Opinion

The new European Commission agenda: Implications for CEE

In a speech before the European Parliament in mid-July of this year, the president-elect of the European Commission Ursula von der Leyen indicated that four key issues will be in focus for the new Commission in the months and years to come: the environment, digital transformation, inclusive growth, and the role of Europe in a global market facing increased protectionism.

Policymakers and business leaders in Central and Eastern Europe would do well to reflect on these four issues and begin planning their strategies for the new EC agenda.

The first issue is environmental protection, an area to which Ms von der Leyen dedicated a large part of her speech. This reflects an adjustment of priorities in reaction to the new balance of power within the European Parliament. Instead of two major factions in this institution, there are now four, including the Greens. That is why emphasis is put on sustainable development and green transformation.

The programme set out by Ms von der Leyen is still rather general, but already some concrete proposals have emerged. She has said that she would enact the first European climate law. This would formalise Europe’s declaration that it will become carbon neutral by 2050, an ambitious plan that will involve major investments and changes in our day-to-day operations. The targets on reduction of CO2 emissions by the year 2030 from 1990 levels would be 50 per cent – or even 55 per cent – and not the 40 per cent reduction in the existing plan. A large portion of EC funded investment projects will therefore be focused on reducing greenhouse gas emissions and the structure of expenditure from the EU budget will have to be changed.

The incoming president says that a quarter of the EU budget for 2021–2027 will be earmarked for sustainable development. The European Fund for Sustainable Development (EFSD) will gain importance, with a budget of one trillion euros to be invested in the coming 10 years to support research and innovation in Europe’s green transformation. Ms von der Leyen also wants a part of the European Investment Bank, which plays a major role in Central and Eastern Europe, to be transformed into a European Green Bank. Preparations for this are already underway and will have an impact on the way projects are funded in our region. This is causing some concerns and potential stress to EU cohesion.

Ms von der Leyen has repeatedly emphasised that EU cohesion is still very important for her. Even if the funds dedicated specifically to cohesion are smaller, the money for this purpose will be available in other funds. Understandably, some EU member states in CEE are concerned that there will be less money in the EU budget in national envelopes and more in all-Europe envelopes for specific purposes like sustainability initiatives. Companies and public institutions in our region will have to compete with entities from other EU countries. This does not mean, however, that our starting position is worse. On the contrary, I would venture the opinion that, because of how much we have to do in the area of environmental protection, we can find it easier to apply for projects with the most positive environmental impact.

In light of this, the way of thinking about investment projects in our region will also have to change. The incoming president talks a lot about a Just Transition Fund. The budget of the fund will be relatively small, around six billion euros, but the money will go primarily to helping the regions cope with the social consequences of green transformation. With a heavy reliance on coal, Poland and other similar countries in CEE can be a major beneficiary of all the essential funding instruments, including the European Fund for Sustainable Development.

Central and Eastern Europe also stands to benefit from activities within the major focus of Ms von der Leyen’s agenda: the digital revolution. This has already been a big area of interest for the EC, but the new president has indicated that she will put even more attention, and even more investment, into dealing with the impact on our economies and societies of digitisation, automation, artificial intelligence and the like.

Ms von der Leyen has indicated that on balance she sees the digital revolution as a potential opportunity, provided that certain social problems are addressed. In striving to maximise the positive effects of the changes and to minimise the negative ones, the EC’s most important instrument will be the Digital Europe programme, which amounts to 9.2 billion euros. This money will be used primarily to support innovative small and medium-sized companies that often find it difficult to access capital, and also to improve people’s skills.

As in the case of green transformation, there is much to be done on digital transformation within most CEE countries. At the same time, it seems that companies and workers in our region see digitisation more as an opportunity than a threat – and are focused on acquiring the skills to take full advantage.

In this year’s edition of the PwC Global CEO Survey, 89 per cent of business leaders in Central and Eastern Europe told us that their top challenge is the availability of key skills for the digital age. Globally, this challenge is third in the list of business leaders’ concerns. This can be understood to mean that while companies in our region struggle to find or retain personnel with the right skills, they are acutely aware of the importance of doing so. They should be active in the uptake of investment upskilling opportunities provided within the new EC agenda. Interestingly, in a recent PwC Global Skills Survey, which featured Poland as one of the countries in the global sample, 63 per cent of Polish workers said they believe that automation brings more opportunities than threats. Worldwide, this figure was only 50 per cent – showing an openness to embracing the digital revolution.

The third issue laid out by Ms von der Leyen as part of her agenda is inclusive growth. So far, the promotion of inclusive growth at the EU level consisted of striving to level out the differences in living conditions in all regions. With regard to income inequality within EU members states, Ursula von der Leyen talks, among other things, about the need for better enforcement of taxes on transnational companies operating in Europe. Income inequality is a problem that has grown in the age of digital transformation, and one for which Ms von der Leyen wants to find a mutually agreed solution.

Under the new EC president, the inclusive growth agenda will be understood more broadly. In her speech, the incoming EC president indicated various social groups will require further support, including the young, the elderly, immigrants and women. It is worth noting that in Ursula von der Leyen’s Commission, half of the members are to be women, while to date women have only constituted 20 per cent of the commissioners.

The fourth and final issue that Ms von der Leyen set out in her speech is the role of Europe in the global market, in the face of growing protectionism around the world. Europe must find its own path towards cooperation with other regions and has the ambition to conduct international dialogue in the spirit of multilateralism rather than isolationism. Ms von der Leyen believes that this requires more cohesion within the EU itself.

The question before us is how successfully member states we will be able to work together on this agenda set out by the incoming EC president, but overall it is a positive step that Ms Leyen has accurately identified four important problems that none of the member states will be able to solve on its own.

Ultimately, policymakers in CEE would do well to examine ways of more effectively partnering with like-minded partner institutions in order to solve these important problems for the benefit of their citizens.

About the author

Agnieszka Gajewska

Agnieszka Gajewska

Agnieszka Gajewska is PwC Public Sector and Infrastructure Industry Leader Central and Eastern Europe.

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