Report by President Charles Michel to the European Parliament plenary session

Our last European Council was marked by the participation of President Volodymyr Zelenskyy. He took part in a brief plenary session, where we took the opportunity to reaffirm our full support for Ukraine for as long as it takes, because defeat for Ukraine is not an option. President Zelenskyy then met in small formats with leaders about intensifying the direct operational assistance, especially for more weapons. To win the peace, we must strengthen our defence and our capabilities. And three days after the Russian attack, we took the decision to deliver arms and munitions to Ukraine, and this marked a paradigm shift. I believe this was the birth of our European defence. Strengthening our European defence means developing our industrial capacities and this is urgently needed to support Ukraine. Russian forces have fired between 20 000 and 50 000 artillery shells per day in recent months. Ukraine needs ammunitions to defend itself and that is why we have worked on the proposal of the Estonian Prime Minister, Kaja Kallas, to organise bulk orders to support the pace of our deliveries to our Ukrainian friends, and High Representative Borrell has developed a concrete plan to implement this assistance to Ukraine.

We would like to see an escalation. We would like to see an escalation towards peace. But Russia has not stopped escalating the war. It would only take one decision, just one decision from the aggressor to engage in peace, to silence the weapons and to withdraw its troops behind the internationally recognised borders of Ukraine. Unfortunately, we do not see any signals from the Kremlin in this direction. And despite this, we continue to fight the battle for peace, the diplomatic battle. We support the just peace formula proposed by President Zelenskyy. It is based on the UN Charter, it is based on respect for international law, and we are working hard to rally the international community behind peace efforts, as we did in the run-up to the vote in the UN General Assembly calling for the withdrawal of Russian forces from Ukraine territory. We also discussed, for instance, this, with many contacts at the recent African Union summit in Addis Ababa, and the High Representative went to the United Nations in New York for the vote. The resolution was supported by an overwhelming majority of 141 countries. This vote is encouraging, but the work of convincing others remains extremely challenging.

The economic consequences of the war in Ukraine have forced us to ask ourselves the right questions about the competitiveness of our economy, both in the short and the long term. Just one example to illustrate the challenge: the EU's energy trade deficit. In 2022, represented some 4% of our GDP, compared with 1.7% in 2021, while the United States has seen its surplus increase threefold during the same period. Energy exports in the United States increased by 60% in 2022. Last December, the European Council asked the Commission to present ways of helping our industry drive forward our green and digital transition, especially in the context of more targeted state interventions, including by the United States. And we have decided on our short-term strands of action. First, relaxing the state-aid regime in a targeted and time-limited way, coupled with greater flexibility in the use of all existing financial means. Second point, making life easier for our businesses by streamlining procedures and authorisations. And third, stepping up training and retraining to provide our future sectors with the professionals they desperately need. But ladies and gentlemen, we also must take action in the long term, because we cannot allow the short-term measures to undermine our long-term strategy. And this is exactly, precisely the debate we will have next week at our next European Council on the competitiveness of the European economy. And we expect the proposals requested from the Commission tomorrow.

In the long term, I think we need to work on three areas: investment, innovation, and trade. First, investment: European companies, particularly SMEs, are having difficulty finding the capital they need to invest in innovation. The gap between the EU and the United States in terms of productive investment represents 2% of GDP. Another example, EU stock market capitalisation is less than half that of the US, as a proportion of gross domestic product. And yet, Europeans save far more than Americans. We must close this gap and we know the solution. There is a solution, which is called the Capital Markets Union, a project whose foundations were laid almost 10 years ago. And it is now crucial that we speed up effective work to bring this essential project to fruition, to finance our economy, to create jobs, and to ensure the well-being of all Europeans for decades to come.

It is for this reason, too, that together with the President of the Commission, the President of the European Central Bank, the President of the European Investment Bank and the President of the Eurogroup, I have publicly called for work to be sped up in relation to the Capital Markets Union.

Ladies and gentlemen, the second point we need to work on is innovation. We all remember that some years ago now the Lisbon Strategy set an ambitious target: 3 % of GDP was to be dedicated to investment in innovation. It is clear, however, that results have not lived up to the target set at that time. We need to do more, we need to do better, and this will certainly be part of discussions in the Council this week. If we take a look at digital platforms, for instance, 90 % of capitalisation for the 70 biggest companies in the world comes from the United States and China. This shows how little capacity the European Union is able to deploy in sectors that are nonetheless vital to our common future.

Finally, the third point that I would like to mention in this forum is the issue of trade. I would like to share some thoughts on this subject with you. Trade has been a mighty asset for the European Union for very many years. It has been a powerful driver of prosperity, of ability to generate growth and improve living conditions for our fellow citizens. Today it is clear to see that even though we are in the ‘Champions League’ in terms of negotiating trade agreements, it is becoming increasingly difficult to ensure that these are implemented. Since 2006, of the 14 trade agreements that have been concluded, the vast majority have either entered into force provisionally rather than definitively, or their entry into force has stalled. In the coming months, a number of choices will have to be made with respect to Mercosur, Chile and Mexico, for example. We must face up to the truth. To cut to the crux of the matter, I think we have two issues in relation to our future trade policy.

The first concerns our decision-making method: not only our negotiating method, but also our ability to ensure that our societies and all those directly concerned can feel involved in the process; in other words we need to strive for more transparency and more trust. A good example of this is Brexit, which provided an opportunity for us to harness all available information, without a hidden agenda and in full transparency, for the European Parliament, for national parliaments, for civil society and for economic actors. We were able to work quickly on this and, I believe, to work well. This example will no doubt inspire us in terms of methods to use in the future.

The second issue is that of substance. I am well aware that there is a generous, sincere desire to try to resolve many of the world’s problems through the instrument of trade agreements. But perhaps it is necessary to consider that choices must be made. As I see it, a trade agreement must first and foremost help to improve and strengthen trade relations – we sometimes have a tendency to forget that this is the objective of a trade agreement. A trade agreement must also have the effect of encouraging more support worldwide for the high standards we would like to see, for example as regards working conditions or environmental conditions. Sometimes we bite off more than we can chew; maybe we need to have a democratic debate on this subject. It is clear that the European Parliament has a major role to play in this regard.

Finally, let’s consider our economic future. The competitiveness of the European Union also involves looking at the relationship we have with other major players in the world. The United States, of course, and China too. In this context, it goes without saying that, in accordance with the Treaties, the Council intends to fully assume its responsibilities in relation to the European Union’s external policy. That has been the underlying purpose of the strategic discussions that have taken place in the European Council several times over the past few months. I would also like to share my thoughts on this subject. On the one hand, it is certain that we are by no means equidistant from the United States and China. We are a steadfast, loyal and faithful ally of the United States. We are developing our historic ties with that country, ties relating to values and to economic cooperation and which, it is clear to see, have a very direct impact on our security. At the same time, China is a reality, a fact, a major player on the international stage, and that is why I think there are three key elements in our relationship with China.

Firstly, to stand up straight and look one another in the eyes when it comes to fundamental values, defending human rights and the democratic principles we hold dear, which are close to our hearts. Secondly, to ensure that we can act to reduce potentially costly dependencies, such as we have seen with Russia on energy issues. This means rebalancing economic relations with China, especially as regards strategic issues, for the sake of the EU’s future prosperity. And finally, it goes without saying – none of us here doubts this, I think – that there is no other option but to engage with China on global issues, including those relating to climate change and global health, for example. It is with this in mind that we in the Council will continue to assume our responsibility for the EU’s external policy by engaging in dialogue with the various countries with which there are a number of topics we must discuss.

Lastly, I will conclude by mentioning – and this is not a minor point – that the European Council provided the opportunity to discuss migration in detail. We know that migration is a subject that sparks political and ideological tension, and which is also sometimes exploited to polarise our societies. We believe that this issue has to be considered calmly and rationally.

On the one hand, we put our trust in the work being carried out by the European Parliament in conjunction with the rotating presidency in order to bring the migration pact into force. That is the internal dimension of migration and we will ensure that the Council also successfully commits itself to making progress on this matter in the coming months.

On the other hand, pending the entry into force of the migration pact, there is no question that we must do more and do better in terms of cooperation with third countries, countries of origin and transit countries. More cooperation to tackle the traffickers and criminals who profit from deprivation and poverty. More efforts, as well, to open legal channels for migration, to not let traffickers and criminals decide who can come to the EU, but to determine in good faith, with due regard for the rule of law, the decisions we take and how we are to manage the issue of migration lawfully, humanely, and with the necessary firmness. Next week we will also have the opportunity to take stock following the in-depth discussion on this subject that took place at the last European Council meeting.

We will also have the opportunity to discuss the situation in the euro area, as we will have a Euro Summit attended by Paschal Donohoe and Christine Lagarde. The summit will be a chance to examine the future of the euro area in the circumstances we are faced with.

In conclusion, ladies and gentlemen, each and every one of us is aware that for some years now we have been confronted by events that have buffeted and, at moments, shaken us. Our points of reference are less clear, we are less certain of where we stand, but the fundamentals of the European project – the values of personal dignity, the promise of prosperity, the guarantee of security – must now, more than ever, be our compass to take us forward, and give an impetus, I would say, to the EU’s strategic autonomy and necessary sovereignty. More resilience, more global influence, less dependence. That is the compass which, I hope, will guide us as we work together to carry forward this project that we hold so dear. Thank you for your attention.