How America makes Europeans nervous and deindustrialised

"The USA supports climate-friendly companies with a lot of money. But only if the companies come from their own country. The answer from Brussels is very European.

Emmanuel Macron was at the football stadium in Qatar on Wednesday. He watched his national team there as they defeated Morocco 2-0. And because the French Republic team had won, somehow the President of the French Republic had also won. In any case, Macron walked the red carpet to the meeting room in Brussels on Thursday in a particularly springy manner, where he met his 26 colleagues from the EU for the summit.

 

And the sentences that Macron said into the microphones in passing had something resolute and confident of victory. According to the Frenchman, Europe must not duck when the Americans spend hundreds of billions of dollars and promote green industries and future technologies in their country - and at the expense of European companies. "I think we have to react decisively now," said Macron.

 

EU Council President Charles Michel, a Belgian whose national team - like Germany's - did not make it through the preliminary round in Qatar, had previously made a similar statement, but who still likes to appear a bit pompous. The Americans are friends, allies, "our brothers," said Michel. But it is Europe's duty to "protect" its companies and citizens and to defend them against competitive disadvantages in these economically difficult times. He, too, called for a "strong response" from Europe.

"We are in danger of being deindustrialized"

That set the line. And the last EU summit of 2022, in which latest sanctions on Russia started, in which Europe grappled with record inflation and an energy crisis, in which China appeared more aggressively than ever on the world stage, was suddenly debating - America. 

 

More precisely: About the question of how the EU should react to the Inflation Reduction Act (IRA). This is the name of an American law that releases more than 350 billion dollars in subsidies and tax breaks in order to promote climate-friendly products and companies. But only if they are from the USA.

 

That makes Europeans nervous. They fear that their companies and goods will be discriminated against in the US market in the future and that companies will therefore relocate their factories across the Atlantic. "We are at a point in Europe where we are in danger of being deindustrialised," Belgian Prime Minister Alexander De Croo warned at the summit.

 

Of course, Macron, Michel and De Croo knew very well that the EU Commission had been dealing with the problem for a long time and was looking for solutions. That was in a letter that Commission President Ursula von der Leyen sent to the EU governments on Tuesday. A confidant of hers is currently negotiating with Washington on exemptions and relaxations for Europe that could be included in the IRA's bylaws. In addition, the Commission wants to relax the EU state aid rules for green technology in the short term.

EU to take on new debt

 

In the long term, according to the Commission President's plan, a "European Sovereignty Fund" should also be created, a kind of special EU budget from which subsidies for climate-friendly industries could also be paid. Von der Leyen does not say exactly where the billions in this fund are to come from, but French EU Internal Market Commissioner Thierry Breton has very clear ideas: the EU should take on new debt for this.

 

A common, European pot of money that strengthens Europe's economic independence from America - that's roughly what Macron and Michel imagine a "strong answer" to be. The fact that they adopted such an alarmist tone on Thursday was probably also intended to put a little pressure on those European colleagues who are not yet convinced that fresh debt is the way out of the dilemma. A diplomat from the Netherlands said it was far from clear how hard the IRA would hit European companies. "We don't know if the patient has a cough or cancer, but we're already starting to operate."

The German federal government is also not keen on filling another European fund, possibly through debt. There are already enough such special budgets, in which there is still a lot of money that could be spent first, said German Chancellor Olaf Scholz. Europe must maintain its competitiveness and sustainability. But it would also be good if the Americans made their economy more climate-friendly. As far as the ideas of the commission are concerned, one can find different elements differently, according to German circles.

The response of the summit on Thursday to the problem with the view of these differences of opinion,    about the USA turned out to be very European - decidedly vague and not quite as strong as Macron and Michel might have wished: After the debate in Brussels, the Commission was commissioned to make proposals by spring 2023 on how "the relevant national and European tools can be used to improve the framework conditions for investments" and "to strengthen competitiveness and productivity at EU level"."