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Speech by Commissioner Gentiloni at the Atlantic Council Frankfurt Forum

Speech given yesterday by Commissioner Gentiloni at the Atlantic Council Frankfurt Forum.

"Check against delivery"

Thank you and good afternoon. It's a pleasure to join you today for this inaugural Forum on US-European GeoEconomics. I'm sorry I cannot be with you in person.

The EU and the United States have deep economic and political ties. At every historic turning point since the Second World War, we have stood side by side: with the Marshall Plan; during the Cold War and the fall of the Iron Curtain; and now in the face Russia's war of aggression in Ukraine.   

Since February, we have come together to impose unprecedented sanctions against Russia's brazen breach of international law. We have come together to provide crucial military and financial assistance to Ukraine. And we have come together to weaken Russia's grip on our energy markets.

Is our common response working? In my view, definitely yes.

The sanctions are steadily eating away at Russia's economy, which is set to shrink markedly both this year and next. Russia's own federal labour service has stated that 3,000 brands have put business on hold since the invasion, with 500 foreign companies having been liquidated by the end of July at a cost of 125,000 jobs.

Russia's imports from the EU fell by around 50% in the period March-June, compared with the same period last year.

Russia's imports of IT equipment have tumbled, despite its legalisation of parallel imports. Blocked access to updates of Western software, essential spare parts and semiconductors are having a grinding effect on industry. Many of the few cars produced in Russia – data over the summer indicated that sales were down by more than 70% compared to the same period last year due to the collapse in production – are without airbags, ABS and catalytic converters.

Russia's share in EU gas imports has fallen by two thirds, from 45% before the war to 14% now. And its share of our pipeline gas imports has fallen by three quarters, from 40% to 9%. The deals we have struck with the U.S. and other partners to boost energy imports have made up for the cuts in Russian fossil fuels. I am mentioning these figures because I think we need to repeat how successful has been our response through sanctions to Russia's aggression.

And the cap on the price of Russian oil exports agreed in principle at G7 level will put downward pressure on global energy prices and reduce the Kremlin's ability to fund its war. Today we are setting out the legal basis to implement this key measure in the EU.

So our common response is working, and I have to say Russia's recent moves – from halting gas deliveries via the Nord Stream 1 pipeline, to the mobilisation of reservists and sham referendums – are clear signs of weakness and of growing desperation. Of course they are also signs of escalation, to which we are responding with an eighth sanctions package, as President von der Leyen has just announced here in Brussels.

Clearly, the war and its consequences are weighing on economic prospects on both sides of the Atlantic.

The combination of high energy prices, high inflation (even if for different reasons), monetary tightening and extraordinary uncertainty are putting a damper on growth. Both the EU and the US will see positive growth for the year 2022 as a whole. But all the signs are pointing to a slowdown underway, such that a recession can no longer be ruled out. We are entering a phase of stagnation and possible recession.

To ensure our economies successfully navigate these troubled waters, we need to maintain agile and responsive fiscal policies, just as we did during the pandemic.

In the EU, we are pushing forward with the implementation of recovery and resilience plans as part of our NextGenerationEU response to the pandemic. And as part of our REPowerEU plan, we are now leveraging the extraordinary funds made available by NextGenerationEU to drastically reduce our reliance on Russian fossil fuels.

NextGenerationEU remains the strongest common tool we have at our disposal. And this is why I have made clear that while we are open to discussing limited and specific points, there should be no wholesale reopening of plans or postponing of key commitments.

In this context, I see three lessons or priorities for the future of our transatlantic relations.

First: our strength lies in our unity, within the EU, and you know how challenging it is to keep our unity, and with our like-minded partners across the Atlantic and beyond. In the challenging months ahead, this unity will be tested again and again. We must stay the course.

Second: in an increasingly multipolar world, the EU and the US must continue to work together every day, and not just in times of crisis, to show that liberal democracies can deliver sustainable and inclusive growth.

This has already started to happen. The arrival of the Biden administration marked a qualitative improvement in these multilateral relations.

Our economic agendas are very much aligned. In Europe, we are pursuing an ambitious path of investments and reforms to deliver on the triple transition: green, digital and social. The Inflation Reduction Act in the US goes in a similar direction.

As you know we are also looking more broadly at how our fiscal rules can better support investments in crucial areas while making sure debt levels remain sustainable. And we will present our proposal on this next month.

Going forward, there is also scope to strengthen our trade cooperation, knowing that the disruptions to global supply chains must galvanise us to build safer, more resilient supply chains in strategic sectors. But this doesn't mean in any sense going towards protectionism. 

Third lesson: transatlantic cooperation is a necessary but not sufficient condition to tackle the challenges the world is facing. For that we need to muster much wider coalitions.

Russia has openly challenged the rules-based international order. This is not a Western order. It's an order that it is in everyone's interest to uphold.

Yet 35 countries, including three members of the G20 decided to abstain in the UN Resolution condemning Russia's invasion of Ukraine.

So we have to increase our influence in other parts of the world. This is the key objective of our Global Gateway strategy to mobilise 300 billion euros in investments across the world, in line with the G7's Partnership for Global Infrastructure.

We also need to work for a more effective multilateralism. A great example that we now have to implement is last year's global agreement to reform corporate taxation: an agreement for which the EU and the US worked hand in hand and which brought together more than 130 countries and jurisdictions.

This was made possible because everyone worked in a spirit of compromise to find a common solution. But I am confident that the spirit that led to that agreement remains alive and can guide us in meeting the common challenges we face.

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