Outside the box: Innovative ideas from CEPS Ideas Lab

It’s a common misconception that institutional ‘ethics’ is a question of morality. Believing that ethical misconduct – such as conflicts of interest – is a ‘necessary’ trade-off inherent to a functioning political system is just as misguided.

The reason why we need to urge a sweeping reform of ethical oversight isn’t because of some moral high ground but because the lack of accountability at the political level chips away at the democratic power that’s supposed to rest with the people.

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As Europe stands at a critical crossroads, the stakes couldn’t be higher. Our research paints a stark picture – without decisive action, Europe faces a staggering EUR 40 trillion wealth gap with the US by 2032. The recent Draghi and Letta reports underscore this urgency. The time has truly come for Europe to reimagine its approach to innovation.

At the core of this transformation lies what we call the ‘Innovation Iceberg’ While investors traditionally chase visible, mature technologies that can be easily and quickly commercialised, Europe’s true strategic opportunity lies beneath the surface, in early-stage breakthroughs developed through its vast academic and research efforts. Alas, these often remain hidden from view and struggle for support and attention.

As Europe’s strategic sovereignty fully depends on unlocking this opportunity, it thus needs to be coordinated by a consortium consisting of decision makers at the highest levels of the European Commission and leading corporations in Europe.

To harness this potential, we need a revolutionary digital platform that identifies all participants in the innovation ecosystem and that maps and coordinates both the visible and invisible parts of the iceberg. This will empower all these participants and democratise converting innovation into commercial ventures across the continent.

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Why does the EU fail to produce its own Google, Amazon or Facebook? Is Europe lacking entrepreneurship, technical savvy or simply imagination? Contrary to what many think, in every year for the past five years, the EU has created more high-tech start-ups than the US; however, many European start-up firms whither on the vine due to a lack of finance. 

Yet a simple solution has been lying in plain sight for decades – we simply need to grasp it. The answer, as with a great many questions, is money. 

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A consensus is now building that structurally improving EU competitiveness is a condition for protecting and enhancing the EU’s geopolitical position, for implementing the twin green and digital transitions and, in general, for preserving the European way of life.

At a corporate level this means focussing on economic and environmental sustainability, on resilience (the capacity to cope with uncertainty, and more severe and more frequent shocks) and on the human factor to contribute to – and take full advantage of – new technologies.

These three dimensions are part and parcel of the European Commission’s ‘Industry 5.0’ approach. For Industry 5.0 to be successful in the long run, private sector follow up is best served by relying on civil corporate, contract and labour law. These are three of the many ‘European Hidden Treasures’, or sources of competitive advantage that many Member States enjoy but are often not recognised as such.

This contrasts sharply with common law and Anglo-Saxon business practices, due to the primacy of shareholder interest in corporate governance, resulting in risk avoidance and the desire to maintain control – hardly desirable assets in such an unpredictable world.

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EU citizens have multiple participatory instruments at their disposal, from the right to petition the European Parliament (EP) to the European Citizen’s Initiative (ECI), from the European Commission’s public online consultation and Citizens’ Dialogues to the role of the European Ombudsman as an advocate for the public vis-à-vis the EU institutions.

While these mechanisms are broadly welcome they have – unfortunately – remained too timid and largely ineffective in bolstering bottom-up participation. They tend to involve experts and organised interest groups rather than ordinary citizens. They don’t encourage debates on non-experts’ policy preferences and are executed too often at the discretion of the political elites to justify pre-existing policy decisions.

In short, they feel more like consultative mechanisms than significant democratic innovations. That’s why the EU should be bold and demonstrate its democratic leadership by institutionalising its newly-created Citizens’ Panels into a Standing Citizens’ Assembly with rotating membership chosen by lot and renewed on a regular basis.

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Despite a 30-year-old Single Market, enforcement remains a key EU weakness, with national authorities largely in charge of implementing EU laws, with very few – and often scattered – EU competencies. EU laws that give people rights and ensure that businesses can trade freely and fairly across borders cannot be effective unless they are respected and enforced where necessary. When enforcement is weak, the credibility of institutions and the rules they implement plummets.

How can the EU be a role model and ‘rule’ the world (to quote Anu Bradford) if its laws do not actually deliver? This isn’t a new problem, of course. At least since the Volkswagen emissions scandal broke in September 2015, there is mounting evidence that enforcement mechanisms are often lax and insufficient when facing Europe-wide issues. This is in stark contrast to the US, which although it doesn’t have the same forecast-based controls as the EU, it does have a much more prominent litigation apparatus (e.g. with class action lawsuits and other mechanisms that strengthen deterrence).

This is why the next European Commission should include a dedicated Commissioner for Implementation and Enforcement.

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By Michael Emerson

The EU’s enlargement process has been the constant talk of the town since the European Commission delivered its annual Enlargement Package in November 2023. There have been three significant developments of real significance to acknowledge, two on Ukraine which are excellent, the third concerning the Western Balkans which is not quite right yet and requires some additional work.

The first was the European Council’s decision to open accession negotiations with Ukraine. The second was the agreement on the EUR 50 billion aid package for Ukraine, agreed unanimously when Viktor Orban unexpectedly decided not to wield his veto – a result that highlights the merits of sustained diplomacy, rather than condemning Hungary’s prime minister as a paid-off pariah.

The third is the Commission proposal for a Growth Plan for the Western Balkans, with fresh financial incentives offered for reform measures, but – worryingly – with no apparent linkage to the formal enlargement methodology. This is an error that should be rectified, sooner rather than later.

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The Western Balkans power sector is close to collapse. Approximately two-thirds of the Western Balkans’ electricity is generated by lignite, most often by power plants that have operated for over 40 years. The carbon intensity of the region’s electricity sector is three times higher than that of the EU. Almost no power plant can run at its designated capacity any longer.

Lignite-based district heating is no different, with several cities experiencing failures this winter. Retrofitting is economically unviable. This is because even if the large majority of plants were upgraded, they still wouldn’t be able to meet sulphur dioxide emissions ceilings under the EU’s Large Combustion Plant Directive, which came into effect in 2018 as a specific obligation of the European Energy Community Treaty, which aims to extend the EU’s internal energy market beyond EU borders – including into the six Western Balkans countries.

The population of the Western Balkans region is exposed to some of the highest concentrations of air pollution in Europe, notably particulate matter (PM2.5), which is principally caused by lignite powerplants, according to a study commissioned by UN Environment. Consequently, the environment is deteriorating rapidly; forests are depleted, landslides are becoming more frequent and soil pollution is increasing.

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In July 2023, the European Commission published an adequacy decision on the EU-US Data Privacy Framework (DPF) – the third attempt to broker a lasting agreement on transatlantic data transfers. While the DPF has made important strides compared to its predecessors, it’ll likely face yet another challenge before the Court of Justice of the European Union (CJEU). To mitigate the risks of another disputed agreement, the EU and US should turn to a toolbox approach to cross-border data transfers – starting with joint R&D investment in Privacy-Enhancing Technologies (PETs).

The stakes of this recurring failure are high – according to AmCham EU, cross-border data flows account ‘for more than half of Europe’s global data flows and for half of the US’ total,’ and 90 % of EU-based companies rely on transatlantic data flows. Most importantly, without an agreement, transatlantic data transfers are more susceptible to legal uncertainty, putting the fundamental rights of European citizens at risk.

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The changes in society being led by Artificial Intelligence (AI) are immense. Among the available AI technologies, language models are right now most universally beneficial for citizens, industry and governments. Yet the most powerful language models are being developed outside Europe by companies such as OpenAI, Google DeepMind and Anthropic.This is why the European Commission should launch a dedicated mission for a collaborative European language model to ensure Europe doesn’t miss the AI boat.

AI is currently an industry where scale matters. If there hasn’t been enough computation spent on understanding the patterns in the data, or the data isn’t comprehensive enough, then the outputs will lack quality. Larger investments tend to pay off. In usual settings there are diminishing returns to investment, but for language models there’s a threshold of investment that needs to be reached before the model can even be considered a relevant addition to the market.

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