Ursula von der Leyen is seeking a second term as head of the European Commission. What has her current five-year stint meant for the economy?
When Europe votes for a new Parliament in June, the outcome will indirectly influence the appointment of a new Commission President.
After five years in the role, German politician Ursula von der Leyen is once again putting her hat in the ring, hoping to hold on to her title as head of the EU’s executive arm.
Given the wider context of her term, von der Leyen is finishing this leg with a significant legacy.
Rarely has a Commission chief weathered such a series of challenges, notably the COVID-19 pandemic, Russia’s invasion of Ukraine, and the inflationary spike these two events triggered.
While monetary policy comes from the European Central Bank, the Commission has a hand in economic affairs, shaping policies that seek to promote growth.
Growth, this holy grail which is essential for maintaining good living standards, is currently stagnating in the EU.
Defendants of von der Leyen would point to a substantial amount of bad luck. Critics would say that poor management hasn’t helped.
In her annual speech to the European Parliament last year, the current Commission President outlined her pro-growth victories, hoping to appeal to MEPs in her centre-right European People’s Party.
More than six months on, with a new political era on the horizon, Euronews now explores some key economic moments of the von der Leyen presidency.
NextGeneration EU fund
One of the Commission’s most defining financial initiatives of recent years has been the NextGenerationEU programme, also known as NGEU.
In an effort to revive Europe’s pandemic-stricken economy, EU nations agreed to pool together funds, hoping to avoid a repeat of the euro crisis seen 10 years earlier.
Member states with the greatest economic needs, such as Croatia or Greece, were given the greatest allocation of aid. In a show of solidarity, wealthier nations, say Denmark or Ireland, received less.
The success of the stimulus package, worth around €832 billion, is still being considered.
Although the NGEU became operational in 2021, member states are required to submit spending proposals to unblock the funds, a clause that has drawn out the allocation of resources.
The deadline to spend stimulus checks is 2026, a limit that some have argued is too restrictive.
Certain infrastructure projects, such as improving transportation systems and infrastructure, can’t happen overnight, they say.
Critics also argue that the scope of a one-off stimulus is limited when creating services that require permanent staffing, such as childcare support.
Yet, despite its flaws, and although it arrived far more tardily than its US stimulus counterpart, the NGEU has proved fruitful.
ADVERTISEMENTAlongside efforts from the European Central Bank, the launch of the fund helped to calm frenzied markets at the height of the pandemic.
“NextGenerationEU has played a key role in the preservation of public investment, a development that stands in stark contrast to the disastrous experience of the post-financial crisis years, when public investment collapsed,” said EU economy commissioner Paolo Gentiloni last month.
“Based on our Autumn Forecast, the EU’s public investment ratio is expected to rise to 3.5% of GDP in 2025, up from 3.0% in 2019. And around half of that increase is related to EU funding.”
Green transition and energy
Up to 30% of the NextGenerationEU package will be funded using green bonds, meaning it will only be used to finance eco-friendly projects.
This initiative sits under the arch of the bloc’s wider environmental strategy: the EU Green Deal.
ADVERTISEMENTApproved in 2020, the Green Deal sets out Europe’s commitment to becoming climate neutral in 2050, and it has significant implications for the economy.
As the EU changes the way goods are produced and consumed, there will undoubtedly be job losses, and recent protests by farmers across Europe are a stark example of the real fear surrounding the green transition.
The EU’s environmental demands, farmers argue, are too demanding for them to earn a fair livelihood.
In the long-run, the Commission says the Green Deal will nonetheless have a positive effect, boosting EU competitiveness by creating jobs in eco-friendly sectors.
Luis Cano, a spokesperson for the ALDE party and the Renew Europe Now campaign, told Euronews that von der Leyen has failed to turn environmental strategies into growth strategies – despite the success of her pandemic relief fund.
ADVERTISEMENT“For ALDE, achieving the Single Market is a priority in order to deliver on the Green Deal objective of sustainable growth for companies and citizens,” he said.
“For five years, the Single Market was neglected by allowing too many fragmentations, from lavish subsidies given to large national companies to a failure of delivering the Capital Market Union.”
Launched in 2014, the Capital Market Union aims to make it easier for funds to flow between EU member states.
This, in theory, could turbo-charge the EU’s climate ambitions by facilitating business investments across borders. In reality, national market barriers are still stalling progress.
De-risking from China
Europe’s attempt to decarbonise its economy is also dependent on global politics and its own inclination towards protectionism.
ADVERTISEMENTCurrently, the bloc is being flooded with cheap, green technology from China, the frontrunner when it comes to producing solar panels and electric batteries.
Although these imports are a key pillar of Europe’s transition, there are concerns about the impact on EU jobs, not to mention the bloc’s political resilience.
For the climate sceptics, one silver lining of the Green Deal was improved energy security. Europe envisaged reducing its reliance on Russian gas by bolstering domestically-sourced power.
Now, the notion that China could potentially ration green technology – and therefore hold Europe to ransom – is far from appealing.
In response to these concerns, von der Leyen is currently talking tough when it comes to protecting the EU market.
ADVERTISEMENTLast year, the Commission launched an anti-subsidy investigation into Chinese electric vehicles and hasn’t dismissed the possibility of imposing punitive tariffs.
Rebecca Christie, a senior fellow at Bruegel think tank, says this wouldn’t be wise.
“This is one area where I believe that what von der Leyen is doing and what she’s campaigning on are going to diverge a little bit. As a campaign question, she needs to show that she’s got a plan for China, that she’s guarding against perceptions of risk,” she said.
“From a practical standpoint … She may not actually want to call for more tariffs if she can avoid it. Because Europe needs to electrify, and the green transition needs to be affordable.”
In terms of jobs, Bruegel experts have equally pointed out that shunning China would actually slow the installation of technology such as solar panels. This would, in turn, destroy European jobs related to deployment.
ADVERTISEMENTLabour shortages
Another pressing concern for European businesses regards labour and skills shortages, said Iratxe GarcÃa Pérez, President of the S&D group.
She told Euronews: “Our approach is to invest in people through training, education and professional development. … Our group believes that the European economy will be more efficient and more competitive with a well-trained and fairly treated workforce.”
The EU is currently suffering from a major labour market imbalance. While some industries have a surplus of skilled workers, there are gaping staff shortages in other sectors.
According to the most recent report from EURES, a European labour network, all 27 EU member states plus Norway and Switzerland experienced labour shortages in the second and third quarter of 2022. Hard-hit sectors included software, healthcare, construction, engineering, and craft domains.
This trend, which will ultimately limit economic growth, is only going to be exacerbated as Europe’s population ages. As the worker-to-retiree ratio grows, businesses will struggle to find enough manpower to satisfy consumer needs.
ADVERTISEMENTOne option, although it may not be a sustainable solution, is to increase the flow of migration to Europe.
Karel Lannoo, CEO of CEPS think tank, told Euronews that von der Leyen has avoided fully addressing this issue because it’s politically sensitive.
“If you call for re-industrialisation, it calls for enormous immigration – because we know that there are huge shortages in the labour market,” he explained,
“[The Commission] shouldn’t be afraid to say this in public.”
Legacy of a first term
In considering von der Leyen’s record over the past five years, we could simply list her goals against her current achievements.
ADVERTISEMENTHowever, when doing this, it’s important not to oversimplify the intricate mechanisms of the European system.
Unlike the head of a national government, who can enact policy more directly, the Commission’s role is to encourage member states into action.
One of the union’s challenges is that meaningful action requires large-scale cooperation, something von der Leyen has managed to achieve, at least on certain occasions, during her term.
“She picks out a position ahead of the group and kind of plants a flagpole, and she waits to see if the group comes under it,” said Bruegel’s Rebecca Christie.
“If it doesn’t, she just picks up her flagpole and moves it to another place that may be adjacent or similar, but that is still ahead of where we started.”
ADVERTISEMENTLooking to the Commission’s future, if von der Leyen does win a second term, a lot will again depend on the persuasions of the new parliament and national leaders.
“Ursula von der Leyen has boldly navigated the European Union through two of the most significant crises in recent decades,” a spokesperson from the EPP told Euronews.
“In the upcoming legislative term, under von der Leyen’s leadership, we want to enhance Europe’s global economic competitiveness.”