Two admonishing speeches in one day: Margrethe Vestager, Vice President of the European Commission, warned on Wednesday against protectionism and overly lavish subsidies for European corporations. EU governments and the Brussels authorities are currently discussing how Europe should react to the US government’s massive package of subsidies for green technologies. The aids that this so-called Inflation Reduction Act (IRA) are partly linked to the fact that the products have been manufactured in the USA. Buy American, buy American products, is the motto of President Joe Biden’s administration. This puts EU companies at a disadvantage and could lead to these plants relocating to the United States.
In response, France’s government is proposing to introduce “Buy European” rules. In December, Economics Minister Bruno Le Maire and his German counterpart Robert Habeck presented a joint concept with details. For example, EU governments could formulate the criteria for awarding government contracts in such a way that only European companies can de facto meet them. Commission Vice President Vestager, responsible for competition, said at a speech at a green technology conference in Brussels, Europe should not “take the dangerous path of using public procurement as a competitive advantage”.
The Brussels authority will present proposals next week on how the EU should respond to the American IRA package. A week later, the 27 heads of state and government will discuss this at a summit meeting. The rough concept is already clear: on the one hand, the strict subsidy rules in Europe are to be relaxed so that governments can better keep up with US subsidies when it comes to promoting green technologies, for example a factory for batteries or wind turbines. On the other hand, the Commission wants to make more Brussels funding available because not all governments can afford lavish subsidies. This imbalance could otherwise lead to unfair advantages for firms in rich and large Member States like Germany.
However, Vestager warned at the conference for green technologies that the long-term competitiveness of Europe as a business location cannot be “built on subsidies”. In the afternoon, the liberal Dane carried out this warning at a speech at another event. She explained that the “idea that is emerging that subsidies are the most important tool to increase competitiveness” is wrong.
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She vowed to relax and simplify the rules, but at the same time emphasized that other things were more important in the long term to improve conditions for companies. In this way, remaining hurdles in the common internal market of the EU would have to be torn down; Member States should no longer use bureaucracy and regulations to disadvantage corporations from other EU countries compared to domestic rivals. That would bring more benefits “than subsidies can ever deliver.”
The question of where the money for new EU funding, with which the Commission intends to supplement national aid, is to come from is also thorny. Commission President Ursula von der Leyen is silent on this and only points out that the authority wants to make a checkout by summer anyway and check whether the multi-year budget for 2021 to 2027 needs to be increased. Another possibility would be for the Commission to take on more debt, for which the member states are jointly responsible. However, Federal Finance Minister Christian Lindner (FDP), for example, rejects this. Dutch Prime Minister Mark Rutte also recently criticized this idea, saying that there was still enough money in the existing aid pots that could be reallocated.
In a draft of the conclusions for the EU summit, which the SZ has, it says that the Commission should develop an aid program that is based on Sure. That’s the name of a relief pot set up during the Covid crisis. From this, the authority distributes low-interest loans to the governments of member states; the pot is financed by debt. Lindner and Rutte would not like that. However, it is uncertain whether the 27 heads of state and government will really agree on such a task for the Commission at the summit. Difficult debates lie ahead.