The European Union is preparing to massively support its industrialists in the face of rising energy prices and Chinese and US state aid, even if new EU funding seems to be ruled out in the near term.
French Finance Minister Bruno Le Maire on Monday called for a “new deal” on industrial policy, arguing for “much more massive” state aid in green technologies. He stressed the importance of “very fast” action, ahead of a meeting with his EU counterparts on Monday and Tuesday. Specifically, he called for “a simplification shock” to streamline procedures, new subsidies and tax discounts in the hydrogen, electric batteries, solar panels or semiconductors sectors, as well as the possibility of favoring European companies in public tenders .
Europeans fear manufacturers will leave the EU to invest in the United States or China, where energy is cheaper and state aid is plentiful. Europe no longer has access to cheap energy from Russia, due to the war in the Ukraine.
“We need a strong European response”
The pressure on European industrialists is increased by the plan adopted this summer by Washington that foresees 370,000 million dollars in investments in favor of the fight against global warming. Behind the environmental objective, it acquires a protectionist character, with aid reserved for companies established on the other side of the Atlantic. The Chinese have long been accused of supporting their industry through massive subsidies.
“We are working on adapting the rules relating to State aid,” explained the European Commissioner for Trade, Valdis Dombrovskis, noting that his Competition colleague Margrethe Vestager had contacted the Member States to start the debate. “We need a strong European response,” she wrote in a letter to the Twenty-seven on Friday, while acknowledging the risks to the single market that could, however, be offset by European funding.
The complex path of joint financing
This idea, which is based on joint financing at the EU level, had already been formulated by the Commissioner for the Internal Market, Thierry Breton, and the President of the European Commission, Ursula von der Leyen. However, it is met with hostility from many member countries, including Germany, net contributors to the European budget worried about seeing their bills rise further.
The establishment of common funds will take time, acknowledged on Monday night the Commissioner for the Economy Paolo Gentiloni during a press conference. “It’s not for tomorrow,” he said. Ursula von der Leyen was evasive this Friday during a visit to Sweden, a country ideologically hostile to state intervention, which will hold the presidency of the EU Council until June. “We must create credible and ambitious funding tools,” she explained, noting that we must first work “on a needs assessment”. Initially, European money should be limited to the reuse of existing funds, diplomats acknowledge.
A race for European subsidies that could benefit Germany and France
The Twenty-seven seek to coordinate before a European summit of Heads of State and Government on February 9 and 10. In mid-December, they had given the European Commission a mandate to submit proposals by the end of January. Several EU states fear a trade war with the United States and want to prioritize ongoing discussions between Brussels and Washington to ensure European interests are taken into account.
Others worry that the race for EU subsidies will benefit the biggest and richest countries, such as Germany and France. These two countries have respectively accounted for 53% and 24% of the state aid notified to Brussels since its framework to respond to the economic crisis caused by the Covid-19 pandemic was relaxed. “I think it’s important that we respect the single market in all its aspects. State aid rules are there to ensure fair competition,” Irish Finance Minister Michael McGrath said on Monday.
Source: BFM TV
