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October 16, 2019

After Goulard, von der Leyen needs to show leadership

Will Sylvie Goulard be the last Commissioner-designate to fall as the European parliament, Paris, Berlin and the new Commission settle their grudges? We still cannot be sure that von der Leyen's Commission will be confirmed. The European Parliament has postponed her investiture, as a result of which the Juncker-Commission will continue for at least another month.

The FT pointed out that one of the reasons Goulard fell was that her party Renew Europe would not sign a non-aggression pact with others ahead of the hearings. They insisted that the candidates are to be measured based on their merits. After Renew launched attacks that led to the rejection of an EPP candidate, the gloves were off. Retaliation was the name of the game. After two long and excruciating hearings Goulard only got 12 votes outside Renew and was out of the running. But at what price? As we keep pointing out, the EPP and PES no longer command an outright majority and must rely on working together with the Greens or Renew. Not the best start into the five year legislative period for the European Parliament. The EPP, PES and the Greens also flexed their muscles on Goulard in a move to demonstrate the power of the European parliament against Emmanuel Macron and the new Commission. 

Goulard was Emmanuel Macron's candidate even if she was not his first choice. His intervention after the first hearing, with calls to Berlin and Madrid, did nothing to save her. Angela Merkel no longer has the whip to get MEPs in line. And the EPP was on a rampage, blaming Macron for killing Manfred Weber's spitzenkandidat bid for the job of commission president even if the EPP group itself could not agree on him before. The PES had its own reasons to reject Goulard, as did the Greens.

Macron is built for success not for failure. Shortly after the defeat he went on to pass the blame to von der Leyen. In an off-cuff remark he said that von der Leyen had assured him that she had talked to the EP groups and that Goulard would get through, something von der Leyen and both the EPP and PES denied. On Monday Macron and von der Leyen had to paper over their differences and hold some constructive talks instead. But Macron has seriously wounded her standing at a critical moment by encouraging doubts about her judgements. Not a good start. Von der Leyen might have learned a lesson from this episode. It will now be up to her and the European parliament how the next phase of hearings will go. 

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October 16, 2019

Franco-German relations are so backward-looking

The subjects Angela Merkel and Emmanuel Macron are prioritising for their bilateral cabinet meetings today are very typical of the state of EU politics right now. The big issue for Macron is the German lack of commitment to a joint defence project, which is currently being held up in the Bundestag. The big issue for Merkel is Formula A1: nothing racy here, but a hellishly complicated EU-level procedure that forces employees on company trips within the EU to prove that they are paying their social insurance back home. 

The issue they are both interested in is the construction of a European data cloud to improve data security for European firms. We find this debate highly revealing. The meeting takes place in Toulouse, the headquarters of Airbus which is arguably the biggest success story in European industrial policy. Ever since, EU leaders have drawn the wrong conclusion from the success of Airbus. It succeeded because it broke a monopoly. That’s absolutely not the issue with digital technologies.  

Having failed to invest into digital technology, France and Germany are now playing a joint defensive move. They already agreed to set up a joint battery production facility near the Franco-German border. While we agree that it is better to have some capacity rather than none, the real issue here is the ownership of the technology supply chains, which is American and Chinese. 

The EU still addresses the multiple technological challenges of the 21st century through protection. 

In this context we noted an interesting article by Kaan Sahin in the Berlin Policy Journal. China also has a tech problem of a similar quality - a lack of domestic production in traditional microchips. This is a technology for which China is dependent on the US, Taiwan and South Korea. China has probably lost the battle for traditional microchips. It is in a similar situation to that of the EU in car batteries. 

But, unlike the EU, China is moving forward by focusing on a fast-growing segment in chips markets: those that specialise on artificial intelligence to process large volumes of data in machine-learning algorithms. These are the chips to be used for electric cars, or in robots. One Chinese company now focusing on AI chips is Alibaba. Google and Facebook are also in that market.

Sahin makes the naively optimistic point that the EU could learn from China: focus on fast-growing market niches where you have an advantage and strive for global leadership. He cites AI systems for machine and engine data that measure temperature, pressure, and rotor speeds as examples - stuff that is associated with existing industrial production. Another potential field is public health data. The EU may also be able to produce higher-quality data than the Chinese. But all these efforts require determined EU-level policies.

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