Transatlantic transition: the choices ahead for Europe and America

Transatlantic transition: the choices ahead

Professor Kojm,

Dear students,

It's a great pleasure to be here today.

In terms of sheer numbers of voters, 2024 is the biggest election year in history. An estimated two billion people worldwide will be heading to the polls. Including, of course, here in the United States in November. And in EU-wide elections in June – the largest democratic exercise in the world, bar India.

These elections will have important implications on the future of the transatlantic alliance and our approach on many common priorities, from the response to Russia's war of aggression against Ukraine to the fight against climate change.

[Ukraine]

Let me start with the war in Ukraine, because that is truly the watershed event of our times.

Bigger countries invading their neighbours to annex their territory – that was something for the history books, or so we thought. The system of international law, and the institutions we collectively put in place in the wake of the Second World War, made us think that we could live peacefully side by side, without fear of being attacked by a more powerful neighbour.

And especially since the end of the Cold War, defence budgets have been shrinking in Europe. For much of history, military expenditure was the single largest spending item of a state's treasury. Over the past decades, it has progressively fallen to a world average of just over 2% of GDP. Even in the United States, it stood at 3.5% of GDP last year, compared to over 9% at the height of the Cold War.

The trend has been to spend more on public services and less on the military. The peace dividend – buttressed in Europe also by NATO's security umbrella – freed up resources for investing in education, infrastructure, healthcare, pensions: the landmarks of our present-day prosperity.

Putin's decision to launch his wholly unprovoked and unjustified invasion of Ukraine puts all those achievements at risk.

If key tenets of international law are trampled on with impunity, it will only embolden others to follow suit and raise the spectre of more wars.

So, on top of the moral argument, we also reiterate to the countries of the Global South, but also to those reluctant or isolationist voices here in the United States and in Europe too, that the war in Ukraine is not just a distant regional conflict. It is about global security. It concerns everyone. It is in the collective interest that Russia does not prevail, does not establish a precedent for further aggression in our part of the world or others.

It is also in the collective interest that the terrible humanitarian crisis in Gaza ends and that we avoid any further widening of this conflict.

On this point, let me underline that the EU has condemned in the strongest terms the Iranian drone and missile attacks against Israel, which marked an unprecedented escalation and a threat to regional security.

The EU has reiterated its commitment to the security of Israel. But in this highly tense regional situation, we call on all parties to exercise utmost restraint. Avoiding further escalation is a common responsibility. And again, further escalation here would also have very strong economic consequences – and not only for Europe. Here, we are looking very closely at what is happening in the Red Sea, which could also have consequences for inflation should the situation worsen.

It is clear that Europe is in a new geopolitical era, in which we must also face tough questions about how to increase our defence budgets. These questions are even more challenging today, when public debt and deficit levels have not fully recovered from the pandemic and the energy crisis, and we face a mountain of investments in other priorities, starting with the fight against climate change.

[Climate]

Over the past four years, the European Commission has significantly stepped up its commitment to tackling climate change with the European Green Deal and our pandemic recovery plan NextGenerationEU. And we have seen a welcome shift in approach also in the US with the Biden administration.

I have to say that these policies are now facing a backlash across Europe, which populists are skillfully exploiting. To some extent, this was to be expected. Setting long-term targets for cutting emissions, like our commitment to reach net-zero by 2050, is relatively easy. Putting in place the actual measures to reach that goal – that affect your cars, your heating system, your diet – is another matter. So while opinions polls consistently show a very large backing for ambitious climate action, a number of our proposals have caused controversy.

We can expect the future of the Green Deal to one of the top issues in the run-up to this June's elections. Just as is the case in the US, green policies have become polarising. In my view taking forward the European Green Deal is the right thing to do. Not only for the climate – some point out that Europe represents only 8% of global emissions – but also to ensure that we are in competitive in the global race for clean technologies, in which China and the US are also investing heavily.

The decarbonisation of our energy system requires immense investments, more than half a trillion dollars per year until the end of this decade. At the same time, we must ensure that efforts are shared fairly, support measures are well targeted, and workers have the necessary skills. Without social acceptability, the transition will not succeed.

It is often said that Europe needs an answer to the Inflation Reduction Act. But we do have our own IRA: it is our pandemic recovery plan, NextGenerationEU, which we financed for the first time with the large-scale issuance of common debt at EU level, a decision many at the time called Hamiltonian.

NextGenerationEU will make a key contribution to meeting our investment needs for the green transition, at least until 2026 when the programme is set to expire. Again, the issue of how to finance this and other common priorities is inescapable.

Compared to the austerity years of the past decade, there is today much greater convergence of views that the need to decarbonise, digitalise, and defend our economies calls for higher levels of public investment. The question is how much of it will be done at national level and how much at EU level. I believe the experience of the past few years has showcased the benefits of common European tools for common European priorities.

[EU-US relations]

Let me conclude with a few words on EU-US relations.

The past four years have brought the EU and the US closer than they had been in years. Just one example, the agreement on international taxation was a very important thing.

What will happen next? Come what may, we must continue to work together to strengthen our relations – as we have done, for instance, in dedicated fora like the Trade and Technology Council. European and American leadership is also needed to restore a fair and sustainable rules-based order, for a more effective multilateralism.

In this year of major political choices, we should never forget that our strength lies in our unity. And that despite the occasional policy differences, this is a strategic alliance that has been able to expand peace and prosperity in the coming years. So we have to continue to work together in the interest of freedom and democracy in the world.

Thank you.