Because the EU industrial plan is a whisper compared to Biden’s Wrath
The European Union's response plan to American neo-protectionism seems quite moderate, not only in terms of content but also in terms of tone. Sergio Giraldo's analysis
Last week, European Commission President Ursula von der Leyen presented the European response to the Inflation Reduction Act (IRA), the company subsidy plan launched last August by US President Joe Biden. The Green Deal Industrial Plan drawn up in Brussels, says the Commission, will improve the competitiveness of the European net zero industry and support the ecological transition. For now it is only a communication from the Commission, but the draft will already be discussed at the next European Council on 9 and 10 February.
WHAT THE EU PLAN PROVIDES FOR GREEN INDUSTRY
The first pillar of the new European strategy will be a more streamlined regulatory framework, which will make it possible to avoid excessive bureaucracy. The Commission intends to propose a Net-Zero Industry Act to identify the obstacles and simplify the framework, to allow for faster economic growth. The Act will be completed by a provision on critical raw materials, which favors adequate access to industrial materials necessary for the energy transition, and by a reform of the electricity market, to allow consumers to benefit from the increase in production from renewable sources .
Secondly, the Union intends to encourage investment and the financing of industrial initiatives. To do this, the Commission proposes to divert unopted funds, therefore still available, from the Next Generation Fund (250 billion), plus 40 billion from the Horizon Europe programme, plus another 100 billion from cohesion policies, to this initiative. In all, in theory, about 390 billion euros, more than the IRA's $370 billion.
WHAT CHANGES FOR STATE AID
It will also be possible for individual Member States to finance their companies in line with the suspension of the ban on state aid, the so-called Temporary Crisis and Transition Framework (TCTF). In practice, state financial support to companies will be made possible by extending the categories of exemption from the ban and increasing the thresholds of the value of possible loans. This is one of the most critical points in the Commission's proposal, because it is clearly discriminatory. In fact, there are very different situations within the Union between countries that have greater possibilities of pushing the public budget into deficit and resorting to debt (for example Germany), compared to others that in fact do not have this possibility ( for example Italy).
To remedy the problem, the Commission proposes to use the funds already allocated to the REPowerEU program as compensation and will propose, perhaps by the summer, a European sovereign wealth fund that invests on the basis of common resources.
THE REACTIONS
The ideas communicated yesterday by Ursula von der Leyen aroused various reactions . German Economy Minister Robert Habeck said he welcomed them. The Group of the European People's Party called the plan "too little, too late". The president of the Renew Europe group in the European Parliament, Stephane Sejourne, said instead that he appreciated the "albeit late" proposals.
It is certainly too early to make a complete judgment on what Brussels has in mind. If one considers the plan as a whole, however, the style of the Union remains the same as that of the Recovery Fund: the European framework regulations are "temporarily" suspended (thus recognizing, once again, that they are holding back growth), for Germany to gain an advantage over the other member states, imaginary or borrowed funds are made available, with all the penetrating conditions that will be placed around them.
The reaction of the European Union to the American neo-protectionism seems, however, quite moderate, not only in terms of content but also in terms of tone. If an act like the IRA, which grants 369 billion dollars in subsidies and public aid to American industry, had been issued by the administration of Donald Trump (although it never went that far), we would have witnessed endless tirades against rising walls, nationalist barriers and dangerous autarky. Since instead a Democrat sits in the White House, Europe and its singers sketch.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/commissione-europea-piano-industria-verde/ on Thu, 09 Feb 2023 10:02:16 +0000.