Industry: why Macron and von der Leyen are pushing for an EU sovereignty fund

European Commission President Ursula von der Leyen on Tuesday (January 17) in Davos confirmed her plan to create a “European Sovereignty Fund” to support EU industry in the face of Chinese and US government aid from the Inflation Reduction Act (IRA). This fund will complement a number of envisaged measures, in particular a new temporary and targeted relaxation of the rules restricting state aid, which, without accompanying measures, could lead to fragmentation of the single market.

This easing, which opens the floodgates of national subsidies, will mainly benefit big rich countries like Germany and France, which will be able to favor their own companies over those of other countries, unfair competition that Brussels says it wants to eliminate. . France and Germany did account for 53% and 24% respectively of the state aid that Brussels has been notified of since March 2022 as part of the Ukraine war-related easing, compared to only 7% for Italy, which ranks third.

Structural solution

“In the medium term, we are going to prepare a European sovereignty fund as part of the midterm review of our budget later this year,” Ursula von der Leyen said on the first day of the debate organized by the European Union. World Economic Forum (WEF), but without specifying how this fund will be financed. “This is a structural decision that will increase the resources available for research, innovation and important strategic industrial projects” in the context of the “green transition”, continued the head of the European Executive Committee. “But since this will take time, we will look for a transitional solution to provide quick and targeted support where it is needed most,” she added.

This transitional solution will be to reallocate existing funds, said Internal Market Commissioner Thierry Breton, referring to a set of tools to meet the different needs of Member States that do not have the same budgetary impact. That basket could include, he said, the remaining funding from the €800bn European recovery plan (NextGenerationEU) and loans from the European Investment Bank (EIB).

It could also include a Sure mechanism, a European instrument that made it possible, during the Covid-19 pandemic-related recession, to support partial unemployment measures in needy Member States. It consisted of loans on concessional terms financed by borrowing from the European Commission in the financial markets.

Paris in support of von der Leyen

France fully supports this project. In a ten-page document submitted to the European Commission, which Les Echos has seen, Paris lays out its “Made in Europe strategy” to respond to the $369 billion in subsidies the United States has chosen to provide. their green industry. “This effort is about two points of GDP,” said Emmanuel Macron last December, addressing the issue during a press conference after the meeting of the European Council.

France is pushing a series of shock measures to appease European companies concerned about massive population displacement. The Sovereignty Fund is at the forefront. For France, it should be launched in two stages. With an “emergency fund” set up “in the very short term with existing funding” that would precede the “full” sovereignty fund, which was due to come into effect before the end of 2023. Paris cites, in particular, all or part of the 365 billion of the “allocated and not yet spent” Recovery and Resilience Fund (RRF), which could be reallocated to the EU’s strategic sectors.

The idea of ​​such a fund, based on co-financing at the EU level, had already been formulated by Ursula von der Leyen, but met with the hostility of several member countries, including Germany, net contributors to the European budget, worried that their accounts were growing even more. The President of the European Commission is due to present his proposals to support European industry by the end of January before the European summit of heads of state and government on 9 and 10 February. On Tuesday, she confirmed that the Commission would propose “temporarily adapting (its) state aid rules.” They were already weakened “temporarily” in 2020 during the pandemic, then in 2022 due to the war in Ukraine.

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