EU ministers in fresh battle on joint debt, after Biden subsidies

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French finance minister Bruno Le Maire has called for a new European shared-debt tool to help bolster the bloc’s sustainable industries, in response to the giant US subsidy package for green tech.

“I want to repeat how much our conviction is that Europe, like the US, must equip itself with the same simple, massive and effective tool to re-industrialise the continent,” Le Maire told journalists at arrival in Brussels on Monday (5 December), where he will meet EU finance ministers for two days of negotiations.

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“We must be the best in the low-carbon industry,” he said.

US president Joe Biden’s Inflation Reduction Act (IRA) was enacted in August. But EU leaders only recently realised its implications for EU businesses.

A visit last week to Washington by French president Emmanuel Macron “allowed the US authorities to become aware of the impact,” Le Maire said, but a clear solution has not yet been found.

The EU is especially angry about a $207bn [€197bn] tax break for US-produced components used in green technology, especially electric vehicles. This puts EU businesses at a disadvantage because the bloc’s so-called ‘state-aid rules’ prevent EU countries from offering similar support.

On Sunday, EU Commission president Ursula von der Leyen had also called for “new and additional funding at the EU level,” which would come in the form of a new European Sovereignty Fund first raised in her State of the Union address in September.

“A common European industrial policy requires common European funding,” she said on Sunday. “This means beefing up the resources available for…strategic projects at the EU level.”

Europe should “adjust our own rules to make it easier for public investments”, von der Leyen also said.

Dutch and German opposition

Most EU ministers arriving on Monday sounded appreciative of the need to review state-aid rules. But the call for fresh funds backed by shared EU borrowing is also likely to run into strong opposition.

“No, this is not something the Netherlands supports,” Dutch finance minister Sigrid Kaag said on Monday, referring to Le Maire’s and von der Leyen’s call for a joint-debt mechanism.

“We see no reason for additional common European debt this is no longer advantageous from an economic point of view,” German finance minister Christian Lindner said on Monday. “Being faster with the existing instruments is certainly preferable.

“We have to examine all tools,” Le Maire said. “The key point for us is whether we have all the tools we need to compete with China and the US in our efforts to decarbonise.”

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