well as continued practical support in the form of financial aid packages.

In a sign of solidarity, EU leaders gathered in Brussels in December for what has arguably been the toughest summit of the year. Leaders prepared for a showdown with Hungary’s Prime Minister Viktor Orbán over unlocking 50 billion euros of financial aid for Ukraine and opening accession talks with Kyiv.

Despite expectations that Hungary would veto the decision on enlargement, in a clear signal of hope and solidarity, the European Council decided to open accession talks with Ukraine and Moldova, as well a grant candidate status to Georgia. Agreement has been reached following Orbán’s decision to abstain from the voting process, temporarily leaving the summit room in a ‘pre-agreed and constructive manner’ whilst the EU26 approved the start of accession talks. Budapest’s’ diplomatic manoeuvre followed the 13 December European Commission decision to restore Hungary’s access to 10.2 billion euros in cohesion funds after finding it had met the conditions relating to judiciary independence. Despite EU officials denying any direct link between the two decisions, there is clear indication that the easing of the domestic embargo aided in swaying Orbán’s concession.

Whilst the budget proposal to support Ukraine’s government over the next four years was firmly supported by EU26 leaders, attempts to convince Orbán to agree to the financial aid package were unsuccessful. At a time of waning financial and military support from its Western allies, namely the United States, Hungary’s blockage dealt another considerable setback to Kyiv.

Beyond Orbán, the EU’s resolve to sustain Ukraine continues, with EU leaders agreeing to a 12^th round of sanctions on Moscow. The start of 2024 will be marked by an extraordinary leaders’ meeting to be held on 1 February, a second attempt to produce a unanimous decision on the EU’s annual budget and financial aid to Ukraine. Confidence remains high amongst EU26 leaders, with the Dutch Prime Minister Mark Rutte stating: “I am fairly confident we can get a deal early next year.” Similarly, French President Emmanuel Macron relayed his conviction in the EU’s operational capacity as a unified bloc, suggesting that Orbán had an incentive to reach a deal, a statement perceived by some as alluding to the 21 billion euros in cohesion funds that still remain out of Orbán’s reach.

Green Deal: Global Leadership vs. Domestic Pushback

With the crucial COP28 UN Climate Conference just behind us, and less than a year before the European elections, the EU’s commitment for transformational change and its role in shaping the green transition has come to the forefront of citizens’ and international partners’ attention.

Globally, Europe has been leading the way in climate action, pledging its support to the green transformation through the European Green Deal, presented in December 2019. Under EU Climate Law, the Deal’s climate ambitions to turning the EU into the first climate neutral continent by 2050 are legally binding. The recent entry into force of the ‘Fit for 55’ legislation has set the EU on a path to reach its climate targets by 2030, reducing emissions by at least 55% in a fair, cost effective, and competitive way.

COP28 produced, for the first time, a global consensus in line with the Green Deal’s goal of achieving net-zero emissions by 2050. A shared vision for the future has been established beyond the EU’s borders, with countries pledging to work together to transition away from fossil fuels, triple the world’s renewables by 2030, and double energy-efficiency progress every year until then.

Additionally, the European Commission has established a goal of reducing net greenhouse gas emissions by 90% by the year 2040, as promised by Wopke Hoekstra, the EU's Commissioner for Climate Action, during his election campaign in October. Environmental groups have expressed disappointment that the EU has not yet set a more ambitious “a legally-binding target” for reducing emissions by 2040, in line with the goals of the Paris Agreement, which would help to achieve the long-term goal of a decarbonized economy by 2050.

On the other hand, European industries assert that they support the EU's climate goals, but caution that decarbonization policies must also safeguard their competitiveness in comparison to companies outside of Europe. Therefore, achieving this balance is expected to be the central topic of discussion during the informal Environment Council meeting on January 16th, when the EU's 27 environmental ministers gather at the Belgian Presidency of the EU.

NextGen EU?

As Europe navigates the challenges of a post-pandemic world, a strategic investment has taken centre stage – Next Generation EU (NGEU). More than a recovery plan, NGEU has been proclaimed by the EU as a ‘turning point’ for Europe, a chance to transform economies and societies, making them healthier, greener and more digital.

Set up in 2020 to address the socio-economic fallout caused by the pandemic, NGEU is one of the largest stimulus packages to be financed. Made up by an unprecedented 806.9 billion of EU debt, the programme has kicked off, turning the EU vision into reality by helping many sectors bounce back from the shock of the pandemic through the Recovery and Resilience Facility.

The programme has been fundamental in setting Europe on track to becoming the first climate-neutral continent by 2050. With at least 30% of the budget earmarked for Europe’s green transition, NGEU has spearheaded investments in environmentally-friendly technologies, sustainable public transport, environmental preservation, and energy efficiency.

European Elections

The European Union (EU) elections will take place 6-9 June. During this time, 705 Members of the European Parliament (MEPs) will be elected across the 26 member states of the EU, serving a term from 2024 to 2029. These elections could potentially mark a pivotal moment for the EU, given the increasing prominence of far-right populist parties throughout the bloc.

For the policy and procedure wonks, it is worth bearing in mind that the EU’s Lisbon Treaty, which came into effect in 2009, considerably enhanced the European Parliament's standing by granting it equal legislative authority alongside the Council and the ability to define Europe's political agenda. Consequently, the forthcoming elections hold significant implications. The forecasted change in the parliamentary majority towards possible extremist right-wing parties is set to pose a substantial threat to the EU's foundational liberal values, both politically and economically. Such a change could in turn fundamentally alter the EU's approach to governance, economic policy, and its dedication to liberal democracy, human rights, and free-market principles. Not much analysis on this has emerged yet, beyond the ‘2024: year of elections’ coverage, but the impact for the EU could be quite profound.

Avoiding the ‘B’ Word? EU/UK Relations and Recalibrations

As part of the Brexit deal and post-Brexit recalibrations, the EU and the UK recognized the need for strengthened relations, culminating in the signing of the Trade and Cooperation Agreement (TCA) on Christmas Eve 2020. Finalized by then-Prime Minister Boris Johnson in 2021, the TCA governs various domains including trade in goods and services, investment, fisheries, energy, transport, and law enforcement. The agreement also includes provisions for fair competition, conflict resolution, and governance mechanisms.

In February 2023, another significant development took place in Windsor, further enhancing and facilitating exchanges between the UK and the EU under the current Conservative government. This agreement played a crucial role in the economic interaction with Northern Ireland, which serves as a vital junction in the EU's economic zone. The Windsor Framework introduced the 'Stormont Brake', effectively resolving the trade disruptions between the EU, the UK, and Northern Ireland, thereby streamlining the process.

However, with the UK approaching general elections, the political landscape could see shifts across these and other EU-UK agreements. Labour Party leader Sir Keir Starmer, in a conversation with the Financial Times, expressed his intention to negotiate and ‘rewrite’ a "much better" Brexit deal with the EU if Labour comes to power. However, Starmer criticized the current TCA as 'too thin,' suggesting the possibility of significant changes in the trade regulations and rules between the EU and the UK, especially considering the TCA is due for review in 2025, while taking pains to point out under his leadership, there will be no attempt to return to the EU.

The UK in a Changing Europe in September 2023 report offers particularly a comprehensive analysis of the TCA, focusing on key provisions and potential areas for review. The review of the TCA could lead to changes in various areas, including energy security. However, any changes would depend on the political will of both parties and the outcome of negotiations. This potential shift indicates an evolving dynamic in UK-EU relations, with future changes possibly aligning with Labour's perspective on Brexit and international trade.

In response to the Russian invasion of Ukraine, in May 2022 the European Union introduced the REPowerEU plan. This plan aimed to reduce energy imports from Russia through a three-pronged strategy of saving energy, producing clean energy, and diversifying energy supplies. The plan would also have supported the Union's efforts to transition to a clean, decarbonized economy in the long term. However, some recent moves by the French and German governments to offer subsidies through reduced energy prices to maintain their industries' competitiveness have been viewed as potentially hindering the single market and the REPowerEU plan by smaller member states of the block.

In these first weeks of 2024, the European Union finds itself at a critical juncture, grappling with a diverse array of challenges and opportunities that will determine its future trajectory. The persistent conflict in Ukraine continues to test the EU's cohesion and resilience, especially in light of the pivotal decisions to initiate accession talks with Ukraine and Moldova, and grant candidate status to Georgia. These actions, though symbolizing unity and hope, also underscore the intricate geopolitical terrain the EU navigates.

Following global agreements reached at COP28 highlights the EU's ongoing role in climate action, with its ambitions laid down in both Green Deal and ‘Fit for 55’ legislation, representing significant milestones towards achieving the ambitious goal of climate neutrality by 2050.However, striking a balance between environmental aspirations and maintaining industrial competitiveness remains an ongoing challenge, a topic that will be at the forefront of upcoming discussions among EU environmental ministers.

As we explored, the June 2024 European elections are also poised to be a transformative moment, with the potential to reshape the EU's political landscape. The growing influence of far-right populism and the outcome of these elections will significantly impact the Union's future direction and cohesion. The 2024 elections are not just a routine democratic exercise but a pivotal moment that could redefine the character and direction of the European Union itself.

Lastly, in terms of EU-UK relations post-Brexit, the evolving political atmosphere in the UK, including the upcoming general elections and the possibility of renegotiating the Trade and Cooperation Agreement under a Labour government, suggests new developments in trade and energy security.