State of the Union 2022 - Headlining the Speech of President Ursula von der Leyen
On 14 September 2022, the President of the European Commission gave her State of the Union address in the European Parliament. This has become an annually revolving tradition of presenting the state of play, the challenges ahead and proposals for legislative changes in the EU.
Dressed in yellow and blue, with the European flag (blue with 12 golden stars) in her back, von der Leyen conveyed her key message of “A Union that stands strong together”. Expectedly, the war in Ukraine was #1 on the agenda, followed by very interesting (I would even say inspiring) thoughts, conclusions and first ideas of upcoming policy initiatives.
In the following, I have summarized what I believe are some of the key messages of the speech for European businesses:
Russia
The Sanctions against Russia are here to stay. Europe will need to get rid of its dependency on Russian fossil fuels. The diversification to reliable suppliers (US, Norway, Algeria and others) is in progress.
Energy
- Member States will have to reduce their overall electricity consumption.
- Revenues of electricity producers should be capped: In extraordinary times, extraordinary profits must be shared and channelled to those who need it most.
- The electricity future markets will need to change, both as regards collateral and on limiting intra-day price volatility.
- The electricity market must be reformed: get rid of “merit order” system, decoupling of dominant influence of gas on price of electricity.
- Major oil, gas and coal companies should equally have to give a crisis contribution.
- The benchmark used in the gas trading market (TTF gas price) will need to become more representative, reflect the increased amounts of LNG and – my interpretation – “downed”.
- A new European Hydrogen Bank will help building a future market for hydrogen (investing EUR 3 billion). The 2030 goal is “upped” to an annual production of 10 million tons of renewable hydrogen.
Jobs and Growth / transition to a digital and net-zero economy
- The Maastricht fiscal rules should be redesigned to allow for strategic investment in a more flexible public debt governance while safeguarding fiscal sustainability.
- An SME Relief Package should, amongst others, introduce a single set of tax rules for doing business in Europe (BEFIT) and revise the late payment rules in an attempt to secure earlier payment of invoices.
- Europe will need to invest more in educating and qualifying its workforce.
- Europe must secure supplies of raw materials (lithium, rare earth minerals) without creating similar dependencies as in fossil fuels (partnering with Chile, Mexico, New Zealand, Australia and India).
- Europe must also increase its capacities in processing these critical metals to reduce its dependency on China. So, a “European Critical Raw Materials Act” was announced together with an increased financial participation to Important Projects of Common European Interest (IPCEIs).
- In order to ensure that the future of industry is made in Europe, also a new European Sovereignty Fund should be created.
Interested readers are invited to read von der Leyen’s script (for download here).
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“Long live Europe.” This was the end of her speech and should also be good for my task here.
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