Berlin and Paris account for most of the European subsidies, creating an imbalance

Germany and France account for the majority of European subsidies, leaving out the other 25 member states and enjoying their collective dominance.

latest figures released by European Commission confirmed what many have feared for months: in March 2022, as Brussels changes the bloc’s state aid rules to deal with the economic fallout from Russia’s war in Ukraine, Berlin and Paris represent 77% of the €672 billion of programs approved together.

The changes have allowed for faster and easier repayment of subsidized loans, subsidized government aid to companies struggling to avoid bankruptcy under the weight of rising energy bills, supply chain disruptions and Kremlin counter-sanctions.

Germany and FranceTwo heavyweights of European industry benefited: Berlin had more than €356 billion in economic support approved by the European Commission – almost 53% of all emergency aid – while Paris received some 24%, or around €161 billion. .

Italy 51 billion euros (7.65% of the total) was approved in third place and Denmark It is in fourth place with 24 billion euros. The remaining member states account for less than 12% of the remaining state aid approved by the European Commission, or about €78 billion.

“These figures are subject to change on a daily basis and the approved aid does not necessarily correspond to the aid allocated by the Member States”The spokesperson of the European Commission told Euronews that this figure is 672 billion euros. “best estimate” based on 200 decisions made.

“We need to start a real discussion”

While Berlin and Paris have historically played a dominant political and economic role within the European Union, the figures put a damper on the economies of other European countries at a critical time when subsidies are back at the top of the bloc’s table.

It caused a debate Inflation Reduction Act (IRA) Washington, D.C. A program of tax credits and direct benefits proposed by the President Joe Biden, promotion of green technologies produced United States of America.

Over the next ten yearsIRA It would distribute up to $369 billion to companies and consumers who want to make, invest in, and buy things like solar panels, wind turbines, heat pumps, electric vehicles, batteries and electrolyzers — but only if those products are mostly made in North America.

The European Union considers the provision discriminatory, unfair and illegal, and fears that the sudden cash injection could trigger a devastating industrial exodus across the Atlantic, leaving hundreds of factories and thousands of workers out of work. This question took on an existential dimension, identifying a number of current challenges that the bloc faced over a very tight period.

How exactly should Europe react this time?

There is currently no clear consensus. Germany** and France They joined forces for a new subsidy push, even a strategy “Made in Europe”others, including The Netherlands, irelandthe Polandthe Czech Republic and Scandinavian countries urged caution before further relaxing state aid rules.

“We need to start a real discussion about how to raise productivity, strengthen competitiveness and attract more companies based on our own capabilities and not on the basis of long-term state aid rules.“, – said the prime minister of Sweden Ulf Kristerssonhis country currently holds the presidency of the Council of the European Union.

An exclusive and coveted skill

Technically speaking, state aid refers to any economic support by the government that gives a particular company or group of companies an advantage over its competitors.

As the economies of the 27 Member States are deeply interconnected and interdependent, European Commission has the exclusive power to examine state aid programs and decide whether fair competition in the single market is preserved or threatened. If the results are too harmful, the executive has the right to cancel the proposal, effectively barring the member state from awarding grants.

However, around 91% of public aid initiatives are exempt from Commission scrutiny, such as social welfare, development, transport infrastructure, disaster relief, culture, education, environmental protection, innovation and digitalisation.

For example, if a member state wants to pour money into new textbooks for primary schools, subsidies to national filmmakers or expanding the Internet in disadvantaged areas, it does not need to inform Brussels. This leaves out a small proportion of strong industrial subsidies, which the Commission must carefully assess.

Literally “temporary crisis frames”Add more flexibility to the internal assessment and allow for faster approvals with a wider scope, as announced last March to mitigate the economic crisis caused by the war and energy crisis.

With an avalanche of US green subsidies threatening the continent, Brussels is working on a new crisis framework to persuade European green producers to keep their businesses at home.

“We will propose to temporarily align our state aid rules to make them faster and simpler. Easier calculations. Simpler procedures. Faster approvals.”The European Commission said on Tuesday. Ursula von der Leyen In front of the audience of the World Economic Forum in Davos.

Von der Leyen he talked about tax incentives and targeted support.countering displacement risks associated with foreign subsidies. (…) But we also know that state aid will be a limited solution that only a few Member States can use.”

“In the interest of 27 Member States”

Though von der Leyen avoids pointing fingers, the latest figures released by its managers show “a little” countries that will benefit from increased public assistance will be countries with strong fiscal strength and strong political will. to know Germany and France.

More worryingly, the statistics reflect a growing dissonance between domestic subsidies and the industrial sector, which faces the biggest risks from a costly energy crisis and attractive US loans.

according to Eurostatbecame the country that produces the most manufactured goods Germany27% of the value of production sold from the European Union in 2021, it follows Italy (16%), from France (11%) and Spain (8%). This means that Germany and France were represented 38% the volume of total industrial production.

A similar dissonance emerges if we look at the GDP figures: according to World Bankentire economyEuropean Union It was worth $17.18 trillion in 2021. Germany contributed $4.26 billion France $2.96 billion. This means that Germany and France accounted for more than 42% of the bloc’s GDP.

But when it comes to emergency state aid approved from March 2022, these two heavyweights have absorbed around 80% of all direct aid approved by Brussels, shaking up the entire single market and leaving smaller and poorer member states in the lurch. it is the great inconsistency that creates the danger. Berlin and Paris were left out as they went ahead with their subsidy counterattacks.

“There is no time to lose to build a new European industrial policy to support green industry and encourage industries to move to European territory.“, – said the Minister of Finance of France. Mayor Bruno .

“This is not the policy we want to implement only for France and Germany”he added. This should be in the interest of 27 member states.

European Commission is committed to its creation “European Sovereignty Fund” to offer common funding sources to governments that cannot afford or refuse the option of aggressive public assistance.

But this fund remains an abstract idea and it is not known how it will be financed, since the bloc’s budget for the next 7 years has already been discussed and there is practically no more room for new spending. It is also unclear whether this fund will be able to offset the increase in Franco-German subsidies once established.

the idea of ​​joint lending European UnionAs the bloc did to implement its €750 billion coronavirus recovery plan, it gained ground, but some austerity countries, including, above all, Germany.

In the meantime Margret Vestager, Vice President of the European Commissiona staunch defender of free markets that oversee competition policy has promised to ease subsidies for green technologies — but with caveats.

“Of course, this may be a short-term boost, but we are not creating competitiveness from subsidies. This should be a temporary fix.”he said Vestager in the European Parliament. “We build competitiveness from a well-functioning, dynamic and innovative market.”

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