Europe is looking for a common strategy to support its industry against the US and China

Acting together to stay competitive against the US and China: this is what the EU countries are aiming for. Because American subsidies (‘The Inflation Reduction Act) and China is abundant and the cost of energy there is lower than on the Old Continent, which encourages manufacturers to invest there. A topic that worries the European side was mentioned again this Monday, January 16, by the French economy minister.

Bruno Le Maire demanded “new deal” on industrial policy, defense of state aid “more massive” in green technologies. While emphasizing the importance of measures “too fast”. He specifically asked “the shock of simplification” new subsidies and tax credits in the hydrogen, electric batteries, solar panels or semiconductor sectors to speed up procedures, as well as the possibility to give preference to European companies in calls for public tenders.

The common European answer lies in negotiations. “We are working on harmonizing the rules on state aid”, The European Commissioner for Trade, Valdis Dombrovskis, emphasized that his counterpart for Competition, Margrethe Vestager, had contacted the Member States to start the discussion. “We need a strong European response,” he wrote in a letter to Twenty-Seven on Friday, acknowledging risks to the single market that could be offset by European funding.

Response to US subsidies: Macron urges EU to go ‘faster’

The establishment of a sovereign fund is not received unambiguously

First, European money should be limited to the reuse of existing funds, recognize diplomats. “We need to create reliable and ambitious financial instruments”, Ursula von der Leyen explained by showing the first case last week “needs assessment”.

If several ways of financing are mentioned, not all of them are unanimous. Especially the establishment of a “sovereignty fund for investments in major projects”, Charles Michel, president of the Council of Europe, a body representing 27 member states, made a special plea in a forum published on Sunday. The idea, based on pooled funding at EU level, has already been drawn up by Internal Market Commissioner Thierry Breton and European Commission President Ursula von der Leyen. However, it faces hostility from many member states, including Germany, with net contributors to the European budget worried about seeing their bills rise further.

In any case, creating common funding will take time, Economy Commissioner Paolo Gentiloni admitted during a press conference on Monday evening. “Not for tomorrow”, he declared.

The US is delaying the Inflation Reduction Act (IRA) amid criticism from Europeans

Don’t get into a trade war with the US

The fact is that several EU countries fear a trade war with the United States and want to prioritize the ongoing discussions between Brussels and Washington in order to take into account European interests. Others worry that the race for subsidies in the EU favors the biggest and richest countries, such as Germany and France. These two countries accounted for 53% and 24% respectively of the state aid reported to Brussels as their frameworks were eased to respond to the economic crisis caused by the Covid-19 pandemic.

“I think it is important that we respect the single market in all aspects. There are state aid rules to ensure fair competition.” Irish Finance Minister Michael McGrath said on Monday. Despite this, “There is a consensus in Europe that state aid procedures should be faster, simpler and more flexible,” Thierry Breton emphasized.

The issue should be resolved at the European Council on February 9 and 10. It is during this summit that the European Commission will list a number of proposals to prevent the risk of companies leaving Europe in favor of the United States. In particular, a regulatory section designed to accelerate the growth of Europe’s “green technology” (green economy) should be introduced, as well as a financial section to ensure that all Member States have access to the resources necessary to support this sector. There should be an opportunity to send this meeting on the French side “a signal to convince companies of the EU’s determination to maintain and strengthen the attractiveness of the European territory”.

Brussels is preparing a three-pronged response to the US protectionist plan (IRA).

(via AFP)