What will the EU do (maybe) on anti-Biden state aid?

What will the EU do (maybe) on anti-Biden state aid?

Competition Commissioner Vestager says subsidies to European industries will need to match US ones, but they will be temporary. In the first months of 2023, the EU will define the changes to the rules on state aid

Competition Commissioner Margrethe Vestager has said that European subsidies to industries critical for the energy transition will have to match the public aid offered by the United States to local manufacturing through the Inflation Reduction Act : it is the anti-inflation law worth 369 billion dollars signed by President Joe Biden last August.

“It's important to look at what we can do to match what we see in a jurisdiction” like the United States, Vestager said.

THE RISK OF BIDEN'S SUBSIDIES

The European Union fears that the inflation reduction incentives and lower energy costs for American companies could cause European companies to lose competitiveness and cause – in the worst case scenario – a deindustrialisation crisis in the Old Continent. One of the most vulnerable sectors is the automotive sector, grappling with a complicated transition to electric technologies.

VON DER LEYEN'S PROPOSAL

In addition to Vestager, the president of the European Commission, Ursula von der Leyen, has recently proposed a "structural response" to the Inflation Reduction Act through an increase in the funds of RePowerEU, the plan dedicated to accelerating energy detachment from Russia and the transition to clean sources, and through a subsidy program called the European Sovereignty Fund.

CHANGING THE RULES ON STATE AID

In December Vestager asked the governments of the EU member countries to express their opinion on the proposed amendment to the EU state aid rules, which should be drawn up this month.

The new rules will allow governments to invest more in strategic products for the ecological transition (such as batteries and electrolysers, for example) and to offer targeted aid to the most strategic "clean technology" supply chains. The amount of subsidies will depend on the incentives offered to industries in non-EU countries, so as to ensure a level playing field for companies.

TEMPORARY BENEFITS, SPECIFIES VESTAGER

Vestager wanted to clarify that the subsidies will be temporary, so that the support to the industry does not weigh on taxpayers' pockets. And he recalled that the European authorities are working with the Biden administration to set up a task force for the management of transatlantic economic relations. The Commission would like to avoid a race for subsidies with the United States which could lead to a trade war made up of reciprocal tariffs.

MINISTER URSO'S THOUGHTS ON STATE AID

The Minister of Enterprise and Made in Italy Adolfo Urso thinks that a "European industrial policy" is needed to respond to the United States.

However, in his opinion a revision of the rules on state aid would represent "a path that could aggravate the European question, because there are countries like Germany that have important and significant resources to invest, and other countries like Italy […] who do not have these national resources to invest. As on the energy front, we would find a Germany that subsidizes businesses and therefore creates a competitive advantage” compared to the Italian ones.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/vestager-aiuti-stato-industria-europea/ on Tue, 03 Jan 2023 06:03:39 +0000.