What’s Wrong With Europe and How Its New Chief Plans to Fix It

(Bloomberg) -- The incoming president of the European Union’s executive arm has her work cut out for her.

Over the next five years at the helm of the EU Commission, Ursula von der Leyen wants to lay the foundations for the bloc’s transition to a low-carbon economy and make Brussels less inward-looking, by shifting its focus on geopolitics.

What’s Wrong With Europe and How Its New Chief Plans to Fix It

Any ambitious legislative proposals by the commission will face an uphill battle thanks to the fragmented EU Parliament, an unforgiving global environment and the perennial challenge of securing approval from the bloc’s governments.

Here’s what von der Leyen plans to do, and why it won’t be easy:

Climate Policy

Objective: Make Europe the first climate-neutral continent by 2050.

Challenge: First von der Leyen will need to get all EU governments on board, including coal-reliant Poland and a small group of its east European allies. Then she will have to find tools to mobilize trillions of euros to finance the transition, which will affect everything from energy production to transport and farming.

What’s Wrong With Europe and How Its New Chief Plans to Fix It

Post-Brexit Talks

Objective: Get a comprehensive and balanced agreement to cement the EU’s relationship with the U.K. after Brexit.

Challenge: Securing a deal that’s beneficial to the EU over the long term, particularly in the areas of trade and security, while not giving the U.K. everything it wants. It’ll be crucial to keep the 27 governments united, a task that will become even trickier when their competing priorities are laid bare.

Dealing With Trump

Objective: Navigate an increasingly hostile transatlantic relationship.

Challenge: The U.S. is the bloc’s most important ally, and relations between the two regions have deteriorated dramatically since Donald Trump took office three years ago.

The president has called the EU a “foe” that’s “almost as bad as China, just smaller.” He has also threatened to hit the bloc with tariffs on its auto exports, which would ignite a new front in the global trade war.

In addition to the trade conflict, the U.S. plans to leave the Paris climate accord next year, while Trump has hectored European allies over their defense spending and even flirted with the idea of leaving the North Atlantic Treaty Organization all together.

Global Trade

Objective: Preserve the World Trade Organization system.

Challenge: Meeting U.S. demands for a WTO revamp while countering American and Chinese practices that are undermining the organization. With the WTO threatened by U.S. protectionism, a looming appellate-body deadlock as a result of Washington’s refusal to consider new appointments and communist China’s trade distortions, the task is as urgent as it is formidable.

What’s Wrong With Europe and How Its New Chief Plans to Fix It

Objective: Expand the EU’s trade-policy arsenal, possibly by empowering the bloc to sanction countries (read the U.S. under Trump) that both impose illegal commercial barriers and block the WTO’s dispute-settlement process.

Challenge: Persuade EU capitals that such an initiative wouldn’t ultimately hurt their bilateral ties with big trade partners outside the bloc. While trade is among the most centralized EU policies, member nations can be reluctant to expand the bloc’s powers in this area because doing so could mean even less national control.

Economic Policy

Objective: Complete the European Monetary Union.

Challenge: There’s not too much von der Leyen’s team can do at the moment to complete the euro’s architecture, because the next steps mainly lie in the hands of euro-area nations. And they seem to be making some progress on common deposit insurance, something the commission has urged for repeatedly. However, it’s unlikely they’ll agree on anything like what Brussels originally had in mind.

Meanwhile, other initiatives she is keen to push, such as a European unemployment reinsurancescheme, have received a lukewarm response from the bloc’s governments.

Financial Regulation

Objective: Fix Europe’s fragmented banking and capital markets.

Challenge: These two projects have remained unfinished as national governments repeatedly held up steps to strike down barriers that banks and other financial firms face in the EU’s common market. The so-called banking union has pitted fiscally conservative countries like Germany against the more highly indebted ones in southern Europe, meaning a difficult compromise will have to be brokered.

As for Europe’s capital markets -- which are severely underdeveloped compared with to the U.S. -- the task is to stop tinkering around the edges and undertake meaningful reforms in sensitive areas like insolvency laws and taxes.

Data Protection

Objective: Turn straw into gold -- or unused data into “innovation” -- with a framework to encourage governments and companies to pool data that they can squeeze insights from.

Challenge: Von der Leyen wants to go further than even the EU’s tough new data-protection clauses, which give regulators the powers for the first time to fine companies as much as 4% of global annual sales for serious data violations.

Data rules in Europe are already a minefield, with some companies struggling to apply a complicated new regulation on personal data. Thierry Breton, the EU’s incoming data commissioner, will be tasked with creating some safe spaces to share non-personal information, skirting antitrust rules that don’t allow rivals to swap some sensitive data. It’s unclear whether there’s gold in Europe’s data hills and if a new legal framework will really unlock vast economic value.

Artificial Intelligence

Objective: Unveil AI legislation within 100 days of taking office.

Challenge: The commission still needs to figure out precisely what problems it wants to address with any new rules, which could hit a wide range of industries. One hundred days is an especially ambitious timeline to unveil a legislative proposal, especially if the EU wants to launch a so-called impact assessment -- which would allow outside experts and companies to provide feedback on potential policies.

That may be why von der Leyen didn’t stress the timeline in her confirmation speech at the European Parliament on Wednesday.

EU Enlargement

Objective: Von der Leyen wants the EU to keep its door open to further expansion.

Challenge: Emmanuel Macron has blocked the start of accession negotiations with Albania and North Macedonia and is seeking a reform of the entire enlargement process before any such talks can begin. But France’s proposals are seen by many as too vague to form a basis for the commission to kick-start an overhaul of the process and little more than an excuse to stop accession talks all together.

What’s Wrong With Europe and How Its New Chief Plans to Fix It

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