After several of their ministers, it is now the turn of the EU heads of state or government to tackle the subject of the EU’s competitiveness on Thursday 9 February in Brussels. They had already addressed the subject in December, when they had asked the European Commission to propose ways of thinking about it, and had agreed to hold an extraordinary summit in February (see EUROPE 13085/2).
Almost two months later, the Commission has done its homework and presented a Communication on a “Green Deal Industrial Plan” (see EUROPE 13112/1) in response to the US Inflation Reduction Act, which supports local production of green technologies.
EU leaders are expected to review and discuss the European Commission’s proposals. Several Member States have expressed concerns in recent weeks about various aspects of the proposal (see EUROPE 13116/5).
The modalities for the relaxation of State aid
EU Member States have different assessments of the degree of flexibility to be introduced on State aid to EU industries. The European Commission has consulted countries on a draft new temporary crisis and transition framework (see EUROPE 13112/3). Once the consultation is completed, the Commission will adopt the final text. EU leaders are expected to discuss the level of state aid flexibility and solidarity tools to be put in place to avoid fragmenting the internal market, according to an EU source: “We will be very careful” to avoid “a centralisation of capital in the centre of Europe, in Germany”.
In their conclusions, they will call for a state aid policy with simpler, faster and more predictable procedures. EU leaders should call for “targeted, temporary and proportionate” support, including tax credits, for strategic sectors for the green transition.
The maintenance of the integrity of the single market should be stressed, as well as the implementation of Important Projects of Common European Interest (IPCEI). Recently, a group of countries (including Denmark, Finland, Ireland, the Netherlands and Poland) expressed concern “that State aid for mass production and commercial activities may have significant negative effects, including fragmentation of the internal market, a harmful subsidy race and weakening of regional development”.
A European diplomat confirms the reluctance: “We are committed to the maintenance of the internal market, and overly generous avenues and possibilities for state aid in a situation where not all Member States have the same means is not acceptable. We are firm on this point”.
European funding for industry
The idea of a European sovereignty fund to fill the gaps in public investment is far from convincing all 27 Member States. For the time being, a consensus is emerging on the mobilisation of existing financing instruments such as the European Recovery Plan. “Everyone agrees that new instruments should not be invented if they are not necessary” says a European diplomat.
The EU27 are thus invited to review their priorities and, if possible, adapt their recovery plan. The possibility of new EU funding should only come after having a clear picture of what is available and what is still needed, say several delegations.
Many of them also believe that a consensus on a European sovereignty fund will not be reached in the EU Council in the near future. However, the countries supporting the fund are aware that it will only be seriously addressed at the time of the revision of the Multiannual Financial Framework, as proposed by the President of the Commission.
One thing is certain, for a European official: “A strong message must be sent to European companies if they are to have any effect on their investment decisions”.
EU leaders are expected to return to the subject of competitiveness at the European Council on 23-24 March. (Original version in French by Léa Marchal and Lionel Changeur)