Brussels Braces Itself for Contentious Fight: The European Union is going to be torn apart over whether or not new EU financing is necessary to help strengthen the bloc’s industrial foundation, and European Commission President Ursula von der Leyen has sounded the starting gun on this contentious discussion.
The European Union (EU) has been exploring methods to assist enhance its competitive edge after being taken off guard by new U.S. legislation that helps North American enterprises at the expense of Europe.
The U.S. Inflation Reduction Act, climate legislation from the Joe Biden administration, has outraged Brussels over sections deemed protectionist, particularly related to electric vehicles, and on Sunday the Commission chief provided her first meaningful response to the bill.
Brussels Braces Itself for Contentious Fight
To further spur local investment in clean technology, von der Leyen has asked for “new and additional funds at the EU level” in addition to promising a reworking of the bloc’s state-aid laws.
This, she said, means “more firepower” for REPowerEU, the EU’s strategy to wean the bloc off of Russian gas. However, in her State of the Union address to the European Parliament in September, von der Leyen also asked for “new and additional funds at the EU level,” specifically mentioning a new European Sovereignty Fund.
She addressed a group in Bruges, “A united European industrial policy requires common European funding.” Our European industrial policy is to make European companies the global models for the clean energy transition. This implies increasing EU funding for early-stage research and development, as well as strategic initiatives, over the course of the next few years.
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The need for further EU money brings to mind discussions that preceded the creation of the COVID recovery fund, which was founded in the end through a combination of private donations and public/private loans. If that discussion was any indication, the future negotiations will be heated.
European Union must “simplify and adapt” its rules on state aid and “adjust our own rules to make it easier for public investments,” von der Leyen said, in her first set of proposals.
— Chad P. Bown (@ChadBown) December 4, 2022
The subject may be on the table for next week’s EU leaders summit in Brussels, despite the insistence of Commission officials that no specific proposal is coming and that negotiations are only beginning with member countries.
Europe is looking for ways to counter Biden’s Inflation Reduction Act, whose tax credits & subsidies for products like EVs effectively penalize European exports.
Ursula von der Leyen’s remarks come a day before US and EU trade officials meet in Maryland https://t.co/nNN02dfBXI
— Catherine Rampell (@crampell) December 4, 2022
Germany is only one of many EU member states that are adamantly opposed to the creation of new EU funds. Rather, they prefer to use funds from preexisting programmes like NextGeneration EU and RenewEU. There are several cities like Berlin.
Clear calls in our @industriAll_EU Executive Committee last week for assertive European industrial policy – we must ensure that regional inequalities within & between countries don’t increase! #JustTransition for all vitalhttps://t.co/lePzPNiDpj
— Jude Kirton-Darling (@Jude_KD) December 4, 2022
One EU official from a financially responsible member country observed, “There is still unused money in the pot — not to mention loans that have not been touched.” Bringing up the topic of increased EU funding is the last thing the EU wants to do.
We need to be clear which industries will truly be hurt by the IRA and to what extent,” a foreign official told POLITICO’s Brussels Playbook.
The US Inflation Reduction Act puts the EU in an uncomfortable position. But the EU should not be dragged into an intensifying subsidy race. Rather, 🇪🇺&🇺🇸 should use the current tensions to revitalise multilateral institutions such as the WTO.
— CEPS ThinkTank (@CEPS_thinktank) December 5, 2022
We may then determine which areas require additional resources based on this information; however, as the speaker went on to say, “Why to begin a very difficult discussion about new monies now if we can look at how to better utilise what is already available?”
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