Written by Annastiina Papunen and Rebecca Torpey.
Discussions at the European Council meeting of 23 March concentrated on Europe’s long-term strategy for economic competitiveness, Russia’s war of aggression against Ukraine, and energy. Other topics mentioned in the European Council conclusions include migration, the donors’ conference in support of the victims of the recent earthquake in Türkiye and Syria, the agreement on the path to normalisation of relations between Kosovo and Serbia, the sentencing of Belarusian democratic opposition leaders, and the Windsor Framework aimed at resetting EU-UK relations.
With recent turbulence in the banking sector as the backdrop, EU leaders discussed the situation in the euro area during a Euro Summit meeting in inclusive format on 24 March, issuing a short statement underling their commitment to close coordination of economic policies.
In addition, the new President of Cyprus, Nikos Christodoulides, outlined his proposal aimed at relaunching negotiations on the Cyprus issue. While not formally on the agenda nor discussed in the meeting itself, according to the Commission President, EU leaders also raised and commented – on the margins of the meeting – on the last-minute opposition by a group of Member States, led by Germany, to the politically agreed phasing out of vehicles with combustion engines by 2035.
1. General aspects
The European Council meeting, which lasted just one day, started with the customary address from the President of the European Parliament, Roberta Metsola. Her remarks focused on the need to strengthen EU solidarity with Ukraine and on measures aimed at boosting investment and EU economic competitiveness. She stressed that the EU ‘must continue to act in unison and deliver on more Europe where it matters’. As indicated in the President, Charles Michel’s, invitation letter, the UN Secretary-General, António Guterres, joined the European Council as guest for a joint discussion on key geopolitical issues and global challenges, in particular food security.
Ahead of the meeting, on 22 March. Charles Michel and Commission President Ursula von der Leyen met with the European social partners (i.e. European employers’ and trade union organisations) for the tripartite social summit, discussing the challenges to the EU’s competitiveness.
The 23 March European Council meeting was the third in a row to finish within one calendar day. While the December 2022 meeting was planned as a one day event from the start, the February and March meetings were both initially planned to stretch over two calendar days. Also worth mentioning, a new indicative Leaders’ agenda for the coming months in 2023 was published ahead of this latest meeting. Whilst originally aimed at providing a concrete work programme to guide EU action in the medium term, and offer an overview of EU leaders’ meetings for a period of at least a year, this document has become shorter and shorter since its inception in 2017.
2. European Council meeting
Competitiveness, single market and the economy
The European Council outlined a number of challenges facing the EU economy, and discussed ways of ensuring long-term economic prosperity and competiveness in the context of shifting geopolitical dynamics. EU leaders underlined the need for a comprehensive approach covering the single market, industrial, agricultural and trade policies, which would aim at increasing the productivity and competitiveness of the EU’s economic base. To be able to assess the progress achieved in the medium term, the Council has been tasked, with the input of the Commission, with providing an annual report to the European Council. At the same time, EU leaders invited the Council and Commission to provide a report in advance of the June European Council meeting to take stock of work carried out to facilitate financing, make energy affordable, reduce strategic dependencies, develop skills, and prepare the EU economic, industrial and technological base for the twin transitions.
The single market, arguably one of the EU’s biggest success stories, is celebrating its 30th anniversary. Based on the Commission’s ‘the Single Market at 30’ communication, EU leaders took stock of the achievements and remaining challenges. The recent years of polycrisis have exposed Europe’s vulnerabilities, which EU leaders are keen on fixing. They thus reiterated their long-term goal of completing the single market, in particular the digital and services markets, as well as their call for the full enforcement of single market rules and the removal of existing barriers. Accounting for 99 % of EU companies and more than half of EU gross domestic product (GDP), SMEs are to receive ‘special focus’ in the efforts to further strengthen the single market.
The long- and short-term performance and competitiveness of the EU economy has been a regular item on EU leaders’ agenda lately, as a result of a series of crises requiring strong economic answers at EU level. At its December 2022 meeting, the European Council asked the Commission to deliver ‘in early 2023, a strategy at EU level to boost competitiveness and productivity’. This is noteworthy insofar as the EU had developed similar growth strategies in the past, namely the Lisbon strategy and the Europe 2020 strategy, both of which were the subject of thorough preparation processes and stakeholder involvement. However, this approach was not taken forward after 2020.
Following the Commission’s communication ‘Long-term competitiveness of the EU looking beyond 2030′, EU leaders are calling for measures in six areas: i) regulatory environment, ii) investment, iii) research and innovation, iv) digitalisation, v) skills, and vi) circularity. They reiterated their call for a simpler regulatory environment and reduced administrative burdens for EU businesses. EU leaders also highlighted possible tools to support simplification efforts, in particular the use of digital solutions, the easing of reporting requirements, the introduction of competitiveness checks for legislative proposals, regulatory convergence, and the removal of barriers for cross-border business.
Providing support to EU companies in their investment needs was addressed at previous meetings. But this time around, EU leaders set a deadline for the co-legislators: to finalise work on the legislative proposals aimed at completing the capital markets union before the 2024 European elections. Flexibility in the use of current EU funding and the need to mobilise all available EU funds to support strategic sectors was underlined. In that context, EU leaders took note of the Commission’s plan to make a proposal for a European sovereignty fund before summer 2023. Furthermore, ‘secure, stable and sustainable supply chains’ were discussed in response to heavy disruption during the COVID crisis and current geopolitical tensions. Improving connectivity and infrastructure for both transport and energy was also mentioned under the investment heading.
EU leaders also took a strong stance in support of innovation, and stated that public and private research and development investment, which in 2021 stood at 2.27 % of GDP, should be increased to meet the 3 % target. They also want to get innovative products and services, especially those with high growth potential, onto the market quicker, and indicated that regulatory sandboxes could be used for that purpose. EU leaders also underlined the opportunities offered by data, and the necessity of the EU staying in the forefront of key digital technologies, such as artificial intelligence, quantum computing, microelectronics and web 4.0. Cybersecurity was also mentioned; that reference is partly linked to the current geopolitical situation and also partly to the rapid development of new technologies, which make organising attacks on key actors and infrastructure easier than before.
EU leaders reiterated their February 2023 call for the development of skills to address a number of challenges facing the EU economy, including demography, labour shortages and specific challenges linked to the twin digital and green transitions. Von der Leyen described skills as the ‘make it or break it of the single market and our economic success’. EU leaders also asked for work to be taken forward on the Commission’s net zero industry act proposal, which aims at helping EU industries move towards clean-tech and clean-energy, as well as on the critical raw materials act, designed to secure the provision of the much needed raw materials for digital and green transitions. The circular economy could also contribute to making EU industry more sustainable and to reducing dependencies and materials costs.
As anticipated, the European Council held a strategic discussion on trade, with some EU leaders stressing the importance of trade in achieving strategic goals, spreading EU values and boosting the economy. While EU leaders took note of the temporary crisis and transition framework for State aid, the challenge will however be to get all 27 on the same page in terms of negotiating, agreeing and ratifying trade agreements with strategic partners, notably for agreements aimed at ensuring access to critical raw materials.
Finally, EU leaders discussed the European Semester. In the process of developing national reform programmes and stability or convergence programmes, Member States are required to take into account the priorities of the 2023 annual sustainable growth survey. EU leaders also endorsed the draft Council recommendation on euro-area economic policy as well as the 14 March Council conclusions on the economic governance review.
Main message of the President of the European Parliament: On competitiveness, Roberta Metsola highlighted that ‘the European Union’s twin transition can happen, with the commitment of our people, but only if we create favourable conditions for that transition to occur. We need to explain that going green will pay-off for people, businesses and their families.’
EU leaders took stock of the situation in Ukraine, adopting lengthy conclusions, largely reiterating previous messages, including the Union’s ‘resolute condemnation of Russia’s war of aggression’, support for Ukraine’s independence and territorial integrity, and support for President Zelenskyy’s peace plan. Volodymyr Zelenskyy addressed EU leaders by video-link once again, stressing that the supply of military aid was a fight against the clock, recalling the importance of each hour on the battlefield, and saluting the Polish and Slovak decisions on supplying MiG fighter jets to Ukraine.
EU leaders focussed on accountability, military assistance, sanctions and food security, among a wider range of Ukraine-related topics flagged up in the EPRS outlook. They condemned child deportation and took note of the arrest warrants issued by the International Criminal Court against Vladimir Putin and Maria Lvova-Belova in connection with this war crime. President von der Leyen called the Ukrainian child abductions a ‘horrible reminder of the darkest times of our history’. She stressed that 16 200 children have been deported, of whom only 300 had returned, and announced that the Commission would, together with Poland, organise a conference to launch an international cooperation process to establish the ‘whereabouts’ of these children.
Artillery ammunition was central to the military assistance debate. EU leaders welcomed the Council’s agreement to provide 1 million rounds of artillery ammunition to Ukraine through the European Peace Facility over the next 12 months. Von der Leyen stressed that European ammunition-production capacities need ramping up, and that the Commission would put forward a specific legal proposal, exploring the possible use of the EU budget for that purpose. As regards sanctions, the focus was on ensuring implementation and countering their circumvention. Whilst further sanctions could be envisaged, EU leaders stressed their commitment ‘to continue working on the oil price cap together with partners’. On food security, EU leaders noted the extension of the UN Black Sea Grain Initiative and stressed the importance of the EU Solidarity Lanes in allowing Ukraine to export its grain. Von der Leyen noted that €56 million to date had been allocated to help EU farmers in frontline countries cope with internal market distortions resulting from the war.
Main message of the President of the European Parliament: President Metsola stressed that the joint procurement of ammunition agreement ‘represents a landmark moment’. She praised Moldova’s resilience, and called for support to democratic forces in Georgia.
Energy was less prominent in the debate than at previous meetings. EU leaders took stock of actions taken to achieve the energy-related objectives set out in earlier conclusions, in particular reducing prices, decreasing demand, enhancing security of supply, and phasing out Russian fossil fuels. They also considered restocking efforts in view of the upcoming winter, urged the co-legislators to agree quickly on proposals that would speed up the green transition, and called for work on the proposal on the internal electricity market design revision to be finalised by the end of 2023.
The Swedish Council Presidency and the Commission briefed EU leaders on progress in the implementation of the 9 February 2023 European Council conclusions on migration. EU leaders called for speedy progress and reiterated their previous commitment to ‘revert to the matter on a regular basis’. As Michel noted, the next progress report is due for the June 2023 meeting.
Main message of the President of the European Parliament: President Metsola indicated that the European Parliament would play its part, but asked EU leaders to deliver on the proposed regulations on asylum and migration management, and on crisis and force majeure.
3. Euro Summit
The Euro Summit convened in inclusive format, for only the second time since December 2021. Both European Central Bank President Christine Lagarde and Eurogroup President Paschal Donohoe were in attendance, to discuss the current issues impacting the euro area and ways of increasing euro stability and EMU resilience. EU leaders stated: ‘our economies entered 2023 on a healthier footing than previously expected, despite high inflation and energy prices’, and asked the Eurogroup to monitor developments. Ongoing work on economic governance was discussed, as was the need for strong EU economic architecture, which requires the completion of the capital markets union and banking union. Work on the latter is especially pertinent in the context of recent turbulence in the banking sector following the collapse of the Silicon Valley Bank and the Credit Suisse takeover.
Read the complete briefing on ‘Outcome of the meetings of EU leaders of 23-24 March 2023‘ in the Think Tank pages of the European Parliament.