Why countries are at odds over Ukraine’s EU candidate status

Good morning and welcome to Europe Express.

One divisive issue coming to a head before the summer break (and possibly as soon as next week) is the question of Ukraine’s candidate status — and the broader question of the bloc’s enlargement policy, which yesterday cost the Bulgarian prime minister his parliamentary majority. We’ll explore the arguments of sceptical capitals and what Ukraine’s deputy prime minister had to say about them.

EU economy ministers yesterday discussed a proposed Chips Act, which aims to use subsidies to bolster Europe’s chip manufacturing base amid a global scarcity of semiconductors. We’ll bring you up to speed with where that debate landed.

Growing pains

Back in March, EU leaders made the firm declaration that Ukraine belongs to the “European family”, writes Sam Fleming in Brussels. Ukraine will soon discover what that pledge amounts to in concrete terms.

Olha Stefanishyna, deputy prime minister of Ukraine, made Kyiv’s view on the topic abundantly clear during a trip to Brussels this week. This cannot be a “game of promises”, she said, arguing that EU leaders needed to take the formal legal step of granting Ukraine status as an EU candidate at a summit.

Failing to do so would have negative consequences for the EU as a whole, not just Ukraine, she argued.

The problem is the EU member states are deeply divided on the subject, making for some highly charged discussions heading into the summit on June 23 and 24.

Ukraine applied for EU membership in late February, days after Russia invaded the country. The next step comes with the publication of a European Commission opinion on the topic, expected next week. Ursula von der Leyen, the commission president, raised Ukrainian hopes sky high early on into the war when she said that Ukraine was “one of us and we want them in the European Union”. 

Accordingly, expectations have been rising of a positive commission assessment of Ukraine’s prospects for EU membership. But the recommendation will land within a fiercely divided body of member states.

While some, notably eastern European capitals, are keen on pushing Ukraine’s application forward, many others are more ambivalent — among them Germany. In a meeting of EU ambassadors this week only a handful of member states actively spoke in favour of Ukrainian candidacy.

Mark Rutte, the Dutch prime minister, has been among the sceptics and last month he told his parliament that the chances of Ukraine’s gaining candidate status were slim, given how many countries oppose the concept.

One of the risks of granting Ukraine candidate status, say opponents, is that it would alienate other countries that have long been waiting for their EU applications to be advanced. As one EU diplomat put it, it would create a precedent for countries to “jump the queue” if their application became sufficiently politicised. “The others will say, ‘if you give it to them, why not us?’” (Indeed, Georgia and Moldova have also applied to join and are awaiting a recommendation from the commission.)

Others argue Ukraine is so far from being in shape for EU membership that giving it candidate status would create unrealistic expectations. Some capitals would be more comfortable with identifying Ukraine as a “potential” candidate for EU membership, as with countries such as Bosnia and Herzegovina, with a number of conditions laid out before it can move forward.

However, Stefanishyna said preconditions were not acceptable to Ukraine, arguing that any conditions should instead follow the granting of candidate status, which she observed would in any event be only the beginning of a complex process.

Further muddying the waters is an associated push for the creation of a new constellation of non-EU nations, with their own sets of benefits. This is an idea backed by senior politicians including Charles Michel, the European Council president, and Emmanuel Macron of France, who has spoken of a wider European political “community” of EU neighbours.

Countries like Ukraine look at such proposals with scepticism, given that admission to a newly created club of non-EU capitals could look like a consolation prize as EU membership applications remain in the slow lane.

Stefanishyna said that Kyiv was willing to consider new ideas but that they should not “undermine” any formal track Ukraine was on. “It is important for us not to become a hostage of another political solution,” she said.

Even if the commission were to recommend granting Ukraine candidate status, that would become a reality only if all 27 EU member states agreed on it. Despite the strong lobbying from Kyiv, that remains a very high bar. The risk Ukraine has run by pinning its hopes so firmly on attaining EU candidate status is that if it were granted anything less it would be perceived as a notable failure for all sides.

Chart du jour: Spreading angst

The gap between Italian and German 10-year borrowing costs — considered an important barometer of economic risks in the euro area — widened for the first time since the pandemic, after the European Central Bank yesterday indicated that bigger rate rises could follow its initial move in July.

Chips ahoy

Member states are split on how to use subsidies for microchips as they discuss a proposal from the European Commission in response to the global semiconductor supply crunch, write Valentina Pop and Javier Espinoza in Brussels.

Back in February, the commission put forward the so-called Chips Act, a €43bn investment plan that would use state aid to promote research and production of higher-technology chips, with the goal of doubling the EU’s share of the semiconductor market from 10 to 20 per cent by 2030.

But capitals are at odds over what constitutes cutting-edge technology worth subsidising, with the Netherlands yesterday warning during the competitiveness council in Luxembourg that the bloc should not put taxpayers’ money behind old technology.

“We always seem to be tackling the crisis of yesterday,” said Dutch ambassador Michael Stibbe. “The lack of chips is due to Covid and not to lack of innovation and it would be a waste of our talents and money if we tried to have a company in every country making yesterday’s chips.”

Europe Express understands that France is part of a group of countries that would want to expand the definition of a “first-of-a-kind facility” eligible for subsidies to include older technologies.

“Currently, our industry lacks even old-school semiconductors,” said Lithuanian economy minister Aušrinė Armonaitė. “We need to increase our production capacity and partnerships with friendly third countries in this field as well,” she said during the public deliberations. (Lithuania is betting on increased links with Taiwan, a major global producer over which Vilnius fought a diplomatic war with Beijing.)

The German state secretary in the ministry of economy, Michael Kellner, said the current global chips shortage had led to “absurd situations where chips are taken out of washing machines to be used in other products”.

Austria insisted that no EU funds be reallocated from other parts of the budget to subsidise chip manufacturing, while Finland criticised the commission for not carrying out an impact assessment ahead of publication of the Chips Act.

When asked about the lack of an impact assessment, EU industry commissioner Thierry Breton pointed to the “urgency to act” and said that there had been a working staff document addressing the points raised by ministers. “We’re thinking about where to set up these factories to meet world demand but also deal with cutting-edge technologies. We need to move quickly.”

He explained that the commission had room for manoeuvre on the definition of “first-of-a-kind” technology, as it refers not only to the size of the microchip but also “energy efficiency, specific packaging . . . cyber security — so it’s not only a technology but everything that is embedded around”.

What to watch today

1. Nato B9 summit of central and eastern European leaders takes place in Bucharest

2. Interior ministers and, separately, research and innovation ministers meet in Luxembourg

Smart reads

• Alt-Brexit: The Centre for European Reform calculates that compared with a doppelgänger model where the UK had not left the EU, the country’s GDP is 5.2 per cent lower in the post-Brexit, post-Covid reality.

• Sovereignty index: While the Netherlands has an “excellent” score on economic sovereignty, Bulgaria, Hungary and Cyprus all receive “failing” scores, reflecting their dependence on Russia and China, their complacency on foreign lobbying and a lack of investor protections, according to a sovereignty index published by the European Council on Foreign Relations.

• Georgia on EU mind: Political wrangling and polarisation are eroding democracy in Georgia. But Tbilisi’s bid for EU membership gives Brussels leverage to help get the country back on track, writes Thomas de Waal at Carnegie Europe.