Industry: Europe launches a counteroffensive

"Companies in the EU are suffering from high energy prices and state-funded US competitors. Now the economics ministers of Germany and France are launching a counterattack.

 

High electricity and gas prices in Europe, high subsidies and tax rebates in the USA: In view of this starting point for 2023, quite a few EU politicians fear that more and more local industrial companies will find themselves in dire straits or that they might even consider reducing parts of their production or relocate to North America or Asia.

 

In order to avert this danger, Germany and France presented a catalog of measures on Monday with which they want to accelerate the climate-friendly restructuring of the European economy, prevent local companies from relocating and counter the so-called Inflation Reduction Act (IRA) of the USA.

 

Among other things, Economics Ministers Robert Habeck and Bruno Le Maire propose relaxing the strict EU state aid law, tailoring state orders in Europe more to domestic companies and negotiating with Washington about exceptions to the IRA regulations. 

 

The goal is to secure the "industrial base in Europe, especially strategically important green industries," according to a statement by the two department heads, with which they want to advance the efforts that have been ongoing for weeks to find a common strategy for all 27 EU countries.

 

The question of how Europe should react to the dramatic deterioration in local conditions and at the same time achieve the turnaround to a CO₂-neutral economy had become the most pressing EU industrial policy problem in recent months. For example, the inflation reduction law is the largest climate protection package that the USA has ever launched. However, many discounts are only granted in full if the products are largely manufactured in the United States.

 

Habeck and Le Maire are now calling for the EU to be granted the same exemptions that Washington has granted to neighboring countries such as Mexico and Canada. European e-car manufacturers, for example, would then be fully entitled to subsidies, even if they did not finally assemble a model in the USA.

 

Conversely, the two ministers also want to create their own European privileges for companies based here: The EU governments should be able to design the criteria for awarding state contracts in such a way that de facto only European companies can fulfill them. In this context, for example, strict recycling regulations or CO₂ upper limits for the production of the ordered goods would be conceivable, which non-European companies cannot comply with due to the long delivery routes.

 

Habeck and Le Maire also propose granting tax breaks, making previously unused EU funds available for financing climate-friendly subsidies, significantly accelerating approval processes and issuing purchase guarantees for wind turbines, for example. In addition, the EU should wave through the award of certain state aid for companies in a different way than before if competing companies in other parts of the world receive similar subsidies. However, a French concern is missing from the paper, which will make it much easier for Habeck to convince his coalition partner FDP: the proposal does not mention new joint EU debt."