Behind the Scenes: 2023 lies in wait

Behind the Scenes: 2023 lies in wait
Credit: Siska Gremmelprez / Belga

BRUSSELS BEHIND THE SCENES

Weekly analysis and untold stories

With SAM MORGAN

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2023 lies in wait

As one satirical cartoon quips, the next year of indecision could well prove decisive. However, some things will indeed happen over the next 12 months, some of which will be rather important. Behind the Scenes tries to predict what they might be.


BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.


Common debt

When the Covid pandemic threatened to bankrupt entire countries back in 2020, EU governments decided to break a massive taboo and agreed to a round of joint borrowing to pump cash into economy-reviving projects.

The European Commission is still doling out the €800 billion it borrowed on behalf of the 27 EU members, with more injections of loans and grants due in the coming months. Fans of the scheme want more of the same.

Tight-fisted nations like Germany and the Netherlands are adamant that the Covid fund was a one-time deal and that more joint debt is not on the cards. That position runs counter to the inflation-wracked reality in which we live.

Cracks in Germany’s resolve have begun to show. Whether Berlin will accept the sourcing of new money, rather than the repurposing of unused cash, remains to be seen. But the writing does seem to be on the wall.

More joint debt will come. Whether it is on the same scale as the €800 billion, composed more of loans than grants or underpinned by a different legislative framework remains to be seen, but the EU’s priorities require more money.

Meeting climate targets, backing industrial policy ambitions with the cash needed to fuel them, health services, defence spending, the list goes on. Every EU country has a vested interest that would benefit from more capital.

This will take longer to agree on than the Covid fund but governments will settle on some sort of deal by the end of 2023. Oh and Hungary will start getting its frozen payouts during the next 12 months as well.

Schengen and eurozone

Croatia joined the border-free Schengen zone and the common currency on 1 January, making the newest EU nation one of the most integrated into the European project.

But Bulgaria and Romania were left fuming in December when their Schengen aspirations were torpedoed by Austria, acting on behalf of other western countries that do not want the Eastern European duo to gain admittance.

That will change by the end of 2023. Both will get the green light or, at the very least, be given a date for joining Schengen after enough horse trading and politicking has happened behind closed doors.

Romania is not yet in a position to join the euro but Bulgaria is very nearly on the launchpad. If its political class can get its act together and put together a working government, it could become the 21st official member of the eurozone.

An agreement to mint Bulgaria’s euro coins was agreed last month and a report in Spring 2023 will reveal if all the necessary milestones have been met. Behind the Scenes predicts that Bulgaria will then be given the go-ahead to join on 1 January 2024.

(Un)healthy competition

The Commission is planning a ‘sovereignty fund’ to help fuel domestic industries, particularly in green transition sectors, in a bid to keep up with China and the United States.

How to fund that fund will be a big bone of contention and the debate about it could last into 2024. The other prong of this new priority though will happen much faster: a big review of competition and state aid rules.

The Commission has been criticised in recent years for preventing the formation of ‘European champions’, such as the planned tie-up between trainmakers Alstom and Siemens.

After the EU executive completes its rulebook reforms, governments will be able to pump even more money into industries that are linked somehow to the bloc’s joint priorities.

Given that most industries could argue that they contribute to either digital or green policies in some form, that will mean a torrent of extra state aid. That will in turn benefit the next object of this prediction-fest.

Climate wakeup

The way things stand, the EU is not on track to meet its climate goals (just like the rest of the world), yet all the pieces of the puzzle needed to achieve them are now at least on the table.

EU negotiators will in the first half of this year broker predictably conservative deals on issues like renewable energy, energy efficiency and building standards, but with the framework in place, Europe will start to go greener at a faster pace.

Raw materials legislation in March will cover more bases when it comes to batteries and electronics needed to decarbonise the EU’s economy and the Covid fund, looser state aid laws and the controversial taxonomy will all start to fire up.

2023 will be a tipping point for green policies, which were — mistakenly — considered an expensive luxury and which are now accepted for what they are: a licence to print money once technologies like wind and solar reach critical mass.

The next 12 months will not drag the EU onto a curve that means all its targets will then be a walk in the park but it will set up 2024 and 2025 to be bonanza years for energy transition sectors.

Enlargement blues

Bosnia, Moldova and Ukraine were granted EU candidate status this year, Georgia and Kosovo applied, while talks with Albania and North Macedonia were formally started. Big announcements but few tangible results. That will also be the case in 2023.

The EU will not touch Ukraine while the current situation with Russia continues. How long that will last is far beyond the foresight powers of your columnist unfortunately, so expect more of the same as far as Kyiv’s Brussels aspirations are concerned.

Lack of appetite for bloc expansion will apply across the board. Talks with long-time candidates like Montenegro and Serbia will continue but their respective issues will prevent any meaningful progress from being made.

The main factor that might affect EU enlargement policy may prove to be Turkey’s presidential election in June.

If Recep Tayyip Erdogan wins reelection and goes to unacceptable means to do so, Behind the Scenes predicts that the EU will finally decide to pull the plug on Ankara’s long-stalled membership bid.

BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.


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