New faces at the top of the EU must deliver in 2015

If 2014 was a year of change for the European Union, 2015 will be the period when the various institutions of the European Union bed down and get to work. The series of institutional changes triggered by the European elections in May brought a number of new faces to the helm of the EU. Jean-Claude Juncker, after much controversy, was elected as the new head of the European Commission, while Donald Tusk became the second person to head the European Council. Federica Mogherini replaced Catherine Ashton as the EU's High Representative for Foreign and Security Policy, the only centre-left politician to secure a top EU job.

With the commission, council president and high representative in situ for just under two months, all eyes will now be on how they shape the institutions they lead over the coming years.

The Barroso II Commission and the tenure of Herman Van Rompuy were dominated by the euro zone crisis, as the EU struggled to contain the effects of a sovereign debt crisis that pushed five euro zone countries into rescue programmes.

But while the apex of the euro zone crisis has abated, Europe’s economic problems have not. Europe has moved from crisis mode into an arguably a more insidious economic phase, as the euro zone struggles with low growth, falling inflation and high unemployment. Both the commission and council have cited the economy as one of the priorities of the coming years.

This is most evident in the €315 billion Juncker Investment plan, unveiled by the commission in November and the focus of Donald Tusk’s first European Council in December. The proposal, which consists of a core fund of €21 billion euro which will then be used to leverage private investment up to an overall amount of €315 billion, is the latest attempt to kick-start the European economy.

Novel and inventive

While critics have been quick to highlight the lack of new money in the fund, the proposal is potentially a novel and inventive move by the commission to mobilise the billions of euro of financing available and move away from a grants-based approach to EU investment. EU vice-president Jyrki Katainen’s pledge to undertake investor roadshows to drum up interest would be a new departure for the commission, though the ability of the notoriously-bureaucratic EU institutions to deliver a feasible project and pipeline and clear investment case is crucial to the plan’s success.

By trying to tackle Europe’s “investment gap,” the Juncker Commission has already found itself in the middle of the age-old debate over austerity versus growth. While the announcement of a stimulus package could be seen as Juncker’s desire to distance himself from the austerity-policies of the Barroso Commission, he has been careful to stress – with an obvious eye to Berlin – that structural reforms need to continue.

It also feeds into the broader debate about where the responsibility for Europe’s economic problems should rest – the ECB, the Commission or member states. Whether the ECB is able to overcome divisions within its governing council level and engage in full-scale quantitative easing next year will be of crucial significance for the euro zone economy in 2015.

Luxembourg Leaks

Next year is likely to see a renewed focus on corporate tax and aggressive tax planning by multinationals in the wake of the Luxembourg Leaks scandal.

The outcome of the EU’s state-aid investigation into Ireland’s tax arrangements with Apple is due to be announced in the second quarter of the year, but the surprise news that the commission is widening its request for information on tax rulings to all 28 member states is likely to give some relief to Ireland and Luxemboug. However, Luxembourg’s assumption of the rolling presidency of the council of the European union in the second half of 2015, is likely to focus attention on the Duchy’s role in fostering aggressive tax planning.

Ukraine and relations with Russia will continue to dominate the EU’s foreign policy agenda next year. In March, the first anniversary of the introduction of EU sanctions against Russia, the EU will decide whether to extend the measures. An eastern partnership summit in Riga in May is also expected to focus minds on the EU’s neighbourhood policy more generally.

Any cohesive EU response to the Israeli-Palestinian conflict is unlikely to emerge in 2015, given the entrenched divisions within the bloc on the issue, though the question of some kind of co-ordinated decision among a sub-set of member states, including Ireland, on the recognition of Palestinian statehood is likely to remain on the agenda.

The fight against ISIS, and the role of neighbouring Turkey which continues to seek EU membership, is likely to preoccupy foreign ministers. One priority will be to progress legislation on the sharing of passenger name records between countries as the EU tries to deal with the issue of ‘foreign fighters’ – EU citizens travelling to Syria and Iraq to fight for Islamic State.

Finally, the issue of Britain’s renegotiation of EU membership is likely to be a major focus, particularly given the general election in May. The prospect of a British referendum by 2017 is expected to prompt serious engagement from both the commission and European Council sides.

The main question is whether Britain’s demands can be met without treaty change. With London saying that Britain has gone as far as it can go in terms of its domestic legislation as regards free movement, the focus will be on what possible changes Brussels can offer.

Whether the other member states have the political will to give Britain special concessions remains doubtful. For Ireland, the possibility of a ‘Brexit’ will be a fundamental issue of concern during 2015.