Because Scholz (and not Meloni) is the real winner of the European Council
Giorgia Meloni celebrated the conclusions of the extraordinary European Council as a success for Italy, but the real winner is German Chancellor Olaf Scholz. What emerges from the comments of analysts and editorialists
The extraordinary European Council of 9 and 10 February served above all to talk about common economic policy, in the light of US and Chinese subsidies for the manufacturing of clean technologies , such as batteries for electric vehicles.
Frightened by the possibility of the European Union losing its industrial relevance, the Commission has drawn up a plan – the Green Deal Industrial Plan – based on the relaxation of state aid rules, which representatives of the member countries discussed last week in Brussels.
WHAT HAS THE COUNCIL DECIDED ON STATE AID?
The Council's conclusions speak precisely of simplification and speeding up of the procedures for assigning national state aid to companies involved in the ecological transition, which must be "targeted, temporary and proportionate".
In commenting on this clarification, Prime Minister Giorgia Meloni defined it as a victory for Italy. The issue of state aid is particularly felt by Rome which, not enjoying the same spending power as Germany and France, is afraid that Italian companies may lose competitiveness on the single market compared to the more supported German and French ones.
THE REAL WINNER OF THE EUROPEAN COUNCIL
More than Meloni, however, the real winner of the European Council seems to be German Chancellor Olaf Scholz: as economic columnist Federico Fubini wrote in Corriere della Sera , "Germany got everything it wanted and granted none of it which he didn't want."
"Germany asked for greater discretion in distributing state aid from its budget – the most robust in Europe – to sectors affected by the rise in energy prices or by American competition in the green transition", such as the automotive and chemical sectors, and it got it . Of the 672 billion euros of state aid that the Commission approved in 2022, Germany was worth 53 per cent of the total (356 billion), followed by France with 24 per cent (161 billion) and, by far, from Italy, with about 7 percent (51 billion).
“What Germany didn't want”, continues Fubini, “was, essentially, more Europe. He wanted neither a relatively small but short-term fund to accompany European industrial projects. Nor in perspective the project of a broader strategic fund that encourages industrial sectors on a European scale in the technologies of the future".
The Green Deal Industrial Plan does not contain new financing, but is based on the expansion of the possibilities of providing national aid to companies and draws on the common economic resources already allocated. However, in the coming months, perhaps this summer, the Commission should propose the creation of a new instrument, a European sovereign wealth fund, intended for investments in emerging technologies.
THE GERMANY-FRANCE ALIGNMENT
Germany's response to US and Chinese subsidies to green industry – that is, to support domestic companies with abundant state aid – is essentially the same as elaborated by France. In this regard, POLITICO had written that Berlin and Paris “are largely on the same wavelength when it comes to how to respond to America's massive green subsidy plan”; but the other members of the Union fear that "the two industrial powers [are trying] to support their own industries at the expense of the less affluent countries of the single market".
“In Brussels”, continues the newspaper, “there are also rumors that France, in particular, is exaggerating the threat posed by the IRA [the Inflation Reduction Act, Joe Biden's 369 billion dollar law, ed ] and the he's using as an excuse to push his agenda."
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WHAT ITALY (NOT) ACHIEVED
The conclusions of the extraordinary European Council speak of the need to "maintain the integrity of the single market and a level playing field within it" and to avoid fragmentation of the single market": it is stated that "a fully effective EU policy response requires fair access to financial means” and that, consequently, “existing EU funds should be used more flexibly and options to facilitate access to finance should be examined”.
“The Italian proposal”, Meloni declared at the press conference, “was […] the possibility of flexibility on existing funds. That is to say: we have funds currently already allocated, ranging from REPowerEU to NextGenerationEU via the cohesion funds; what we have asked for is the possibility of making full use of these resources”.
However, as Fubini notes, the document does not mention an idea that Italy has been pushing for some time, namely the reduction of the impact on the deficit of state investments in strategic sectors, those covered by the relaxation of the legislation on public aid. “Without that special treatment”, continues the journalist, “Italy runs the risk of being able to distribute very few subsidies. Spending on them could in fact clash with the constraints of the Stability Pact: it matters little that the government in Rome may have more 'flexibility' in the use of European funds”.
WHAT IT MEANS, IN CONCRETE, FLEXIBILITY
In the Sole 24 Ore the journalist Gianni Trovati pointed out that "to truly evaluate how much flexibility can be introduced 'without undermining the objectives of the cohesion policy', as stated in the other constraint written in the official conclusions of the summit, it will be necessary to bring the negotiations on the revisions of the PNRR, and on the integrations with the other strands starting from the REPowerEU".
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“One of the possible practical declinations of this flexibility”, continues Trovati, namely “the extension of the calendar by one year to 2027 to complete the investments financed by Next Generation EU, appears to be among the most complicated. Italy has placed the issue on the table , […] but no reference is found in the conclusions of the European Council”.
LITURI'S ANALYSIS
On Startmag Giuseppe Liturri wrote that "the reference to 'existing EU funds which should be used in a more flexible way and options to facilitate access to finance should be examined' is a cold shower for those asking for new funds, but also a good news for Italy, which is the main recipient of the existing funds”.
"In other words", he concludes, "in Europe the current of countries has prevailed which claim – with well-founded reasons – that there are still over 200 billion of NextGenEU (all loans, not surprisingly) not yet committed after 2 years from the launch of the program".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/consiglio-europeo-straordinario-germania-aiuti-stato/ on Tue, 14 Feb 2023 06:13:47 +0000.