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In order not to be crushed by American competition, the European executive wishes to give more flexibility to Member States in granting aid to companies in the ecological transition sector, according to a joint statement published Friday at the end of the Brussels summit.
Faced with massive American subsidies, the leaders of the Twenty-Seven opened the way on Friday February 10 to further relaxation of the rules on public aid in the European Union (EU), but in a “targeted, temporary and proportionate” way to avoid fragmentation of the single market.
In terms of State aid, “the procedures must be made simpler, faster and more predictable”, and “allow the rapid deployment of targeted, temporary and proportionate support (…) in strategic sectors for the transition environment,” European heads of state and government said in a joint statement.
“We want to be pragmatic”, by adapting the State aid regime without threatening “the integrity of the single market”, summed up the President of the European Council Charles Michel.
Legislative proposals
Gathered in Brussels for a summit monopolized by the visit of Ukrainian President Volodymyr Zelensky, European leaders debated ways to support their industry, threatened by Chinese competition, soaring energy prices and the American “green” subsidy plan. “.
By the next summit of the Twenty-Seven at the end of March, the European Commission is responsible for translating into legislative proposals the plan formulated last week by its President Ursula von der Leyen to strengthen the continent’s green industries.
The European executive wishes to give more flexibility to Member States in granting aid to companies involved in renewable energies (solar, wind) and the decarbonisation of industry (hydrogen, electrification, energy efficiency), certain investments in new factories that can be supported by “tax advantages”.
But this idea is greeted with caution among member states, divided between supporters of the free market and advocates of state intervention, even though not all countries have the same financial leeway to help their businesses.
The rich countries winning?
Sign of these tensions, the final declaration of the Twenty-Seven, adopted in the night, insists on the need to “maintain the equality of the conditions of competition” within the EU, while guaranteeing “equitable access to financing” .
While the straitjacket of national subsidies has already been relaxed since the start of the pandemic in 2020, opening it up further risks benefiting the large rich countries, mainly Germany and France, which might excessively favor their companies to the detriment of their competitors in the EU.
Italy and several “small” countries including Austria, Denmark and Finland are leading a revolt for a mechanism that is as targeted and limited as possible, at the risk of making it insignificant.
“We were worried regarding too much relaxation of state aid, at the risk of undermining the internal market. But now it is a temporary measure and targeted at innovation and green technologies, exactly where we have to compete with the Americans,” said Dutch Prime Minister Mark Rutte.
Deploy existing funds
To mitigate the risk of fragmentation of the single market, some Member States, France and Italy in the lead, are also calling for new common funding.
Ursula von der Leyen has also promised to propose before the summer a European “Sovereignty Fund” which would make it possible to invest in research or the capital of strategic companies. But the idea is rejected by several countries such as Germany, the Netherlands and Sweden, hostile to any increase in their contribution to the EU budget.
In the end, in the text adopted on Friday, the Twenty-Seven are content simply to “take note” of the idea of a Sovereignty Fund. For the time being, European leaders are instead calling for “a more flexible deployment of existing EU funds” to ensure fairness between states.
The Commission is counting on the mobilization of funds from the European recovery plan of 800 billion euros (NextGenerationEU), of which 250 billion might be devoted to the green transition. Including other funding already released, the total might approach the 370 billion dollars announced by the Americans in their climate plan adopted last summer.
“We can respond (at the American level) with the credits we have,” acknowledged French President Emmanuel Macron following the summit. It is possible for Europe to “build mechanisms comparable in volume, by mobilizing what we already have” but also “in rapidity, and this is where the flexibility of State aid and the possibility of using tax credits is very important”, he commented, criticizing the current deadlines for granting subsidies in the EU.
Regarding a possible Sovereignty Fund and additional common funding, “we know the divisions, there is no consensus today between the States, but the debate will come”, assured Emmanuel Macron.
With AFP
