Given the comments made by Ursula von der Leyen, we can assume that the new Commission will focus on four issues. In her speech before the European Parliament (in mid-July [edit.]), most time was dedicated to environmental protection, the climate. Additionally, she spoke about the challenges of the digital revolution, inclusive growth and the role of Europe in the global market in the face of growing protectionism. Europe must find its own path towards cooperation with other regions and has an 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.
Is this a good diagnosis of the challenges facing Europe, which should be dealt with at the EU level?
I think that Ursula von der Leyen has accurately identified problems that none of the Member States will be able to solve on its own, nor do so effectively.
Another question is whether the Member States see it this way. In other words, is the new Commission going to push the EU in a direction which some countries will not want to pursue?
The President of the EC has adjusted her priorities to the balance of powers within the European Parliament. Normally, there were two major factions in this institution, now there are four, including the Greens. That is why emphasis is put on sustainable development and green transformation. In general, however, von der Leyen expresses balanced views on matters in which the four forces sometimes have divergent interests. Which does not mean that all the EU Member States will like the details of the EC proposals.
Are any specific proposals already known? Let us start with the green transformation.
The programme outlined by Ursula von der Leyen is still at a high level of generality. Specific proposals can be expected within 100 days following the launch of the new EC. However, a lot of concrete proposals have already emerged in this regard. By 2050 Europe is to become neutral for the climate (this declaration follows from the long-term strategy of 2018 [edit.]). This is a very ambitious plan, which involves major investments, but also changes in our day-to-day operation. The future President of the European Commission has declared that she would enact the first European climate law, which will turn this declaration into a formal goal. The way to this is through reduction of CO2 emissions by 2030 by 50 or even 55 percent as compared with 1990, and not by 40%, which is the existing plan. A large portion of the investment projects will therefore be focused on reducing the greenhouse gas emissions. But the climate agenda also includes, among other things, the construction of a closed-loop (circular) economy and the appropriate strategy for agriculture and the entire food supply chain. All this combined is referred to by Ms von der Leyen as a “green new deal” for Europe.
We are talking about goals but is anything known about concrete instruments that will serve to achieve them?
A few ideas can be inferred from von der Leyen’s speeches. For example, the future President says that a quarter of the EU budget for 2021–2027 will be earmarked for sustainable development. It is also known that the European Fund for Sustainable Development (EFSD) will gain importance, and it is to invest EUR 1 trillion over the coming 10 years. The EFSD is to focus on supporting research and innovations intended to accomplish Europe's green transformation. 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.
Do you think that the future President of the Commission will understand the specificity of Poland, where mining and the coal-based power industry play a greater role than in other EU countries?
That seems to be the case. For example, she talks a lot about a Just Transition Fund. The budget of the fund will be relatively small, around EUR 6 billion, but the money will go primarily to regions which rely heavily on coal. It is about helping the regions cope with the social consequences of green transformation. It can also be expected that Poland will be a major beneficiary of all essential instruments, including the European Fund for Sustainable Development.
What you talk about is a symptom of a more general change of the EU budget structure. Recent reports regarding the EU budget for 2021–2027 suggest that its portion allocated to cohesion and agricultural policies will be much lower, and it has been distributed in advance among the Member States. Poland may, for this reason, get even 25% less than in the period of 2014–2020. The portion allocated to the green deal will increase, and the countries will compete to get those funds. Is there a chance that we can get more from these new envelopes than we lose as a result of reduction of the cohesion and agricultural funds?
Such a chance does exist. If this is so, the argument that the new budget in total is unfavourable to Poland will prove untrue. Ursula von der Leyen has repeatedly emphasised that EU cohesion is still very important for her. Even if the cohesion funds are smaller, the money for this purpose will be available in other funds. I understand the concerns that there will be less money in the EU budget in national envelopes, and more in all-Europe envelopes for specific purposes. Polish companies and public institutions will have to compete with entities from other EU countries. I would not say, however, that our starting position is worse. On the contrary, I would risk 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. At the same time, if we abstain from making efforts to get these funds, the effects will be more serious than ever before. This is not simply about losing money, but rather about having a unique opportunity to switch the economy to new tracks.
Will these new special funds actually be new? It can be argued that the priorities referred to by the EC are only some sort of reputational effort, and in practice the structure of spending from the EU budget will be determined by the past, the political strength of the Member States, etc. And finally, due to inertia, the allocation of funds in the new budget will be very similar to the current one, although the instruments will be different.
If we assume that the EC is seriously approaching the goal of reducing greenhouse gas emissions by 2030 by 50–55% as compared with 1990, followed by accomplishment of climate neutrality by 2050, the structure of expenditure from the EU budget must be changed. The way of thinking about investment projects must also change. It is true, however, that for a long time green development has been a high priority for the EC and for institutions such as the European Investment Bank. For example, the Juncker’s plan, of which Poland is a major beneficiary, has largely financed investments aligned with the sustainable development objective.
Do you have any suggestions as to which specific goals could be pursued in Poland using the EU instruments?
The European Fund for Sustainable Development and the European Green Bank will have enormous funds for investment projects, while the Just Growth Fund aims to eliminate the negative social impact of green transformation. It could, for example, support retraining programmes for workers of the coal mines which are being wound up in Poland. I also think that small and medium-sized enterprises will have easier access to funds allocated to green innovations.
The second priority of the new EC is to build digital economy. What challenges can be seen at the EU level?
Already now the digital revolution is one of the EC’s key areas of interest, but the new President puts even more emphasis on this. This somehow reflects the trends that can be observed worldwide. Digitisation, automation, artificial intelligence, etc. have had an increasingly greater impact on the functioning of economies and societies. Ursula von der Leyen regards this digital revolution as a potential opportunity, which can be used provided that certain social problems are solved. The EC strives to maximise the positive effects of the changes and to minimise the negative ones. The Digital Europe programme, which amounts to EUR 9.2 billion, is the most important instrument. The money will be primarily used to support innovative small and medium-sized companies, but also to improve people's skills so that they can find their way in this new world.
Digitisation must be accelerated somehow, for example by investing in infrastructure, or is it about eliminating the negative consequences of technological advancement, such as increased income inequalities?
Ursula von der Leyen’s public statements indicate that she is primarily committed to ensuring that people acquire the skills needed in the world after the digital revolution, and to supporting innovative companies, especially small and medium-sized enterprises, which often find it difficult to access capital.
Are we well-prepared as a state to fully benefit from the funds for digitisation?
Again, as in the case of green transformation, in most countries of Central and Eastern Europe, there is much to be done as regards digital transformation. At the same time, it seems that companies and workers from the countries of our region, including Poland, see digitisation more as an opportunity than a threat. This conclusion can also be drawn if we consider the results of our CEO Survey. In Central and Eastern Europe, 89% of the management board presidents consider it the greatest challenge to have access to workers with skills of key significance in the digital age. Globally, this challenge is third in the list. This can be understood to mean that companies in our region lack qualified workers, but they seem to be more aware of the challenges involved in digitisation and automation. At the same time, in Poland, 63% of workers believe that automation brings more opportunities than threats. In the world, this figure is only 50 per cent. This shows that the Polish society is open to digital revolution.
What does Ursula von der Leyen understand by the concept of “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. Currently, this concept is understood more broadly. In her speech, the future President indicated various social groups which require support, including the youth, 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 had only constituted 20% of the Commissioners.
One of the consequences of the digital revolution is an increase in income inequalities. In Poland, as latest research shows, this problem is much more serious than we thought. Can the EC cope with such challenges?
The issue of fiscal policy and income redistribution is largely the domain of the EU Member States. But Ursula von der Leyen talks, among other things, about the need for better enforcement of taxes from transnational companies operating in Europe. This is a problem that will grow in the age of digital transformation, and for which Ms von der Leyen wants to find a mutually agreed solution.
Interviewer: Grzegorz Siemiończyk.
PwC Partner responsible for public sector services in Central and Eastern Europe, concerning the priorities of the new European Commission
Partner, CEE Capital Projects and Infrastructure, Government and Public Sector Leader, PwC Poland
Tel: +48 517 140 537