How Ursula von der Leyen is using the Covid crisis to relaunch the EU
European commission president Ursula von der Leyen started her mandate just one year ago at the head of an EU weakened by debt, the euro, the migrant crisis and Brexit. As her first 100 days in office came to an end, very few were betting on a president ignored by her administration's officials and overwhelmed by chaotic border closures. But in the months that followed she turned the Covid-19 crisis into an opportunity for Europe’s relaunch.
Why it's geopolitical. While her predecessor Jean-Claude Juncker was leading a ‘last chance commission’, the former German defence minister took into account the depth of the geopolitical changes and the growing aggressiveness of powers, including Trump's US, Erdogan's Turkey and China's mercantile diplomacy.
Favoured by the German presidency of the European Council over the past six months, her achievements are above all economic: a one trillion euro green deal and the first mutualisation of the European debt, paving the way for an autonomous EU budget.
A year after taking office, she has grown into the role of a firm president, strengthening Europe against competing powers.
A difficult start. Even though she was not the top candidate of a political group in the parliament (according to the ‘Spitzenkandidaten’ system), she was narrowly elected in July 2019 by European leaders. Her candidacy had been put forward by French president Emmanuel Macron, at the same time as Christine Lagarde was nominated for the European Central Bank.
Coming from a Lutheran bourgeois family, Ursula von der Leyen is as sober as her predecessor, Jean-Claude Juncker was effusive. A mother of seven, a doctor and an economist, she had led her political career alongside Chancellor Angela Merkel since 2005 as minister for family affairs and, later on, for labour and defence.
Her narrow election came as a surprise in Brussels. Despite the fact that her father was a senior European civil servant (adviser to the first president of the commission Walter Hallstein), that she was born and raised in Brussels, and that she speaks the three working languages of the commission fluently (English, French, German), Ursula von der Leyen does not belong to the inner EU circle, unlike her main competitors to the presidency such as Michel Barnier or Frans Timmermans.
Was this to her advantage? Not according to the director of the Jacques Delors Institute, Sébastien Maillard:
"It was a difficult start, especially as she arrived from Berlin accompanied by two close colleagues who have been following her since her previous political functions in Germany."
At first, she found it difficult to be accepted by the commission's directorates-general and departments, which continue to reproach her for taking too long in her appointments. Moreover, while the commission works as a body, she imposed a certain verticality to its decision-making, which bothered some of the commissioners. Sébastien Maillard says:
“After her first 100 days, it seemed to be off to a bad start. Then there was the Covid crisis, which finally put her on the right track.”
What Covid revealed. Despite being a physician specialised in epidemiology, Ursula von der Leyen initially seemed overwhelmed by the pandemic. The disorderly closure of EU internal borders, the battle for mask stocks, and the export restrictions on certain medical equipment created a sense of chaos. But from April onwards she took back control of the situation.
Sébastien Maillard notes:
“The first sign of a turnaround came when she made a public apology to Italy, which had been abandoned at the start of the crisis. This is a first for a president of the commission.”
Getting a grip on healthcare. Ursula von der Leyen succeeded in getting vaccine pre-orders and treatments grouped together to be negotiated by the commission with the pharmaceutical companies.
Maria da Graça Carvalho, a member of the European parliament (EPP) and former science minister of Portugal, says:
"She focuses a lot on the issue of healthcare. Having specialised in public health, she is the right person for the job in the pandemic’s context. That's why she has been able to impose bulk vaccine purchases, but also why countries have to submit their vaccination plans to the commission."
This proficiency in health (whereas initially, the EU had very little) was gradually extended through the creation of a new European health agency for medical research as well as strengthening existing ones — the European CDC and European Medicines Agency.
Admittedly, member states’ policies continued to lack coordination during the second wave. But recently, Ursula von der Leyen announced a platform for sharing data on hospital beds to facilitate patient transfers between European countries and the harmonisation of scientific recommendations.
However, the lack of transparency in vaccine pre-orders (2 billion doses for €15bn) and the exceptions to the legal liability of pharmaceutical companies in case something goes wrong, have sparked questions that are now being considered by the parliament's health committee.
The order for 500,000 doses of remdesivir from Gilead – a few days before the WHO revealed its ineffectiveness in its Solidarity clinical trials – also casts a shadow over her track record. Even then, it is still not clear whether the $1.2bn contract will be called into question. Gilead had in fact been made aware of the WHO results before the EU order.
The success of the Sure programme. Ursula von der Leyen scored points in her first year as president mainly in the economic field.
Her relationship with Chancellor Angela Merkel allowed her to put the Stability Pact and the Maastricht criteria, which are under the commission’s control, on hold for 2020 and 2021. She announced this on Twitter at the end of March, a few days after relaxing the rules on state aid to businesses.
From spring onwards, she became more proactive by providing a €240bn credit line and particularly by creating the Sure Programme to finance short-time work through the European Rescue Mechanism, which was created in 2012 at the end of the Greek crisis.
This programme made it possible to lend €87.4bn at very low rates to the sixteen countries that requested it in order to finance measures to keep employees in their jobs.
Financed by the commission's first issues of "social" bonds, Sure is in line with Ursula von der Leyen's positions. In spite of her political origins (the Christian Democratic Union), she has long demonstrated to care for social issues. When she was minister for family affairs, she promoted the development of childcare centres and introduced a parental wage.
Sébastien Maillard also notes:
“Even though she delegated the Brexit issue to Michel Barnier, she profited from the absence of the British, who would never have accepted a social programme like Sure.”
However, not all of her early measures were equally effective. For one, the three-fold increase to the limit of state aid provided to businesses saw half of the subsidies going to German companies (15 per cent to Italian and 14 per cent to French companies). Moreover, the ESM has not received any requests from member states, probably in anticipation of a more generous recovery plan.
Europe’s recovery plan. On 21 July, European leaders reached an agreement on an exceptional recovery plan (Next generation EU) of €750bn funded for the first time by bonds issued by the European commission’s bonds. This was a victory for Ursula von der Leyen as it was she who proposed the plan, which could not have been accepted without the influence of Chancellor Angela Merkel.
Maria da Graça Carvalho says:
"She was very innovative in designing the plan itself, which made it possible to get it accepted by the previously reluctant Northern European countries.”
These funds will finance national programmes in all member states, in the form of grants (€390bn) and loans (€360bn):
Next year, each member state will receive a pre-defined amount based on its population, GDP per capita, unemployment rate before the pandemic, and the development of its economy by 2023.
The national plans are currently being assessed by the commission, and early next year the mechanism will have to be approved by each national parliament.
The first bonds are expected to be issued by the end of the second quarter of 2021.
This first pooling of bonds by member states gives more power to the European commission as it will evaluate the national plans, raise the funds and then hand them out. Sébastien Maillard analyses:
“This will give much more autonomy to the European budget. Reimbursement does not depend on the states, so in the long term this implies creating their own resources.”
This is already the case with the entry into force of the tax on non-recycled plastics on 1 January (0.80 euros per kilo). This could be followed by a carbon tax at the borders and a digital tax by 2023. The resources of the carbon market could also be extended to aviation and maritime transport.
For Sébastien Maillard, “this budget autonomy and the recovery plan represents a real relaunch of the European project, which is partly to Ursula von der Leyen’s credit.”
Moreover, her fingerprints can be found both in these environmental taxes and in the recovery plan objectives. A third of the emissions will be in the form of "green" bonds and 37 per cent of the funds will finance projects linked to the ecological transition.
At any rate, the council of EU leaders and the European parliament will vote in the coming days on the 2021-2027 European budget, which will contain the recovery plan. On Tuesday 10 November, the negotiating teams had reached an agreement after ten weeks of talks.
But Hungary and Poland decided to block the budget, refusing to link the receipt of European funds to respect for the rule of law (independence of the press and the judiciary). However, Sébastien Maillard says:
“Poland and Hungary being net beneficiaries of the European budget, their means of opposition are limited. Ursula von der Leyen can rely on the European parliament, which is very keen on the respect for the rule of law.”
Politically, this is what she had already done for another budget, which is also awaiting a final decision in the coming days. While the commission had proposed a budget of €94.4bn for the Horizon Europe research framework programme for 2021-2027, EU leaders reduced it to €81bn last July.
But thanks to European parliamentarians, she was able to raise the agreement to €85bn, an increase compared to the previous Horizon 2020 programme budget of €80bn, despite it still being lower than what she hoped for.
“She has taken the measure that the parliament can now be a political ally of the commission,” Maria da Graça Carvalho says.
The green deal. In January 2020, Ursula von der Leyen published her green deal, which aims to reach carbon neutrality by 2050. Sébastien Maillard says:
"She has made the ecological transition the backbone of her policy and has found a way to get everyone to agree on the essentials."
This plan involves an ambitious and above all binding climate law: A 55 per cent reduction in greenhouse gas emissions compared to 1990 levels by 2030 (raised to 60 per cent by the European parliament) and €1 trillion of funding over 10 years.
This sum will not come from a new budget, but will come from five existing or new sources:
25 per cent of the EU budget (€500bn over ten years) would be redirected to ‘green’ projects but would still be paid to the current recipients of these subsidies, meaning farmers (40 per cent of the current budget) and regions (30 per cent).
Member states would have to contribute around €114bn through existing national, regional or local EU co-financing mechanisms.
The InvestEU programme, which provides an EU budget guarantee on private or European Investment Bank green transition projects, is expected to mobilise €279bn of private and public investment.
Ursula von der Leyen also proposed the creation of a ‘Just Transition Fund’ for the regions furthest behind in the energy transition of €143bn over 10 years.
Finally, €25bn would come from the revenues of the European carbon market.
Ursula von der Leyen also proposed during her speech on the State of the European Union last September the creation of a ‘European Bauhaus’, a new area of collaboration between architects, designers, artists, scientists and engineers on topics such as zero-emission buildings or the cycle of building materials.
A breath of fresh air. Established in 2009 by the Treaty of Lisbon, Ursula von der Leyen's first State of the European Union address was an opportunity to take stock of her ambitions and style. Sébastien Maillard observes:
“Her predecessors José-Manuel Barroso and Jean-Claude Juncker carried out this exercise on a more classical manner. She gave a speech that was both very human and enthusiastic. Add to this the fact that she is quite telegenic, it gives a much more human face to the position.”
Ursula von der Leyen has benefited from Chancellor Angela Merkel’s aura (74 per cent approval rate after 15 years in power) and her support during the six months of the German presidency of the European Council while managing not to irritate France or the small countries by showing a more favourable attitude towards Germany.
If the European budget, the recovery plan and the climate law are adopted in the coming days, she will undoubtedly appear as the one that has reinvigorated Europe.
This bodes well for a new period in the ‘Atlanticist’ relationship with the United States, to which she heavily favours. In fact, the former German Defence Minister had announced a "geopolitical" commission, which is supposedly more resistant to competition from other powers.
These economic achievements and the enormous funding linked to them will allow her to implement her plan to build resilience in fourteen industrial sectors that are key to Europe. These include projects such as an alliance for batteries for electric vehicles, public-private partnerships such as Clean Sky for aviation, or the development of hydrogen production from renewable energies.
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