Posted on 1/17/2023 5:49 am Updated on 1/17/2023 2:48 pm
France apparently wants a European bazooka in response to the massive US Inflation Reduction Act (IRA) subsidies. In a 10-page document submitted to the EU Commission, which Les Echos – along with other media outlets, most notably Handelsblatt – was informed of, Paris outlines its “Made in Europe” strategy to respond to the $369 billion in subsidies the United States has decided to allocate to its green industries.
The message is clear: we must act very quickly and we will need a lot of money… Paris wants to send a strong signal to businesses, while the old continent trembles at the idea of having to face a massive relocation and that some no longer hesitate to point out the threat of “de-industrialization”.
“Emergency Fund”
France has been very offensive on this issue from the start, advancing a series of shock measures. The answer is ambitious, especially when it comes to financing. “It’s an effort that accounts for about two points of GDP,” Emmanuel Macron introduced last December when raising the issue during a press conference at the end of the European Council.
With hundreds of thousands of greenbacks set to rain down on American companies, Paris is therefore in favor of a sovereign wealth fund – already facing friction between member states – according to Ursula von der Leyen, President of the European Commission.
For France, to move forward quickly, it would have to be launched in two phases. With “an emergency fund” created “at very short notice using existing funds” that would precede a “full” sovereignty fund (much less consensual within the EU) to be operational before the end of 2023, Paris cites all or one in particular Part of the 365 billion Recovery and Resilience Facility (FRR) “allocated and awaiting disbursement” that could be reallocated to strategic sectors of the EU.
In order for each Member State to benefit fairly from the funds, Paris is committed to setting up an instrument similar to Sure, a temporary support to protect jobs during the Covid-19 epidemic.
“Modernization and Simplification Shock”
At the same time, France is calling for a “shock of modernization and simplification of the state aid framework”, the reform of which is underway in Europe. Of course, it would be necessary both to extend the temporary Covid-19 regime (which ended in June 2022 with few exceptions) beyond 2023 and to “authorize temporary and targeted support in the form of counters for those sectors that need it in the short term have term. These provisions are in line with those envisaged by Margrethe Vestager, the EU Competition Commissioner responsible for this reform.
Paris also wants to reduce the processing time to four months for the PIIECs (Important Projects of Common European Interest that benefit from subsidies) that are proliferating in Europe, which today can take up to two years. The tax credits granted by the IRA are immediate…
Look for batteries and hydrogen
Paris also wants to end European dependencies, particularly in sectors that will suffer under American law, such as photovoltaics, batteries, hydrogen and critical materials.
France believes it needs “production targets to be achieved by 2030” and sectoral legislation such as that drafted for the chip law, which would allow billions to be released to boost production of chips in Europe in order to reduce its dependence on Asia.
Paris has once again made ongoing energy market reform a priority for the coming months. Bruno Le Maire also recently hinted that France would be adamant about this reform.
“Complete and rapid mobilization”
Europe under attack? So what we need is a “full and rapid mobilization” of trade defense instruments, some of which have only recently been created, we can still read in the document. The EU’s “credibility” is at stake, Paris insists, while, for example, the new regulation allowing Brussels to control subsidies that third countries grant to the EU and could distort competition within the single market has just come into force.
Ursula von der Leyen will shortly present the new stage of EU action against American law. After that, an extraordinary European Council on February 9th and 10th should be the subject of concrete announcements by EU leaders.