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THE EUROPEAN LAW REVIEW

Table of Contents Issue 4, 2024

Issue 4 August 2024

Editorial - A European Industrial Policy and the EU's Turning Point

European Union; Industrial policy

The need for a new, overarching approach to economic productivity and security has been acknowledged widely in European quarters. In September 2023, the President of the Commission asked Mario Draghi to prepare a report on the topic which is supposed to be published soon. In the meantime, the former President of the European Central Bank has given various indications about its contents. In his first speech outlining the report,1 he highlighted the need for radical change in the shape of a new European industrial policy to tackle today’s challenges in a coordinated and effective fashion. The report will put special emphasis on green, digital, and security challenges, and the common threads will be enabling scale, providing public goods, and securing the supply of essential resources across different sectors. This new industrial strategy, the report will argue, requires a more centralised approach; to this end, the report will propose the creation of a new strategic tool to coordinate different economic policies, without waiting for Treaty change and, if necessary, resorting to enhanced co-operation.

A few weeks later, Mario Draghi shared more details of his forthcoming report.2 He took the opportunity to emphasise again the impending challenges (technological change, the green transition, the need for greater defence capability), the changing geopolitical landscape, and the need to move away from the EU’s previous approach to economic policy, trade, and its faith in the rule-based international order. This, he argued, requires an industrial policy that places greater weight on political considerations and that—without becoming protectionist—makes careful use of tariffs and subsidies (“We don’t want to become protectionist in Europe, but we cannot be passive if the actions of others are threatening our prosperity.”)3 Again, a European industrial policy would need better co-ordination across economic policies, and it would require spending. Draghi has been vocal in the past about the need for common EU financing, and this report will be no exception (“We would derive enormous benefit from some form of common financing, but I don’t want to restate things that I’ve said many times in the past today.”)4 Regardless of the particular form of funding, the speech emphasised—rightly—that important decisions about the substance of this industrial policy and its financing will need to be made, and that these are likely to require “a yet unseen degree of cooperation and coordination between the Member States of the European Union.”5

We will have to wait for the full report and its eventual reception and use by the Commission to learn more about the proposed coordination instruments and the funding and spending mechanisms behind a future European industrial policy. The political guidelines for the next Commission proposed by Ursula von der Leyen when standing for re-election as President of the Commission in July 2024 echo many of the priorities outlined by Mario Draghi:6 there is mention of a future Competitiveness Fund and a European Defence Fund,7 as well as a new economic foreign policy that advances economic security.8 The proposal mentions the need for a new approach to the EU budget and for Treaty reform,9 without going into details. Member States, too, share an awareness of the challenges facing the EU, and an agreement on the need for significant change: see, for example, Emmanuel Macron’s speech in April 2024 about the EU’s mortality,10 and his joint piece with Olaf Scholz in the Financial Times on the need to strengthen European sovereignty.11 Both heads of government agree that the EU is experiencing its Zeitenwende, a historical turning point that will require the sort of substantial change proposed by Mario Draghi. This is, of course, big-picture agreement only; there are plenty of details that will need to be worked out, including on how to pay for these changes. Germany continues to be notoriously reluctant to issue more common debt, in part due to the German Federal Constitutional Court’s approach to the matter.12 In their joint FT piece, both heads of government propose to “make the EU budget fit for the future and further prioritise investments in transformational expenditure and European public goods while on working on introducing new ‘own resources’ as agreed in 2020.” All in all, it seems clear that the EU is indeed at a turning point, and that changes are necessary and coming. The question is how far these changes will go, given the institutional and political limitations at play, and how we will pay for them.

[AH]

1 M. Draghi, “Radical Change—Is What Is Needed”, Speech at the High-level Conference on the European Pillar of Social Rights (Brussels, 16 April 2024), https://geopolitique.eu/en/2024/04/16/radical-change-is-what-is-needed/ [Accessed 29 July 2024].
2 M. Draghi, “An Industrial Strategy for Europe”, Acceptance Speech at the Monastery of San Jeronimo de Yuste (Spain, 14 June 2024) for the Carlos V European Award, https://geopolitique.eu/en/2024/06/14/mario-draghi-grand-continent-an-industrial-strategy-for-europe/ [Accessed 29 July 2024].
3 Draghi, “An Industrial Strategy for Europe” (Spain, 14 June 2024).
4 Draghi, “An Industrial Strategy for Europe” (Spain, 14 June 2024).
5 Draghi, “An Industrial Strategy for Europe” (Spain, 14 June 2024).
6 U. von der Leyen, “Europe’s Choice: Political Guidelines for the Next European Commission 2024–2029”, https://commission.europa.eu/about-european-commission/president-elect-ursula-von-der-leyen_en [Accessed 29 July 2024].
7 von der Leyen, “Europe’s Choice: Political Guidelines for the Next European Commission 2024–2029”, p.12 (Competitiveness Fund) and p.14 (Defence Fund).
8 von der Leyen, “Europe’s Choice: Political Guidelines for the Next European Commission 2024–2029”, p.26.
9 von der Leyen, “Europe’s Choice: Political Guidelines for the Next European Commission 2024–2029”, p.29 (EU budget) and p.30 (Treaty reform).
10 Speech at the Sorbonne on 15 April 2024. See e.g. “‘Our Europe can die’: Macron’s dire message to the continent”, The Economist (25 April 2024), https://www.economist.com/europe/2024/04/25/our-europe-can-die-emmanuel-macrons-dire-message-to-the-continent [Accessed 29 July 2024].
11 E. Macron and O. Scholz, “We Must Strengthen European Sovereignty”, Financial Times (27 May 2024), https://www.ft.com/content/853f0ba0-c6f8-4dd4-a599-6fc5a142e879 [Accessed 29 July 2024].
12 K. Matussek, “Germany’s Legal Bogeyman Is Hampering Europe’s Response to Putin”, Bloomberg (27 July 2024), https://www.bnnbloomberg.ca/investing/2024/07/27/germanys-legal-bogeyman-is-hampering-europes-response-to-putin/ [Accessed 29 July 2024].

Articles

  • Greening Central Banking in the EU: Closing the Judicial Accountability Gap

    • Agnieszka SmoleÅ„ska, Anne-Marie Weber and Marcin Opoka

    This article discusses the idea of a judicial accountability gap in the obligations of EU central banks in relation to climate change policy. With the interest in incorporating climate change considerations into monetary policy on the rise, legal scholarship has focussed largely on the toolbox at the disposal and the political accountability of central bankers with respect to the sustainability transition. The judicial route has so far remained largely unexplored, the general global trend of climate litigation notwithstanding. In light of this omission, we develop a framework to address the judicial accountability gap in three steps. First, we explain the implications of the special status of climate change mitigation objectives in the EU constitutional order on members of the European System of Central Banks (ESCB). Then, we explain how these treaty obligations apply not only to the Eurosystem, which has been well explored in the literature, but also to non-euro area Member States. This point is particularly underexplored, despite its significant implications for the success of the EU sustainable finance agenda, which is contingent on a supportive macrofinancial regime.

    Finally, we discuss different judicial accountability routes to ensuring that central banks adequately incorporate the secondary mandate objectives in their policies. We examine whether establishing a “minimum standard” for meeting treaty obligations on incorporating climate change considerations into central bank policies could lead to the conceptualisation of a standard of judicial review across the EU, thereby enhancing the democratic legitimacy of central banks within the EU’s economic constitution.

  • COVID-19 Pandemic: Lessons from the European System of Financial Supervision

    • Christopher P. Buttigieg, Gerd Sapiano, John Consiglio and Beatriz Brunelli Zimmermann

    The COVID-19 pandemic has posed challenges to financial supervision and regulation at a global level. Supervisors had to quickly adopt convergence measures and align their supervisory priorities and practices. This article aims at analysing and discussing the response of financial supervisors to the COVID-19 pandemic, with a special focus on Europe. It finds that, at the backdrop of the COVID-19 pandemic, there was a high degree of supervisory convergence amongst European supervisors, particularly regarding alignment of supervisory priorities (e.g. digitalisation) and practices (e.g. supervisory flexibility). This shows that supervision is not a static phenomenon but rather something that constantly adapts to a changing environment. That being stated, given that these changes were triggered by the pandemic, they were reactive in nature. Therefore, although financial policy is not static, it can often be reactive.

  • “To Establish Justice”: The EU Response to the War in Ukraine in the Field of Justice and Home Affairs

    • Federico Fabbrini

    The aim of this article is to examine the European Union (EU) response to the war in Ukraine in the field of justice and home affairs. The article highlights how EU primary law has enabled the EU to adopt ground-breaking measures to express solidarity to Ukraine, sanction Russia, and prepare the terrain for compensating the damages caused by its war of aggression. To this end, the article maps inter alia the use of the Temporary Protection Directive, the expansion of the list of EU crimes and of the mandate of Eurojust, the adoption of several rounds of sanctions, and the approval of legislation designed to seize the extraordinary profits resulting from Russia’s immobilised assets. At the same time, however, the article highlights how several of the measures adopted by the EU to remedy the injustice of Russia’s aggression of Ukraine raise issue of compatibility with domestic and international human rights and rule of law principles. In particular, the article discusses the challenges posed by the recent decision by the EU to forfeit the extraordinary profits resulting from Russia’s immobilised assets, from the perspective of international rules on foreign sovereign immunity. As the article underlines, historically wars put stress on constitutional systems, but it is important that the EU continues to abide by its foundational values also in time of war.

Analysis and Reflections

  • From the “Disguised” Horizontal Direct Effect of Directives to the “Bare” Horizontal Direct Effect of Fundamental Rights? KL v X (C-715/20)—“Lack of Reasons for Termination”

    • Mateusz Miłek

    This case note examines the ECJ’s judgment in KL v X. Despite the absence of horizontal direct effect of the principle of equal treatment, laid down in cl.4(1) of the framework agreement on fixed-term work, attached to Council Directive 1999/70, the ECJ held that the national court was required to disapply a conflicting national law provision in a horizontal dispute, since the latter also infringed upon the right to an effective judicial remedy under art.47 of the Charter. The fact that this right has not been given a specific expression in the framework agreement did not call that conclusion into question. The case analysis outlines the conditions for the horizontal direct effect of the Charter’s rights, in particular art.47 of the Charter, and discusses possible implications of the judgment for the interplay between the framework agreement and the Charter.

  • Monetary Policy and Climate Obligations: Can the ING Case Bypass ECB Independence?

    • Annelieke Mooij

    This article discusses the independence of the European Central Bank in relation to climate obligations. The article first considers the independence of the ECB and the applicability of secondary legislation through the OLAF case; it then discusses the relationship between the primary mandate and the right to environmental protection codified by the Charter of Fundamental Rights of the EU. The article argues that the primary mandate must abide by the climate obligations. It then continues by assessing the climate plan of the ECB’s monetary policy in light of the recent ECtHR case law on the matter and determining that the current ECB climate plan lacks specific targets and evaluation criteria. The article then discusses the ECB’s climate obligations in light of the secondary mandate. It is argued that there are multiple options open to the ECB on how to reach emission reduction targets, and that detailed instructions on how to reach the targets from the legislator would interfere with its independence. Finally, the upcoming Dutch climate case of Milieudefensie v ING may provide a further piece of the puzzle, in that it may provide more clarity on the obligations of (commercial) banks. By contrast, without climate targets in its monetary policy, the ECB may circumvent financial stimulation to brown industries through its own purchases. This would result in an undesirable situation as the ECB would be able to purchase assets that commercial banks cannot. It is therefore this article’s conclusion that preliminary questions touching on this topic should be asked in the Dutch case; ideally, the Court of Justice of the European Union should then use the opportunity to require of the ECB that it abides by its climate obligations.

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