Saving Europe’s industry

EU PUSHES EMERGENCY BUTTON TO SAVE INDUSTRY: Bells are ringing in Europe’s power centers — alas, they’re not sleigh bells, but alarm bells. Leaders in Brussels, Berlin and Paris now believe Europe’s economy stands before a precipice, faced with an exodus of industrial investment across the Atlantic to the U.S. — which they fear will start as soon as January.

To prevent European industry from being wiped out by American rivals, the EU is now readying a big subsidy push, two senior EU officials told POLITICO.

Transatlantic shakedown: Indeed, Europe is facing a double hammer blow from across the icy Atlantic, where its supposed partner, the U.S., has adopted policies that — whether intentional or not — amount to a full-on shakedown of EU industry.

‘Buy American’: It wasn’t enough that Europe’s energy prices look set to remain permanently far higher than those in the U.S. thanks to Russia’s war on Ukraine (more on that here). Now, U.S. President Joe Biden is also rolling out a $369-billion industrial subsidy scheme to support green industries under his Inflation Reduction Act, key provisions of which enter into force next year. Crucially, those subsidies will be linked to “Buy American” provisions that mean only cars, batteries and solar cells manufactured in the U.S. can benefit.

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Existential threat: EU officials fear that businesses will now face almost irresistible pressure to shift investments to the U.S. rather than Europe. At a meeting with EU industry leaders Monday, European Commissioner Thierry Breton warned that the U.S. subsidy package was an “existential challenge” for the bloc’s economy, according to people in the room.

In other words: Rather than bringing presents, the imminent risk is that Santa Claus will this year be snatching up Europe’s most-prized economic assets — from its aerospace to its renewables industries, painfully built up over decades but now suddenly at risk of becoming industrial wastelands.

‘It’s like drowning’: Unlike with COVID, the fear is not so much of a sudden economic crash, but a long-term, much more pernicious and permanent loss in competitiveness. “It’s a bit like drowning. It’s happening quietly,” BusinessEurope President Fredrik Persson said.

New data today hammers that point home: Persson’s bleak assessment is being echoed by industry leaders across the board: Chief executives’ confidence in Europe has reached an all-time low, according to a survey by the European Round Table for Industry, a C-suite business lobby, published today.

Emergency measures: According to the two senior officials, the EU is now working on an emergency scheme to funnel money into key high-tech industries. This would happen via the “European Sovereignty Fund,” which Commission President Ursula von der Leyen mentioned in her State of the Union speech.

On the agenda: One official said European leaders will discuss Washington’s subsidies and the EU reaction on the margins of the Western Balkan summit on December 6 and at the European Council mid-December.

‘Last of the Mohicans’: Liberal-minded diplomats are warning of a subsidy race, pointing to evidence that such industrial incentives are often wasteful and favor established companies that are better at lobbying than innovating, redistribute money from taxpayers to shareholders and risk further driving inflation. But several diplomats and senior officials also stressed that it might be too late to avoid a subsidy race, given the U.S. and China have already started running. Or, as French Economy Minister Bruno Le Maire put it Tuesday: “Europe must not be the last of the Mohicans.”

Περαιτέρω ανάγνωση … Από το Playbook και τη Barbara Moens εδώ .