The conflict over state subsidies both within the EU and the United States and within Europe is reaching.
First, the good side in a nutshell: when public subsidies are directed to the production of non-emission energy and the green transition, the climate will thank you.
Then the bad news: the competition is quickly turning into a competition with state subsidies, which big countries are able to pay better than small ones.
European Minister Titti Tuppurainen (sd.) appealed to the commissioners in Brussels on Tuesday that they would take the perspectives of the small country into account when preparing a proposal to secure the EU’s competitiveness. On Wednesday, the negotiations continued with civil servants.
– The large member countries have more room, if state subsidies were to be distributed recklessly, and I conveyed this message to the commission, Tuppurainen tells in an interview.
As can be seen from the graphic above, large countries have already spent significantly more money than small countries to support their business life during the corona pandemic and during the Russian war of aggression.
Germany and France are responsible for nearly 80 percent of all state aid exemptions for which member countries have applied for permission from the Commission in times of crisis. Now the big countries want to support their companies even more.
The reason is above all the new, ambitious climate law package of the United States, the Inflation Reduction Act, or IRA, which has become a curse word in the EU’s trade policy.
In a short time, the United States has already attracted several factory investments from Europe to its soil with its new state subsidies, say for example Financial Times (you will switch to another service) and Spiegel (you switch to another service).
Many EU countries now want to support the production of their own companies with direct state subsidies, in order to subsidize investment leakage to the United States.
“No to productive subsidies”
Finland does support the simplification of EU state aid rules so that all subsidies do not need to be approved in advance by the EU Commission. The rules could be simplified, which would speed up companies’ climate investments.
Likewise, the government believes that the existing joint funds and the EU budget could be used to promote climate investments.
– There must be a readiness to revise state aid rules in order to promote the production of emission-free electricity and the success of critical industries that are important to us, so that Europe would be more self-sufficient than before, Tuppurainen defines.
On the other hand, according to him, Finland does not accept that companies would be given “production support” from the state’s pockets. In practice, this means, for example, investments in walls, i.e. in new factories.
Internal market in danger
State subsidies for production have not previously been allowed under the rules of the internal market. They can distort competition.
– Such a reckless use of funds, where production would be artificially supported by state support with company subsidies, is not in Finland’s interests, Tuppurainen says.
According to the minister, at worst, loosening the state aid rules would lead to member countries competing in the internal market with state aid instead of companies competing with their own strengths and abilities.
– This would ultimately destroy the entire EU idea of the internal market, and it would not be in Finland’s interest in any case. That’s why you have to be active in the matter, Tuppurainen says.
He says that he took a message to Brussels that he would not go to “any kind of alley running” with state aid.
– Companies must make profitable investments and transactions must be profitable. Europe is an attractive investment destination when its internal market is competitive, Tuppurainen says.
Solutions will come in the next few weeks
According to Tuppurainen, the Czech Republic and Sweden are also opposed to the relaxation of state aid rules.
– We have a group of like-minded countries, which also includes big countries like Poland, Tuppurainen says. He does not specify this “group of like-minded countries” any further.
With this information, by the end of January, the Commission will present a package with which the Union will respond to the United States’ new ambitious climate law, the Inflation Reduction Act, or IRA.
The Commission’s proposal will be on the decision-makers’ table for the first time at the summit of the EU countries in early February.
If the rules of the game for state subsidies are compromised, Finns think it should be temporary. For example, France has wanted to make state subsidies for the green transition permanent.
At least on Wednesday, the vice-chairman of the commission, the competition commissioner Margrethe Vestager said in his speech (you will switch to another service)that the internal market is not sacrificed in trade competition and that taxpayer support for companies can only be temporary.
You can discuss the topic on 27.1. until 11 p.m.
More on the subject:
Europe starts a counterattack to prevent the supremacy of China and the United States in trade – Finland threatens to be left at the feet of the big guys.
The United States threatens European industry with its support package – the EU, which is driven as an underdog, may even end up in a trade war.
The United States attracts important green technology investments for Europe – asked experts if there is reason to worry